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. Show
According to a study by MicroStrategy, companies worldwide are using data to:
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. Access your free e-book today. DOWNLOAD NOWWhat 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:
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 ScienceTo 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 Analytics1. More Informed Decision-MakingBusiness 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 RevenueCompanies 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 EfficiencyBeyond 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 NeedSuccess 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 SkillsIf 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. Measuring the right Key Performance Indicators (KPIs) is vital to the health and success of your The most common mistake companies make when they start measuring their KPIs is to try to measure too much. The problem with this approach is that if you don't know which KPI to measure, how do you know whether or not you're making progress? If you have no idea what you're trying to achieve, you'll never be able to tell if you're succeeding or failing. KPIs are more than the numbers and metrics you report out weekly - they enable you to understand the performance and health of your business so that you can make critical adjustments in your execution to achieve your strategic goals. Knowing and measuring the right KPIs will help you achieve results faster. A Key Performance Indicator is a measurable metric that demonstrates how well a company is performing against its key business objectives, quarterly rocks, business objectives, and progress towards your 3-5 year strategic plan.
The Importance of KPIs
KPIs to Monitor Company HealthKPIs are a scorecard for company health. You only need a handful of KPIs to monitor your company's vital signs. Only measure what you want to move so you can put energy where you want to effect change. We’ve found that it is important to measure a few KPIs in each of the 4 categories: Employees, Customers, Processes, and Revenue. These fall under the disciplines of human resources, customer satisfaction, business processes, and business strategy. First, make sure you choose the right KPIs for your business, then worry about who is accountable for them (leadership accountability.) KPIs to Measure Progress Over Time Key performance indicator (KPI) refers to any measurable result that indicates whether an organization is meeting its objectives. It could be revenue, gross margin, number of locations, number of employees, customer satisfaction, product quality, employee productivity, or anything else. You set these KPIs for yourself and your team every quarter so you know where you stand. Then you track them weekly to see if they're moving in the direction you want them to go. If not, adjust your actions accordingly and notify other departments if you are off track. KPIs to Make Adjustments and Stay on TrackIn addition to your current performance, you should also monitor your leading indicator KPIs so you can see how close you are to achieving your goals. These metrics give you an idea of whether you are on track to reach your desired outcomes. You can then adjust your strategy accordingly. For example, if you notice that your sales are dropping off, you may decide to focus more on marketing efforts instead of product development. Leading indicators have two characteristics: they are measurable, and you can directly influence them. They are good KPIs to have on your dashboard to keep your projects on track. KPIs to Solve Problems or Tackle OpportunitiesUse a combination of KPIs in a dashboard so that you have the right information at your fingertips to solve problems or tackle opportunities. Let’s say you are in a sales slump. Identify a handful of KPIs that can help you turn the tide (maybe it is # of outbound calls, # of appointments kept, # of trade shows attended). Put them on a dashboard and track them weekly to see if you’ve found the right lever that helps you generate more predictable sales. Or, let’s say you have a great idea for a new product. Maybe you test it out with a few clients and use KPIs to validate your business model before launching it on a large scale; you might monitor # of customers interested, $ to support the new product, NPS score, implementation time, # of defects, etc. KPIs to Analyze Patterns Over TimeIf you measure the same KPIs quarter over quarter, you can begin to detect patterns in your numbers. There are countless ways these patterns can help you in your business. Maybe you can predict when your slowest quarter will be and use that time to do a system update or company-wide training initiative. Maybe you can tell that your sales manager always forecasts that you’ll come in 5 deals over or under where you usually end up at the end of the quarter. Maybe you can see that you’ve got some team members who are habitually under-performing or over-performing on their KPIs and can use this data to talk about consequences, bad or good. An effective KPI dashboard has a mixture of KPIs that follow the balanced scorecard. You want to ensure that you are covering all the important aspects of your business required to monitor your company's progress towards its critical goals and objectives. Therefore, the top businesses always have at least 2 KPIs (including one leading indicator KPI) from each of the following categories:
I know that many of you are also using OKRs, which are similar to KPIs. To learn more about the difference you might be interested in reading OKRs vs KPIs to make sure that you have the right metrics that to help you improve your productivity. Watch this quick video to find out how using KPIs can make your weekly meetings more productive and have your Key Performance Indicators drive your performance. Need help getting your team aligned to achieve your growth goals? Rhythm systems software was ranked the #1 easiest software to use, highest ROI, fastest implementation, and highest adoption rate on G2.
Rhythm Systems KPI Resource Center for all you need to know about Key Performance Indicators. Looking for some KPI Examples to help get you started? Check out our additional KPI and KPI dashboard blog articles: 21 Production KPI Examples to Improve Manufacturing Performance CEO KPIs: 23 KPIs Every CEO Dashboard Should Consider 5 Simple Steps to Create Useful KPIs (Video) 10 Best Employee KPI Examples 5 Tips to create, evaluate and use Key Performance Indicators (KPIs) to drive results in your business 33 KPI Examples to Measure Productivity & Prevent Organizational Drag Employee KPI Examples: How to Measure What (or Who) You Want to Move (Video) KPI Examples for Successful Sales Teams Huddle Meetings: Keep your KPIs on track Photo Credit: iStock by Getty Images |
Are the most essential and important quantifiable measures used in analytics initiatives to monitor success of a business activity?
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