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BI or Analytics?

Just the other day I was in a pretty hot sales meeting with a client where one of my colleagues said, in responding to a client question, something like, “BI, analytics, whatever, it’s the same thing.” I have to confess, that statement really bugged me. There is a substantial difference between the two, but you might be asking, “what difference could it possibly make?” Well, I think it does matter, but let me explain.

There is no question that in the world of IT solutions and CRM technology, analytics is a very popular topic. Analyst research for the last couple of years has put this technology at the top of the wish list for the average IT spending budget. More recently the term Business Intelligence (BI) has become more commonly presented and I have started to notice that the two terms are now becoming interchangeable, which can lead to confusion. Perhaps it is useful to offer some definitions.

BI as a term is doubly confusing because it really has two meanings. The first version of the definition refers to the general ability to use information to make informed, and therefore, better decisions. The second definition refers to a complex technical capability combining multiple sources of financial and operational data with sophisticated multivariate analytical software managed by comprehensive data collection and decision making processes. The latter definition is a subset of the former, but it represents the former on mega-steroids.

Analytics on the other hand is the software package that is utilized within the typical BI architecture. You can’t really do the latter version of the BI definition without the analytics software (unless you have about 10,000 mathematicians crunching numbers all day long). So far you are probably thinking, what is the big deal? Well, there is another confusing element in this mix, which is reporting. Companies use reporting tools to assemble and present the information provided by either analytics software or more complex BI systems. But some business decision making utilizes simple reporting software without the use of analytics or BI, and this is often incorrectly referred to as either analytics or BI. Now I bet you’re thinking that this is just a bunch of semantics and who really cares. You should care.

When you decide that your enterprise needs better decision support you can go down one of these paths, which are really on a continuum of sophistication. You can improve your reporting on the simple end of the continuum. These tools assemble business figures using simple calculations to make it easier to see a number of things in one place. Assembling revenue by territory for each fiscal quarter is a great example. Good reporting packages make it easy to break this information into revenue by sales rep, revenue by product, and highlight product lines with the best margin.

What happens if you want to know what led to some reps being more successful than others or why some products sold better in some zip codes? Enter analytics. This software helps to compare multiple variables, over time, to better establish the relationship between changes in the numbers (getting to the all important cause and effect). For example, can we determine what sales activity, when performed with the customer, increases the likelihood of getting the sale? Or, do we know what telesales message was most effective with a specific campaign to produce the best leads? Analytics software helps to determine that.

We cross the line into business intelligence when we combine sales, marketing, order, and financial data, with analytics software, and work to get the correct data flowing through each system with data entry best practices & policy, metrics established for constant monitoring, and a data architecture that allows all enterprise data to be logically compared. This type of program requires resolving critical issues such as customer data hierarchy, integration of external data sources, and often the challenge of cross-functional policy compromise.

But, oh what you can do with a real BI program. Why do you have better margins for one product line in one geography but not the other? Why are you making more money for products with further ship-to locations? Which customer segment is really the most profitable with the right warranty offer? What is causing the cost of sale for services to be higher this fiscal year versus the last two? These are questions that you get answered with BI. Plus, you can come up with answers to questions you have not even thought of yet.

So, what’s the problem? For starters, sales people are pushing reporting solutions and calling it BI. Not to mention that the cost of a reporting package versus the cost of getting a BI program running are similar to the differences between a Piper Cub and the Space Shuttle. Mixing them up is misleading because it drives expectations to be set incorrectly. Installing an analytics package gives you number crunching horsepower, but it might not give you any intelligence. It is important to know what you are getting into and that starts with knowing the difference between what your options are. Choose wisely.

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