Last week I was presenting business analytics framework to a large audience at one of the partner organizations. There were a lot of questions around business analytics and business intelligence reporting. I think there is lot of confusion between business intelligence & business analytics. I would like to address some basic questions about business analytics in this blog.
What is difference between Business Intelligence(BI) & Business Analytics(BA)?
Business Intelligence word was first coined decades ago. Business intelligence converts data into information. It includes query & reporting, OLAP, interactive dashboards and alerts. It's about analysis on past events, and more reactive in nature. It helps you address the following questions
1. What happened?
2. How many, how often, where?
3. Where exactly is the problem?
4. What actions are needed?
This is a first step towards creating intelligent enterprise.Today, there are many big organizations who are struggling to establish enterprise wide business intelligence reporting platform. It's not enough to compete using BI in today's economic scenario. You need much more than BI to create differentiation against your competitors in today's market place.
Business Analytics converts information into knowledge.It's about predicting future using past data and current events. It's more proactive in nature. It helps you address the following questions
1. Why is this happening?
2. What if these trends continues?
3. What will happen next?
4. What's the best that can happen?
Business analytics can directly impact top & bottom lines. It helps you to
1. Identify segment of people who are more likely to buy your product
2. Identify the best offer among the list of potential offers
3. Identify potential customers who can buy more products and services from you
4. Retain most profitable customers
5. Optimize resources based on various contraints
None of the above is possible using business intelligence tools. All of the above requires usage of statistical algorithms and processes.
BI will give you information like number of stock outs in a store where as BA will give you knowledge like optimal quantity of stock that you need to keep in your store to prevent stock out situations and minimize inventory cost. BI will give information like amount of withdrawals and cash out instances of a particular ATM where as BA will give you knowledge like optimal amount of cash that you need to keep in your ATM based on location, and withdrawal patterns so that you prevent cash out situations and minimize cost. There are several such examples available.
Do you need a Data warehouse to implement Business Analytics framework?
No. It's not necessary to source data from data warehouse for business analytics. You can apply business analytics techniques on data which is directly extracted from source system. You do not have to wait till your data warehouse is implemented as it usually takes anywhere from 12 - 24 months. One of pre-requistite for business analytics is availability of good quality data. It's doesn't matter where it comes from.
How much data do you need to perform Business Analytics?
It's depends on type of analytics that you want to perform. Typically, business analytics techniques requires data from last 3 to 36 months. As mentioned earlier, you need to have good quality data to derive effective results out of business analytics techniques.
According to me business intelligence is a subset of business analytics framework. You must have strategy in place to implement business analytics framework to compete in today's economics conditions. Business Intelligence is just not enough. Be aware of vendors who supply query & reporting tools in name of "Analytics".
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