Business Analytics for Managers PDF

Business Analytics for Managers Author : Priyank Aneja 08-Jul-2024  Unit 1 The Business Analytics Model What is Business Analytics?  Business analytics is the process of transforming data into insights to improve business decisions.  Business analytics is delivering the right info...

Business Analytics for Managers Author : Priyank Aneja 08-Jul-2024  Unit 1 The Business Analytics Model What is Business Analytics?  Business analytics is the process of transforming data into insights to improve business decisions.  Business analytics is delivering the right information to the right people at the right time to take right business decisions.  Data management, data visualization, predictive modeling, data mining, forecasting simulation, and optimization are some of the tools used to create insights from data.  Business analytics leans heavily on statistical, quantitative, and operational analysis.  Developing data visualizations to present your findings and shape business decisions is the end result. Overview of Business Analytics Model The most important thing in a large and complex project with a many resources and different competencies involved is to create an overview of the project. The model provides an outline for understanding and creating successful Business Analytics in any type of organization. The purpose of the model is to give the organization a single common frame of reference for an overall structure in the creation of successful BA. The model clarifies the roles of the individual contributors and interaction in the information generation and information consumption process. There are many competencies, people, and processes involved in the creation of Business Analytics Model.  Overview of Business Analytics Model There are many competencies, Business-driven Environment people, and processes involved in the creation of Business Analytics Model. Top Management Strategy Creation Choosing an Information Strategy The Information Requirement flows Information Requirements from top (business driven) layer to Operational Decision Makers Business Process Information Supply down to technical oriented Using information & knowledge environment. Analysts, Controllers, and Reporting and analytics Report Developers Creating information and knowledge The information flow moves upwards from technical environment to business-driven environment. ETL Developers and Database Data Warehouse Specialists Gathering data, making them accessible and usable This information is being used by the IT Professionals Data Sources and IT Infrastructure Top Management to create strategies. Data Creation In Second layer, the operational decision makers’ need for information Technically Oriented Environment and knowledge is determined in a way that supports the company’s chosen  Overview of Business Analytics Model In Second layer, the operational decision makers’ need for information and knowledge is determined in a way that supports the company’s chosen strategy. In the middle layer, analysts, report developers creates the information from the data to be used by the Operational Decisions makers. This information is used for innovating and optimizing their day-to-day activities. In the second last layer, database specialists and ETL developers ensures that this data is accessible to the business users to be used. In the bottom layer, the business primary data generating source systems are developed by IT professionals. Strategy Creation The Information Strategy are specified in the business-driven environment at the top of the model. Here, analysts specify which information and data are necessary to achieve desired behavior of operational managers and The Information Strategy is based on the organizations overall business strategy i.e., (Vision, Mission and Objectives). All these strategies are created with the purpose of measuring the degree of progress and success with the help of KPIs (Key Performance Indicators). The content of KPIs will depend on which business process to be controlled for e.g., Customer Satisfaction, Profitability, Return on Equity or Sales Targets etc. Business Processes and Information Use Once the overall strategy and strategic KPIs are defined, a framework and objectives are established for Operational business processes and initiatives. The KPIs defined in this layer of model must be directed at changing and managing business process towards the strategic objectives. The objective of Business Analytics is to change business process and actions to achieve organization’s strategic objectives. For e.g., operational decisions makers from sales, marketing, production, human resources, finance and general management can use this information and knowledge to optimize their daily activities. Reporting and Analytical Process This process falls in the middle layer of the Business Analytics model. Analysts specify which information and data are necessary to achieve the desired results. This is the layer where how the data stored in data warehouse is to be analyzed is established. All this is done with the purpose of meeting the demands from the higher layers and levels of the model. Data Warehouse This layer stored the data which is to be analyzed to take strategic decisions. Data Warehouse holds the historic data as well to identify trends based on the historic data. If the data is already