See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/305991499

Business Analytics and Business Growth

Conference Paper · May 2016

CITATIONS READS
0 1,430

1 author:

Bhavani Shanker K
Birla Institute of Technology and Science Pilani
6 PUBLICATIONS   0 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Health informatics gamut spans on Big Data influence on minimizing readmission rates View project

All content following this page was uploaded by Bhavani Shanker K on 08 August 2016.

The user has requested enhancement of the downloaded file.

 Business Analytics and Business Growth
K. Bhavani Shanker1, Dr. S. Vasantha2
1
Management Consultant, Former Practice Head in Analytics CoE, Tech Mahindra,600026, India
2
Professor, School of Management Studies, Vels University, 600043, India
1 2
hcl.bhavani@gmail.com , vasantha.sms@velsuniv.ac.in
1
corresponding author: phone: +91-97877-61278

Abstract
Background/Objectives: Business analytics has ushered in changes at the level of business growth which has been
depending on conventional methodologies. The objective is to measure and calibrate the impact of business analytics
on the business growth in the light of market trends.

Methods/Statistical Analysis: has successfully invaded into prolific business activities. It is undergoing a kind of
metamorphosis in terms of projecting a naïve spectrum of bridging the incredible gap between the organization and
the customer. BA is a process of transforming the data into viable actions through insights in the context of the
organizational decision-making process.

Business Analytics spans into three major perspectives such as descriptive, Predictive, and Prescriptive process. The
ultimate goal of business analytics is to provide value addition to the organization by virtue of utilizing sophisticated
agile statistical methods such as Heuristic models and simulation scenarios. It also helps to implement unrelenting
performance management that is aligned towards strategic direction of the company. Business analytics is also
oriented to reduce customer attrition which is computed using Survival analysis techniques. It also helps to gain
sustainable competitive advantage.

Findings: Since business users are gaining knowledge and experience in analytics they are tuning their expectations
in the areas of action and Return on Investment and Return on Analytics. These two measures are important to
adjudicate the lift in profitability by adopting the nuances of business analytics. The successful analytic solutions must
enlighten the user to grasp its significance in the light of the business action plan. Though there may be many
hindrances faced by the firms the cardinal aspect is to exploit business analytics for yielding sustainable value
creation.

Application/Improvement: In this paper a comprehensive maturity model for business analytics is attempted to
understand the level of business growth pattern as a reflection of the maturity of business analytics that is adopted.

Keywords: Business Analytics, descriptive, Predictive and Prescriptive models, Performance Management, Return on
Investment and Data Model
1. Introduction
Analytics is a powerful antidote to many commercial problems. Business analytics focuses mainly on developing new
insights derived from Business Intelligence. It should address to a consistence set of metrics as reflections of past
business performance. These also provide a technical handle to guide proactive business planning.

Analytics shall also address multi-dimensional and multi-faceted ecosystem fraught with technical, commercial and
domain oriented issues. To characterize business analytics, it involves a comprehensive congruent and cognitive road
map featuring many process pathways.

Analytics spans into diverse segments of business

 Market changing scenario/ Market dynamics (Stochastic process)

 Customers’ /Consumers’ predilections and skewed propensities (Probabilistic process)
 Organizational orientation and focus (shift/Drift - Probabilistic process)
 Technological threat (Probabilistic process)

1.1 Business organization and the customers(5)

Customers rule the roost in deciding the market environment. Business analytics should aim at customer sustainable
retention. It is an art. The vicissitudes of market trends may trigger customers’ skewness and their propensities.
More often than not it may exert its impact on their loyalty levels. It is imperative on the part of the organization to
track customers’ proclivities periodically. In other words, the customer should always be considered as a strategic
partner of the organization. Customers delight is a sine qua non for business growth.

Winning strategies are to be adopted to retain the customers by motivation, goodwill, appropriate campaign
management, prompt responses, incentives and good services. Predictive analytics helps to solve many such issues
by recognizing the incredible gaps which are to be handled by adopting appropriate mathematical and statistical
models.

2. Objective

The objective is to measure and calibrate the impact of business analytics on the business growth in the light of
market trends through case study method

Business analytics has uncanny knack of answering the following questions:

1. Why is this happening?

2. What if these trends continue?
3. What would happen next?
4. What is the best that can happen?
5. How has it happened? (Root cause analysis)

The cardinal issue is how the organization makes an adroit decision at every stage that could usher in condign
benefits, part of which is to be earmarked for future growth.

