Eight levels of Analytics

Summary: Jim Davis, senior vice-president and chief marketing officer of SAS Institute Inc., discusses about the features of a good analytics software. Reports, Query drill-down and Alerts encompass the classical Business Intelligence definition. Statistical analysis, Forecasting, Predictive modelling and Optimization support pro-active decision-making.

Speaking at SAS's Premier Business Leadership Series in Las Vegas, Jim Davis, senior vice-president and chief marketing officer of SAS Institute Inc., begins by considering how used and abused is the term "Analytics".

There are eight levels of analytics, according to Davis. The first four encompass what he considers "the classic definition of business intelligence" and what the majority of organizations are actually doing. They support reactive decision-making, understanding the facts after things occurred and now reacting.

The eight levels

The last four levels support pro-active decision-making. It is the last four that "are really going to help change the future" for business, said Davis.

  1. Standard reports

    Standard reports provide summary statistics and answer questions like "What happened?" and "When did it happen?" said Davis. "That's analytics, but not enough."

  2. Ad hoc reports

    Ad hoc reports answer questions like, "How many? How often? Where?" he said. They provide a level of independence on desktops that allow an individual, for example, to see sales in a particular region or at a particular point in time without needing to go to an IT governance counsel and wait three months for the result.

  3. Query drill-downs

    Also referred to as OLAP, query drill-downs answer questions like, "Where exactly is the problem?" and "How do I find the answers?" said Davis. This is for when an organization wants to see not only the results, but what the results mean and what backs it up, he explained.

  4. Alerts

    Alerts answer questions like, "When should I react?" and "What actions are needed now?" said Davis. "This is when you reach a particular threshold ... something changes from green to red, so you do something about it."

  5. Statistical analysis

    Statistical analysis answers the questions, "Why is this happening?" and "What opportunities am I missing?" he said. "You begin to take the data ... and you begin to understand why things are happening."

  6. Forecasting

    A popular level, forecasting answers questions like, "What if these trends continue? How much is needed? When will it be needed?" he said.

  7. Predictive modelling

    Predictive modelling tells users what will happen next and how it will affect the business, Davis said.

  8. Optimization

    Optimization answers the questions, "How do we do things better?" and "What is the best decision for a complex problem?" said Davis. This includes areas such as price optimization, markdown optimization and size optimization. This isn't just about cost-cutting and can be the difference between success and failure for an organization, he noted.

As a final note, it is interesting to point out how Optimization is considered the highest rank in analytics software and the key to business improvements.