The Value of Business Analytics: Identifying the Path to Profitability

BUSINESS ANALYTICS: A DEFINITION

Before we start examining the role of the organization in an economic context, it is important to quickly review what is meant by “business analytics” and why it is different from pure analytics or “advanced analytics.”

The cornerstone of business analytics is pure analytics. Although it is a very broad definition, analytics can be considered any data-driven process that provides insight. It may report on historical information or it may provide predictions about future events; the end-goal of analytics is to add value through insight and turn data into information.

Common examples of analytics include:

• Reporting: the summarization of historical data
• Trending: the identification of underlying patterns in time series data
• Segmentation: the identification of similarities within data
• Predictive modeling: the prediction of future events using historical data

All of these applications of analytics have a number of common characteristics:

• They are based on data (as opposed to opinion).
• They apply various mathematical techniques to transform and summarize the raw data.
• They add value to the original data and transform it into knowledge.

Broadly speaking, various applications of analytics can be divided into two categories. Activities such as business intelligence, reporting, and performance management tend to focus on what happened—they analyze and present historical information.

Advanced analytics, however, aims to identify:

• Why things are happening
• What ...