Introduction to Business Analytics

Business Analytics

Introduction to Business Analytics Contents

Companies worldwide are using data to:
- Boost process and cost efficiency (60%) Decision Making and Business Analytics
- Drive strategy and change (57%)
- Monitor and improve financial performance BA in building AI-powered Organizations
(52%)
Descriptive Data Regression Optimization
(MicroStrategy) Introduction Types
Statistics ofVisualization
Business Analytics
Model Model

Data and Models in BA

“Using data analytics is a very effective way to have influence in an organization,”

Business Analytics in Practice
(Jan Hammond, Harvard Business School)

1. Decision Making… 1. Decision Making…

Managers’ responsibility
To make strategic, tactical, or operational decisions.
Strategic decisions
Strategic decisions
◦ Involve higher-level issues concerned with the overall
Tactical decisions direction of the organization.
◦ Define the organization’s overall goals and aspirations
for the future.
Operational decisions

| Business Analytics | Introduction | Nano_PAMS Program |

Assoc.Prof. Nguyen Vinh 1

 Introduction to Business Analytics

EXAMPLE

1. Decision Making … The Thoroughbred Running Company (TRC)

Tactical decisions:
● a catalog-based retail seller of running shoes and apparel
◦ Concern how the organization should achieve the goals and
● changed its emphasis from catalog-based sales to Internet-based sales =>
objectives set by its strategy. TRC sales revenues grew quickly
◦ Are usually the responsibility of midlevel management.
Operational decisions:
◦ Affect how the firm is run from day to day.
◦ Are the domain of operations managers, who are the closest
to the customer.

| Business Analytics | Introduction | Nano_PAMS Program |

1. Decision Making … 1. Decision Making …

Decision making can be defined as the following process:

1. Identify and define the problem (is the most critical) Approaches
2. Determine the criteria that will be used to evaluate
alternative solutions.
3. Determine the set of alternative solutions. Rules of Using relevant
Tradition Intuition
thumb Data
4. Evaluate the alternatives.
5. Choose an alternative.

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 Introduction to Business Analytics

1. …Business Analytics Definition 1. …Business Analytics Definition

The use of
data
information technology
statistical analysis
quantitative methods
mathematical or computer-based models
To help managers
gain improved insight about their business operations
make better and fact-based decisions

1. …Business Analytics Definition 1. …Business Analytics Definition

Business analytics:
◦ Scientific process of transforming data into insight for
making better decisions.
◦ Used for data-driven or fact-based decision making,
which is often seen as more objective than other
alternatives for decision making.

Scientific process of transforming data into insight for making better decisions

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 Introduction to Business Analytics

1. …Business Analytics Definition 1. …Business Analytics Definition

Impacts…
Tools of business analytics can aid decision making by:
◦ Creating insights from data
◦ Improving our ability to more accurately forecast for planning
◦ Helping us quantify risk.
◦ Yielding better alternatives through analysis and optimization.
◦ BA moves decisions away from being based purely on
judgment and intuition of the decision maker to
something more powerful (based on data, facts, and
analysis)
◦ more prediction rather than reactive decisions
◦ use of analytics by everyone at the point where decisions
are made rather than relying on skilled experts in a
consulting group

1. …Business Analytics Definition 2. BA in building AI-powered Organizations

… and Challenges
◦ lack of understanding of how to use analytics.
Understand how data are analyzed to
◦ insufficient analytical skills Business make decisions
◦ competing business priorities Analytics
◦ difficulty in getting good data and sharing information
Transform those analytical and decision-
◦ not understanding the benefits versus perceived costs of making ways into automated systems
analytics studies

Building AI

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 Introduction to Business Analytics

2. BA in building AI-powered Organizations 3. Types of Business Analytics

Business analysts actions ◦ Descriptive Analytics what has happened?
◦ Predictive Analytics what might happen?
The data passes If the insights
through The analyst are found to ◦ Prescriptive Analytics what should we do?
The analyst is be actionable
analytical visualizes the
presented with they are acted
models findings and
a situation or upon
powered by draws some
maybe a
machine insights.
problem
learning The fourth
algorithms. step could lead
to the
The executive integration of
Acquires data Certain patterns body is made IPA systems
to start an are recognized aware of these into the
investigation by the insights company’s
algorithms workflow

| Business Analytics | Introduction | Nano_PAMS Program |

3. Types of Business Analytics 2. A Categorization of BA Methods

◦ Descriptive Analytics what has happened? ◦ Descriptive Analytics
◦ Predictive Analytics what might happen? - set of techniques that describes what has happened in
the past and current business performance;
◦ Prescriptive Analytics what should we do?
- Most commonly used and most well-understood type of
analytics
(It get more value added as you go down this list) Example: "How much did we sell in each region?", "What
was our revenue and profit last quarter?"

