A friend on LinkedIn recently posted an interesting question that I’ve been thinking about the past week:
“What’s the difference between Reporting and Analytics?”
I laughed when I first read it. “Isn’t it obvious?” I almost blurted out loud. Being a data guy, I was ready to jump in and post the response of a lifetime. But then a funny thing happened. The more I wrote, the harder it was to actually answer the question.
Do you have a good answer? Perhaps you’ve pondered this data mystery yourself. It’s okay if you don’t know. Many executives and even Business Intelligence vendors use the terms interchangeably.
As data practitioners, we generally believe that they’re not the same thing, but don’t really know how to explain the difference. Perhaps more importantly, we don’t always know when we should use one over the other.
What a Report Shows You
Reports are often the first thing that businesses ask for. They need facts and numbers at their fingertips to indicate WHAT has happened or is happening in their world. These reports are usually driven by Key Performance Indicators (KPIs) that are pre-determined and carefully calculated by their BI or IT teams. Here are some examples of what a report may tell you:
“Sales are up 3 percent this quarter.”
“We had 5,000 returning visits on our homepage this month.”
“Our form submits have doubled this year.”
“We average 3.4 email campaigns per month.”
Reports tell you these important facts, but are you obtaining a full picture? If you’re a key decision maker in your organization, would you be satisfied with these answers? Or would you also like to know WHY these numbers are the way they are?
Why are sales up this quarter? Did we just get lucky? Or, was it that new Sales training we just implemented?
Why did we have multiple returning visitors? Where did they come from? How are we generating that much consistent engagement? Can we replicate this next month?
Was our recent e-mail campaign the reason for the increased form submit rate? Or, maybe it came from our social strategy? Could it be from our new TV spot?
Even the best reports and visualizations can’t give you all of these answers.
Why Analytics Are Important
Asking WHY is not a question that reports can answer. That’s the job of analytics! Let me be clear before we dig deeper: this doesn’t make reporting unreliable or less valuable, it’s just that reports aren’t designed to give you that deep of an answer.
Analytics can be a murky subject with lots of definitions. At Relationship One, we define the term as, “a tool or process used to ask questions, find outliers, and to understand WHY our business is performing the way it is, with the end goal of making a decision or taking an action.” This definition allows us to include various analytic techniques: data discovery, self-service, inferential statistics, predictive models and many others. Let’s go back to the sales example and see if we can spot the difference.
Reporting tells us:
“Sales are up 3 percent this quarter”
Analytics tells us:
“Sales went up due to 10 more deals closing this quarter than last quarter. Eight of those 10 were from existing customers that expanded their relationship with us. Most of the expansion happened within our Telecom clients who are purchasing our new product we launched earlier this year.”
See the difference?
The Best of Both Worlds
If you’re like me, you see the wealth of information that analysis can provide over reporting, and it might be tempting to throw your reporting tools out the window to double-down on analytics. Fight that urge, because it might be the worst thing you can do. You really need both.
We know that reporting without analytics won’t provide you with all the information you need to fix something when it goes off-track. You’ll be answering “what” without understanding “why”. But doing analytics without reporting doesn’t work either. Analytics is a much more manual, labor-intensive activity. Without reporting telling you WHAT to dive deeper into, you’ll end up with a lot of highly-skilled analysts running around analyzing whatever they can find. It’s inefficient and won’t align well to your business. They’ll be trying to answer “why”, but won’t know the “what” questions on which to focus.
Reporting and analytics, when working well, form a tight-knit closed-loop system. Reporting tells you what is doing well and what needs attention. It should elicit key questions about your areas of most concern. Those key questions should be given to your analytics team to dive further into “why”. Often, answering “why” leads you to new metrics that need to be tracked closer going forward, which leads to reporting on those new things, which leads to more analytics, and the loop continues.
So where should you start? In most cases, you already have some form of reporting. Start there. Take the information you have and start asking the “why” questions. The process might feel awkward, disjointed and slow at first. Once you pick up momentum you’ll be amazed at the new insights you uncover, the clarity you’ll achieve, and the excitement you’ll experience from putting your data to optimal use.
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