Tuesday, January 4, 2011

Trends in Business Analytics

The field of business analytics is one of ever increasing demand.  Recently, the Boston Globe listed "data modeler" as one of the 11 hot jobs of 2011: View Here

There is a reason for the attention that business analytics is getting in the business world: Due to the prolonged recession and its unclear direction, organizations are being asked to do more with less.  Coupled with that is the fact that they are being presented with more and more data about their business that on its own do not present any answers.  Most business managers realize that smart use of their data will help them address the pressures that are placed on them by the recession.  The problem is that they do not know where to start.  This is where the business analytics professional (or "data modeler" as the Globe calls them) can help.

This article describes five trends in business analytics that are a reaction to its increased demand:
  1. Marketing effectiveness
  2. Sales forecasts
  3. Operational efficiencies
  4. Cost control
  5. Revenue projections
Marketing effectiveness implies that with ever increasing amounts of data being captured about marketing campaigns (with tools like Eloqua), business analytics will not only be able to identify what campaigns worked and those that did not, but also will be able to predict the effectiveness of campaigns before they happens!  This type of predictive analytics will allow for more efficient spend of marketing dollars.

As leads come out of the marketing machine and into the sales pipeline, business analytics will be able to predict sales outcomes with ever increasing accuracy by combining sophisticated statistical models with data stored in CRM tools like Salesforce.com.  In addition, sales forecasts will offer mechanisms that allow sales managers to optimize their sales force, by recommending which opportunities should require focus at any given time.

Once the sale is made and the product needs to be delivered, operational analytics will leverage data captured in ERP systems to create optimization tools for operations managers.  These models will support varying needs such as resource allocation, inventory control, R&D, quality control and production processes.  These tools will recommend an optimal set of production decisions, at any point in time, that are specific to an individual business.

It is not poor performance that kills a business, but business variability that prevents the correct anticipation of business trends and preventative action.  Using historical business data, organizations will be able to better understand past drivers of business variability so that risk can be better managed in future periods.  This will be driven by precise cost control measures that maintain profitability, yet do not kill productivity.  Conversely it will facilitate preemptive expansion that will allow an organization to be ready to ride a wave of growth when it arrives.

Without an accurate revenue projection, a business is effectively flying blind.  With ever increasing detailed data about revenue earnings, organizations are positioned to make laser-sharp revenue forecasts that will give business insight that was previously seldom enjoyed.  These forecasts will allow managers to understand drivers of their revenue and will suggest what manageable factors are likely to contribute to the largest revenue growth.

While the business needs that business analytics will address over the next few years are not new, the approach to solving them is.  Business analytics is positioned to be a cornerstone of how business is "done" over the next decade, and it will provide a tremendous competitive advantage to those that are early adopters of its methodology.