BAT 401 – FUNDAMENTALS OF BUSINESS
ANALYTICS
CHAPTER 1
Business analytics is “a process of transforming
data into actions through analysis and insights
in the context of organizational decision making
and problem solving.”
Modern business analytics analysis and
solution of complex decision problems using
mathematical or computer-based models.
Modeling and Optimization—techniques for
translating real problems into mathematics,
spreadsheets, or other computer languages,
and using them to find the best (“optimal”)
solutions and decisions.
Decision Support Systems (DSS) began to
evolve in the 1960s by combining business
intelligence concepts with OR/MS models to
create analytical-based computer systems to
support decision making.
DSSs include three components:
1. Data Management includes databases
for storing data and allows the user to
input, retrieve, update, and manipulate
data.
2. Model Management consists of various
statistical tools and management
science models and allows the user to
easily build, manipulate, analyze, and
solve models.
3. Communication System provides the
interface necessary for the user to
interact with the data and model
management components.
Data mining understanding characteristics and
patterns among variables in large databases.
CHAPTER 2: SCOPE OF BUSINESS ANALYTICS
Business analytics begins with the collection,
organization, and manipulation of data and is
supported by three major components:
1. Descriptive analytics use of data to
understand past and current business
performance and make informed
decisions.
2. Predictive analytics seeks to predict the
future by examining historical data.
3. Prescriptive analytics uses optimization
to identify the best alternatives to
minimize or maximize some objective.
Organizations today may find that business
analysis is being performed within their
organization by one or more of these roles:
 Agile team members – by design,
flexible and responsive.
 Business architects people who build
business architectures, blueprint of the
enterprise that provides a common
understanding of the organization.
 Business intelligence analysts analyze
data with the purpose of identifying
areas where an organization can
improve.
 Business process analyst’s specialty
Business Analyst Role that involves
“thinking processes”.
 Business subject matter experts an
individual with a deep understanding of
a particular job, process, department,
function, technology, machine, material
or type of equipment.
 Enterprise business analysts perfectly
positioned to understand the needs of
an organization.
 Product owner’s person who
represents the business or user
community.
 Project managers have the
responsibility of the planning,
 procurement and execution of a
project.
 Requirements managers a person in
charge for the process of documenting,
analyzing, tracing, prioritizing and
agreeing on requirements.
CHAPTER 3: DEFINITION OF REQUIREMENTS
Requirement is defined as “a condition or
capability that is required to be present. Explain
a feature that is to be met by a product or
software component.
Project manager that requirements-related
activities are performed.
Requirement Types:
1. Business Requirements the higher-level
needs of the organization as a whole
(overall requirements in business or the
end goal).
2. Stakeholder Requirements role of
anyone with a material interest in the
outcome of an initiative.
3. Solution Requirements features,
functions, and characteristics of a
product, service, or result that will meet
the business and stakeholder
requirements.
- Functional Requirements the
behaviors of the product.
- Nonfunctional Requirements the
environmental conditions or
qualities required for the product to
be effective.
4. Transition Requirements operational
changes needed to transition from the
current state to the future state.
5. Project requirements are defined as
“the actions, processes, or other
conditions the project needs to meet.”
Data are numerical facts and figures that are
collected through some type of measurement
process.
Information comes from analyzing data that is,
extracting meaning from data to support
evaluation and decision making.
Data set is simply a collection of data.
Database is a collection of related files
containing records on people, places, or things.
Metrics and Data Classification
Metric is a unit of measurement that provides a
way to objectively quantify performance.
- Discrete metric is one that is
derived from counting something.
- Continuous metrics are based on a
continuous scale of measurement.
Data may be classified into four groups:
1. Categorical (nominal) data which are
sorted into categories.
Ex. Name, Address, Phone Number.
2. Ordinal data which can be ordered or
ranked.
Ex. Age
3. Interval data have arbitrary zero points.
Ex. Time and Temperature
4. Ratio data are continuous and have a
natural zero.
Ex. Money, Height
Reliability means that data are accurate and
consistent.
Validity means that data correctly measure
what they are supposed to measure.
Problem Solving with Analytics
I. Recognizing a problem
II. Defining the problem
III. Structuring the problem
IV. Analyzing the problem
 V. Interpreting results and making a
decision
VI. Implementing the solution
CHAPTER 4: CATEGORIZATION OF ANALYTICAL
METHODS AND MODELS
1. Descriptive Analytics what has
happened in the past and describe what
is currently happening.
OUTPUT: Fast and current data in a
form of Report.
Report summarizing relevant historical
information.
Data Visualization techniques can be
used to find patterns or relationships in
a large database.
Data dashboards are collections of
tables, charts, maps, and summary
statistics that are updated as new data
become available.
Data mining understanding patterns
and relationships that exist in large data
