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What is Business Analytics? - Definition & Strategy

Instructor: Lucinda Stanley

Lucinda has taught business and information technology and has a PhD in Education.

This lesson will introduce you to how data is used in business to help make decisions. We will define data analytics and look at some strategies businesses can use.

Defining Business Analytics

What do you use to help you make decisions? Is it information or data? If you had more of it, would you make better decisions? Probably, yes. The same is true for businesses. Businesses use data to help them make the best decisions possible. They use structured and unstructured data, and lots of it. But it's not enough to have the data; businesses have to know what to do with it - they have to know how to analyze the data they acquire.

Businesses use business analytics to analyze the data they have accumulated in order to make decisions. Business analytics is the statistical analysis of the data a business has acquired in order to make decisions that are based on evidence rather than a guess. This is called data driven decision making. Making decisions based on data allows businesses to operate more efficiently, and the more data based decisions they make with positive results, the more they can simplify the process by coming up with formulas for the future. For example, when we do 'A', 'B' happens 90% of the time and that's the result we want, so let's do 'A' again.

Some examples of using business analytics include finding patterns and relationships between processes and outcomes, explaining why a result was achieved, determining if a previous decision was appropriate, or predicting the likelihood of a particular result happening.

The Business Analytic Process

Business analytics is an iterative process, which means as businesses collect and analyze data, their analysis impacts the future needs of the business. Let's look at a seven step process:

Business Analytics Process
Business Analytics Process

  1. First the business will determine what it is that they need, or what their goal is for collecting the data.
  2. Next they'll collect the data. This could be structured data like customers' demographics (age, gender, political affiliation, etc.), or unstructured data like feelings about customer service.
  3. Once the data is collected, it is analyzed. If the goal was to find out the average age of customers who bought a particular project, the business would do a statistical analysis, perhaps using a spreadsheet to perform the calculations.
  4. Based on the analysis of the data, the business can make certain predictions. For example, if they find the average age for their customer is 25, they can predict that if they target their marketing campaign to that demographic they will increase their sales.
  5. The analysis of the data may have suggested more than one viable route that will meet the business' need or goal. These need to be evaluated to find the one that best meets their need.
  6. Once the best solution has been found, it must be acted on - someone in the business needs to follow through and take action.
  7. The final step - well, almost the final step - is to evaluate the effectiveness of the decision and update the information the business has access to. This evaluation generally leads back to the first step where the business decision makers can use the information acquired and analyzed for an initial need to determine what other needs the business may have.

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