Business Analytics Tutorial for Beginners

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In this guide, we examine business analytics from 1) comparing business intelligence and business analytics, 2) discussing the benefits and challenges of business analytics, 3)  discussing whether small businesses need business analytics, 4) great analytical tools you can use to gain more business insights, and lastly 5) provide some actionable tips on business analytics.


There are many parts of a business that can benefit from the use of Business Analytics. Sometimes this wide variety makes it hard for business owners to know exactly where to start when they want to apply business analytics.

Business analytics can be defined as software or business systems that make it possible for organizations to make decisions after carefully analyzing relevant metrics. These decisions range from customer relationship and workforce management to supply chain and even financial management.

This wide range of functions that can benefit from analytics is the reason why some companies are stuck at the first step of applying business analytics. Another problem that is common among businesses is telling the difference between Business Analytics and Business Intelligence.

It’s common to find these two terms being used interchangeably in online forums and discussions. Before we look into business analytics, let’s first draw a line between Business Analytics and Business Intelligence.

Business Intelligence

Business intelligence is about the technologies, tools and techniques that are used in providing insight about where your business currently stands. It is very broad and the tools and hardware platforms used differ depending on the size of the business and the volume of data to be handled.

To better understand Business Intelligence, let’s use an example. Assuming you own a number of fast food outlets in different parts of the country. You normally use Excel spreadsheets for storing the data on sales and operations from each of these stores. One day you decide that you would like to use this data to better understand your businesses.

Here, you want to know the days of the week that you get more sales, the days of the week that have the most sales, the outlets that sell more on weekends, etc. The solution is in collecting all these spreadsheets and storing them in a central position, then sorting the data and displaying it in an easy to understand form. Some of the visualizations that you can use here include bar graphs, pie charts, etc. They will help you get the information you need faster.

The systems that you will use to achieve this fall under Business Intelligence. Simply put, they make it easier for you to know what is happening in your business. Generally speaking, they take data collected from the business and structure it in a manner that is easy to understand so that you can know your business and as a result make better management decisions.

Here are some recent business intelligence trends you need to be aware of.

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Business Analytics

Once you have understood what is happening in your business, it’s time to bring in Business Analytics. In Business Analytics, you’ll be trying to find a reason for why things are going the way they are going. The tools used here are complex statistical analysis instruments.

Once again, let’s use our example of a chain of fast food outlets. You may have used Business Intelligence tools and found out that more customers frequent a particular shop on weekends, and others on weekdays. Business Analytics looks at all the different factors at play to try and find out why that is the trend.

Once you have been able to know why a particular outlet performs badly on certain days and why it performs well on others, you can try and change the things that are within your control that improve the performance.

For example, if you find that the performance is better on the day that follows your weekly social media promotion, you can invest more on advertising on the days that the outlet doesn’t perform as well. The performance of this decision will again be monitored using Business Intelligence tools and any necessary changed will be made.

Unlike Business Intelligence that uses simple mathematical operations like the sums, products, averages and percentages, Business Analytics uses more complex data science operations. Some of these include correlation analysis, regression analysis, variance and standard deviation among many other advanced techniques.

In summary, Business Analytics covers the tools that tell you why something is happening in your business and what is likely to happen in future.


Going by the large number of businesses that are looking to add business analytics systems to their operations, it goes without saying that there are benefits that come with it. Let’s take a look at the benefits that businesses gain from the analytics systems.

