Despite its growing importance, it seems some aspects of the business analytics story remain unclear for many. Here, we take a look at one of the most frequently asked questions on the topic: ‘What actually is the difference between business reporting and business analytics?’
Firstly, what they share in common
There is certainly a significant difference between reporting and business analytics, but there are also a number of aspects common to both. Reporting and analytics involve the capture, storage and processing of large quantities of business data. Both work with pre-determined key performance indicators and dimensions (data characteristics). And indeed, they both use the information carried in data to steer decision making – although this is where the difference in their effectiveness comes to the fore.
What is reporting?
Reporting is the structuring of information in such a way that it can be used to measure and monitor business performance. It’s the process of converting data into information.
Reporting can supply answers to questions like: What happened – and when? How often and how much? Where exactly is the problem located? And how can I find the solution? Based on a pre-determined query (how many of article Y did we sell in Q1?), the specific answer can be delivered by analysing and revealing the necessary information from the transactions database. It is about specific answers to specific questions.
And business analytics?
Business analytics solutions look a step further, helping you use business data to uncover opportunities in the market and to manage risk associated with business activities. It’s the process of converting information into knowledge.
Analytics can supply answers to questions like: Why did this happen? Which opportunities am I missing? What is the impact on my business if this trend continues? How can we do things better? It’s a more dynamic system that’s capable of combining information from across the whole system to explore answers to more complex, strategic questions. Rather than creating one report to deliver a specific answer, analytics allows different data sources to be ‘sliced and diced’ at will, allowing a more ad hoc, deeper exploration of the company data.
Reporting tools are generally used to validate an apparent trend or deviation in the market in a one question, one answer format (did sales of X decrease from March to April in the same way as last year?). Analytics give you the opportunity to research a trend and respond directly to unexpected changes in market conditions (Why did sales decline from March to April last year? Were there relevant issues in the supply chain/warehouse/personnel/cash flow that could have had effect?). An analytics solution will support the locating, combing and reviewing of any/all relevant information on the fly.
Reporting tools tend to deliver static results. Managers need to fully understand the context and know in which way the results in the report need to be interpreted. Analytics go a step further, providing explanations and understanding around the results that a report can uncover. As such, analytics promote managers to take smart action based on what they discover. They give insight into why things stand as they do and point to possible solutions. Whereas traditional reporting may often lead to more questions, analytics can reveal the answers needed to overcome challenges or capitalize on opportunities.
Reporting tools reveal whether a specific KPI is going to be met or not. Analytics can reveal how a business can ensure a specific KPI is realized, or explain why one hasn’t been, based on exploration of all relevant information.
Reporting tools often require a lot manual work, can be difficult to maintain and can be inflexible. Analytics tools tend to be far easier to configure and offer far greater flexibility in what you’re able to do with the information. In many cases, analytics will offer real time information, able to deliver the insight needed in a fraction of the time it takes to design and realize a traditional report.
Reporting tools usually report on one or more databases, whereas analytics tools can be configured to use a wide variety of data sources.
To help further clarify these differences, a couple of practical examples:
Reporting can give you information on what the stock level of a particular article in the warehouse is or was. Business analytics can offer you advice on what the optimum stock level should be based on historical sales trends and forecasting.
Reporting can reveal how much of a product has been sold. Analytics can combine historical information for that product line, and relevant others, to calculate the likelihood a particular volume will be sold within a particular period.
Insight and decision making
In summary, reporting and analytics systems are both important tools, with reporting focusing on the conversion of data into information. Analytics goes a step further, combining and manipulating this information to give actionable insight and knowledge into the how and why around performance, directly supporting better strategic decision making in a more business relevant time frame.