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Business Analytics Assignment
A study conducted by IBM revealed that companies who drive analytics tend to do have about 33% more revenue growth and 32% more return on capital invested. The study conducted in 2010 with 1900 CFO’s also revealed that respondents decided to use analytics to understand not related correlation between information which cannot be detected manually and it is an absolute necessity that a company have business analytics as one of their top priority (2009 Global Study of 2,500 CIO’s). (IBM, 2010)
Big Data is the next big break in data warehousing and business analytics. (Minelli, Chambers, & Dhiraj (2013)
Companies have immense data being produced every day by the company. Keeping a track of all this data to build the business is definitely not an easy task; knowing what a customer needs and striving to fulfill their demands and knowing how to manage the internal functioning of the company; and thus the need for business analytics is felt. A solution of skills, technology and action business analytics studies any given data through statistical and operations analysis, It is the addition of business and technology. Therefore we can conclude business analytics is ‘Business analytics means delivering the right decision support to the right people at the right time.’ (Laursen &Thorlund, 2010)
As managers one should understand how to interpret the data than manipulating it. Managers should be able to answer the question, ‘why strategy execution unravels and what to do about it’.
"Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations." (Johnson, Scholes & Whittington, 2005).
Strategy a combination of integration of data and the processes of the organization is an aspect which influences business analytics and the structure of the organization. (Shanks & Sharma 2011)
The crisis today is the information received is not clearly interpreted and that how strategy is not clearly understood by the managers. According to Donald Sull, ‘Manager’s today measure communication to the number of meetings held or the number of emails and text sent; instead they should focus more on how to structure and lead discussion.’ (Sull, 2015)
Neglecting the drivers of effectiveness: decision rights and information flow is where organizations fail to succeed in implementing. (Neilson, Martin & Powers 2008)
Strategy is a picture drafted to run the organization. It is a short term process to handle company’s issues and simultaneously create a competitive advantage in the market. Therefore the need to understand information at a strategic level is a necessity as this influences the development of a strategic process. The inter action between Business Analytics and strategy can be depicted with the help of the four strategic scenarios. These scenarios help an organization understand where their company stands and if they have made the maximum use of business analytics.
The four scenarios being: (Laursen &Thorlund, 2010)
Scenario 1: Separate- No formal link between strategy and BA.
Scenario 2: Coordinated- BA supports strategy at functional level.
Scenario 3: Dialogue- Dialogue between strategy and the BA functions.
Scenario 4: Holistic- Information as a strategic resource.
(Laursen &Thorlund, 2010)
Being an analytical organization is not easy. Organizations face a immense obstacles like the growth of information, an expected increase of 40 – 50% annual growth in the volume of data generated (McHugh, 2012), , The nature of data (structured or unstructured), quality of data, the organizational culture.
The business analytics framework is built to understand and interpret this data and thus help in the strategy development process. In brief business analytics framework gives the organization an overall idea (systematic evaluation of data) of the information collected on the company and the market they work in. it consists of data integration, analytics, reporting and business solutions.(Panjwani, 2010)
Analysis of the data helps in strategy development to mark the performance of the organization. Just analyzing the data and interpreting them to understand if it is accurate and timely would not do the real work. Managers at the strategic level need to make sure action are taken and implemented to overcome the issues.
This section will look at the integration between strategy and business analytics under four scenarios as shown in the diagram.
(Laursen &Thorlund, 2010)
Scenario 1 – No formal link between Strategy and Business Analytics.
When strategy is implemented in this type of organization, they generally tend to overlook the in-depth information received and instead defines target which are measurable (ex. Sales target) along with its support functions without which the organization would fail to overcome its market obstacles. (Laursen &Thorlund, 2010)
While implementing the strategy, analytics may be used to analyze the progress and achievement of each set of target. In this scenario the feedback is not sent to the strategic level as it reports are analyzed by individual departments. Since the strategic level does not review the analysis so as to come up with a strategy for the betterment of the organization the information does not get processed further. Thereby concluding, in this scenario the degree of intelligence and degree of competition is very low. (Laursen &Thorlund, 2010)
This scenario is mostly seen in practice in small independent firms like hair dressing salons. In these types of organizations each department has its own strategy and often ends the analysis after receiving the reports on how many, how often and where (ad-hoc basis). This absence of link is noticed since adequate resources and where capital technological investment cannot be allocated in the business. The data received just used to answer material question as mentioned above. (Laursen &Thorlund, 2010)
When working under this scenario the company will have to be efficient when implementing the strategy, this is because the information received is not strategically analyzed and thus remains inconsistent and unrelated to the other departments of the company which leads to problems in future when the company decided to expand.