  • Smart Decision Making. This is the most obvious benefit that comes with the use of analytics in business. When businesses apply analytics in their decision making, they are able to achieve higher accuracy in the desired outcomes and as a result, the risk and uncertainty that comes with change is significantly lowered. This is a significant improvement of the decision making process that would normally rely on a manager’s gut.
  • Faster Decision Making. In addition to improving the overall quality of decisions made, business analytics help in speeding up the process. For a company to stand out from the competition, it has to respond quickly to changes. It’s also very important to carefully evaluate each decision. Making quick decisions is easy. The tricky part comes in making smart decisions quickly because the decisions needs to be evaluated. Business analytics make this possible because the ready access to data and insights from its analysis make it possible for employees and top management executives to make informed decisions faster.
  • Better Track of Company Values. Every forward minded business has a mission statement that is used to define the core values in the organization. In these companies, all new employees are trained on these values in order to push the company to success. Unfortunately, most of these companies don’t track the adoption of these values in core operations. Business analytics provide a better way of measuring the adoption of these values by translating them into numbers that can be quantified, analyzed and recorded. This makes it easy to notice trends in the adoption of values and missions and at the same time, employees have a better understanding of what customers expect from them.
  • Better Insights through Data Visualization. We have all heard that pictures are worth more than plain words. When it comes to trend analysis, numbers make it possible to present patterns in simple visualizations like charts and graphs. These visualizations help companies to move quickly. This is because it is possible to find useful and relevant insights without taking a lot of time trying to understand what is happening. Decisions are made faster and processes improve.
  • Companies Stay Updated. The modern consumer is becoming more and more unpredictable by the day. They change their minds very easily and will not hesitate to go to the company that seemingly offers more value. They are very responsive to fads, something that can significantly affect a company’s bottom line. To stay in business, there is a need for companies to ensure that they dynamically adjust in line with the trends that consumers care about. Business analytics ensure that these companies have insights about the way their target market thinks. As a result, it’s possible to come up with a logical explanation for the actions that their consumers take. Armed with this information, it’s easy for a company to adjust its offerings in accordance with the needs and preferences of consumers.
  • Efficiency in Operations. We have mentioned that analytics help speed up the decision making process by providing actionable insights from large amounts of data. This alone is a step towards a more efficient working environment because management officials are able to save time, which will be spent on more productive tasks. Business analytics also encourage teamwork since employees are able to participate in decision making. Employees will also be more productive since they will better understand the overall goals and the strategy and tactics applied in achieving them.
  • More Profitability. Overall, analytics help a company to produce more and better results while using fewer resources. What this means is that the company will be able to achieve higher profits thanks to cost reduction, and better resource utilization. Untapped opportunities are also identified, hence the company is able to expand its reach. By offering new products and services, the company will see increased profits and growth. The result is a competitive edge that can push a company to unprecedented heights.

Learn about why data and business analytics are so important to generate a competitive advantage.


Even with the many benefits mentioned above, business analytics also come with a fair share of challenges that companies must overcome before they can fully enjoy the benefits. Let’s take a look at these challenges.

  • Requires Cross-Organizational Collaboration. Unlike other smaller changes in the company operations, adoption of business analytics requires full collaboration from multiple departments within the organization. This will ensure that everyone understands and works towards achieving the organization’s vision and finding the best solutions for the customers’ needs.
  • Complicated Technical Integration. At the time of adopting business analytics solutions, most companies already have existing performance management, transaction recording and operational management systems. Sometimes, integrating business analytics systems to existing systems can be challenging, resulting in errors that could make it look like the company isn’t getting value for money spent.
  • High Initial Cost. Implementing business analytics in business requires expensive software and networking infrastructure to ensure that data is collected and stored appropriately for processing. This can be a challenge for small businesses that have limited IT resources and small budgets for expansion.
  • Lack of Technical Skills. Since business analytics use involves the use of analytics software, there is a need for employees who interact with the system to have technical skills. In companies that are used to doing things the traditional way, most employees don’t possess the necessary skills to achieve the full potential of these analytics systems. In these companies, the analytics systems appear too complex for employees. The solution is usually in hiring an expert with analytics skill-set, which also means an additional expense.
  • Information Maturity. Take the example of a farmer. Even with the best and the most expensive farm machinery, without good seeds, the venture will not be successful. In the same way, for business analytics to reap the best results, transactional data should be of a high quality. Some of the problems with information maturity could be unavailable data sources, poorly mastered data or too complex data sources.

Got time? Watch a full lecture on business analytics.


Small businesses do not have the financial muscle needed to try out large ventures no matter how promising they are. As a result, they tend to carefully analyze and validate the benefits of any major change before investing in it.

To find out if small companies need business analytics, let’s identify some of the biggest priorities for these companies and the effect of business analytics on each of these priorities.

