BUSINESS ANALYTICS
BUSINESS ANALYTICS
• Business analytics (BA) is a set of disciplines and technologies for
solving business problems using data analysis, statistical models
and other quantitative methods.
• ”Business analytics refers to the skills, technologies, practices for
continuous iterative exploration and investigation of past business
performance to gain insight and drive business planning”.
• In short, BA is a rational, fact-based approach to decision making.
These facts come from data, therefore BA is about the science and
the skills to turn data into decisions. The science is mostly
statistics, artificial intelligence (data mining and machine
learning), and optimization; the skills are computer skills,
communication skills, project and change management, etc.
How business analytics works
Before any data analysis takes place, business analytics
starts with several foundational processes:
1. Determining the business goal of the analysis.
2. Selecting an analysis methodology.
3. Getting business data to support the analysis, often
from various systems and sources.
4. Cleansing and integrating data into a single
repository, such as a data warehouse or data mart.
Components of Business Analytics
PRE-PROCESSING
• DEFINE OBJECTIVES: This is the foremost step. Without having a
clear understanding of business goals, questions we need to
answer, and problems we ought to solve, none of the following
steps will deliver. This also helps us to translate business
objectives into analytics objective and map data requirements.
• Data Aggregation: The process of having a centralized location for
the data, extracting and loading the relevant data by putting
relevant filters, and creating subsets of data is the core aspect of
Data Aggregation. This is where the data is transformed
depending upon the business requirement. Also data pertaining
from various sources are combined to have one large dataset. The
format of the data is also sometimes changed at this step to make
it compatible with the tool being used to achieve the objectives.
• Data Cleaning: Data Cleaning is an extremely
important component of business analytics
because the data in its raw form sometimes is
not directly usable. As the other components of
Business Analytics use mathematics, statistics,
and computer programming, the data must be
compatible with these streams of study.
• Analytical Methodology: Having a detailed
understanding of the different type of analytics
out there dominate this component as this is
where the analysts have to identify the method
with which they will go to achieve their end
goal.
• Evaluation and Validation: Once the results come out, the
next task is to understand if the result stands true given a
different situation or not. This is where is predictive
models are used and their evaluation and validation are
conducted whereas, for other methods, various simulation
techniques are put to use to identify the most plausible
outcome, thus providing provide a very reliable result.
• Reporting and Data Visualization: Perhaps the most
important and often overlooked component of the
discipline is the aspect of communicating the results in an
easy to understand way. This requires innovation and
creativity and is the reason that this field is open to all and
not only to mathematicians, statisticians, or computer
programmers.
PROCESS OF BUSINESS ANALYTICS
• Identify Objectives – Spend analysis can’t be a one-size fit for all
business scenarios. Therefore, the first step for conducting a spend
analysis is to clearly define the objectives and scope of the analysis.
• Identify Spend Data Sources – Once the goal of spend analysis is
finalized, the next step is to identify all the data sources for spend-
related data across different business units, departments and teams. This
will help to gather and consolidate the entire spend data at one central
database.
• Consolidate Data – To avoid errors, inconsistencies, duplicates and other
potentially tragic data errors, the next step in the spend analysis is to
ensure that there is a developed process either to transfer all
information into a common format or allow all the existing data sources
to communicate to one another.
• Clean the data – Once the data is consolidated, the next step is to clean
the data. The cleaning process will involve finding and correcting the
errors, standardization of the spend data, etc. The results of the analysis
will be completely dependent on the accuracy of the dataset that’s why
it is important to be thorough in this step.
• Categorize the spend data – This step includes the classification of
spend data into different categories, grouping suppliers together
based on purchase data, payment terms, frequency of purchase,
spend categories, etc.
• Analyze – Now, the insights from the spend data are compared with
the standard spend analysis – key performance indicators. In this
step, it’s crucial to conduct a proper classification of spend data in
different categories like direct spend, indirect spend, maverick
spend, etc. Successful analysis results in numerous benefits for the
end-users
• Rinse, Reassess and Repeat – Spend analysis is a dynamic
process. The objectives of spend analysis, the data sources used,
the data format, etc will always keep evolving. The insights revealed
by spend analytics can be used to pursue the set goals and at the
same time, the entire 7-step process can be repeated regularly as
the data grows and new objectives are identified.
Types of business analytics
Different types of business analytics include the
following:
• Descriptive analytics tracks key performance
indicators (KPIs) to understand the present state of
a business.
• Predictive analytics analyzes trend data to assess
the likelihood of future outcomes.
• Prescriptive analytics uses past performance to
generate recommendations for handling similar
situations in the future.
• Descriptive Analytics: Focuses on summarizing and analyzing
historical data to understand past trends and patterns. It answers
the question, “What happened?” Common tools include
dashboards, reports, and visualizations that depict historical data.
• Diagnostic Analytics: Goes deeper by interpreting data to
determine why something happened. It uses techniques like data
mining, correlations, and drill-downs to identify root causes
behind past outcomes. The key question here is, “Why did it
happen?”
• Predictive Analytics: Leverages the insights from both descriptive
and diagnostic analytics to forecast future trends or behaviors. It
answers the question, “What is likely to happen?” Techniques
include statistical models, machine learning, and forecasting
methods.
• Prescriptive Analytics: Suggests actions to take based on the
analysis of historical and predicted data. It focuses on
determining what should be done to achieve desired outcomes
and improve decision-making. This type of analytics uses
optimization models, simulation, and decision analysis.
• Cognitive Analytics: Incorporates artificial intelligence (AI) and
machine learning to mimic human intelligence. It aims to
provide deeper insights by analyzing data in a more contextual
manner, uncovering hidden patterns, and making sense of
complex and unstructured data. The focus is on enhancing
decision-making with systems that understand, reason, and
learn over time.