In a hair dressing salon each employee is seen to undertake different duties varying from styling to cutting to a separate individual managing the finance. In this setting it is clearly seen that there is no interaction between the departments. The individual managing the finance would only restrain herself to that particular work and so goes for the other employees working in different department. Each employee handles different number of customers on a daily basis. Their aim is to achieve a certain level of target for each day thus proving the strategy developed in this scenario is short term and there is no link between the strategy and Business Analytics. This strategy implemented by the organization may later obstruct the business from expanding. When a business expands integration of information and an understanding should be developed strategically and implemented.
Scenario 2 – Business Analytics Supports Strategy at Functional Level
Also known as ‘adapted information strategy’ (Laursen &Thorlund, 2010) the scenario produces reports and supports individual department. It is an interaction with no back flow.
The strategic level is who develops the strategy; it is carried out by the functional level later for implementation. the functional level develops sub strategies to meet the main goals stated by the top level management. Thus, information at a strategic level should be understood centrally with regard to the strategic development process.
Business analysis monitors individual performance and reports to the department. This information is not passed on to the strategic level. Every department has its own business strategy which is backed by its business analysis to analyze if the targets listed have been met; this is through the technique SMART. SMART technique helps guide employees and keeps track of the goals and targets of the organization.
The organization when working under this scenario should have a clear idea on their targets and goals. If not clearly defined they are prone to travel off track resulting in letdown of meeting requirements as stated.
(Laursen &Thorlund, 2010)
The most suitable example for this scenario would be a bank. A bank is known to have many divisions / departments like deposit operations, electronic banking, investment banking, etc. each of these departments have their own business strategy. The supervisors for each of these departments study the data after conducting a business analysis. The outcome is then measured through the technique SMART.
S – Specific: Each of the department should have their targets specific and clearly set/defined. This is to be clear on what the department wants to achieve. Having a clearly defined goal will help guide employees thus pushing them to meet the goals. Targets can be in numbers or also can be asked to be in coordination with the other departments.
M – Measurable: Targets should be measurable that is when analyzing the information the supervisor should be able to measure the output to know if the stated targets have been met. If targets are stated in numbers, ex. 20% in life insurance policy scheme, it helps achieve target faster as it is clear.
A – Agreed: The targets stated should be accepted by the organization and the department. If any objections the strategy must be reconsidered. If not reconsidered there are chances the employees fail to given in their 100%. If agreed upon it also means the organizations has someone to take up the responsibility of the targets set.
R- Realistic: goals set should be realistic. Often targets stated tend to face a downfall without even position a chance on meeting success.
T - Time Bound: targets must be set with a time frame. If no time frame employees tend to have a laid back attitude towards the targets. It is also necessary to have a time bound as it helps in reduction of costs and helps in increase of customer loyalty. Ex. Winter clothes if not sold during winter the company would not gain any profit as they lost out on their customers.
