company strategy. Even though we often look at our organization through an organization chart, where some people work in marketing and others in procurement and production, it makes more sense to see the organization as a large number of processes that, across the different departments, create value chains to satisfy the organization's customers and their needs.
One example of a traditional value chain could be procurement of raw material, manufacturing, sales, delivery, and follow‐up services. The mere fact that someone is part of this value chain means that he or she is measured at some point. We may not be calling it BA, but instead performance targets, budgets, or key performance indicators (KPIs). Regardless of name, these are measuring instruments established to inform management functions about whether the established processes are achieving the organization's various targets.
BA is relevant in both large and small businesses. As shown in the BA model in Chapter 1, it doesn't say anywhere that a company must be a large financial institution with hundreds of data warehouse tables placed on large and expensive mainframes to deploy BA. Small and medium companies are known to carry out excellent BA, using the most popular BA tool in the world: spreadsheets (as do large companies).
We have endeavored to make this technically complex discipline more easily accessible and digestible to a broader group of readers. Students at business schools with a couple of years' work experience should therefore be able to obtain maximum benefit from the book, too.
The book is structured in a way that shows the role of BA in the individual parts of this process and explains the relationship between these parts. You may read the chapters out of order, depending on the area that is of particular relevance to you. The intention of the book is to describe BA coherently and comprehensively while at the same time offering each chapter as a work of reference.
Compared to other publications on the subject, this book is less about describing the individual small subelements of BA, and more about demonstrating the link between them. Specific examples are also offered showing how to add value in the business by using BA solutions.
In Chapter 1, we examine the BA model. The chapter covers the spectrum from business strategies to sourcing of data from the operational systems (data sources) as well as a case study. The model is the pivot of the subsequent Chapters 2 through 6, and the radio station case study illustrates a BA process that will work as a point of reference throughout the subsequent chapters.
In Chapters 2 through 6, we go through the five layers of the BA model, each of which is allocated a chapter. Chapter 2 addresses the relationship between business strategies and the BA function.
Chapter 3 focuses on the creation and use of information at a functional level. The question is how BA can work to support the improvement and maintenance of the company's various business processes (e.g., in sales, marketing, finance, management, and HR) so that they support the overall strategic goals as discussed in Chapter 2.
In Chapter 4, we look at business analytics through processes and present options as well as analytical methods for the transformation of data into information and knowledge.
In Chapter 5, we explain the functionality of a data warehouse and the processes in connection with the availability of data for business use.
In Chapter 6, we discuss the different operational systems and data sources in the organization's environment.
Chapter 7 shifts gears and focuses on the structuring of BA initiatives in so‐called business analytics competency centers (BACCs).
Chapter 8 looks at how businesses can assess and prioritize BA projects, and Chapter 9 focuses on the future of BA. The big question is “Where is BA heading?”
This book could also have been given the title, How to Make an Information Strategy, or How to Use Information as a Strategic Asset. We chose the title Business Analytics for Managers: Taking Business Intelligence Beyond Reporting because we felt that this is the next stepping stone for companies in today's information age. Today most business processes are linked together via electronic systems that allow them to run smoothly and in a coordinated way. The very same information systems generate electronic traces that we systematically collect and store, primarily for simple reporting purposes.
BA allows business to go beyond traditional BI reporting. Had we therefore called our book Business Intelligence, we feared that it would be bundled with all the technical literature on the subject that it attempts to counterbalance. We are entering the analytical age, a window in time where competitive advantages will be gained from companies making increasingly more advanced use of information. It will also be a period when other companies will fail and falter as infosaurs, with only muscles and armor, and not the brainpower needed to survive in changing market conditions.
So to make it clear: Analytics is an advanced discipline within business intelligence. BI today as a term is heavily associated with large software vendors that offer only simple technical reporting solutions for the end users. We will use the term business analytics to put extra focus on these missing elements of the BI equation, and which are by far the most exciting ones; if mastered, they will drive your company into a prosperous future.
Chapter 1
The Business Analytics Model
The most important thing in a large and complex project with a large number of people and competencies involved is to create an overview of the project from a helicopter perspective as quickly as possible.
This chapter focuses on the business analytics (BA) model, which will help provide that overview. The model provides an outline for understanding – and creating – successful BA in any type of organization. The purpose of the model is to give the organization a single common frame of reference for an overall structure in the creation of successful BA; the model clarifies the roles of the individual contributors and the interaction in the information generation and information consumption process, which is what BA is, too. The model is the pivot of the rest of the book; the five layers of the model are subsequently explained in detail, with each layer allocated a separate chapter.
If your job is to make an information strategy, for example as a CIO, the model comprises all the stakeholders and processes on which you should focus. The model also gives clues about why most BA projects fail, which is simply because it is a large cross‐organizational activity. You can compare it to a chain that is only as strong as its weakest link; if one of the departments involved lacks the skills or resources, or if the knowledge handover between departments fails, your project will fail.
The BA model in Exhibit 1.1 illustrates how BA is a layered and hierarchical discipline. Arrows show the underlying layers that are subject to layers above. Information requirements move from the business‐driven environment down to the technically oriented environment. The subsequent information flow moves upward from the technically oriented environment toward the business‐driven environment.