available in the warehouse, it is the responsibility of database specialists and ETL developers to make this data accessible to the front-end applications. If not, then it needs to be retrieved from one or more operational data sources in the organization’s environment. Else, IT department’s help can be taken to make necessary changes or to implement new infrastructure to start capturing the data. Data Sources : IT Operations and Development IT Operations and development focus should be to integrate any new data source with the older data sources in data warehouse to cater complete data. This data further will be analyzed to get insights about the listeners to cater business requirement. It is important to realize that every layer of Business Analytics model should be aligned with the organizational goal. Any discrepancy may lead to bigger problems. Case Study – How to Make an Information Strategy for a Radio Station Introduction Now, since we have touch based on all the aspects of Business Analysts layers and understand them in brief. Let us utilize this information to a concrete example in order to understand it better. In this case study, we will look at the Business Analytics initiative for a large radio station that broadcasts nationwide. This case study is created to help you understand how to outline Business Analytics process at the Radio Station with somewhat creative version of real events. All the events we will try to relate to the Business Analytics model which we discussed already. Overall Strategic Targets of the Business The radio station’s vision is that there is a demand for radio entertainment for good music, entertaining talks and news. Their mission is to become a leading player in the national market. Their business goal is a market share of 25% and ROE (Ration on Equity) of 15%. They are tracking the above two measures or KPIs (Key Performance Indicators) to access their business performance. The current state of the business performance is described as below: Overall Strategic Targets of the Business Their actual KPIs score for ROE is 9% and an actual market share is 17%. The business strategy and objectives will be measured with the help of these measures. Their business goal is a market share of 25% and ROE (Ration on Equity) of 15%. Goal (KPI1) : Return on Equity (ROE) = 15% Actual = 9% Goal (KPI2) : Market Share = 25% Actual = 17% Looking at both metrics, ROE is most important metric and is directly affected by Market Share metric. As per the new goal i.e., bigger market shared (KPI2) will mean more concurrent listeners and increased advertising revenue, which means a bigger ROE for a given level of cost. Functional Strategy and Business Case Business Analytics activities must always be based on business-driven environment. Where management specifying or creating one single information strategy subject to company’s overall business strategy (vision, mission and objectives). The Program manager of the radio station has taken strategic decision to increase the business market from 17% to 25%. To achieve this target, the radio station must hold on to their listeners longer from 15 minutes to 30 minutes before they change the channel. To measure that, Program manager has introduced a performance target : Average Listening Time as a new measure or KPI for the production department. Looking at both metrics, ROE is most important metric and is directly affected by Market Share metric. Target for KPI 2 : Average Listening Time = 30 minutes Actual Time = 15 minutes Functional Strategy and Business Case This strategic target penetrates right into the core business of the radio station. Let us understand it in detail by logically relating all the above discussed KPIs: o If the target to hold on to the listeners for average 30 minutes is achieved, it will mean a bigger market share and it will increase advertising revenue and ultimately an improved ROE. o This means that an increase in KPI 3 will affect both KPI 2 and KPI1 positively. Before launching the Business Analytics initiative, Program Manager prepared the business case which states that a profit of 5 million (i.e. 50 Lacs INR) per year. As per the business case report, the KPI1 ROE will increase from 9% to 13%. Functional Strategy and Business Case To set up Business Analytics initiative will incur a resource consumption for 3 employees for 4 months and purchasing necessary software to establish environment and consultancy services of 2.5 lacs per month. Total estimate in establishing Business Analytics initiative is 10 lacs which speaks in favor of carrying out this project. Moreover, the payback period will only be 4 months and the project is not stating any risks. Note that if the business case shows a negative result (or shows any risks), the Business Analytics initiative may not necessarily be initiated. Business cases are a good way or evaluating and prioritizing Business Analytics projects. Business Process and Actions The business process of the production department is to adjust in such a way to hold listeners for longer time. Post discussion with team, it was understood that they need more information about their listener's characteristics, preferences at different times and in connection with different programs and RJs. That means, the processes much be adapted to a listener’s profile to enable RJs to continuously deliver content as per their