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BUSINESS ANALYTICS FRAMEWORKS - The collected data is stored in data warehouse and then
Framework for Business Analytics
• A general framework for Business Analytics (BA) consists of four
layers: Data layer, Analytics layer, Reporting/Visualization layer,
and Access layers as presented in Figure 1.
Figure 1. Framework for Business Analytics
1. DATA LAYER
- Data is present in many places in many forms, so it needs to
be gathered in one place. Data is collected from internal as
well as external sources.
- Internal sources of data include the operational database of
an organization where daily transactions are stored while
external sources of data include suppliers, customers,
competitors, government agencies, Internet, etc.
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analyzed for decision making. Various tools used in data layer
include:
o Data Warehouse
- Oracle Corporation defines a data warehouse as a
collection of corporate information derived directly from
operational systems (internal sources) and some external
data sources.
- Data warehouse is a copy of transaction data specifically
structured for query and analysis. It is informational,
analysis and decision support oriented, not operational or
transaction processing oriented.
- Data in a data warehouse is integrated, subject-oriented,
non-volatile, and time-variant.
o Extract, Transform and Load (ETL)
- Before a data warehouse is populated with data from
internal sources as well as external sources, data needs
to be transformed. This transformation is called extract,
transform and load (ETL) and performs the following
functions:
▪ Extract – Data is extracted from many sources
including internal or external sources. It is then
consolidated, and non-relevant data is filtered out.
▪ Transform - Extracted data is validated and cleaned
up to correct missing, inconsistent, or invalid values.
Data is integrated into a standard format and
business rules are applied that map data to the
warehouse schema.
▪ Load - Cleansed data is then loaded into the data
warehouse/ data mart.
o Data Mart
- Also known as localized data warehouses, are small-
sized data warehouses, typically created by individual
divisions or departments to provide their own decision
support activities.
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2. ANALYTICS LAYER
- In this layer, data from Data Warehouse/Data Mart are
analyzed by using descriptive, predictive, or prescriptive
analytics.
- Various techniques that are used in this layer are:
a. Data Mining
o The process of exploration and analysis, by semi-
automatic or automatic means, of huge quantities of
data in order to discover meaningful patterns and
rules
o The technique that includes management science,
statistical, mathematical and financial models and
methods, used to find the vital relationships between
variables in the historical data, perform analysis on
the data or to forecast from data.
b. Multidimensional Data Analysis
o Also known as Online Analytical Processing (OLAP),
it is part of the wider variety of business intelligence
software that enables managers, executives, and
analysts to gain insight into data through rapid,
reliable, collaborative access to a wide range of
multidimensional views of information.
o It also allows business analysts to rotate data,
changing the relationships to get more detailed
insight into corporate information.
3. REPORTING/VISUALIZATION LAYER
- There are various tools used in this layer.
a. Dashboards
o Dashboards are the tools for visualization of important
business data presented in the form of graphic indicators,
charts, and tables.
o A digital dashboard provides the user a graphical high-
level view of business processes that can be drilled down
to find more details on a particular business process.
o It organizes and reflects the information into the user
interface in an easy, interactive, and intuitive manner.
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b. Balance Scorecards
o Balanced scorecards are semi-standard structured
reports, supported by design tools and techniques, that
can be used by managers to keep track of the execution
of activities by the staff within their control and to monitor
the consequences arising from these actions.
o They are performance metrics to identify and improve
various internal functions and their resulting external
outcomes. BSC enables organizations to put the strategy
into practice by measuring and delivering feedback to the
organizations.
c. Reports: These are the written documents relating to the
situation and can be created by the end users by supplying
parameter data. The pre-executed report results are cached
in order to support interactive and high-performance viewing
of these reports.
d. Ad hoc Reports: Contrary to standard reports which are
predefined and routinely processed, ad hoc reports are
generated when the need arises. They enable users to
produce their own customized reports without relying on the
IT team.
e. Alert: A type of report that is automatically triggered when an
event occurs, e.g. an e-mail or SMS message is sent to the
customer when the product becomes available which he had
previously tried to purchase, or an alert can instantly notify the
manager if the sales numbers fall below the acceptable level.
Types of Analytics
There are four types of advanced analytics namely: Descriptive,
diagnostic, predictive, and prescriptive.
1. Descriptive /Reporting Analytics
- Descriptive analytics gives information about the past
performance or state of a business and its environment by
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using data that is stored in databases/data warehouses. It
helps companies to gain insight from historical data with
reporting, scorecards, clustering.
- Descriptive analytics provides routine, regular and Ad hoc
reports that helps companies to look at the facts like, what has
happened, where, and how often.
- Visualization has become an important component of
descriptive analysis as it can develop powerful insights into
the actions and operations of a company.
2. Diagnostic Analytics
- It focuses on past performance to determine the answer to the
questions like why it is happening or why something
happened.
- It gives companies deep insight into a problem by techniques
such as drill-down, data discovery, data mining, etc. to find out
dependencies and to discover patterns from the historical
data.
- The outcome of this analysis is mostly an analytic dashboard.
3. Predictive Analytics
- Predictive analytics tools determine the probable future
outcome for an event, or the likelihood of the situation
occurring and identify relationship patterns. Its objective is to
understand the causes and relationships in the data to make
accurate predictions.
- It is an application of statistical, data mining, or visualization
techniques to detect patterns and anomalies in detailed
transactions. Analysts use patterns into models that can be
applied to new transactions to predict behavior or outcomes.
- For example, it can predict mixed analysis like, the customers
that are most likely to shift to a competitor, find the customers
that are credit risk, what a buyer is likely to buy and in what
quantity, what promotional campaign customers are likely to
respond.
- Various techniques of predictive analytics include:
a. Classification: classification techniques like Logistic
Regression (LOG), K-Nearest Neighbors, Artificial Neural
Networks (ANN), Decision Trees, Support Vector
Machines, Fuzzy Sets, Genetic Algorithms (GAs), and
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Rough Set are used for customer identification which
includes target customer analysis and subsequently
classifying the segments of potential customers so that
organizations can direct their resources and efforts into
attracting the target customer segments.
b. Clustering: Clustering techniques can be used to divide
customers into different groups in order to target specific
promotional campaigns to them.
c. Association: It can identify the relationships between
different purchasing behaviors, i.e., if a buyer buys one
product, it can predict the other items that he/she is likely
to purchase, thus helping in the promotion of related
products.
4. Prescriptive/Optimization Analytics
- It helps to choose the best possible outcome by evaluating a
number of possible outcomes.
- Enterprise level optimization models join the descriptive and
predictive models together with probabilistic and random
methods such as Bayesian models or Monte Carlo Simulation
to assist in the determination of the best course of action
based on various “what if” scenario assessments.
REFERENCES:
Ahmad, Rafi. (2019). Business analytics: A framework.
Retrieved from
https://www.researchgate.net/publication/332569572_Busine
ss_Analytics_A_Framework.
Camm, J.D., Cochran, J.J., Fry, M.J., Ohlmann, J.W.,
Anderson, D.R., Sweeney, D.J., & Williams, T.A. (2018).
Essentials of business analytics (3rd ed.). Cengage
Learning.
Evans, J. (2017). Business analytics: Methods, models, and
decision (2nd ed.). Pearson Education Limited.
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