What Does Business Analytics Mean?

It’s quite easy to imagine a bank that runs all its customer processes and dialogue programs entirely without using IT—and what really hard work that would be. The point here is, of course, that you can have business analytics(BA) without deploying software and IT solutions. At a basic level, that has been done for centuries, but today, it just wouldn’t stack up. In this book, we look at BA as information systems, consisting of three
elements:

1. The information systems contain a technological element, which will typically be IT-based, but which in principle could be anything from papyrus scrolls and yellow sticky notes to clever heads with good memories. A characteristic of the technological element is that it can be used to collect, store, and deliver information. In the real world, we’re almost always talking about electronic data, which can be collected merged, and stored for analysts or the so-called front-end systems who will deliver information to end-users. A front-end is the visual presentation of information and data to a user. This can be a sales report in HTML format or graphs in a spreadsheet. A front-end system is thus a whole system of visual presentations and data.
2. Human competencies form part of the information systems, too. Someone must be able to retrieve data and deliver it as information in, for instance, a front-end system, and analysts must know how to generate knowledge targeted toward specific decision processes. Even more important, those who make the decisions, those who potentially should change their behavior based on the decision support, are people who must be able to grasp the decision support handed to them.
3. Finally, the information systems must contain some specific business processes that make use of the information or the new knowledge. A business process could be how you optimize inventory or how you price your products. After all, if the organization is not going to make use of the created information, there’s no reason to invest in a data warehouse, a central storage facility that combines and optimizes the organization’s data for business use.

The considerable investment required to establish a data warehouse must render a positive return for the organization through improved organization-wide decision making. If this doesn’t happen, a data warehouse is nothing but a cost that should never have been incurred. An information system is therefore both a facility (for instance a data warehouse, which can store information) as well as competencies that can retrieve and place this information in the right procedural context.

When working with BA, it is therefore not enough to just have an IT technical perspective—that just means seeing the organization as nothing but a system technical landscape, where you add another layer. It is essential to look at the organization as a large number of processes. For instance, the primary process in a manufacturing company will
typically consist of purchasing raw materials and semi-manufactured products from suppliers, manufacturing the products, storing these and selling them on. In relation to this primary process there are a large number of secondary processes, such as repairing machinery, cleaning, employing and training staff, and so on.

Therefore, when working with BA, it is essential to be able to identify which business processes to support via the information system, as well as to identify how added value is achieved. Finally, it’s important to see the company as an accumulation of competencies, and provide the information system with an identification and training of staff, some of whom undertake the technical solution, and others who can bridge the technical and the business-driven side of the organization, with focus on business processes. In terms of added value, this can be achieved in two ways: by an improved deployment of the input resources of the existing process, which means that efficiency increases, or by giving the users of the process added value, which means that what comes out of the process will have increased user or customer satisfaction.

In other words, successful deployment of BA requires a certain level of abstraction. This is because it’s necessary to be able to see the organization as a system technical landscape, an accumulation of competencies as well as a number of processes and, finally, to be able to integrate these three perspectives into each other. To make it all harder, the information systems must be implemented into an organization that perceives itself as a number of departments with different tasks and decision competencies and that occasionally does not even perceive them as being members of the same value chain.