Why Analytics Will Be the Next Competitive Edge

Lawrence Maisel, Gary Cokins
  • Journal of Corporate Accounting & Finance, April 2015, Wiley
  • DOI: 10.1002/jcaf.22054

Why Analytics Will Be the Next Competitive Edge

What is it about?

Today many business people do not really know what predictive modeling, forecasting, design of experiments or mathematical optimization mean or do, but over the next ten years, use of these powerful techniques will become mainstream, just as financial analysis and computers have, if businesses want to thrive in a highly competitive and regulated marketplace. Executives, managers and employee teams who do not understand, interpret and leverage these assets will be challenged to survive.

Why is it important?

Here is a useful way to differentiate business intelligence (BI) from analytics and decisions. Analytics simplify data to amplify its value. The power of analytics is to turn huge volumes of data into a much smaller amount of information and insight. BI mainly summarizes historical data typically in table reports and graphs as a means for queries and drill downs. But reports do not simplify data nor amplify its value. They simply package up the data so it can be consumed. In contrast to BI, decisions provide context for what to analyze. Work backwards with the end decision in mind. Identify the decisions that matter most to your organization and model what leads to making those decisions. By understanding the type of decision needed, then the type of analysis and its required source data can be defined.

Perspectives

Mr Gary Cokins
Analytics-Based Performance Management LLC

To clarify, BI consumes stored information. Analytics produces new information. Predictive business analytics leverages data within an organizational function focused on analytics and possessing the mandate, skills, and competencies to drive better, faster, decisions and achieve targeted performance. Queries using BI tools simply answer basic questions. Business analytics creates questions. Further, analytics then stimulate more questions, more complex questions, and more interesting questions. More importantly, business analytics also has the power to answer the questions. Finally predictive business analytics displays the probability of outcomes based on the assumptions of variables. The application of analytics was once the domain of “quants” and statistical geeks developing models in their cubicles. However, today it is becoming mainstream for organizations with the conviction that senior executives will realize and utilize its potential value.

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http://dx.doi.org/10.1002/jcaf.22054

The following have contributed to this page: Mr Gary Cokins