  • Efficiency. Since most of the small companies usually have fewer resources than they need, it’s very important that they efficiently use whatever they get. This is the reason why you find employees wearing more than one hat so that they can fully utilize the available time. Business analytics ensures that these companies are able to measure the impact of different actions on revenues and profitability. From the Pareto Principle, 80% of the results come from 20% of the action. Business analytics help in identifying the 20% of the actions that are responsible for the 80% of the results.
  • Growth. Small companies don’t want to stay small forever. Studies have shown that growth is the top priority for more than 70% of small businesses. As a result, growth potential is a big consideration in any decision that will be made in the business. Business analytics provide insights about critical performance aspects of the business like the parts of the company that are posting improvements and those that are not, why there is no improvement in a given area and so on. This means that the company’s management will have the information necessary to enhance growth.
  • Customer Acquisition and Retention. This is a big priority because it has a big impact on the company’s bottomline. As a result, small companies try to acquire and retain as many customers as possible. This means that they will do what it takes to identify the needs of new and existing customers, so that they can design solutions that address these needs in the best possible way. Here, business analytics help in tracking customer behavior so that companies will be able to tell what they like and what they don’t. This means that they will be able to make accurate predictions thanks to the insights from customers’ past actions. It’s also possible to quickly tell how customers feel about a change in the service delivery hence the company will be able to make quick adjustments to keep customers happy.
  • Employee Productivity. To achieve efficiency, small companies have to keep their employees highly motivated and productive in their assigned tasks. This will ensure better results, and growth will be inevitable. The use of business analytics ensures that this priority is achieved because employees will have access to information about their performance, hence they will know what they can improve to post better results. They will also have a better understating of the overall standing of the company and the impact of their individual performance on this hence everyone will pull their weight.


According to a forecast done by Statistica, it is projected that by the year 2019, companies will be spending over US$ 100 billion annually on business analytics services. This figure is expected to grow gradually from 58.6 billion in 2015.

To avoid expensive mistakes, it’s vital to ensure that you fully understand the business analytics solution that you adopt. Let’s take a look at some of the common mistakes in business analytics.

Lacking specific business problems that you are trying to solve

Many companies rush into business analytics because it feels like the right thing to do. Others do it because competitors have adopted analytics and they have started reaping some benefits. Unfortunately, these alone should not be the reasons for adoption of business analytics.

To avoid this, you need to define a specific problem that you will be solving using business analytics instead of seeking a silver bullet that will fix everything. This will help you in formulation of goals, and also when identifying the software to use.

Confusing Causation with Correlation

This is another common mistakes in interpreting business analytics. You might find that two or more metrics go up or down at the same time. Some of these metrics could be moving at the same rate.

The most obvious conclusion in such a case might be that the two are correlated. However, this is not always the case. You need to analyze the cause of the move in each metric before you jump to any conclusions.

Presenting your data using the wrong charts

There are many ways you can present your data. The choice of the method to use will determine to a great extent the insights that your audience will be able to get from the data. If you are not visualizing your data correctly, it’s very easy to confuse or mislead your audience.

An example would be using a pie chart to show progress over time. For this, a bar graph or line graph would do a better job. A pie chart is better for something like telling the number of customers from different geographical locations.

Choosing a solution that is not scalable

A good business analytics solution should adapt to changes in the company. Regardless of how small or big a company is, one thing that is certain is change.

New data sources will crop up and the analytics solution should be able to work with these new sources. It should also be able to grow with your company’s growth so that you will not need to look for another analytics solution when things go well.

Insufficient training of personnel

Just like any new way of doing things, there is a need for proper training of employees if you are going to reap maximum benefits of business analytics. After proper training, employees’ performance is improved and as a result, they are able to deliver better results while saving time.


Owing to the complicated integration process and the high initial cost, some companies may choose to outsource business analytics to an external firm specialized in analytics. This eases the burden of starting up and the heavy integration and training costs associated with setting up an in-house team.

At the same time, the company will be able to become more efficient and competitive thanks to the information that will be availed by the external analytics firm.

Should you outsource analytics?

