WHAT IS ANALYTICS?

BAI

• scientific process of transforming data into insight

 for making better decisions, offering new opportunities for a competitive
advantage
• Analytics uses
 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.

• Analytics, Business Analytics, and Business Intelligence

 Three terms are often related to one another
 BAI

• Analytics
 a process that involves the use of
 statistical techniques (measures of central tendency, graphs, and so on),
 information system software (data mining, sorting routines), and
 operations research methodologies (linear programming)
to explore, visualize, discover and communicate patterns or trends in data.
 analytics convert data into useful information
 an older term commonly applied to all disciplines, not just business.
 A typical example of the use of analytics is the weather measurements
collected and converted into statistics, which in turn predict weather patterns.
 three categories ( descriptive, predictive, and prescriptive )
What Can Be Learned From Data Sets?
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• Business Intelligence (BI) or Business Analytics (BA)

• Data analytics is an emerging technique that dives into a data set
without prior set of hypotheses
• The data derive meaningful trends or intriguing findings that were not
previously seen or empirically validated
• Data analytics enable quick decisions or help change policies due to
trends observed
Challenges many organizations face
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• Many organizations:
 Can’t always generate the information they need.
 Can’t generate insight fast enough to act upon it.
 Continue to incur huge costs due to uninformed decisions and misguided
strategies
What if an organization could
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• Predict the buying behaviour and decision criteria of its prospects

weeks before its competition?
• Gain first-mover advantage by introducing new products and services to
micro-segments that haven't been identified by competitors?
• Evaluate the impact of its marketing campaigns hourly and make
adjustments in real-time?
• Improve customer experience scores that grow products per customer,
reduce attrition, and leverage the power of customer recommendations
for new business?
• Predict likely failures of critical equipment and processes?
 Confusing Terminology
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• Business analytics is
 application of data analytics to business.
 Example - offering specific discounts to different classes of travelers based
on the amount of business they offer or have the potential to offer
• Data science is
 an interdisciplinary field (including disciplines such as statistics,
mathematics, and computer programming) that derives knowledge from
data and applies it for predictive or other purposes.
 Expertise about underlying processes, systems, and algorithms is used.
 Example - the application of t-values and p-values from statistics in
identifying significant model parameters in a regression equation.
 Business Analytics
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• 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
• Tools of business analytics can aid decision making by:
 Creating insights from data
 Improving the ability to more accurately forecast for planning
 Helping in quantifying risk
 Yielding better alternatives through analysis and optimization
 Importance of Business Analytics
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• There is a strong relationship of BA with:

 profitability of businesses
 revenue of businesses
 shareholder return
• enhances understanding of data
• vital for businesses to remain competitive
• enables creation of informative reports
 Categorization of Analytical Methods and Models
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• Descriptive analytics:
 Encompasses the set of techniques that describes what has happened in
the past
 examples:
 Data queries - A request for information with certain characteristics from a
database
 Reports
 Descriptive statistics
 Data visualization (including data dashboards)
 Data-mining techniques
 Basic what-if spreadsheet models
 Categorization of Analytical Methods and Models
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• Data dashboards
 Collections of tables, charts, maps, and summary statistics that are updated
as new data become available
• Uses of dashboards
 To help management monitor specific aspects of the company’s
performance related to their decision-making responsibilities
 For corporate-level managers, daily data dashboards might summarize
sales by region, current inventory levels, and other company-wide metrics
 Front-line managers may view dashboards that contain metrics related to
staffing levels, local inventory levels, and short-term sales forecasts
 Categorization of Analytical Methods and Models
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• 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
• Survey data and past purchase behavior may be used to help predict
the market share of a new product
• Techniques used in Predictive Analytics:
 Linear regression
 Time series analysis
 Data mining is used to find patterns or relationships among elements of the
data in a large database; 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
 Categorization of Analytical Methods and Models
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• Prescriptive Analytics: Indicates a best course of action to take

 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
 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
Spectrum of Business Analytics
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Business Analytics Applications
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 Management of customer relationships

