Moving From Data To Insights
Insights are valuable. Business insights, once discovered, can catapult an organization forward and help it address shortcomings. But, many finance professionals get stuck on data before they reach true insights. Insights lie somewhere between hindsight and foresight. In finance, analytics and a new wave of work are pushing the function from simply reporting on numbers to analyzing them.
Where does it all begin?
To obtain insights, finance professionals must start with their usual reporting.
As an example, Finance has noticed that global sales have dropped -1% the past two quarters and is thereby able to tell “What Happened” as part of its high-level standard reporting.
Also, Finance can drill down to find “Where It Happened”; i.e. global sales are down 1% which mainly relates to the regions North America (NA) and Latin America (LA) which are down -3% to -5% year-over-year (YoY) whereas all other regions are up 2% to 4% YoY. Is this insight? No, because we haven’t yet told Why It Happened…
A classic mistake when trying to provide insight
To understand Why, 99% of all Finance groups will use their soft skillsets (communication, acumen, and teamwork) to get involved with the VP of Sales to understand his perspective for why sales are declining in NA and LA.
The VP of Sales explains that the last two quarters had several deals which slipped to next quarter in LA and NA, and provides a list of the slipped deals.
Is this then insight? No, it is information or knowledge at is best but you cannot take any data-driven decisions from it, so we still don’t know if the underlying driver for Why sales are down is because of slipped deals. The VP of Sales is providing his “first-hand explanation” but unfortunately, Finance most often takes it as-is and stops their investigation here.
Looking for patterns to uncover real insights
However, what could Finance have done to provide real insight, and not simply to copy a message from the VP Sales? The 1% of Finance professionals who act as Analytics Business Partners approach the above situation differently.
It starts with curiosity. Are slipped deals really the underlying issue? The ABP will employ analytics to look for patterns in data to uncover insights.
The ABP often use multi-source data to gain multi-dimensional perspectives. Solutions like DataRails allow ABPs to draw upon cross-organizational data that is all consolidated in one place. Salesmen tenure may be pulled to learn if tenure correlates with sales performance. Quickly insights appear, such as, the longer the tenure of a salesman the more the salesman sells.
The Analytics Business Partner can now tell something valuable, not yet known by the business, which the business can use to make decisions which are data-driven. In this case, that tenure is the underlying driver for how much the business is selling.
Understanding the underlying driver
The way to expose and understand business drivers is to dig through all existing organizational data in order to get to the cause of a particular result. Only by looking at the data from varying perspectives can the ABP attempt to recognize what caused particular results and how to deal with them.
This is an example of how Finance use Diagnostic Analytics to tell ‘Why It Happened’ by finding a correlation for the financial performance and thereby provide real insight. And as demonstrated, insight is not to copy/paste of a message from having asked a Business Executive Why it happened. Insight is something that Finance has found through analytics that the business can form decisions from that are data-driven.