Defining Business Analytics
What is business analytics? How does it differ from business intelligence? What ARE data cubes? New words and phrases keep popping up to explain these complex concepts. Let’s talk about terminology and the questions we most frequently hear from our customers and prospects.
Question 1: Are business analytics and business intelligence the same thing?
No. Although the terms are often used interchangeably, business intelligence is really a subset of business analytics. Business analytics is a relatively newer concept, and more all-encompassing than business intelligence.
Business intelligence typically refers to gathering insight and reports about the business itself. Typically, when people talk about collecting business intelligence data they are organizing historical transactions to find patterns in years, seasons and product demand.
Business analytics uses business intelligence data, and combines it with other data sources, to create leading and lagging indicators in real time. These indicators allow businesses to take the temperature of their organization instantly, and enables them to drill in detail so that pro-active action can be taken in real time. Advanced Analytics are typically complicated calculations that act as indicators that enable businesses to measure improvement of ongoing business initiatives. Advanced Analytics include indicators and data that predict what may happen in the future using predictive algorithms. Business intelligence tells us what happened. Business analytics tells us what this information means, and provides insight as to how best to respond.
Question 2: What’s the difference between a data warehouse and a data mart?
A data warehouse is fed information from multiple sources, and holds detailed information across various areas of the business. A data mart usually only contains data from one business area (like finance) or from one set of source systems. Multiple data marts are typically built quickly from larger data warehouses, which contain many years of very detailed historical data. A company typically deploys multiple data marts, but should have only one Enterprise data warehouse. As the word “warehouse” implies, the data warehouse should be built to accommodate high transaction volumes, with the intention to hold every meaningful data point in your company. Today, the Enterprise data warehouse is fed with data from multiple business applications, such as ERP, MRP, and CRM, but it also includes real time data from unstructured data lakes where billions of transactions of streamed data is loaded. Streamed data includes sensor data from any device in the organization as well as social media data.
Question 3: How is machine learning different than predictive analytics?
This question is harder to answer because machine learning and predictive analytics are two different things. Predictive analytics is the concept of using data to understand the likely probability of the future. As Thomas H. Davenport explains in his Harvard Business Review article, “A Predictive Analytics Primer,” predictive analytics requires good data, statistical variables and the assumptions that underlie the predictive model. The analysis itself can be conducted on spreadsheets by a human analyst – or it can use machine learning.
So what is machine learning? Machine learning is a way to analyze dozens, even hundreds of variables to understand which factors drive an outcome in real time. With machine learning, you typically start with the outcome – how can I identify which manufacturing equipment is most likely to fail – then the machine works backwards to figure out which factors contribute to the machine failure. As the machine learning model takes in more information, it is able to adjust and improve its accuracy over time.
How does your business want to use business analytics?
We are on the edge of a major business shift in how businesses compete, and business analytics are a major contributing factor to this shift. Business analytics technology that was once too complex and too expensive for most companies is now becoming a must have!
If you’d like to find out what business analytics can do for your business, we invite you to download our business analytics brochure or book an analytics scoping session.
Written By: Mark Hatting, Managing Director, Business Analytics, mcaConnect