Over the past few decades more and more businesses have embraced the use of data analytics. According to a recent survey conducted by Bloomberg Businessweek Research Services, just short of 97% of business respondents claimed their organisations now use data analytics. However, properly implementing processes of data analytics that are capable of shaping and influencing positive business decisions takes time and a lot of patience.
In this blog, illumo digital explains how companies use data analytics, how it can help performance, and why it is so important in the modern business world.
What is business data analytics?
To put it simply, the term business data analytics refers to the process of solving business problems using data analysis, statistical models and other quantitative methods. The ultimate aim of this methodical exploration of a business’ data sources is to make business decision-making more data-driven.
Successful business analytics relies on a number of things. This includes:
- The quality of data collected
- The amount of data collected
- The skill level of the analysts employed to take meaning from the data
- The quality of analytical software your business uses
- A business-wide philosophy that embraces data-driven decision-making.
How companies use data analytics in their business
When carried out properly, addressing the issues outlined above, data analytics can offer invaluable insights into your business and the behaviour of your customers. On the back of this, data analytics can then help your business understand everything from how to market products and run PR campaigns to how to better mitigate risk, improve security and increase brand awareness. We look at how this is achieved below, specifically concentrating on the ways in which data analytics help organisations improve performance in a range of different areas.
How data analytics help businesses
As touched upon above, data analytics are used by companies in a variety of different ways that can help improve performance in a number of key areas. Below are four major ways data analytics can help your businesses.
1. Informed decision-making
The most obvious benefit of data analytics, and one we have previously mentioned, is using data to inform and justify key business decisions. This is typically done in two steps. Firstly, predictive analytics can help suggest what might happen in the future, based on collected data, while prescriptive analytics can then be used to indicate how your business should react to these forecasted changes.
For example, a business can change product offerings and pricing based on customer data to increase sales, directly impacting their marketing strategies. E-commerce giant Amazon customises the product recommendations it shows returning customers in marketing material based on what they have bought in the past and the items sitting in their virtual shopping basket.
2. Improved efficiency
Many businesses use data analytics to streamline operations. For example, collecting and analysing data relating to the supply chains your business relies on that identifies where delays and/or bottlenecks originate can help to predict where future problems may occur and how to best avoid them.
For instance, if a demand forecast report identifies that a specific supplier won’t be able to handle the increased volume in orders over a certain holiday period, your business could search for a supplement supplier (or a new supplier all together) in order to avoid production/delivery delays.
3. Risk mitigation
Just as analytics can be used to identify and predict inefficiencies, it can also be used to highlight potential risks and implement preventative measures. Retail chain businesses, for instance, can use statistical models based on crime data to determine which stores are at the highest risk being targeted by shoplifters and increase security in these stores accordingly.
As well as helping to mitigate physical risk, financial risks can also be highlighted and prevented. This is to say, data can be used to limit losses by helping to do things like determining the optimal price to sell clearance sale items for when it’s time to reduce inventory.
4. Enhanced security
In this day and age, all businesses face serious data security threats. However, using data analytics can be one of the most effective ways to improve your organisation’s cybersecurity and prevent serious threats from causing either financial or reputational damage.
For example, businesses can use data analytics to parse, process and visualise the company’s audit logs to identify the course and origins of a past cyber attack. This data can then be used to pinpoint vulnerabilities within a business’ cybersecurity processes and suggest potential fixes. Additionally, statistical models can also be used to prevent future threats. They can be used to set up new models that highlight and flag abnormal behaviours, for instance, allowing you to stop a threat before it can turn into a security issue.
Why is data analytics important in business?
To answer simply, data analytics is so important in business nowadays because the success of business has come to rely more and more on technology in recent years. This means the role data analytics has played has also grown significantly. Success now relies so much more on in-depth data analysis rather than on gut feeling alone.
As outlined above, data analytics is so important in business simply because it enables an organisation to make more informed, data-backed decisions, as well as providing invaluable insight in key business areas, including:
- Customer behaviours and trends
- Security and risk mitigation
- Business productivity and efficiency
- Customer personalisation.
Although finding the types of data analysis to suit the needs of your business, and the tools required to do this, may take time and a period of trial and error, the long term benefits of adopting these techniques can be huge.