Effective adoption of analytics requires the right mindset, toolset, skillset and dataset to get the job done. If you don’t have any of these, and you don’t have the resources to acquire it, then you are better off outsourcing. Luckily, you can still get all the benefits of having business analytics when you outsource.

Granted, outsourcing analytics comes with its own fair share of challenges. Some of them include the difficulty of coordinating work across employees in different locations, ensuring accountability of workers and protecting your intellectual property.

Nonetheless, it also has its own benefits. To decide if you should outsource, you need to weigh the benefits against the challenges and find out if outsourcing will have a positive impact on your organization.

Benefits of Outsourcing Analytics

  • You get an objective and unbiased view from someone who is operating from outside your company
  • You get the latest technology and highly trained personnel for a fraction of the cost
  • Even if you have limited internal capacity to set up in-house systems, you will still get actionable insights
  • It’s possible to easily pull out if you need to redirect resources to a more critical part of your business

Choosing a company to outsource analytics to

Before you pick a specific company, you need to check the following things:

  1. Personnel Capabilities. This one is about the people that the company has hired who will be handling your company’s data. The company should have well trained personnel who have a good understanding of modern trends in analytics. You don’t want data aggregators. They should be able to analyze the data and draw relevant insights from it. They should also have signed non-disclosure agreements to protect your intellectual property.
  2. Technical Capabilities. Here, you need to be sure that they will not be using obsolete tools to draw conclusions from your data. They should be up to date in their technology so that they can give you the best insights. They should also be able to handle all your data sources and the volume of data that you produce.
  3. Past Experience. This is where the rubber meets the road. Unless you would like to gamble with your company’s success in business analytics, you should hire a company with a proven track record. They should provide testimonials from existing clients and at the same time prove to you that they will be able to handle your company.


There are plenty of tools that you can use to analyze data. Regardless of the analytics software that you are using, these tools remain standard in most scenarios. Let’s discuss them and their uses in business.

  • Correlation Analysis. This is a statistical technique that will help you to establish whether or not there is a relationship between two different variables. If there is a relationship, it will help you tell how strong the relationship is.
  • Scenario Analysis. This one helps you evaluate possible future outcomes when you take different actions. It is used where a decision has to be made but management is not sure how the decision is going to impact the company in future. It’s also known as total return analysis or horizon analysis.
  • Regression Analysis. This is another statistical tool that is used to find out if a change in one variable will affect another. For example, it can tell if the demand of a product is affected by a change in the price.
  • Sentiment Analysis. This one seeks to get the opinion of a particular group of subjects about a given topic. This is ideal for better understanding how your customers feel about any given subject.
  • Monte Carlo Simulation. Monte Carlo simulation tries to assess the risk and solve problems mathematically by approximating the probability of given outcomes occurring. It uses computer simulations to identify likely occurrences.
  • Linear Programming. Like the name suggests, this one uses a linear mathematical model to come up with the best outcome. It is used to either maximize or minimize conditions to get the best solution. An example would be getting the setup that completes in the minimum time or the one that achieves the maximum profit.
  • Neural Network Analysis. Neural networks work like human brains and they try to process information and identify patterns the way a human would do. It is capable of processing large volumes of data which would normally overwhelm a human brain.

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Let’s finish with some tips to ensure success in your business analytics adoption.

  • Familiarize yourself with the outputs from the systems. This will make it easy for you to interpret the results and draw actionable conclusions.
  • Make small actionable steps in your business analytics strategy. Pick several key performance indicators to start with and build from them. Doing everything all at once can overwhelm your employees and negatively affect your results.
  • Start with the most important part of your business. An example would be analyzing sales data first because optimizing the sales process has higher value that is far reaching across the company.
  • Depending on the size of your organization, decide whether you will build a customized data model or if you will buy an out-of-the-box data model made for your industry. Customization may bring some benefits, but it also comes with a bigger price tag.
  • Know your needs at the outset. This will help you start with an end result in mind hence it will be easier to formulate a plan to get you there.
  • Regularly track the performance of the business analytics solution to establish if you are on track towards achieving this goal.

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