Business analytics is a powerful tool in today’s marketplace that can be used to make decisions and craft business strategies. Across industries, organizations generate vast amounts of data which, in turn, has heightened the need for professionals who are data literate and know how to interpret and analyze that information.
According to a study by MicroStrategy, companies worldwide are using data to:
- Improve efficiency and productivity (64 percent)
- Achieve more effective decision-making (56 percent)
- Drive better financial performance (51 percent)
The research also shows that 65 percent of global enterprises plan to increase analytics spending.
In light of these market trends, gaining an in-depth understanding of business analytics can be a way to advance your career and make better decisions in the workplace.
“Using data analytics is a very effective way to have influence in an organization,” said Harvard Business School Professor Jan Hammond, who teaches the online course Business Analytics, in a previous interview. “If you’re able to go into a meeting and other people have opinions, but you have data to support your arguments and your recommendations, you’re going to be influential.”
Before diving into the benefits of data analysis, it’s important to understand what the term “business analytics” means.
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View VideoWhat Is Business Analytics?
Business analytics is the process of using quantitative methods to derive meaning from data to make informed business decisions.
There are four primary methods of business analysis:
- Descriptive: The interpretation of historical data to identify trends and patterns
- Diagnostic: The interpretation of historical data to determine why something has happened
- Predictive: The use of statistics to forecast future outcomes
- Prescriptive: The application of testing and other techniques to determine which outcome will yield the best result in a given scenario
These four types of business analytics methods can be used individually or in tandem to analyze past efforts and improve future business performance.
Business Analytics vs. Data Science
To understand what business analytics is, it’s also important to distinguish it from data science. While both processes analyze data to solve business problems, the difference between business analytics and data science lies in how data is used.
Business analytics is concerned with extracting meaningful insights from and visualizing data to facilitate the decision-making process, whereas data science is focused on making sense of raw data using algorithms, statistical models, and computer programming. Despite their differences, both business analytics and data science glean insights from data to inform business decisions.
To better understand how data insights can drive organizational performance, here are some of the ways firms have benefitted from using business analytics.
The Benefits of Business Analytics
1. More Informed Decision-Making
Business analytics can be a valuable resource when approaching an important strategic decision.
When ride-hailing company Uber upgraded its Customer Obsession Ticket Assistant (COTA) in early 2018—a tool that uses machine learning and natural language processing to help agents improve speed and accuracy when responding to support tickets—it used prescriptive analytics to examine whether the product’s new iteration would be more effective than its initial version.
Through A/B testing—a method of comparing the outcomes of two different choices—the company determined that the updated product led to faster service, more accurate resolution recommendations, and higher customer satisfaction scores. These insights not only streamlined Uber’s ticket resolution process, but saved the company millions of dollars.
2. Greater Revenue
Companies that embrace data and analytics initiatives can experience significant financial returns.
Research by McKinsey shows organizations that invest in big data yield a six percent average increase in profits, which jumps to nine percent for investments spanning five years.
Echoing this trend, a recent study by BARC found that businesses able to quantify their gains from analyzing data report an average eight percent increase in revenues and a 10 percent reduction in costs.
These findings illustrate the clear financial payoff that can come from a robust business analysis strategy—one that many firms can stand to benefit from as the big data and analytics market grows.
Related: 5 Business Analytics Skills for Professionals
3. Improved Operational Efficiency
Beyond financial gains, analytics can be used to fine-tune business processes and operations.
In a recent KPMG report on emerging trends in infrastructure, it was found that many firms now use predictive analytics to anticipate maintenance and operational issues before they become larger problems.
A mobile network operator surveyed noted that it leverages data to foresee outages seven days before they occur. Armed with this information, the firm can prevent outages by more effectively timing maintenance, enabling it to not only save on operational costs, but ensure it keeps assets at optimal performance levels.
Why Study Business Analytics?
Taking a data-driven approach to business can come with tremendous upside, but many companies report that the number of skilled employees in analytics roles are in short supply.
LinkedIn lists business analysis as one of the skills companies need most in 2020, and the Bureau of Labor Statistics projects operations research analyst jobs to grow by 23 percent through 2031—a rate much faster than the average for all occupations.
“A lot of people can crunch numbers, but I think they’ll be in very limited positions unless they can help interpret those analyses in the context in which the business is competing,” said Hammond in a previous interview.
Skills Business Analysts Need
Success as a business analyst goes beyond knowing how to crunch numbers. In addition to collecting data and using statistics to analyze it, it’s crucial to have critical thinking skills to interpret the results. Strong communication skills are also necessary for effectively relaying insights to those who aren’t familiar with advanced analytics. An effective data analyst has both the technical and soft skills to ensure an organization is making the best use of its data.
Improving Your Business Analytics Skills
If you’re interested in capitalizing on the need for data-minded professionals, taking an online business analytics course is one way to broaden your analytical skill set and take your career to the next level
Through learning how to recognize trends, test hypotheses, and draw conclusions from population samples, you can build an analytical framework that can be applied in your everyday decision-making and help your organization thrive.
“If you don’t use the data, you’re going to fall behind,” Hammond said. “People that have those capabilities—as well as an understanding of business contexts—are going to be the ones that will add the most value and have the greatest impact.”
Do you want to leverage the power of data within your organization? Explore our eight-week online course Business Analytics to learn how to use data analysis to solve business problems.
This post was updated on November 14, 2022. It was originally published on July 16, 2019.
