Companies with mature data analytics capabilities outperform competitors by wide margins in the most critical metrics for success, according to research conducted by McKinsey and Company, but only 20% of organizations in the $4 trillion consumer goods segment are realizing the full value of analytics.
Analytics enables companies to respond more quickly and accurately to market fluctuations, accelerate system and process innovation, increase efficiencies in planning, production and replenishment and reduce waste.
“Achieving sustained digital and analytics at scale requires new skills and capabilities, operating models, technology, and data. Leaders in digital and analytics are outperforming laggards on 10 foundational dimensions,” the McKinsey research noted. Data analytics has had the following benefits:
- More than 3% higher total returns to shareholders
- Thirty percent increase in online sales growth
- Reduction of 15% in inventory costs
- Reduction in 50% churn among top-performing employees
Companies began investing aggressively to expand their analytics capabilities during the pandemic, with some estimates noting nine out of 10 intend to continue development.
A separate McKinsey report predicts “investing in big data talent at scale is a must,” signaling a growing demand for business professionals with insights and technical expertise in business analytics.
What Is Business Analytics?
Business analytics comprises the use of data and technology to answer four types of questions: What happened? (descriptive); Why did this happen? (diagnostic); What might happen next? (predictive) and What should we do next? (prescriptive).
How do businesses use prescriptive analytics to realize value?
Professionals can use machine learning algorithms to sort through and identify trends in large, complex data. Knowledge gleaned from those data sorts enables business leaders to make informed decisions and set strategies more quickly and with greater accuracy.
Harvard Business School (HBS) cites product management as an example of prescriptive analytics at work. In this scenario, a company can sort through data on customer preferences and market research on how they interact with beta versions of a new product. Then, machine or manual analytics identifies trends and reasons behind them in the data sorts and predicts whether they will re-occur.
That knowledge, in turn, enables them to decide what to include in the new product, what to leave out and what to optimize to drive consumer satisfaction.
How do businesses use predictive analytics to realize value?
While prescriptive analytics finds data trends that enable businesses to answer, “What should we do next?” predictive analytics differs by using historical data to forecast scenarios that answer, “What might happen next?”
The summary of a case study published by HBS found that Caesars Entertainment used predictive analytics to optimize staffing costs. The business analytics team developed regression models to analyze historical data on guest arrivals and departures to predict when it needed to staff up or down as demand required.
Those examples and others cited by HBS underscore the importance of unlocking the value hidden in data. It follows, then, that any business professional tasked with making important decisions — including marketers, product leaders, finance professionals and human resources managers — to have a foundational understanding of business analytics.
What Are Career Outlooks for Business Analytics Professionals?
“A lot of people can crunch numbers, but I think they’ll be in very limited positions unless they can help interpret those analyses in the context in which the business is competing,” according to HBS professor Jan Hammond.
The U.S. Bureau of Labor Statistics predicts demand for data-literate business professionals will grow by 25% through 2030, adding an estimated 25,600 jobs annually throughout the period.
Moreover, LinkedIn lists business analytics and analytical reasoning among the top 10 hard skills companies need most. In 2018, business analytics climbed 10 spots to No. 6 from the previous year, including increased demand for professionals with data skills. An advanced business degree focusing on analytics will prepare professionals for an increasingly data-driven world.