Many businesses are still trying to understand big data and how it can help decision making. Even though it has been a new concept within the business world, it has been gathering momentum as a key factor in the way in which businesses are going to make decisions that affect their business analytics.
The rise in technology and social media as a tool has meant that big data and business analytics are transforming the way businesses analyse data to obtain competitive advantage. Therefore, the question remains – how do organisations harness data for competitive advantage? and how can data be transformed into revenue? The finance function of an organisation will be the first point of call for many and therefore the role of FD/CFO will transform from being simply number crunchers to one of strategic data driven decision makers. No longer will historical data be sufficient but rather real time forward looking predictive analytics of data will be required.
James Milne, senior finance director at Yahoo said: “Rather than rely on traditional month-end reports that used to be commonplace, we now have daily metrics that highlight how our users are behaving across a variety of touch points. This allows us to be much more agile in the decisions we make.” The benefits can also be seen in driver-based forecasting, where getting timely data is essential for realistic budgeting and forecasting decisions.
Data capture can be through many sources. External data providers (e.g, Dun & Bradstreet and Experian) can be used as benchmarking tools to gain strategic competitive advantage. Data can also be used to improve operations within an organisation. Taking a fast food restaurant as an example – analysis of large volumes of data could help optimise stock levels, staffing, menu selection and speed at which food is delivered. The benefits achieved would be potential customer satisfaction and improved overall operational performance.
Every organisation has a potential to collect data from retail shopping, supermarkets, airlines and credit card companies but not many are using the data to its maximum potential. Strategies need to be in place for data capturing and managing and subsequently analysis of the data in order to maximise the benefits of business analytics. The most claimed benefits of business analytics are improving and speeding up the decision making process, better alignment of resources with strategies, realising cost effectiveness and responding to user demands for information.
Big data for customer-based use
Netflix is the perfect case study for big data and business analytics. Reed Hastings and Marc Randolph set upon using data to set up their billion dollar empire simply by using existing data effectively to offer the public the opportunity of watching movies without even having to drop off the DVD to a shop. At the outset, customers were required to return their movie in the prepaid envelope provided, now they simply subscribe to Netflix and are able to view a plethora of movie titles on the database.
Generally, small businesses will use intuition to make decisions instead of data simply due to the limited resources and budgets. However, small companies can use several means of data capture such as Google Analytics, Swipely and Kaggle in order to make more useful powerful and strategic performance decisions for their organisations. In house use of data and business analytics could aid better decision making processes such as information on particular suppliers and the quality of raw materials provided compared to the number of returns from customers.
The challenge to embrace big data and business analytics is to recognise its potential and subsequently develop the strategies to take the next step towards it.
Meena Jafferali of Cresco – Business analytics explained in detail on our Finance for Non-Financial Manager Workshop.