choices. This further means that in future the content must be customized as per current listner’s interests and results must be measurable on an ongoing basis. Analytical Processes and Front End In this layer, it is analysts responsibility to gather information related to the business objectives. If in the current situation, we are not gathering the complete information like : o Who are our listeners? o What di they like to listen to? o Who listens to what and when? o What is their gender and age? The analysts should quickly realize that and work towards gathering the sufficient data to be able to store it in the database. Data Warehouse The analysts needs the data warehouse to provide them with data on the listeners age, gender, taste and preferences 24/7. They need this information to customize their content to cater as per their listeners requirement and preferences. The database specialists are asked to create a new operational data source to collect this data on listeners profiles at different times of the day. Data Source : IT Operations and Development IT operations and development decide to collect data on the listeners ages, gender, taste, moods and listening times via a questionnaire or survey. The survey is announced and promoted on air and sponsor prizes are given out via draw to participating listeners. This data-collection process enables the creation of new operational data source in the technical environment. With the help of ETL tools, this data is merged with other data sets stored in the data warehouse. From data warehouse, this data is made available to analysts to do analysis using statistical methods and data mining tools shows most of the listeners in the early hours of morning are < 35 years. Using this report, RJs must customize their actions in such a way that provide better support for the achievement of the strategic targets of the business. Evaluating of Business Analytics Process With the help of automatic digitalized decision making helps RJs to hold their listeners for a longer duration. Over the next 6 months, the radio station succeeds in holding on to the listeners for average 9 minutes longer than before. Due to this all three KPIs are improved as below: The business is on its way to achieving its overall strategic targets and the production department’s Business Analytics initiative must be said to have been successful.  Unit 2 Business Analytics at the Strategic Level Business Analytics at the Strategic Level  Business analytics (BA) is the process of transforming data into insights that can be used to make strategic decisions.  It can help you understand your customers, identify new opportunities, and optimize operations.  Analytics and insights can be powerful by limiting the risks you take and helping you make decisions with confidence.  To be effective, it needs to be integrated with aspects of the business, from decision- making to preparing strategies to identifying opportunities etc.  We will discuss scenarios that have different degrees of coordination between the development of strategies in a company and the role of BA. What is Strategy? is a description of the way in which a business currently is, and is to be, run. Its purpose is to adapt the organization’s business area, resources, and activities to the market. It attempts to handle company issues in the short run and parallelly trying to create advantages in the long run. It is developed by defining a number of specific and measurable targets for each department. A strategy can also be described as a list of projects that must lift all the business processes to the next level. Strategic management should not be seen as a number of serial actions, rather as a number of parallel actions, in a number of departments, that must be coordinated. Strategy and Business Analytics : Four Scenarios Here we will discuss scenarios shows different degree of integration between BA and organization’s strategy. This will help you understand whether organization is using full potential of BA or not.  Scenario 1: No formal link between strategy and BA  Scenario 2: BA supports strategy at a functional level  Scenario 3: Dialogue between strategy and BA function  Scenario 4: Information as a strategic resource. Scenario 1: No Formal Link Between Strategy & BA Companies that are separated in their strategy, without data or with limited data. Companies where data is distributed over a large number of source systems. Companies where data is not used for decision making at a strategic level. Companies focus on most visible aspects like Sales, Production or Cost targets etc. The objective is to achieve these targets and companies focus is to work closely with these core functions like sales department, production departments etc. However, there are support functions as well like HR, Finance, Product Development, Administration, BA etc., which also plays a vital role in achieving the objectives for the organization. Scenario 2: BA Supports Strategy at a Functional Level Companies where BA function monitor individual functions achievement of targets in connection with the implementation of a strategy In this scenario, the information does not flow back from BA to the strategic level. Here the role of BA is to produce reports supporting the performance of individual departments. The recipients of these reports are individual departments and no feedback