Business Analytics for Managers. Thorlund Jesper
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are also offered showing how to add value in the business by using BA solutions.
In Chapter 1, we examine the BA model. The chapter covers the spectrum from business strategies to sourcing of data from the operational systems (data sources) as well as a case study. The model is the pivot of the subsequent Chapters 2 through 6, and the radio station case study illustrates a BA process that will work as a point of reference throughout the subsequent chapters.
In Chapters 2 through 6, we go through the five layers of the BA model, each of which is allocated a chapter. Chapter 2 addresses the relationship between business strategies and the BA function.
Chapter 3 focuses on the creation and use of information at a functional level. The question is how BA can work to support the improvement and maintenance of the company's various business processes (e.g., in sales, marketing, finance, management, and HR) so that they support the overall strategic goals as discussed in Chapter 2.
In Chapter 4, we look at business analytics through processes and present options as well as analytical methods for the transformation of data into information and knowledge.
In Chapter 5, we explain the functionality of a data warehouse and the processes in connection with the availability of data for business use.
In Chapter 6, we discuss the different operational systems and data sources in the organization's environment.
Chapter 7 shifts gears and focuses on the structuring of BA initiatives in so‐called business analytics competency centers (BACCs).
Chapter 8 looks at how businesses can assess and prioritize BA projects, and Chapter 9 focuses on the future of BA. The big question is “Where is BA heading?”
This book could also have been given the title, How to Make an Information Strategy, or How to Use Information as a Strategic Asset. We chose the title Business Analytics for Managers: Taking Business Intelligence Beyond Reporting because we felt that this is the next stepping stone for companies in today's information age. Today most business processes are linked together via electronic systems that allow them to run smoothly and in a coordinated way. The very same information systems generate electronic traces that we systematically collect and store, primarily for simple reporting purposes.
BA allows business to go beyond traditional BI reporting. Had we therefore called our book Business Intelligence, we feared that it would be bundled with all the technical literature on the subject that it attempts to counterbalance. We are entering the analytical age, a window in time where competitive advantages will be gained from companies making increasingly more advanced use of information. It will also be a period when other companies will fail and falter as infosaurs, with only muscles and armor, and not the brainpower needed to survive in changing market conditions.
So to make it clear: Analytics is an advanced discipline within business intelligence. BI today as a term is heavily associated with large software vendors that offer only simple technical reporting solutions for the end users. We will use the term business analytics to put extra focus on these missing elements of the BI equation, and which are by far the most exciting ones; if mastered, they will drive your company into a prosperous future.
Chapter 1
The Business Analytics Model
The most important thing in a large and complex project with a large number of people and competencies involved is to create an overview of the project from a helicopter perspective as quickly as possible.
This chapter focuses on the business analytics (BA) model, which will help provide that overview. The model provides an outline for understanding – and creating – successful BA 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 the interaction in the information generation and information consumption process, which is what BA is, too. The model is the pivot of the rest of the book; the five layers of the model are subsequently explained in detail, with each layer allocated a separate chapter.
If your job is to make an information strategy, for example as a CIO, the model comprises all the stakeholders and processes on which you should focus. The model also gives clues about why most BA projects fail, which is simply because it is a large cross‐organizational activity. You can compare it to a chain that is only as strong as its weakest link; if one of the departments involved lacks the skills or resources, or if the knowledge handover between departments fails, your project will fail.
The BA model in Exhibit 1.1 illustrates how BA is a layered and hierarchical discipline. Arrows show the underlying layers that are subject to layers above. Information requirements move from the business‐driven environment down to the technically oriented environment. The subsequent information flow moves upward from the technically oriented environment toward the business‐driven environment.
Exhibit 1.1 The BA Model
As illustrated by the BA model in Exhibit 1.1, there are many competencies, people, and processes involved in the creation of BA. In the top layer of the model, in the business‐driven environment, the management specifies a strategy that includes which overall information elements must be in place to support this strategy. In the 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 of the model, analysts, controllers, and report developers create the information and knowledge to be used by the company's operational decision makers with the purpose of innovating and optimizing their day‐to‐day activities. In the second layer from the bottom, in the technically oriented environment in the data warehouse, the database specialist or the ETL (extract, transform, load) developer merges and enriches data and makes it accessible to the business user. In the bottom layer, in the technically oriented environment, the business's primary data generating source systems are run and developed by IT professionals from IT operations and development. Successful BA processes should have a fixed structure that always begins with the specification of the information strategy, which is derived from the objectives of the business strategy.
Strategy Creation
All underlying contributions and activities must submit to the chosen information strategy, as specified in the business‐driven environment at the top of the model. This information strategy is decided at this level based on the organization's or the business area's overall business strategy (vision, mission, and objectives). Normally, these strategies will result in a number of key performance indicators (KPIs) with the purpose of measuring the degree of progress and success. The contents of the KPIs will depend on which underlying business process we want to control. The KPIs could, for instance, relate to profitability, return on equity (ROE), or different types of sales targets. The information strategy is often specified by the top management of the organization, by functional managers, or by business process owners. Large organizations may have an actual business development function, which is responsible for the formulation of the strategy for the entire group. How this is undertaken will be explained in detail in Chapter 2.