Large organisations will generally generate significant quantities of raw data and information on a daily basis – this data can be a real asset to the business and when utilised properly it will support more informed decisions throughout a business; optimising or creating processes/systems, methodologies and opportunities.
Many businesses however are unsure of the difference between developing a management information (MI) capability and true business intelligence, analytical capability (BI). Put simply, MI is data collected for the monitoring and reporting of the business in general. It can be measured and compared against previously collected data to provide specific performance indicators of how the business is running; a historical account of what happened (what we call the “rear view mirror”). Good examples of MI could be static snapshots of staff sickness levels, sales data, production statistics etc.
MI in a business provides valuable insight, but it does not link the ‘why’ it happened. BI is a set of methodologies, processes, architectures, and technologies that take raw data and transform it into information that can be used to make more effective strategic, tactical, and operational decision-making (‘looking down the road’). The financial services industry, particularly lenders, can benefit from understanding consumer behaviours/trends, geospatial insights, macro-economic trends and affects etc; essentially the selection of a “good” customer and how to predict behaviour of future performance to drive profit. These insights could drive policies and procedure throughout the customer journey making sure the whole process is economically optimised for all stakeholders. For example; run off loan portfolios would benefit with insight into payment behaviours and statistical probability of default which could drive collections campaigns at strategically aimed customer segments.
For any data analytics programme to have a positive impact, it is vital for the systems to allow the users to quickly get insights the data provides and take meaningful action. It is also important to monitor the impact of these changes once implemented in the system. This process closes the loop and ensures that the improvement is a continual one.
BI’s raison d’etre is to drive and validate business decisions, creating an environment where hypotheses on performance are challenged and optimised. Strategic business decisions based on data are valuable and put the business performance within management control; the enhanced insight could even throw light on things that the business may not have even considered. With all the mathematics, statistics and financial modelling disciplines involved, any insight as an output of the analysis needs to be understood by non-technical individuals; therefore an important part of the capability is people who can translate technical information into easy to understand business language.
The decision here is not solely a technology or a people one but rather a strategic one about how organisations can derive genuine insight from their data. The capability to drill into your data and provide insight which drives strategy, potentially affecting the bottom line figures is something to be envious of.
Understand more on our data analytics offering.