to the strategic level provided by BA. BA function supports company performance, reporting and process proactively. There may be formal dialogue between BA and other individual functions however, the relation to the strategy and BA function can be formalized with the help of a discussion. Scenario 2: BA Supports Strategy at a Functional Level To get most out of BA functions, in such organizations, it is important to define targets based on strategy. These targets should relate to each other internally, combined and make up to organization’s objective. BA function should measure these targets via reports and making them accessible to users. These specified targets must be: o Specific o Measurable o Agreed o Realistic o Time-Bound Scenario 3: Dialogue Between Strategy and BA Functions Companies where individual functions optimize their way or working based on BA information. Also, strategy function proactively improvise its way of decision-making utilizing BA support The decisions will be made based on the data stored in the data warehouse exist in the organization. BA function monitor and report business targets and compare actuals and targets. Here, BA function’s objective is to improve both future strategies and the individual department’s performance. Based on strategy, three things occur: o Benchmarking o Ongoing Measurement o Analysis of deviation from targets Scenario 3: Dialogue Between Strategy and BA Functions Based on these analysis, the strategy is adapted and optimized. When measured performance on time-to-time basis, action will be taken when major deviations between targets and achievements are observed. There are always feedback being passed from BA function to Strategy function to optimize the strategies if required. Scenario 4: Information as a Strategic Resources Companies which treat information/insights coming from BA function as a strategic resource. These insights further used to determine organizations strategy. These companies analyze opportunities and threats of the market on timely manner. Also consider the information in sync with their strategies can give them competitive advantage. In a strategic development process, people competencies are required more as compared to technical solutions. A typical example of an enterprise that focuses on information as a strategic resources is Amazon.com. They began by selling books but has expanded to other goods via the Internet. Scenario 4: Information as a Strategic Resources It is a case of improving the relevance of offers to customers based on information. The strategies created by a company that uses information or data as a strategic asset. This means that if one region learn to improve its process via the use of information, this gets captured by strategy team and implemented as best practice to the rest of the organization. Which Information Do We Prioritize? BA function needs to deliver information to strategy development process team. It is not always possible to know exactly at all time which information to deliver. However, not any information can be ruled out as irrelevant. As per “Three Paths to Market Leadership” article by Treacy and Wiersema in 1993, enterprises have become market leaders by mastering one or two of the following three disciplines: o Being strong in the field of Product Innovation – (example, Sony launches Walkman or Apple first introduced iPod, iPhone etc.) o Having strong Customer Relations – (example, Apple has strong relation with customers, Banks, Phone Service Providers etc.) o Operational Excellence Discipline i.e., being efficient in relation to production and delivery services and focus on optimizing internal processes. The Product and Innovation Perspective This perspective is highly prioritized by enterprises based on Product Innovation or Product Leadership strategies. That is, business that adopt products and services as their central competitive parameters. The focus is typically on the technological aspect and their products can do all the things. For example; Server Solutions, Data Warehouse Solutions, Road Paving and Windmills etc. Another analysis which will have priority to determine which product deliver the highest revenue. This kind of analysis combined with forecasting models for individual products, can give useful estimates for future strategies. Customer Relations Perspective This is essential to enterprises with a focus on maintaining good customer relations. Banks, Insurance Companies and Telecoms, Apple, Nike etc. are few examples. Their focus is customer loyalty. Customers feedback are considered as essential strategic insights. The Operational Excellence Perspective When organization has a strong focus on operational excellence. It focuses on effective ways of producing and delivering services to its customers. Cement factory is a good example: o Here, an enterprise will not be using product leadership strategy, sine product can not differentiate itself technologically. o Customer intimacy strategy does not relevant as relations of one manufacture can be matched by other manufactures. o So, to ensure its survival in the long run, the Cement factory has to create competitive advantages built on its ability to produce and deliver products better than their competition. The overall purpose is to minimize waste and variance in internal; process by making the process stable and predictable. Thank You