Five Business Analytic Principles
by Chris Clegg
Business analytic ideas and concepts are often presented as extremely complicated. There are a lot of tools on the market today that are supposed to help with this. Purveyors of many business analytics tools often work hard to convince you that the project is so complicated that you’ll need their product or software to complete it.
There is another way. It recognizes that you have a business analytic need, but not the technical expertise or time to learn a new business application. Let’s bring the whole down thing down to earth.
Business analytics is all about organizing the past to understand what the future might hold.
Their is a history of patterns in your business that, when understood, can be applied to your future decision making. Too many business decisions are made based on a manager’s “gut.” With the application of some simple business analytic principles, anyone can apply historical evidence to the decision making process (and still check your “gut” to see if it still “feels” right).
To get a grasp of the power of business analytics, you need to recognize five universal truths:
- Anything can be measured.
Anything. We’re not using the term loosely here. Truly, anything can be measured. You might say this is impossible;tThat there are things so abstract that this simply is not possible. Take “perspective” for example. You may think that you can’t measure something so dynamic as a consumer’s perspective of your brand. Sure you can, so long as you define it in a measurable way. The trick to measuring anything is how you define everything. We must define things within their context. Let’s say you are trying to understand the extent to which consumers view your brand as the high-quality option. If you define quality as someone’s level of agreement to the phrase, “Brand XYZ is the highest quality option available to me today,” then you have a method of measurement. Sure, there are limitations and other issues at play, but by defining the concept in a relevant and measurable way you have given yourself a rational starting point from which you can build.
- All recorded measurements can be graphed.
You simply apply the variable of time. If I’m measuring customer loyalty with a survey, all I need to do is chart my loyalty score at different points in time. With the time frame along the bottom of a chart (x-axis) and the score along they side (y-axis), you can get a clear graph of customer loyalty.
- When graphing anything, patterns emerge.
This is where you need to lean on statistical techniques to help you uncover the pattern, but understand that it is always there. The alternative to a pattern is chaos. Chaos simply does not exist among the actions of people in groups. (This is something I’ll back up in a later post.) As humans, we move in patterns, and these patterns will become visible when measuring any type of human behavior over a defined period of time.
- Patterns hold the power of predictability.
This is due to the very nature of patterns. You simply extend the variable of time and apply the average measure. Again, there are some fancy techniques to be applied here to help you control for things that influence the historical average (e.g., seasonality, marketing initiatives, competitor activity, roll-backs). However, any pattern can be extended beyond its current end point to predict the future.
- Therefore, the future can be accurately predicted.
Therein lies the power of business analytics.
What happened in the past is the past. There is nothing we can do about it. The future represents opportunity, and the more we know what to expect, the more we can position ourselves, our brands, and our clients’ brands to be more successful in that future.
The business analytic basics are truly powerful tools for business planning and decision making. It has been the exclusive domain of expert analysts and software training experts far too long. At Portland Marketing Analytics, we work to bring the rationale of business analytics to business professionals. This gives you the power to use these tools as you see fit. When it comes to the heavy lifting you can always lean on the statisticians and software experts. However, you’re the one who has to make the final business decision.
Photo courtesy of Pixabay.com