3. Data model

Data modeling – prelude to Business Analytics. Data modeling is the consequence of conceptual modeling and it
represents the following aspects:
  Is equivalent to an architects’ building plan
 Is independent of hardware and software constraints
 Is not to represent the model as a “database see it”
 Is more to represent the model as the user sees it in the real world
 It acts as a bridge between the concepts and ultimate physical representation

When the conceptual model is designed then the data model is improvised in relation to the application domain as
shown in figure 1.

<<<<<<<<<<<<<<<<<<<<Insert Figure 1 Here>>>>>>>>>>>

The above scenario represents the sequential transformation steps to convert the conceptual model into a data
model. The following scenario which is depicted in figure 2 represents the design of a data model in consonance with
the needs of the business application. The data model should review the “concept to completion” leading to a
business conclusion for effective decision making.

<<<<<<<<<<<<<<<<<<<<<<<Insert Figure 2 Here>>>>>>>>>>>>>>

Analytics is a recursive process to be adopted with a view to obtaining precise models for forecasting the future
business growth which is the essential determinant of the success of the organization.

3.1. Rationale for Business Analytics(2)

1. Competitive edge for survival and sustenance is being accomplished

2. Better decision outcomes and organizational performance are ensured
3. Value addition is extracted
4. The strategic and tactical goals of the organizations are viably supported
5. Knowledge projection is also obtained to help the subsequent business plan

To gauge the efficacy of the Business Analytics effort there should be a paradigm shift in terms of inculcating
analytics culture, nurturing analytics movement, and analytics practices. Perhaps it can be surmised that the growth
rate might have been increased due to the technical evolution of Business analytics and its adoption in most of the
organizations.

It has also been observed that business analytics is a confluence of 3 distinct disciplines such as Statistics including
Operational Research, Business Intelligence, and Information Systems. There are many tools (Proprietary or Open
source) available to do the computation based on the Business Analytics models developed in relation to the various
applications desired and designed by the organizations.

3.2. Maturity Models in Business Analytics(1)

There are many maturity models cited in literature associated with information systems such as staged model,
continues models and contextual models. All these models contribute to developing the pathway to maturity status.

On similar lines, we have developed a tentative maturity model for Business analytics based on our experience and
knowledge of the projects handled and projected into the future trends.

Level I – Turbulent

 There is no awareness of business analytics and its lack of reflection in the business plan.
 Experience-based and evidence-based ad-hoc decision making is projected.
Level II – Steady state (Adoption)
 There is an exposure to Business Analytics and it is being applied in some projects with less risk and no
crucial backlash

Level III – Commercial Touch (Reaction)

 There is a Partial conviction for Business analytics

 It acts as an impetus to enhance its incursion into some of the crucial projects with the tacit expectation of
some profitability.

Level IV – Commercial penetration and polarizations (Resonance)

 Well-orchestrated applications of Business Analytics in all vertical domains are contemplated, designed and
implemented
 The profits with competitive advantage are realized

Level V – Commercial impact – Optimizing (Reach)

 The predominance of Business Analytics and its inevitable presence is affected by the organizations.
 Such internal scenario will reflect the performance in the market space.
 There is a definite realization of business value leading to high profitability

In order to extract full value analytics should not be confined to business processing alone; it is to be extended with
competitive advantage to sales, marketing, supply chain visibility, price optimizations and workforce analysis.

3.3. Change management

In general, the consumers want to get reconciled to the status quo. It is a glaring symptom of priority drag. It is often
anticipated that a change may turn out to be a boon or a bane. It may usher in benefits or challenges which are to be
tackled with the extemporary commercial acumen. Sometimes it is essential to make proactive planning with a view
to forecasting effectively and be prepared to reckon with the outcomes of change.

If the customers are averse to changes anticipating risk in the real business process, the progress is likely to get
stifled. The changes need not be cherished for their own sake; they should be brought in the right time and with the
right technology in the matter of augmenting dynamic business cycles and ensuring market flourishing scenario. It
also involves the need for training to demonstrate the value and the profitability of new practices emanating from a
change in order to enlighten/enthuse customers to adopt them without any bias or reservations.