Scenario 3 – Dialogue between Strategy and Business Analytics Functions
In order to get a Business Analytics function that sustains the strategy function, the organization ensures that both of them in cooperation take part in the learning loop which is assisted when the Business Analytics function is reporting on business targets with the endeavor of improving individual department’s performance as well as the strategies. This scenario primarily relies on the existence of data warehouse and Business Analytics function to amass and make use of this data, further, being exemplified by an incessant dialogue between the strategy and Business Analytics functions. Additionally, the reporting methods have been given distinguished names, illustrated as scorecards and customer profitability etc. (Laursen &Thorlund, 2010)
This section concerns information regarding scorecards and Business Performance Management (BPM) solutions which start from a three stage strategy, commencing from benchmarking and relying on analyses the strategy is finally modified. This adaptation along with the capability to deliver pertinent information is the eminence for the Business Analytics function. While delivering the reports, which explain if individual departments are meeting their Key Performance Indicators (KPIs), any deviation between targets and achievements will lead to an action being taken. Hence there will always be feedback between these two keeping the process solemn. The recognition of the alleged ‘critical success factors’ corroborates the performance of coordination. (Laursen &Thorlund, 2010)
The advancement of the strategy is measured on an enduring basis and analyses is done to derive learning which in turn is used to improve the business processes thus known as optimization. Besides, this learning can add to generate learning in terms of strategy for the later iteration. On another note, “balanced scorecard” is a substitute means of operationalizing strategic feedback processes. The internal processes are linked with the development of business. The basis of devising of these requirements in relation with the implementation of a new strategy is the method developed by Kaplan and Norton. (Laursen &Thorlund, 2010)
British Airways aims to be the world’s leading premium airline (British Airways, 2009). They in 2009 launched a 5 goal plan for the three years. One such program was Compete 2012 where their aim was to keep the spirits alive of the Olympic game. They had to set themselves apart from other airlines to be noticed. Along with this aim they believed to be socially responsible and give back to nature. Their strategic aims were colleagues, customers, performance, excellence, partnership. (British Airways, 2010)
Having a clear strategy and implementing it accordingly like the British Airways will help companies help monitor what went wrong, how and why and thus will be able to rectify those errors to prevent further loss due to the same mistake. British Airway was clear on their goals and their implementation strategy. This helped them analyze their performance in the market and thus act wisely while developing a new strategy in the coming year.
(Laursen &Thorlund, 2010)
Scenario 4 – Information as a Strategic Resource
This scenario represents information regarding strategic resource. Market strengths and weaknesses are used to distinguish such ventures which are principally concerning people competencies requisite for the strategy development procedure. A characteristic example would be Amazon.com, where individual customers receive offers after their requirements and purchases are processed. This distinguishing factor makes amazaon.com distinct from other online book shops. This concept of customizing services to local conditions is becoming popular among other retail chains too. Moreover manufacturers are provided with the vital information from the shops with regards to product development, this constitutes to the promotion in the right places. (Laursen &Thorlund, 2010)
Some definite elements of strategy can be looked upon to distinguish information based strategies. The use of information as a strategic asset will help the organization gain a competitive advantage in the market when analyzed the information procured with the help of business analytics. Information as a strategic asset on culture will scan through the data and identify where the company can gain advantage in the market resulting in a process either top-down that is from the top level management to the bottom level or vice-versa. If the information benefits one department it will be taken as a base to develop the next strategy and thus be implemented within the organization. (Laursen &Thorlund, 2010)
After the monitoring process the company can use business analytics to understand their deviations and the market along with its competitors and draft a new strategy for the next year.
The information from the previous year will help the company to analyze where the problem was, what actions are needed to rectify them, why is it happening, what would happen to the company if these trends continue and what will happen in future, gaining a high degree of integration and high degree of competitiveness.
Therefore ‘Information at a strategic level must be understood centrally in connection with the strategy development process and throughout the organization where implementation is carried out.’ (Laursen &Thorlund, 2010)
In this essay various levels of business integration were studied. It is important to understand that each none of these scenarios are better than the other. Organizations strategy, competitiveness in the market, its internal competencies and technological depends on which integrations the company/organization choose.
The first scenario was no integration that is no link between strategy and business analytics. This type of integration is usually adopted by small firms like hair dressing salons. This works on a pure ad-hoc basis where only the material questions are just answered and this is if Business Analytics actually exist in the company.
In a banks each department, often objectives are specified. This leads us to the second scenario that is Business Analytics supports strategy at functional level. This scenario is relative to business strategy. Information here is not passed to the strategic environment.
Dialogue between Strategy and Business Analytics Functions, this scenario is formal in nature.
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