6 Business Analysis Techniques You Need to Know
How is your business performing? Where are the opportunities for improvement? Analytics, of course, can tell you. But which analytics? There are literally dozens of business analysis techniques out there.
From a Business Intelligence perspective, an ideal business analysis technique is one that can take complex business performance data as an input, and then present the underlying situation so as to quickly highlight:
- If performance is satisfactory or not
- Where any problem areas are
- How to prioritise remedial actions
In today’s world of Business Intelligence-driven business dashboards, the choice of the right business analysis technique is important. So here’s a selection of our favourite business analysis techniques.
Control charts have their roots in quality management—but they’re a business analysis technique that can be used in a wide range of other applications.
The key to using control charts as a business analysis technique is to have a lot of continually updating data, and a firm understanding of what represents ‘good’ and ‘bad’ performance—or, as control chart purists prefer to put it, ‘in control’, versus ‘out of control’.
There’s no particular trick to using control charts as a business analysis technique: plot your data as it arrives, and aim to constantly tweak the process represented by the data so that the average performance is well inside the ‘in control’ limits.
Bar charts are simple and powerful visual displays of a situation. Vertically-oriented or horizontally-oriented, they provide an instant snapshot of performance, especially if accompanied by a superimposed ‘target’ line.
That said, the use of bar charts as a business analysis technique should ideally be restricted to discrete, not continuous, data. Monthly, weekly, or daily performances, for instance, are ideally represented by bar charts.
Don’t make the mistake, though, of superimposing lines on a bar chart that would indicate a transition or interpolation. Each ‘bucket’ of performance stands on its own—a line would indicate a gradual transition from one bucket to the next.
Go/ No Go indicators
Sometimes mistakenly called ‘traffic light’ indicators, Go/ No Go indicators are powerful visual representations as to the adequacy of an operational situation.
In a factory context, they have their roots in the ‘andon’ lights used in Japanese factories to indicate if production cells or production lines are working normally or not.
A green light indicates all is well; a red light indicates a stoppage. Fairly obviously, managers should head to the red lights, and find out what is going wrong!
Traffic light indicators
Go/ No Go indicators are binary displays—something is either satisfactory, or not satisfactory.
As a business analysis technique, it’s powerful, but lacks the ability to provide a warning. Which is useful, because in business, many operational situations aren’t binary.
So if production output is above target, but dropping—and in danger of falling below target—that’s a non-binary situation where a warning is useful. Likewise sales order intake, overdue orders, or quality levels.
A traffic light indicator shows green when the situation is acceptable; red when it’s not acceptable, and amber when it’s still acceptable, but in danger of becoming unacceptable.
‘Dial’ or ‘Gauge’ indicators
An alternative to the traffic light indicator is the ‘dial’ or ‘gauge’ indicator. Again, you’ve got green, amber, and red, but shown pictorially in the style of a dial or gauge that you might see in a car, or thermometer.
Some organisations use the two business analysis techniques almost interchangeably, but this can be a mistake. If the underlying data is continuous, a dial representation is usually better.
Was last week’s production output (or sales order intake) satisfactory? A traffic light is probably a better tool. Is this month’s production output (or sales order intake) satisfactory—and we’re still part way through the month? Use a dial or gauge representation.
Like bar charts, pie charts are a surprisingly powerful business analysis technique: easy-to-grasp, visually clean and simple, they quickly summarise a situation.
But bar charts and pie charts aren’t completely interchangeable—and it’s a mistake to think that they are.
Use pie charts to summarise and interpret a situation where the underlying data represents 100% of something, and you want to break that 100% down into its individual elements.
Late production orders by cause, for instance. Sales order intake by market. Or customer complaints by category.
Business analysis techniques—the bottom line
As you’ll have seen, the correct choice of business analysis techniques can make a significant difference to how problems are represented, and management actions prioritised.
With modern cloud-based Business Intelligence systems, building dashboards has never been easier. But make sure you give proper consideration to the business analysis techniques with which you populate those dashboards.
For lots of useful tips on creating compelling business dashboards that your users will love, download our eBook below.