3.4. ROI(7)

Business Analytics is no longer a fancy. It becomes imperative to establish synergy between business analytics and
economics. All firms show their desirability to introduce business analytics as a rescue pad and work on the business
plan. The organizations also feel at home with business analytics since they also realize that analytics is definitely
worth at least 10% what is invested into it. But they seek answers for the following queries’:

1. How much should I invest?

2. How much did I make in return?
3. Is the investment greater than return and vice versa?
4. Can we have a preliminary idea of Return on Investment? (ROI)
With the advent of Business Analytics model, the concept of ROI (Return on Investment) is changed to ROA (Return
on Analytics). The firms embark upon strategies to utilize business analytics to enhance their Returns. There will be a
streak of delight that the firms enjoy if the full incremental return within a discrete time is realized.

A Simple equation for calculating ROA is presented below.

ROA 
(R  R ) * d
a in

I a

Where Ra is the Return after the application of Business Analytics

Rin – Return prior to the application of Business Analytics

d– Time factor (Week, Month, Quarter and Year)

Ia- Initial budget earmarked for Business Analytics

From the equation, it becomes quite obvious that the firms are seriously concerned with the incremental return
benefit as a reward of Business Analytics

ROA has the potential power in ushering in the success that can propel the true driver of growth.

3.4.1. Net Present Value – Impact on ROA

Net Present Value represents the value of future money in today’s term

n
Valuesi
NPV  
i 0 (1  rate) i

The time valued return on analytics formula

( NPV ( R )  NPV ( R )) * d
ROA  a in

NPV ( I ) a

The above computation of ROA taking into account the Net Present Value (NPA) throws light on the organizational
growth trajectory and the need for proactive planning to avert any exigencies such as backlash on profitability.

3.4.2. Customer Life Time value & Business Analytics(6)

In Business, the paramount issue is how the firms and the organizations make astute decisions at every stage of the
typical customer lifecycle. They put in consolidated and constructive efforts in assessing the evanescent attitudes of
customers and focus on contemporary solutions to reckon with the changing scenes of market vagaries. There seems
to be an implicit relationship between the adoption of Business Analytics in the firms and the Customer Life Time
Value. CLV represents the kind of net revenue generated from the customers. It becomes quite obligatory on the part
of the firms to retain and sustain them over a long horizon. Besides other statistical techniques adopted for the
survival of the customers with the firms, business analytics provides an impeccable leverage to enhance the survival
horizon.
A quantitative estimate of CLV (simple holistic model) is presented below

h
CFi ,t
CLV  
t 0 (1  d )
t

Where
h= time span
i=Customer
d= discount rate
CFi,t = Net cash flow generated by the customer i, activity at time t
By proper and well-orchestrated adoption of Business Analytics in the organization, the enhancement of revenue
from the customers is optimistically expected.

4. A Typical case study(4)

The case study illustrates how campaign management is to be tuned to relevant customers with the adoption of
business analytics. The firm under review has been very enthusiastic in keeping a large customer database without
discriminating whether all of them are beneficial customers. Unwittingly they are confronted with unjustifiable
redundancy creating a negative effect on their investment. Many a time they have to be reconciled with monitory
losses. This situation has been prevailing prior to the adoption of business analytics. Later on, an intelligent expert in
business analytics has advised them to go in for Business Analytics adoption in dealing with the target segments of
potential customers. Business Analytics used involves customer profiling and suitable mining techniques such as
classification, clustering, and association rules.

Finally, they are able to isolate and segregate the customers who are germane to the organization. The rest of the
customers are not considered for the proposed campaign. The actual problem revolves on dispatching emails to all
customers to get their responses, but the scenario is dismal showing a small net profit which may not justify the
effort and the investment bequeathed to the campaign. As advised by the analytical expert the firms implemented
Business Analytics and reviewed the customer base. Using the Business Analytics techniques, they are able to focus
on potential customer segment. They repeated the campaign effort towards these segregated customers. To their
surprise, they are able to realize an excellent net profit. This illustration substantiates that there is a synergy between
the business analytics and the CLV realized through ingenious campaign management. Table 1 presents certain
values as a matter of validation.

<<<<<<<<<<<<<<<Insert Table 1 Here>>>>>>>>>>

Note:
 The Revenue per customer has been calculated ₹600
 Out of the 627 initially identified customer (prior to Business Analytics adoption), 594 customers (After
Business Analytics adoption) matched with new targeted customer list
 Before Business Analytics, the campaign mail has been sent twice to all the customers (incurring double
expenditure) and got only 627 customers
5. Conclusion

The impact of Business Analytics on external business trajectory creates a Win – Win logistics in the market space
leading to the economic trade harmony between the customers and the firms. The ingenuity of the organization lies
in the art of exploring and exploiting the latent potential of Business Analytics so as to make it propel its growth in
the short time horizon. Growth refers to the performance in terms of garnering the fiscal value from the external
ecosystem. It is also imperative on the part of the organization to keep measuring economic impact, customer
satisfaction, and periodic investment pattern, the effect of engagement and ROA realization. The key operations
should include optimization, mapping the customer patronage for ensuring the profitability, developing growth
indicators by frequently gaining right insights about the market truancy and sustaining the price image even in the
light of price level oscillations. The spike and the spurt of competitive predominance should be meticulously handled
without causing any damage to the market rhythm.

