Introduction to Business Analytics

17 January 2020

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General Rules
 General Rules
1. Students are allowed to drink in the classroom.
2. Students are allowed to go to the toilet if necessary.
3. Present check will be conducted at the beginning of class. Students who come
late to the class will be allowed to join but would not be considered present in
the administration report. You will have 15 minutes tolerances.
4. Students who come in and out of the class without permission, or not attend
the class for half an hour before the class is over, will be considered as absent.
5. Homeworks and assignments should be done on time. There will be penalties
for lateness. There are also no make up homeworks or assisgnments.
6. There will be no make up Quiz for those who can not attend whether because
of sick or other cause.
 Mid and Final Term Exam
Rules
1. Make up test for mid or final term exam should be recommended by study
program/academic department.
2. Students who present under 80% in class may result in his/her final grade
will be down-graded.
3. Make up test for mid or final term might be conducted with different
duration and problems. The maximum score will be 80.
4. There will be no review before mid and final term exam. However, lecturer
will provides time to discuss.
5. Students have the right to see the exam answers sheet after the exam
and complaint about mid and final term exam result.
 Additional Rules
1. Lecturer only provide time to discuss with the student about BCA in the
working hour (08.00 – 17.00 WIB Monday-Friday).

2. Lecturer have the right to reject discussion which conducted with Hand
phone (SMS, BBM, or Telephone) other internet messenger (Chatting).

3. Additional rules will be given by class lecturer if necessary.

4. Class regulation will be evaluated in the mid semester. Changes in

regulation are possible.
REMEMBER!!!!!

IF YOU ARE CAUGHT CHEATING OR DOING PLAGIARISM, YOU WILL RECEIVED

ZERO CREDIT FOR THE ASSIGNMENT/QUIZ/EXAM
 Software used in this class
1. RapidMiner
GOOGLE CLASSROOM
• Material
• Assignment

srkioxl
USED YOUR FULL NAME AND YOUR CLASS
CODE WHEN JOINT THE GOOGLE CLASSROOM
Full Name (Class)
Example:
Nur Budi Mulyono (A)
Liane Okdinawati (B)

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OUTLINE

1. Overview of Business Analytics

2. Introduction to RapidMiner

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 Imagine The Following
Situation
q You visit a hotel in Switzerland and are welcomed with your favorite drink and
dish; how delighted you are! You are offered a stay at a significantly discounted
rate at your favorite hotel when you travel to your favorite destination.
q You are forewarned of a probable riot at your planned travel destination. Based
on this warning, you cancel the visit; you later learn from news reports that a riot
does happen at that destination!
q You enter a grocery store and you find that your regular monthly purchases are
already selected and set aside for you. The only decision you have to make is
whether you require all of them or want to remove some from the list. How
happy you are!
q Your preferred airline reserves tickets for you well in advance of your vacation
travels and at a lower rate compared to the market rate.
q You are planning to travel and are forewarned of a possible cyclone in that place.
Based on that warning, you postpone your visit. Later, you find that the cyclone
created havoc, and you avoided a terrible situation.

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 Imagine These Situations From
a Business Perspective
q You are in the hotel business and are able to provide competitive yet profitable rates
to your prospective customers. At the same time, you can ensure that your hotel is
completely occupied all the time by providing additional benefits, including
discounts on local travel and local sightseeing offers tied into other local vendors.
q You are in the taxi business and are able to repeatedly attract the same customers
based on their earlier travel history and preferences of taxi type and driver.
q You are in the fast-food business and offer discounted rates to attract customers on
slow days. These discounts enable you to ensure full occupancy on those days also.
q You are in the airline business, and based on data collected by the engine system,
you are warned of a potential engine failure in the next three months. You
proactively take steps to carry out the necessary corrective actions.
q You are in the business of designing, manufacturing, and selling medical equipment
used by hospitals. You are able to understand the possibility of equipment failure
well before the equipment actually fails, by carrying out analysis of the errors or
warnings captured in the equipment logs.

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DEFINITION OF BUSINESS
ANALYTICS
Analytics is the use of:
data,
information technology,
statistical analysis,
quantitative methods, and
mathematical or computer-based models
to help managers gain improved insight about their
business operations and
make better, fact-based decisions.
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 DEFINITION OF BUSINESS
ANALYTICS
Business analytics
is the scientific process of transforming data into
insight for making better decisions.

qBusiness analytics is used for data-driven or fact-

based decision making, which is often seen as more
objective than other alternatives for decision making.

