If you currently run a business or are considering taking the leap and starting one of your own, you may already be aware of the term “business analytics.” Business analytics refers to practices and technologies ranging from statistics and other measurements to machine learning and artificial intelligence. However, it can also mean simple, time-honored business practices like bringing in more money than you spend. Read on to discover the foundational methods of modern business analytics and how to employ them.
What Are Business Analytics?
Business analytics uses various methodologies for capturing and evaluating data to aid in making informed business decisions. Companies that use analytics can measure their performance and make micro or macro adjustments to improve that performance. This ongoing self-reflective process is a form of praxis and can lead to monumental economic change within an organization over time. Businesses that employ big data analytics tend to see an average 8-10% increase in profits. Not using it puts you at a significant disadvantage against industry competitors investing in analytics with enthusiasm and success.
The field of modern business analytics is comprised of three primary foundational methods: descriptive, predictive, and prescriptive analytics, respectively. Descriptive analytics looks at past information and brings attention to patterns and historical trends. Predictive analytics provides a look at potential futures, offering a wide range of possibilities, any of which could be good or bad. Finally, prescriptive analytics looks at potential futures and aims to suggest which are most desirable for you. These methods can be used in isolation but are most effective when used in conjunction with each other.
Who Uses Business Analytics?
Companies have been using methods employed in business analytics for many years. For example, simply analyzing your company’s net income is one commonly practiced form. Business analytics, at its core, is a fundamental part of what makes a business a business. So, every person who runs a company uses a form of analytics in some capacity, whether intentionally or unintentionally. In this sense, this field of methodologic self-improvement is ubiquitous throughout all industries.
However, modern business analytics can be challenging to implement effectively, as big data is complicated to capture and analyze. So many companies hire analytics professionals to guide them through the analysis process. Professionals in this field can earn a degree at a traditional university or work for an online business analytics degree. Professionals with such qualifications are taught how to apply analytical tools and techniques that allow them to uncover and correlate market trends, customer preferences, and other patterns. They can then take this data and use machine learning algorithms and other predictive models to steer businesses toward success.
This type of analytics aims to give an insight into past information. Such analytics looks at that past information and highlights patterns within it. It does not, however, provide an insight into the future of those patterns. This analysis methodology is only concerned with what has come before it and presents you with that information. It is done primarily through data mining and aggregation and shows data in the form of charts and other readable material. Some standard business practices fall into the domain of description analytics, and you might even practice them yourself. Annual revenue reports are one of the most classic examples of these analytics. Other kinds of reports also fall into this category, such as inventory management and the effectiveness of marketing materials. Modern digital businesses like YouTube and Instagram accounts might use analytics to see which posts performed best. Account owners can measure user engagement through views, likes, and dislikes and then consider how to use that information.
Predictive analytics is like its descriptive counterpart insofar as it uses data mining, statistical algorithms, and machine learning techniques to help determine future trends. It does so by employing machine learning algorithms to evaluate statistical models to “fill in” missing data points with predictive guesses. This information can consider outside data, such as environmental and other contextual trends that might influence future decisions. One of the best features of predictive analytics is its ability to provide possible growth opportunities. This is where the capacity for analytics to process large amounts of data is unrivaled. For example, you might notice that one product or service sells better than others. However, predictive analytics can show you what products or services may grow to be even better in the future. You can use predictive analytics to grow your business with information that might not be immediately apparent to you otherwise.
Prescriptive analytics may seem like predictive analytics, and, well, that’s because it is. Just like their predictive counterpart, prescriptive analytics provides a range of growth opportunities for you to consider. However, it also suggests which of those opportunities would be the most optimal investment. This can save lots of time and money in the long run. What makes them especially invaluable is their ability to highlight possible and even likely outcomes based on multiple branching scenarios. Machine learning algorithms can evaluate the desirability of different outcomes and present you with business-making recommendations. Using prescriptive analytics can feel like having a secret weapon up your sleeve. It effectively lets your team glimpse possible futures to make more informed decisions, mitigating the likelihood of undesirable scenarios developing.
Putting It All Together
Modern business analytics is a valuable tool that business owners and managers can use to increase company performance. Improving analytical understanding and developing problem-solving and strategic decision-making are beneficial to professionals across multiple sectors and organizations. Many successful businesses have used some form of analytics to ensure future growth. Descriptive, predictive, and prescriptive analytics can be used separately to varying degrees; however, they’re most effective when used in conjunction with one another. They can give you access to incredible insights that can contribute to business growth and success.