According to IBM we create 2.5 quintillion bytes of data — so much that 90 percent of the data in the world today was created in the last two years alone. It’s not surprising, therefore, that organizations are collecting more and more data on their customers/constituents, prospects, suppliers, and competitors to the point where they have so much they don’t know how to go about extracting meaningful executable information. What to do with all of this “big data”?
Business analytics and business intelligence tools exist not only to help organizations access and store this information but also to help executives reach important, business-differentiating insights. Here’s a brief overview.
Business analytics (BA) is a collection of tools, an umbrella term that comprises data storage, information management, and analytic applications. It is the skills, technologies, and applications that an organization uses to access and track its information.
Business intelligence (BI) is the output of business analytics; it’s how you derive value from the information gathered. Historically referred to as a decision support system, BI covers all the methods used to analyze a company’s raw data and interpret that information with the goal of developing insights for improving future financial and business planning. While BA gives you a synopsis of where the company has been, BI helps monitor where you are now and more accurately forecasts where you can be in the future.
As more businesses adopt BI, the ones who don’t will be at a disadvantage. Why are some slow to embrace this practice? Because of the disconnect between IT leaders and management regarding IT and business alignment. Business and IT executives look through different lenses when it comes to understanding BI tools, how to deploy them, and how to harness the multitude of data that’s mined. The results of CIO magazine’s 2011 State of the CIO Survey indicated the persistence of this gap. “More than one-quarter of senior IT executives say their bosses view IT as a cost center, and only 11 percent believe IT is perceived as a competitive differentiator.”
However, when an organization can bridge these differences, it will boast a clear, competitive advantage. As it improves in its ability to sift through the data and extract meaningful information at the right time, it will be in a position to offer better pricing because it will have a clearer picture of its customers, operations, processes, and its place in the market. A business will be able to better analyze its data and respond to shifts in the market on a timely basis. It can make more informed decisions when determining the value of its business and its products and services. The companies that fail to understand the data will be the ones that fail to thrive.
The volatile economic environment leaves no room for intuition and hunches. Whether you’re a mortgage company analyzing risky or safe borrowers or a retail outlet studying your finances to see if you can take on a loan to stay afloat, you need business intelligence to make thoughtful calculations. BI helps you filter through the facts and determine what’s significant. It helps you answer a variety of questions.
Questions like: What products are losing money, and what services are valuable? Are particular customers costing me money? Is the best place to conduct operations close to home or overseas? Why is our competitor seeing profits when we’re not? BI tracks your internal data, benchmarks you against other organizations, and considers external factors to give you fact-driven solutions. It’s a powerful approach to studying your customers, inventory on hand, financial outlook, and any other factors that are crucial to the success of your organization. BI takes seemingly random data and computes it into functional information which becomes the basis of decisions that drive the accomplishments of your business. This is how BI provides you a competitive advantage.
Jeanne Harris, senior executive at the Accenture Institute for High Performance in Chicago and author of Analytics at Work: Smarter Decisions, Better Results, has estimated, “Forty percent of important decisions are not based on facts but rather on intuitions, experience, and anecdotal evidence.” That means nearly half of all your decision-making processes are no longer adequate. Business intelligence is how you can improve your ability to analyze your options. It’s the clear way to make reasoned decisions, whether your organization has one building and 50 employees or 5,000 employees in different countries. At its core, BI is simply the ability to keep your finger on the pulse of business in today’s ever-changing marketplace.