Business leaders, who wish to base their decisions on fact and logic rather than emotion or instinct, probably follow a thinking process that lends itself well to the application of business analytics:
- What has caused this issue to be brought to my attention? If not from an external source (e.g. reading the papers) then business reports may well identify some deviation from a normal course of events (increasing costs, falling profitability, etc.) – often displayed on dashboards, indicators that cross boundary conditions can catch the attention, but what do they mean?
- How do I define this issue? How do I express what I know (and do not know) in ways that I can share with colleagues and which are unambiguous and consistent and might then form the basis of a collaborative approach to resolving the issue?
- What is actually happening? Although business reports often allow for drilling into more detail and gathering more facts, they rarely reveal the whole picture (e.g. the correlation between measures, or possibly other indicators that are not being measured). For example, profitability may drop either because costs are rising or sale price is falling or both – but why?
- What are the underlying processes? This is where the depth of business analytics really tells: identifying correlations, sequences, associated conditions & dependencies, and the validity of (previously held) assumptions – getting to the why of an issue and expressing that understanding in a way that can be used
- What might happen (and how can I affect it)? When you really understand what is happening, and why, you can begin to model possible futures – scenarios of ‘what if we?...’ the ability to forecast into the future is where business reporting aften fails – simple trend lines often mislead (as we know, the past is not always a good indicator of the future)
- Who needs to do what, when and how? By building business analytics into your strategy, using analytical techniques to identify critical processes & measures and reporting tools to monitor progress against the plan, it is possible to build a living, flexible plan that is optimised to securing the optimal future for your organisation and its stakeholders.
Importantly, business analytics allows every form of leader to think and act more effectively. Visionary leaders can peer into the future looking for new sources of competitive advantage, operational leaders can focus on what is important right now, people leaders can align their resources to promote increasing contribution (and reward) and so on.
For further reading, you might like to read more about 'critical thinking'