Business analytics is an area of analytics where business data is used in order to increase the efficiency of a business. The job of a business analyst is to ask the right questions and act after answers are found. Business analytics, however, can not help before starting a novel business. It needs existing business data in order to describe, diagnose, predict and prescribe. Business analytics deals with the bigger picture. It finds out the trends and patterns, analyses them for a better understanding, predicts the future and fine-tunes the processes and divisions of a business accordingly.
Let us understand the role by an example.
A motorcycle company had a huge success with a small displacement motorcycle they launched three years ago. But the recent upgrade, which is surprisingly cheaper than the older model failed to achieve the sales it was expected to achieve.
A business analyst might conclude,
- There is competition and it offered better value for money, a better design and better ergonomics.
- The previous high sales reduced the premium and uniqueness factors of the motorcycle.
- A rapid growth in the economy resulted in people shifting towards greater displacement motorcycles etc.
These conclusions were not drawn based on assumptions nor a direct jump based on experiences was at play. Without further ado, let us break down the types of analytics and how they come into play together for drawing conclusions.
Types of business analytics
- Descriptive business analytics
In this type of business analytics, the concentration remains confined within “what’s going on ?” or in case of the motorcycle company, “ what went wrong ?”. This type of analytics deals with patterns and data of the past. The ultimate goal, in this case, is to provide a bigger picture depicting the patterns and incidents of the past which are important for further analysis.
- Diagnostic business analytics
The patterns and data revealed by the descriptive analysis are diagnosed in this type of analysis. The questions it deals with are mostly centred around hows and whys. For example, if the descriptive analysis revealed a hike in a product’s sales, the diagnostic analysis will work for understanding why it happened.
- Predictive business analytics
After the diagnosis is done, the responsibility of prediction falls upon a business analyst. In predictive business analytics, a B.A. deals with previous patterns and probable events of the future in order to predict trends and patterns. Multiple factors can be considered and prediction can be made in accordance. In case of that aforementioned motorcycle company. After finding the reason for decreased sales for the new model multiple assumptions can be made accordingly. The assumptions might answer if the model is still relevant or not. Is there a chance to achieve better sales with a few adjustments? If the reason lies in functioning and processes of the business can a correction result in better sales?
- Prescriptive business analytics
This type of analytics will deal with how the drawbacks and flaws can be rectified. What changes the product or the service needs for better acceptance. Or maybe what changes the business should introduce in its internal processes and mindset? The prescriptive analysis is heavily reliant on descriptive, diagnostic and predictive analysis conclusions and the accuracy depends on the experience the business analyst carries.
The elephant in the room
The elephant in the room is human error. The frequency of errors can be reduced with the employment of experienced candidates but human error is impossible to nullify. And In the case of business analysis error in any stage can result in something nasty and holds a destructive capacity to jeopardise an entire operation. For example, if the error manages to hide in the descriptive analysis results it might affect all the other three types culminating in a bad prediction and wrong decisions during prescriptive analysis. Artificially intelligent business analysis, however, is not an alternative as businesses and decisions need a human touch. Gaining more and more experience before assuming responsibilities remains the solution.
The four types of analytics are heavily intertwined with each other and rely on statistical methods and data analytics. A well-trained business analyst is expected to perform all four types of analysis in order to achieve better efficiency and profit margins. However, Just a business analytics certification can not place someone at the helm of a business. Experience is highly required. As a small misjudgment by the analyst can sometimes cost the livelihood of thousands of people. The best way of understanding the role is not just training but also work experience. Learning while working is the best way to become a proficient business analyst adept in all four kinds of analytics.