The Value of Business Analytics: Identifying the Path to Profitability

IDENTIFYING TANGIBLE VALUE

Tangible benefits are returns that can be directly mapped to some form of economic return. The most common examples are revenue increases and cost reductions, but they are not necessarily limited to those two supergroups. Other examples include:

• Profitability improvements
• Capital investment reductions (such as through decreased inven­tory stock levels)
• Improved liquidity (and the corresponding reinvestment potential)
• Decreased bad and doubtful debts
• Deferred investments

One of the biggest reasons why these are so critical in any tactical project is that when defined and measured accurately, they are often indisputable. A good example of the difference this can make is in the creation of a customer satisfaction insight process.

Most organizations care about what their customers think; it is tremendously easier (and cheaper) to sell to a happy customer than it is to either sell to an unhappy customer or acquire a new customer. Getting some insight into customer satisfaction level and the reasons behind customer dissatisfaction therefore seems like a logical application of analytics. And, for many organizations, it becomes a project for the business analytics team.

Where the difficulties emerge is in the value the insight brings to the business. Inevitably, getting an understanding of customer satisfaction levels is a challenging (and time-consuming) process. Not only do customers need to be accurately and representatively surveyed, their answers need to be ...