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 DEFINITION OF BUSINESS
ANALYTICS
VS VS VS

It is the It’s the application It is an It is the analysis of

analysis of of data analytics to interdisciplinary field huge amounts of
data, whether business. i.e., (including disciplines data. Requires a
such as statistics, huge amount of
huge or small, offering specific
mathematics, and storage and/or
in order to discounts to computer computing
understand it different classes of programming) that capability,enormous
and see how to travelers based on derives knowledge amounts of memory
use the the amount of from data and to hold the data, a
knowledge business they offer applies it for huge number of
hidden within it. or have the predictive or other processors, and high-
potential to offer. purposes. speed processing to
crunch the data and
get its essence.
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Drivers for Business Analytics
qGrowth of Computer Packages and Applications
qFeasibility to Consolidate Data from Various Sources
qGrowth of Infinite Storage and Computing Capability
q Easy-to-Use Programming Tools and Platforms
q Survival and Growth in the Highly Competitive World
q Business Complexity Growing out of Globalization

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Importance of Business
Analytics
} There is a strong relationship of BA with:
- profitability of businesses
- revenue of businesses
- shareholder return
} BA enhances understanding of data
} BA is vital for businesses to remain competitive
} BA enables creation of informative reports

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Understanding the Business
and Business Problems
q Having a clear understanding of the business and business problems
is one of the most important requirements for a business analyst.
q If the person analyzing the data does not understand the underlying
business, the specific characteristics of that business, and the
specific problems faced by that business, that person can be led to
the wrong conclusions or led in the wrong direction.
q Having only programming skills along with statistical or
mathematical knowledge can sometimes lead to proposing
impractical (or even dangerous) suggestions for the business. These
suggestions also waste the time of core business personnel.

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The Framework for Business
Analytics

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Scope of Business Analytics
Business analytics can involve anything from simple
reports to the most advanced optimization
techniques (methods for finding the best course of
action). Analytics is generally thought to comprise
three broad categories of techniques:
qdescriptive analytics,
qpredictive analytics, and
qprescriptive analytics.

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The Spectrum of Business
Analytics

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Descriptive Analytics
q Descriptive analytics encompasses the set of techniques that
describes what has happened in the past. Examples are data queries,
reports, descriptive statistics, data visualization
q Descriptive Analytics are the use of data to report and understand past
and current business performance. These reports involve using
statistics to summarize and report data to keep managers informed
about business metrics such as sales, revenue, profit, budgets,
expenses, inventory, and customer status. Such descriptive statistical
reports are used to measure trends and levels over time in much the
same manner as a driver uses the instruments on a dashboard to
measure driving toward a destination.
q A data query is a request for information with certain characteristics
from a database.
q Data dashboards are collections of tables, charts, maps, and summary
statistics that are updated as new data become available. Dashboards
are used to help management monitor specific aspects of the
company’s performance related to their decision-making
responsibilities

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 Predictive Analytics
q Predictive analytics consists of techniques that use models constructed from past
data to predict the future or ascertain the impact of one variable on another.
q For example, past data on product sales may be used to construct a mathematical
model to predict future sales, which can factor in the product’s growth trajectory and
seasonality based on past patterns
q Example of techniques used in predictive analytics: Linear regression, time series
analysis, some data-mining techniques, and simulation
q Data mining, techniques used to find patterns or relationships among elements of
the data in a large database, is often used in predictive analytics. For example, a
large grocery store chain might be interested in developing a new targeted marketing
campaign that offers a discount coupon on potato chips. By studying historical point-
of-sale data, the store may be able to use data mining to predict which customers are
the most likely to respond to an offer on discounted chips by purchasing higher-
margin items such as beer or soft drinks in addition to the chips, thus increasing the
store’s overall revenue.
q Simulation involves the use of probability and statistics to construct a computer
model to study the impact of uncertainty on a decision. For example, banks often use
simulation to model investment and default risk in order to stress test financial
models. Simulation is also often used in the pharmaceutical industry to assess the
risk of introducing a new drug. 1-22
Prescriptive Analytics
q Prescriptive analytics indicate a best course of action to take; that is, the
output of a prescriptive model is a best decision (optimization model:
models that give the best decision subject to constraints of the
situation).
q Prescriptive Analytics are used to decide, based upon the predictive
models, the best (optimum) decisions to make.
q Example:
q a) Airlines use past purchasing data as inputs into a model that recommends
the best pricing strategy across all flights for maximizing revenue;
q b) Portfolio models use historical investment return data to determine the
mix of investments that yield the highest expected return while controlling or
limiting exposure to risk;
q c) Supply network design models provide the cost-minimizing plant and
distribution center locations subject to meeting the customer service
requirements.

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Example Applications of
Business Analytics
qFinancial Analytics
q Predictive models are used to forecast future financial
performance, to assess the risk of investment portfolios and
projects, and to construct financial instruments such as
derivatives.
q Prescriptive models are used to construct optimal portfolios of
investments, to allocate assets, and to create optimal capital
budgeting plans.
qHuman Resource (HR) Analytics
q Descriptive and predictive analytics are used to support employee
hiring and to track and influence retention.