 Financial and marketing activities
 Supply chain management
 Human resource planning
 Pricing decisions
 Sport team game strategies
Business Analytics in Practice
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• Predictive and prescriptive analytics are sometimes referred to as

advanced analytics
• Financial analytics
 Use of predictive models to:
 Forecast future financial performance
 Assess the risk of investment portfolios and projects
 Construct financial instruments such as derivatives
 Construct optimal portfolios of investments
 Allocate assets
 Create optimal capital budgeting plans
 Simulation is also often used to assess risk in the financial sector
Business Analytics in Practice
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Human resource (HR) analytics

 New area of application for analytics
 The HR function is charged with ensuring that the organization:
 Has the mix of skill sets necessary to meet its needs
 Is hiring the highest-quality talent and providing an environment that retains it
 Achieves its organizational diversity goals
 Business Analytics in Practice
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Marketing analytics
 Marketing is one of the fastest growing areas for the application of analytics
 A better understanding of consumer behavior through the use of scanner data
and data generated from social media has led to an increased interest in
marketing analytics
 A better understanding of consumer behavior through marketing analytics
leads to:
 Better use of advertising budgets,
 More effective pricing strategies,
 Improved forecasting of demand,
 Improved product line management,
 Increased customer satisfaction and loyalty
 Business Analytics in Practice
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• Health care analytics
 Descriptive, predictive, and prescriptive analytics are used to improve:
 Patient, staff, and facility scheduling
 Patient flow
 Purchasing
 Inventory control
 Use of prescriptive analytics for diagnosis and treatment
 Business Analytics in Practice
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• Supply chain analytics
 The core service of many companies 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
 Companies can benefit from better inventory and processing control and more
efficient supply chains
 Business Analytics in Practice
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• Analytics for government to:
 Drive out inefficiencies
 Increase the effectiveness and accountability of programs
• Analytics for nonprofit agencies to ensure their effectiveness and
accountability to their donors and clients
 Business Analytics in Practice
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• Sports analytics
 Professional sports teams use to:
 Assess players
 Decide how much to offer players in contract negotiations
 Teams use to assist with on-field decisions
 The use of analytics for off-the-field business decisions is also increasing
rapidly
 Using prescriptive analytics, franchises across several major sports
dynamically adjust ticket prices throughout the season to reflect the relative
attractiveness and potential demand for each game
 Business Analytics in Practice
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Web analytics
 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
 Leading companies apply descriptive and advanced analytics to data collected
in online experiments to determine the best way to:
 Configure web sites
 Position ads
 Utilize social networks for the promotion of products and services
Challenges in Analytics Adoption
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Source: The Current State of Business Analytics: Where Do We Go From Here?

Prepared by Bloomberg Businessweek Research Services, 2011
Information Challenges
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• Growth in external data, such as from social media sources

• Complexity, access, and security
• Data availability, quality, consistency, and format
• Alignment with changing business requirements
• Human resources, such as Analytical, Domain, IT Staff, etc.
• Infrastructure scalability, reliability, and cost
Types of Analytics
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 Descriptive analytics
- uses data to understand
past and present
 Predictive analytics
- analyzes past performance
 Prescriptive analytics
- uses optimization techniques
2 3
Predictive analytics
Predicting the future based
on historical patterns
What could happen?
1 Prescriptive Analytics
Enabling smart decisions
based on data
What should we do?
Analytics
Descriptive analytics
Mining data to provide
business insights
What has happened?
BAI
 BAI

• process of analytics can involve any one of the three types of analytics
Business Analytics (BA)
 the major components of business analytics include all three used in
combination to generate new, unique, and valuable information that can aid
business organization decision-making.
 a process beginning with business-related data collection and consisting of
sequential application of descriptive, predictive, and prescriptive major
analytic components, the outcome of which supports and demonstrates
business decision-making and organizational performance
Business Analytic Process
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BAI
The process of BI
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• Data -> information -> knowledge -> actionable plans

• Data -> information:
 the process of determining what data is to be collected and managed and in
what context
• Information -> knowledge:
 The process involving the analytical components, such as data
warehousing, online analytical processing, data quality, data profiling,
business rule analysis, and data mining
• Knowledge -> actionable plans:
 The most important aspect in a BI process