In much of what we do on the internet or in virtual transactions, we leave a trail of data. When you click on an advertisement, scan your loyalty card at the supermarket or search for a specific term on Google, businesses collect data about you. It may be to personalize their product or service and better meet customers’ needs, or to make important business decisions based on purchasing trends.
Why is data such an integral part of how businesses operate? Because numbers don’t lie, says Dimitris Bertsimas, associate dean of business analytics at the Massachusetts Institute of Technology Sloan School of Management. He describes data as an “objective reality” for businesses. Unlike our own opinions, data is grounded in fact, and that’s what businesses need to improve their operations and sales and to increase customer retention.
Those looking to pursue a career related to data may consider business analytics. But first, it’s important to understand what that entails and why data plays such an important role in today’s business world.
Business analytics is the science of using data to build mathematical models and arrive at decisions that have value for a company or organization, Bertsimas says. This is relevant in nearly every field, whether it’s medicine, technology, retail or real estate.
“The world of data is pretty extreme, and to not leverage it effectively puts a company in a competitive hole,” says Douglas Laney, innovation fellow for data and analytics strategy at the business and technology consulting firm West Monroe, and author of “Infonomics.” He says business analytics is “simply about using data to generate insights.”
More data is available to businesses than ever, which is why business analytics is a growing field. But how and why professionals use data to reach decisions varies depending on the industry. Airlines may rely on business analytics to determine ticket prices, for example, while hospitals use data to optimize the flow of patients or schedule surgeries.
“It’s the process, in other words, of going from data to models to decisions to value,” Bertsimas says.
To put it simply, business-analytics professionals collect data and analyze it to influence decisions in an organization, Bertsimas says.
There are different types of business analytics. Descriptive analytics uses data to identify historical business trends within a company. Predictive analytics identifies likely outcomes or events. Prescriptive analytics are used in the decision-making part of the process – to recommend actions that businesses can take to reach desired outcomes.
Most business-analytics professionals focus on descriptive and predictive analyses, though some also work on prescriptive analytics, Bertsimas says.
Soft Skills and Hard Skills
A business-analytics professional first and foremost needs to be a strong communicator and storyteller, Laney says.
Bertsimas agrees, noting that if others in your organization aren’t able to understand the data, nobody will find your findings useful.
Business-analytics professionals – especially those in senior positions – should also have knowledge of the scientific method, as conducting analyses, reaching conclusions and sometimes retesting are a big part of those roles, Laney says. In addition, someone in the field “not only understands the business but understands the data that the business captures and what external data sources might be available and useful,” Laney says.
When it comes to hard skills, learning a programming language can be beneficial, Bertsimas says – perhaps R or Python. He recommends taking free or low-cost online classes in these areas, as well as in data science and machine learning.
Laney says a strong knowledge of mathematics and statistics can also be beneficial. However, he notes that “there’s a host of technical products out there for doing visualization and coding algorithms, but they’re always changing.
“I really wouldn’t encourage anyone to get fixated on any kind of technology because it will be secondary in two to three years,” Laney says. “So understand the process for doing analytics, understand the business, the data that’s available, how to prepare data.”
Traits and Characteristics
Business-analytics professionals need an innate curiosity with a willingness and ability to test different hypotheses, Laney says.
They also need to be good at working with and training others.
“Most companies are trying to move toward what’s called ‘self-service analytics,’” Laney says. More and more, he says, companies are training everyone in the organization to be a business analysis professional at some level.
In addition, Bertsimas says business-analytics professionals need the maturity to understand organizational processes and how businesses operate, especially because other employees at your company may use your analyses to make the important decisions.
Example of Business Analytics at Work
For an example of business analytics in the real world, Laney points to Walmart, which has a search engine on its website that accounts for millions of product searches each month.
In one instance, Walmart recognized that consumers searching for the term “house” were going down the wrong path. Their results were related to housing goods, doghouses and housewares, while consumers were actually looking for a DVD set of the TV series “House.” The timing had aligned with the launch of the latest season.
That’s where business-analytics professionals came in.
“Walmart realized that their search engine was only looking at its own data – was not looking at external data. It wasn’t looking at what was trending in the world,” Laney says. “And once they incorporated that external data from Twitter and Facebook and elsewhere into their search engine, they found that they were able to reduce what’s called ‘shopping-cart abandonment’ by 10% to 15% across the board.”
Bertsimas also cites clothing stores. They use historical sales data to determine what types of clothing, and in what colors and quantities, will sell moving forward.
There are a number of resources available online that could help you develop your business-analytics skills.
Business Analytics vs. Data Analytics
While Laney says the two fields are primarily the same, Bertsimas says there’s a slight difference. By and large, while business analytics involves moving from analyzing data to making predictions to making decisions, data analytics focuses on the first two stages, he says.
Business Analytics vs. Data Science
“Data science is probably a corner of business analytics,” Laney says. “It involves developing more complex algorithms, getting into more of the predictive and prescriptive and diagnostic kinds of analytics.”
In general, business analytics is more about generating dashboards and simple visualizations, while data science dives into the complex, sophisticated solutions, he says.
Business Analytics vs. Business Intelligence
Both experts say these fields are interchangeable.
Before pursuing online learning about business analytics, consider your goals. There’s a difference between taking a free or low-cost online course in the field and earning a bachelor’s or master’s degree in business analytics. What’s right for you will depend largely on what you hope to achieve.
If you’re looking for a basic background in business analytics, perhaps to gain skills relevant to your current job, you may want to pursue a lower-cost option. If you’re looking to make a major career change, consider the degree.
If you’re taking online classes “you need to have the aspiration and the desire and the stamina to complete these courses,” Bertsimas says. Without an instructor there to guide you, self-motivation and discipline will be key.
After learning the basics of business analytics, Laney recommends volunteering to help a nonprofit organization glean important insights from their data.
He also says those interested in business analytics may consider online forums such as Kaggle.
“Companies hold contests where they’re trying to solve a particular analytic problem, and they put a data set out there, and people, individually or in groups, can come to try to come up with the best analytic model to solve that problem, and then they could win cash awards or other kinds of awards,” Laney says.