Business Analytics: Or – lies, lies and damn statistics?

Business Analytics (BA) is fast becoming the driver for strategic decision-making; more so, however, for the large than small company. The larger the organization the more likely it is to use BA to drive strategic thinking and strategic decision-making, whereas the smaller organization is more likely to use metrics for operational matters, such as, cash-flow management and HR resource allocation.

What is Business Analytics?

Companies and corporations today are accumulating enormous amounts of information in numerical, text and graphic form in the business transaction process. Data mining (DM) is but one method of extracting knowledge from masses of data, however, DM is not good at extracting data from information in graphical form. Thus, the real challenge in all this is how to translate text and graphics into meaningful statistical data. Text-to-data tools have been available for many years so that is not the problem, graphics to data is.

How to use the knowledge generated from BA is critical in extracting value for the business. It is also central to creating a knowledge-centric business. The major challenge, however, is to make sense of the knowledge generated from the data and to represent that knowledge in a manner that is easily understood and embedded in the corporate culture and company-wide strategic decisions.

The real hurdle in all this is the fear of statistics and what they represent.

Remember Benjamin Disraeli (Queen Victoria’s Prime Minister) who is credited with the saying: “There are three types of lies: lies, damned lies, and statistics”. And, as a wise sage once said: “Statistics can be used as drunken men use lampposts – for support rather than for illumination”.

So, how can statistics be used?

Statistics can be used to: justify actions, guide actions, prescribe actions – or to bury the obvious in a blizzard of snow!

Proponents of the latter option soon come to realize this has no value whatsoever over the long-term. In fact, it has great potential to do oneself and the company more harm than good!

BA has great potential to identify the specific profit drivers of your business from a mass of data. The real benefit of that knowledge is the opportunity to allocate resources to those activities that (as one smart scribe stated eons ago) generates the greatest ‘bang for the buck’!

The greatest benefit of BA is that it allows one to model a range of possible outcomes from a series of options, and to allocate finite resources to the option most likely to generate optimal returns on resources expended.

SOG has found BA to be particularly effective at developing the next generation of CEOs. How best to know if the CEO waiting in the wings is made of the ‘right stuff’ to take on the challenges in managing the corporation? Business Analytics!

Give the CEO-in-waiting a $100m business with the instructions to grow it into a $300m corporation in quick time and place him or her in a team of competing aspirants to the top job. One will very quickly identify those who have what it takes to be successful – and those who don’t!

How can your organization (either public or private) do this?

Use business simulations!

What one looks for is not whether a participant makes a mistake. We all do that. It is how they recovered the situation after the mistake and were they working within a coherent strategic framework.

Or is it all lies, damn lies, and statistics!


7 thoughts on “Business Analytics: Or – lies, lies and damn statistics?

  • I am a big fan of Business Analytics. I remember reading a recent study somewhere that found that companies gaining the most value from business analytics share several characteristics. These include: A top-down embrace of analytics by senior leaders; putting the right analytic team in place; improving data management and governance; deploying the right analytic tools; and applying results into your operation.

    Comment from: Rob

  • Charles,
    I forgot to mention that some SMEs are using MS-Access as a basic data-text KM system.
    Kenneth

    Comment from: Strategic Outcomes

  • Charles,
    Most of the knowledge intensive organisations I know of are developing their own software applications to turn data into information for dissemination – and are finding the challenge very difficult. Most of what is being done is interlinking various software applications outputs into an organisation-wide knowledge file. There are many applications avaliable, very few breakout of the data capture and manipulation domain. You may want to access a paper I published back in 2000 where I presented a two-stage process for eliciting and prioritising critical knowledge (http://www.emeraldinsight.com/journals.htm?articleid=883717&show=abstract). In that paper I identify the software applications (Repertory Grid and Expert Choice) and how they were used in the two-stage process. I think that is why there is not as yet a comprehensive integrated application that translates data, text and graphics into knowledge/information – as yet. It is essentailly a multiple step process where there are some great software applications that separately generate great outcomes, but most of which do not ‘talk to each other’.
    I hope this helps.
    Kenneth

    Comment from: Strategic Outcomes

  • What software would you recommend for turning data into information that allows you to disseminate it?

    Comment from: Charles K

  • There is a shift toward providing deeper insight into business information. And there is a growing emphasis on better tools and putting more powerful and better software in the hands of business decision makers.

    Comment from: Mel

  • Jen,
    Business simulations generate large quantities of data in a short time period that can be used to identify those variables that predict (or not) the achievement of the strategic objectives (e.g., profit, market penetration, ROE and the like). In addition, strategic learning is enhanced because the strategic thinking/strategic decision-making stimulus-response relationship is contiguous. In real time, one often has to await the end-of-quarter or end-of-year financials to assess the full impact of multiple decisions on the overall success of the enterprise. The cojoining of the simulation and BA provides the individual, the group and collectives (i.e., multiple groups) to draw their own conlusions from the data and then, make a much better and more rigorously tested set of decisions that have been filtered, prioritised and optioned to be more readily understood at a wider audience level.
    I hope this helps
    Kenneth

    Comment from: Strategic Outcomes

  • Its interesting the suggestion to utilize BA within the context of a business simulation. I wonder how would one simulate a business for insightful feedback based on BA discussion to foster improvements in ones business or profits? Is this simulation cojoining BA similar to forming a ‘committee’ to analyze the data and report back to the larger group their findings?

    Comment from: Jen-USA

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