Even though big data could still be considered a relatively 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. In light of this, many businesses are still trying to understand big data and how it can help decision making.
The rise in technology and use of social media as a tool has meant that big data and business analytics are transforming the way in which businesses manage and analyse data to obtain competitive advantage. Therefore, the question remains – how do organisations harness data for competitive advantage and how can they transform data into revenue? The finance function of an organisation will be the first point of call for many and therefore the role of FD or CFO will transform from simple number crunching 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.
Commenting on the benefits of real-time data, 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 high quality and realistic budgeting and forecasting decisions.
Data capture can be through many sources such as external data providers – such as 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, managing and, subsequently, analysis of the data in order to maximise the benefits of business analytics. The most often 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.
Netflix would be the perfect case study for the advantages of big data and business analytics. Reed Hastings and Marc Randolph‘s billion-dollar empire started out providing customers the opportunity to borrow and return movies using prepaid envelopes. The firm performed detailed analytics on its existing database and ascertained what customers were watching; this information then allowed it to market unwatched movies to their customer database. Now that Netflix simply requires its customers to pay a subscription to view a plethora of movie titles, this process proves evermore valuable and is the perfect example of using data for predictive forecasting and enhancement of competitive advantage.
So how can big data and business analytics help small businesses? 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.
This article comes courtesy of Cresco, the domain names and internet security company.