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Business Analytics Blog

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

The Data behind “Big Data Analytics”

Categories : BusinessTechnology

The insight afforded by the rigorous exploitation of data cannot be overemphasised, particularly now that mobile, social networking and other technological advancements threaten to overwhelm businesses with data.  Information and the judicious use of it is vital to staying ahead of the competition, and perhaps with the spectre of the Eurozone crisis hanging over Europe, it may be crucial to survival.

 The Pareto principle states for many phenomena 80% of consequences stem from 20% of the causes.  This principle has often been applied to businesses where it is alleged that 20% of customers generate 80% of the profits.  As a consequence of this principle it is generally accepted that companies will do better by focussing on that 20%.  Crucially, however, the techniques afforded by business analytics can help businesses understand and make the most of the entire customer population and extract more value from them, not just the top 20%.

 Big data is meaningless without analysis

An internet search of the phrases “big data” or “business analytics” (or any of its many variants for that matter) will yield thousands of articles, opinions, blogs and commentaries on what these relatively well used terms are.  The meaning of these terms is now pretty clear, having been subjected in recent times to a lot of research time.  Also the inter-relationship between these two terms has never been more unambiguous.  Essentially the message is firms need the best of business analytics to address issues arising from the increasing magnitude of data which threatens to overwhelm even the most tech aware businesses.

 However, what a lot of these articles, blogs and commentaries fail to address is essentially what they preach.  Developing insight from the numbers, making the numbers talk, and giving companies the ability to listen and act. What are the numbers behind big data and business analytics?  

 Companies embracing business analytics succeed

With the aim of understanding the impact of analytics on businesses, a survey commissioned by Capgemini from the Economist Intelligence

Unit was conducted to determine the opinion of business leaders regarding the importance of business analytics and the maturity of their capabilities as well as the impact of data driven decision making has had on their businesses.  This survey compared the performance of 600 companies with a view to understanding if the maturity of their business capabilities is a key driver of differences in performance.

 The responses show some key themes around the impact superior data management have on company performance.  Though the respondents did not directly attribute the intelligent use of analytics as their primary driver of growth, it is unlikely to be pure coincidence that respondents who take a holistic view regarding data management and the insight derived from it are likely to be the ones who have achieved rapid/steady growth.

 Information as a foundation for decision-making

It should be noted however, that isolating this growth to data management may be considered implausible. Growth or lack of it is usually a function of a combination of systematic and unsystematic factors; with a number of these factors outside the control of organisations and their capabilities.  It will therefore be disingenuous to attribute growth or lack of it in organisations solely to the maturity of their analytics and data management capability.  Nonetheless, all things being equal, our analyses show that organisations with a mindset that “information is purely an IT-asset” compared to those with the thinking that “information is a foundation of decision making” are more likely to perform below expectations.

 In a bid to understand the performance of these companies, the survey questioned the respondents about growth in their companies.  In a total of over 600 respondents cutting across multiple geographical jurisdictions and industries over 60% say they have experienced steady or rapid growth in revenue and profitability over the last 3 years.  

How much of this performance is driven by the availability of data?  Data availability is a pre requisite to business success particularly for customer focussed businesses.  Decision making without the relevant data is akin to fishing in the dark.  The consequences of that do not need much elucidation.

 56% of respondents confirm that the decisions made would have been “a little better” and “significantly better” if all the required information were available.  In contrast 8 out of every 10 companies reporting a contraction or no growth say they would have performed a little better and significantly better if they had access to all the information.  While it is not a shocking disclosure that better information will improve performance, it is somewhat surprising that as many as 81% of companies with zero and negative growth feel that way.

 Data collection alone is not enough

However, data collection by itself will not make a difference; it is the application of that data to derive useable useful insight that delivers value.  Those insights can have far-reaching impact on interactions with customers, in addition to enhancing an organization’s operation and performance.  65% of respondents believe that management decisions are based on “hard analytical information”. If this is split on the basis of company performance, growing companies’ respondents who believe this assertion are about 7 in 10, while negative growth companies who accept this assertion are less than 5 in 10.  It will be disingenuous to attribute this to coincidence.

 In the same vein, 54% of these steady and rapid growth respondents have made the right decisions more than 50% of the time.  This is not surprising, to achieve steady or rapid growth in very challenging markets, you’d expect such good performance to be driven on the back of very good decision making; decision making driven off superior data management.

 Business analytics can transform information assets into a competitive advantage by delivering fact-based insights. Used to its fullest potential, business analytics can enhance and empower an organization beyond its core business objectives and take it to new, unforeseen heights.

 Intelligent enterprises have the right data

Of those companies with reporting rapid revenue growth 47% suggested that their companies made the correct decision more than 75% of the time.  For those with steady growth it was 42% and perhaps understandably for those organisations with slow, no growth or contraction the respective figures were 34%, 29% and 28% respectively.  The implication here is that making correct decisions helps drive revenue growth. But what helps you make those “correct” decisions?  Regardless of revenue growth response type everyone thought that their ability to make better decisions would be enhanced by access to the right information and tools, which generate valuable insights. This is unsurprising.

 In a customer focussed business where repeat patronage is a vital source of growth, firms must look to enhance their knowledge of customer behaviour and customer predictability know-how.  Winning the hearts and minds of consumers is a key battle ground for competing firms.  As companies focus more on customer issues they understand that business analytics can have a significant impact.

 Prioritising data and analytics for competitive advantage

9 out of every 10 of the companies that have experienced rapid growth view “big data” analysis as vital to consumer loyalty and retention programmes.  Contrastingly, about 55% of the companies experiencing negative growth share the same view.  The trend goes to show the contribution certain priorities may have made to growth.

 The trend spotted in the responses support the view that ability to make fact based decisions is a distinct advantage that companies doing well relative to their peers possess.  The use of analytics to gain insight can enhance the understanding of consumer behaviour and derive additional value in a very challenging business climate.

About the author

Nigel Lewis
Nigel Lewis
Nigel leads the Capgemini Consulting’s 35 strong Business Analytics team, which delivers analytical, operational and strategic modelling solutions to clients. He has 18 years consultancy experience as well as 8 years experience in the UK gas industry. Nigel has successfully managed complex projects in both the public and private sector, including capacity modelling, simulating supply chain operations, strategic business modelling to support future policy decisions, and implementing complex demand forecasting systems. Nigel is currently focussing on the development of Capgemini’s customer analytics and analytics advisory services.

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