I often hear people complain that they are “drowning in data but starving for information.” It’s a common problem for both businesses and individuals— and a topic I discussed with IMA® (Institute of Management Accountants) President and CEO Jeff Thomson in a recent interview.
In fact, according to technology research firm IDC, the amount of data in the world is said to double every two years! Defined as a collection of data sets so large and complex that it becomes difficult to process, Big Data presents challenges to organizations seeking to harness it.
You may be wondering how your organization can make the most of Big Data for effective business decisions. I recommend, instead, shifting the discussion from “Big Data” to “Big Value.” Several kinds of tools have been heralded as solutions for harnessing data to make faster, smarter decisions, but what are the differences, and how are they best used?
A Shift in the Conversation
As IMA’s executive-in-residence, I examine business trends and assist with research, and I’d like to offer some clarity on these tools. In the past, business intelligence (BI) software tools have been offered as the solution for leveraging Big Data, but an emerging term, business analytics (BA), is gaining popularity and causing some confusion.
Business intelligence answers basic questions. It summarizes historical data, typically in table reports and graphs, so that businesses can answer questions. But reports don’t simplify data or explain its value; they simply package up the data so it can be consumed.
Business analytics, on the other hand, creates questions. It produces new information. Finally, there’s the concept of predictive analytics, a subset of business analytics. It can display the possibility (and ideally the probability) of outcomes based on the assumptions of variables. In other words, predictive analytics leverages data to drive better and faster decisions, thereby improving an organization’s performance.
Making Sound Decisions
In business and in life, it’s important to use data to make well-informed decisions. There is always risk when decisions are made based on intuition, gut feel, or flawed and misleading data.
In business, it’s important to identify the decisions that matter most to your organization. By understanding the type of decision needed, it becomes easy to determine what type of analysis to use to reach your goal.
Business analytics is the next wave for organizations to successfully compete and make the best use of their resources and assets. The ultimate business strategy, in the long run, may be to foster analytical expertise among an organization’s staff.
What tips do you have to leverage good data in order to make sound decisions?
Guest blogger Gary Cokins, CPIM, is president of Analytics-Based Performance Management LLC and IMA’s executive-in-residence.