Data Analysis
The generation of data from everything that we do has rendered data as a commodity in today’s world. Every digital device and every action taken on a device connected to the internet creates new data. Data is generated constantly from Internet of Things (IoT) devices, smartphones, social media, web browsing, and online shopping, just to name a few. This data reveals our tastes, preferences, and even geographical movements.
Data analysis is the process of using statistical methods on data sets to extract patterns, trends, and actionable information. Data analysis involves collection of data, categorization of data, and interpretation of patterns to allow for efficient decision making and knowledgeable actions. Both predictive and descriptive analytics can be performed to articulate valuable insights on data trends and patterns. Predictive analytics evaluates data using data mining, modeling, and machine learning (AI) to forecast future trends. Descriptive analytics evaluates historical data to explore cause and effect relationships, which are then used to improve operation strategies.
The Importance of Data Analytics to Business
The mass amounts of data available creates a growing importance for data analysis. The current available data is more than ever before, but this amount of data is only predicted to increase exponentially as technology advances. For business, data consists of collected statistics of business operations, customer preferences and behaviors, and the economy. There is a specific need for businesses to convert this data into knowledge that can be developed into meaningful action. When data is presented within the correct context, businesses then have the ability to extract meaning and relevance, which can ultimately be used for planning, strategizing, and making business decisions.
Data analysis is crucial for achieving business goals and outcomes in an efficient manner in today’s digital world. Despite the assumption that many leaders hold, data analysis is useful for every organization, not just large corporations. Many business leaders fail to recognize the importance that data analysis can provide for their business, pushing it off as too complex, unnecessary, timely, and costly. The reality is that real-time analysis is no longer a costly endeavor only suited for top companies.
There are numerous benefits that data analysis provide for every business, but these factors go beyond just benefits. Businesses around the globe face an increasingly volatile market, which has facilitated the move of data analysis from an optional business component to an essential one. Today’s success no longer warrants success tomorrow. In order to survive and to thrive, businesses need to be able to adapt to the rapid changes that will continue to occur within every environment and industry. The economy, markets, customer preferences and expectations, and industry standards will continue to change, and business outcomes and goals should adapt to these changes as they occur. Data analysis provides businesses with the capability to sense changes and make decisions and actions as a result.
Uses of data analysis for business:
- Evaluate external data
The availability of data to businesses includes more than just data regarding business operations and customer preferences. External data such as holidays, new local business openings and closures, population trends, local events, and economy trends can all be analyzed to provide beneficial insights.
- Establish a target audience & predict customer trends and behaviors
Data analysis provides a basis for understanding a company’s most profitable customers. Analyzing data trends and patterns allows for a better understanding of who the target customers are, their likes and dislikes, their behaviors, how they are evolving, and how they interact with the company.
Without data analysis, companies risk targeting an uninterested audience, or just unknowingly targeting the wrong audience. Performing data analysis on customer data allows businesses to refine their target, evolve with their customers, and maximize advertising dollars by aiming at a specific audience.
Along with establishing a target audience, data analysis allows companies to develop a deeper understanding of their customer base. Data analysis can reveal customer spending behaviors, evolving customer preferences, and future business prospects. This allows for generation of personalized marketing techniques that are specific and relevant for each company based on their target audience.
- Identify weaknesses & solve problems
With the help of data analysis, businesses can find abnormalities, both externally and internally. The discovery of abnormalities can help pinpoint areas of weakness within a business. This can allow for detection of weaknesses before devastating loss or damage occurs. As weaknesses are detected, business leaders can implement correctional actions before unwanted outcomes develop.
- Identify strengths
Data analysis exposes not only weaknesses in a business but strengths as well. Analyzing business operational data can reveal areas of success. Identifying areas of strength within a business can help improve decision making and allocation of resources.
- Operate more efficiently
The analysis of business operation data allows a business to remove unnecessary waste, work faster, and monitor business and employee productivity. Ultimately, data analysis helps with all areas of operations, including sales, marketing, forecasting, performance, finances, managing employees, etc.
- Innovate
Identification of a target audience, a businesses strengths and weaknesses, as well as having the ability to predict future trends, allows for low risk innovation. Availability of reliable contextual data can assist a company in identifying new products, services, and opportunities. Businesses that utilize data analysis can take advantage of greater innovation due to greater efficiency of resource management, operations, and decision making.
- Execute smarter business decisions and actions
- Manage uncertainty
- Create effective business strategies
- Mitigate risks
- Manage and improve performance
- Construct fast and accurate decisions
- Determine relevant and helpful marketing techniques
- Improve customer service and customer personalization
Optimizing customer experience remains a priority for most, if not all businesses. Evaluation of customer related information helps a company grasp a better understanding of their audience. More information and knowledge regarding the audience and its preferences positions a company to better support and interact with each customer on a personal basis. Improved customer interactions helps form long-term relationships, increase customer loyalty, and fulfill customer expectations.
- Maintain competitive edge
Many business leaders, especially small to mid-sized business leaders, perceive data analysis as a complex task, a process only necessary for large corporations, or that their business fails to accumulate enough data for analysis. Unfortunately, data analysis is no longer a task to gain a competitive edge; data analysis is often necessary just to keep up with the competition. As technology advances and available data continues to accumulate, the reliance on data analysis will also increase.
- Reduce cost and drive revenue
The analysis of business productivity, inefficiencies within the business, and resource allocation permits effective cost reduction within all areas of a business. Data analysis has the potential to reduce risks, improve waste production, effectively allocate resources, manage inventory, and monitor productivity, which all contribute to cost reduction.
In the same manner that data analysis helps to reduce business costs, it also permits the growth of a business. Knowledge of external influences, establishment of a valid target audience, identification of strengths and weaknesses, refinement of efficient operations, innovation, execution of smart business decisions and actions, improved customer service, and reduction of costs all contribute to greater overall success of a business.
For business, data left unanalyzed is wasted opportunity. The uses and benefits of data analysis grant valuable insights for cost reduction, driving revenue, and business growth. Overall, data analysis provides businesses with the knowledge needed to effectively manage and embrace the change that will continue to occur in this competitive, fast-paced market. If you have any questions about how your business can better manage and analyze data, contact us.