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Example Applications of
Business Analytics
qMarketing Analytics
q Descriptive, predictive, and prescriptive analytics are all heavily used in
marketing.
q A better understanding of consumer behavior through analytics leads to the
better use of advertising budgets, more effective pricing strategies,
improved forecasting of demand, improved product line management, and
increased customer satisfaction and loyalty.

qHealth Care Analytics

qDescriptive, predictive, and prescriptive analytics are used to improve patient,
staff, and facility scheduling; patient flow; purchasing; and inventory control.
qThe use of prescriptive analytics for diagnosis and treatment is relatively new, but
it may prove to be the most important application of analytics in health care. For
example, working with the Georgia Institute of Technology, Memorial Sloan-
Kettering Cancer Center developed a real-time prescriptive model to determine
the optimal placement of radioactive seeds for the treatment of prostate
cancer.

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Example Applications of
Business Analytics
qSupply Chain Analytics
q The core service of companies such as UPS and FedEx is the efficient delivery of goods,
and analytics has long been used to achieve efficiency. The optimal sorting of goods,
vehicle and staff scheduling, and vehicle routing are all key to profitability for logistics
companies such as UPS, FedEx, and others like them.
q Companies can benefit from better inventory and processing control and more efficient
supply chains. Analytic tools used in this area span the entire spectrum of analytics. For
example, descriptive analytics used to present the status of supply chain to managers
visually; predictive and prescriptive analytics uses to better plan capacity utilization by
incorporating the inherent uncertainty in commodities pricing
qAnalytics for Government and Nonprofits
q Analytics uses to drive out inefficiencies and increase the effectiveness and accountability
of programs.
qSports Analytics
qUsed for player evaluation in order to assemble a competitive team with a limited budget.
qWeb Analytics
qWeb analytics is the analysis of online activity
qHas huge implications for promoting and selling products and services via the Internet.
qLeading companies apply descriptive and advanced analytics to data collected in online
experiments to determine the best way to configure Web sites, position ads, and utilize
social networks for the promotion of products and services.
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Scope of Business Analytics
Example: Retail Markdown Decisions
} Most department stores clear seasonal inventory by reducing prices.
} The question is:
When to reduce the price and by how much?
} Descriptive analytics: examine historical data for similar products
(prices, units sold, advertising, …)
} Predictive analytics: predict sales based on price
} Prescriptive analytics: find the best sets of pricing and advertising to
maximize sales revenue

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 Scope of Business Analytics
Analytics in Practice:
Harrah’s Entertainment
Harrah’s owns numerous hotels and casinos
Uses analytics to:
- forecast demand for rooms
- segment customers by gaming activities
Uses prescriptive models to:
- set room rates
- allocate rooms
- offer perks and rewards to customers

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Data for Business Analytics
} DATA
- collected facts and figures
} DATABASE
- collection of computer files containing data
} INFORMATION
- comes from analyzing data

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Data for Business Analytics
Examples of using DATA in business:
} Annual reports
} Accounting audits
} Financial profitability analysis
} Economic trends
} Marketing research
} Operations management performance
} Human resource measurements

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Problem Solving and Decision Making
} BA represents only a portion of the overall problem solving and
decision making process.
} Six steps in the problem solving process
1. Recognizing the problem
2. Defining the problem
3. Structuring the problem
4. Analyzing the problem
5. Interpreting results and making a decision
6. Implementing the solution

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Problem Solving and Decision Making
1. Recognizing the Problem
} Problems exist when there is a gap between what is happening and
what we think should be happening.
} For example, costs are too high compared with competitors.

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Problem Solving and Decision Making
2. Defining the Problem
} Clearly defining the problem is not a trivial task.
} Complexity increases when the following occur:
- large number of courses of action
- several competing objectives
- external groups are affected
- problem owner and problem solver are not the
same person
- time constraints exist

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Problem Solving and Decision Making
3. Structuring the Problem
} Stating goals and objectives
} Characterizing the possible decisions
} Identifying any constraints or restrictions

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Problem Solving and Decision Making
4. Analyzing the Problem
} Identifying and applying appropriate Business Analytics techniques
} Typically involves experimentation, statistical analysis, or a solution
process

Much of this course is devoted to learning BA techniques for use in Step

4.

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Problem Solving and Decision Making
5. Interpreting Results and Making a Decision
} Managers interpret the results from the analysis phase.
} Incorporate subjective judgment as needed.
} Understand limitations and model assumptions.
} Make a decision utilizing the above information.

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Problem Solving and Decision Making
6. Implementing the Solution
} Translate the results of the model back to the real world.
} Make the solution work in the organization by providing adequate
training and resources.

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THANK YOU

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