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2. A Categorization of BA Methods
◦ Descriptive Analytics
Techniques
Data query: A request for information with certain
characteristics from a database.
Data dashboards: Collections of tables, charts, maps,
and summary statistics that are updated as new data
become available.
2. A Categorization of BA Methods
◦ Predictive Analytics:
Techniques
Linear regression
Time series analysis
Data mining is used of analytical techniques for better
understanding patterns and relationships that exist in
large data sets; often used in predictive analytics.
Simulation involves the use of probability and statistics
to construct a computer model to study the impact of
uncertainty on a decision.
Assoc.Prof. Nguyen Vinh
Introduction to Business Analytics
2. A Categorization of BA Methods
◦ Predictive Analytics:
- Techniques that use models constructed from past
data to predict the future or ascertain the impact of
one variable on another.
- Survey data and past purchase behavior may be used
to help predict the market share of a new product.
Example: A bank manager predicts the chance that a loan
application will default
2. A Categorization of BA Methods
◦ Prescriptive Analytics
- Techniques that use to indicate a best course of action
to take, uses optimization to identify the best alternative
to maximize or minimize some objectives
- Predictive model provide a forecast or prediction, but do
not provide a decision. A forecast or prediction, when
combined with a rule, becomes a prescriptive model.
- Prescriptive models that rely on a rule or set of rules are
often referred to as rule-based models.
Example: determine the optimal amount of cash to store in ATMs
-
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 Introduction to Business Analytics

2. A Categorization of BA Methods 2. A Categorization of BA Methods

◦ Prescriptive Analytics ◦ Prescriptive Analytics
Techniques
Optimization models: Models that give the best decision
subject to constraints of the situation.
Simulation optimization: Combines the use of
probability and statistics to model uncertainty with
optimization techniques to find good decisions in highly
complex and highly uncertain settings.
Techniques
Decision analysis
Used to develop an optimal strategy when a decision maker
is faced with several decision alternatives and an uncertain
set of future events.
Employs utility theory, which assigns values to outcomes
based on the decision maker’s attitude toward risk, loss, and
other factors.

3. Types of Business Analytics 3. Types of Business Analytics

The Spectrum of Business Analytics
◦ Example: When to adjust the price in retail stores and how
much to maximize revenue?

- Descriptive analytics: examine historical data for similar

products (prices, units sold, advertising...)
- Descriptive analytics: predict sales based on price
- Prescriptive analytics: find the best sets of pricing and
advertising to maximize sales revenue

Source: Adapted from SAS

.

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 Introduction to Business Analytics

4. Data and Models in BA 4. Data and Models in BA

◦ Data sets and Databases ◦ Data Sources
Information
Primary Data: Internal company records and business
Data Data set Database transactions; Automated data capturing equipment;
Analyzing Customer market surveys
numerical simply a a collection Secondary Data: Government and commercial data sources;
or textual collection of related
facts and of data files extracting Custom research providers; Online research.
figures containing meaning
records on from data
people,
places, or
things

| Business Analytics | Introduction | Nano_PAMS Program |

4. Data and Models in BA 4. Data and Models in BA

◦ Big Data ◦ Big Data
Set of data
Set of data that is too that is too
large or too complex to large or too
be handled by standard complex to be
data-processing handled by
techniques and typical standard
desktop software. data-
processing
techniques
and typical
desktop
software.
Source: IBM

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 Introduction to Business Analytics

4. Data and Models in BA 4. Data and Models in BA

◦ Types of Data ◦ Types of Data
- Structured and Unstructured - Structured and Unstructured

Entities

4. Data and Models in BA 4. Data and Models in BA

◦ Types of Data ◦ Types of Data
- Structured and Unstructured - Structured and Unstructured

Records

Entities Variables or Attributes Entities Variables or Attributes

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 Introduction to Business Analytics

4. Data and Models in BA 4. Data and Models in BA

◦ Types of Data ◦ Types of Data
- Structured and Unstructured - Structured and Unstructured
- Cross-Sectional and Time Series Data
- Population and Sample
=> Random sampling: a sampling method to gather a representative
Records sample of the population data

Entities Variables or Attributes

4. Data and Models in BA 4. Data and Models in BA

◦ Models in BA ◦ Problem solving with analytics

- Model is an abstraction or representation of real system, idea and

object
- Models are usually developed from theory or observation and Interpret
establish relationships between actions that decision makers might Define
take Recognize Structure Analyse results Implement
the
the the the and the
problem solution
problem problem problem making a
decision

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 Introduction to Business Analytics

5. Business Analytics in Practice 5. Business Analytics in Practice

• Financial Analytics • Supply-Chain Analytics • Financial Analytics (1) • Supply-Chain Analytics (4)

• Human Resource (HR) • Analytics for Government and • Human Resource (HR) • Analytics for Government and
Analytics Nonprofits Analytics (2) Nonprofits

• Marketing Analytics • Sports Analytics • Marketing Analytics (3) • Sports Analytics

• Health Care Analytics • Web Analytics • Health Care Analytics • Web Analytics (5)

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