The organizations may encounter certain threats which may strike panic. There may be a lack of positive responses
from the customers. Some polarization issues may also surface which may induce ripples in the distinct decision
process. Ultimately what counts more significant are the economic factors in terms of either constraints or benefits?
There are certain lucid computational measures such as ROA & CLV which stress the significance of the impact due to
Business Analytics on the realization of profitability. The customers also play a vital role in contributing to the
economic gains of the organizations. The virtue of adopting the Business Analytics in the organization renders it as
the prime mover for establishing the symbiotic relationship between the customers and the organizations.
7. References:

7.1. Research Articles

1. Cosic R, Shanks G. Towards Business Analytics Capability Maturity Model 23rd Australian Conference on
Information Systems By Ranko Cosic, Graeme Shanks,
Department of Computing and Information Systems, University of Melbourne, Victoria, Australia 2012.
2. Emerging Trends in Business Analytics, BY Ron Kohavi, Neal J. Rothleder, Evangelos Simoudis Appears in the
Communications of the ACM, 2002,45(8), pp. 45 – 48
3. A unified foundation for business analytics,By Clyde Holsapplea, Anita Lee-Postb, Ram Pakathc Decision
Support Systems,Volume 64, August 2014, Pages 130–141
4. Integrating Business Analytics with Performance Management,By Sultan Gashgari
International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 3, Issue 2, pp:
(624-629), Month: October 2015 - March 2016, Available at: www.researchpublish.com
5. Valuing Customers,By Sunil Gupta, Donald R. Lehmann, Jennifer Ames Stuart, Novartis International Journal
of Marketing Research, pp. 7-18, February 2004, HBS Marketing Research Paper No. 03-08
6. Modeling Customer Lifetime Value By Sunil Gupta, Dominique Hanssens, Bruce Hardie, Wiliam Kahn, V.
Kumar, Nathaniel Lin, Nalini Ravishanker, S. Sriram Journal of service research 9(2) 139-155, 2006
7. Othniel Denis, The ROI of Business Analytics Calculating Financial Return by Principal, Excellent Ones
Consulting LLC.

7.2. Book/Report
8. James R. Evans, Business Analytics, 2/E, Pearson

7.3. Chapter in a Book

9. Evans, James R., Business Analytics: The Next Frontier for Decision Sciences
SOURCE Decision Line; Mar2012, Vol. 43 Issue 2, p4, PUB. DATE March 2012O(S)

7.4. Internet Sources

10. https://dro.deakin.edu.au/eserv/DU:30049067/cosic-towardsabusiness-2012.pdf
11. http://robotics.stanford.edu/~ronnyk/cacmEmergingTrendsInBI.pdf
12. http://www.sciencedirect.com/science/article/pii/S0167923614001730
13. www.researchpublish.com/download.php?...Integrating%20Business%20...
14. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=459595
15. http://pubsonline.informs.org/journal/inte (By Matthew J. Liberatore, Wenhong Luo
16. Interfaces Volume 40, Issue 4, August 313-324, 2010)
17. www.sqlpass.org/DownloadFile.aspx?File=6c16a19a
18. http://www.kaushik.net/avinash/calculate-return-on-analytics-investment/
19. http://www.kaushik.net/avinash/calculate-return-on-analytics-investment/
Figures

Figure 1 – Conceptual Data Model

Figure 2: Data model versus business application – A tentative scenario
 Table 1

Prior to Business Analytics Adoption

Total Customers Targeted Converted Avg. Exp. Per

base Customers Customers Percentage Expenditure customer Revenue Net Profit
213000 213000 627 0.2944% 372997 0.875579812 376200 3203

After Implementing Business Analytics

213000 12600 842 6.6825% 11032.30563 0.875579812 505200 494167.694

* (All finance figures are in ₹)

Table 1: Impact of Business Analytics on profitability

View publication stats