sets.
Cluster analysis refers to algorithms
that group similar objects into groups.
Sentiment Analysis is the process of
determining whether a piece of writing
is positive, negative or neutral.
2. Predictive Analytics to predict the
future or ascertain the impact of one
variable on another.
OUTPUT: Future Data or Prediction.
Simulation involves the use of
probability and statistics to construct a
computer model.
3. Prescriptive Analytics differs from
descriptive and predictive analytics in
that prescriptive analytics indicates a
course of action to take.
OUTPUT: Decision or Actions.
Optimization models are models that
give the best decision subject to the
constraints of the situation.
Portfolio models use historical
investment return.
Supply-network design models provide
plant and distribution center locations.
Simulation optimization process of
finding the best input variable values.
Decision analysis also employs utility
theory, which assigns values to
outcomes based on the decision.
Utility theory bases its beliefs upon
individuals’ preferences.
CHAPTER 5: BUSINESS ANALYTICS IN
PRACTICE
Predictive and Prescriptive analytics are
sometimes referred to as advanced
analytics.
1. Financial Analytics
 Predictive models are used to
forecast financial performance,
to assess the risk of investment
portfolios and projects.
 Simulation is also often used to
assess risk in the financial
sector.
 Prescriptive models are used to
construct optimal portfolios of
investments.
2. Human Resource (HR) Analytics
Google refers to its HR Analytics function as
“people analytics.” Google has analyzed
substantial data on their own employees.
3. Marketing Analytics
A better understanding of consumer behavior
through the use of scanner data and data
generated from social media.
Descriptive, Predictive, and Prescriptive
analytics are all heavily used in marketing.
4. Health Care Analytics
Descriptive, Predictive, and Prescriptive
analytics are used to improve patient, staff, and
facility scheduling; patient flow; purchasing; and
inventory control.
5. Supply-Chain Analytics
The optimal sorting of goods, vehicle and staff
scheduling, and vehicle routing are all key to
profitability for logistics companies.
Companies can benefit from better inventory
and processing control.
6. Analytics for Government and
Nonprofits
Government agencies and other nonprofits
have used analytics to drive out inefficiencies
and increase the effectiveness and
accountability of programs.
Nonprofit agencies have used analytics to
ensure their effectiveness and accountability.
7. Sports Analytics
Use of analytics for player evaluation and on-
field strategy is now common, especially in
professional sports.
8. Web Analytics
Web analytics is the analysis of online activity,
which includes, but is not limited to, visits to
web sites and social media sites such as
Facebook and LinkedIn.
Online experimentation involves exposing
various subgroups to different versions of a web
site and tracking the results.
CHAPTER 6: NEEDS ASSESSMENT
Needs Assessment analyze a current business
problem or opportunity.
Determine Required Capabilities Needed to
Address the Situation
Root causes or contributors to a situation are
known, the methods to correct them and/or
take advantage of opportunities can be
specified.
Simple process improvement situations
recommend process changes.
Identify Problem or Opportunity
 Identify Stakeholders part of the needs
assessment to assess which
stakeholders are impacted.
 Stakeholder may affect, be affected by,
or perceive itself to be affected.
RACI MODEL
R—Responsible person performing the needs
assessment.
A—Accountable who approves the needs
assessment, including the business case, when
warranted.
C—Consult person or group to be consulted for
input
I—Inform person or group who will receive the
results.
Goals are typically broad-based and may span
one or more years.
Objectives are used to enable goals; these are
more specific and tend to be of shorter term
than goals, often with durations of 1 year or
less.
Well-written goals and objectives are also said
to be SMART ANALYSIS
S—SPECIFIC clear, concise and observable
outcomes are needed.
M—MEASURABLE should be testable and
measurable.
A—ATTAINABLE should be realistic and
resources devoted so it can be achieved.
R—RELEVANT should be aligned with the b) Interrelationship Diagrams –
organizations mission, vision and strategies. This special type of cause-and-
effect diagram is helpful for
T—TIME BOUND specific period should be
visualizing complex problems.
attached to the outcomes.
 Process Flows used for many things,
primarily to document and analyze
current and future (e.g., proposed)
CHAPTER 7: SWOT ANALYSIS processes.
SWOT investigates the situation internally and
externally as follows:

 Internally shows where the

organization has current strengths to
help solve a problem or take advantage
of an opportunity.
 Externally generates potential
opportunities in the external
environment to mitigate a problem or
seize an opportunity.

Perform Root Cause Analysis on the Situation

Root Cause Analysis to determine the basic

underlying reason that causes a variance,
defect, or risk.

Opportunity Analysis to determine the viability

of successfully launching a new product or
service.

There are a number of techniques used to

perform root cause and opportunity analysis,
and most work for both:

 Five Whys (Why-Why) ask for the cause

of a problem up to five times or five
levels deep to truly understand it.
 Cause-and-Effect Diagrams designed to
understand the cause of a problem so
as not be distracted by its symptoms.
a) Fishbone Diagrams – Formally
called Ishikawa diagrams, these
diagrams are snapshots of the
current situation and high-level
causes of why a problem is
occurring.