Z-Business Analytics 1.2

Business Analytics
Dr. S. Somokanta Singh

[email protected]
MIMS, M.U.
Purpose of study
The purpose of studying Business Analytics:
• To provide the students with a sound
conceptual understanding of the role that
business analytics plays in the decision making
process
• To provide better understanding of the variety
of applications in which analytical methods
have been used successfully
Decision Making
The responsibility of managers
• Plan
• Coordinate
• Organise
• Lead
Organisations to better performance
• Ultimately manager’s responsibilities require
that they make different types of decisions
– Strategic decisions
– Tactical decisions
– Operational decisions
Strategic decision
• It involves higher-level issues concerned with
the overall direction of the organisation
• Defines the organisation’s overall goals and
aspirations for the future
• Have time horizon of three to five years
Tactical decisions
• Concern with how the organisation should
achieve the goals and objectives set by its
strategy
• They are usually the responsibility of middle
management
• Tactical decisions usually span a year and thus
are revisited annually or even every six
months
Operational decisions
• Operational decisions affect how the firm is
run from day-to-day
• They are the domain of operations managers
who are closest to the customer
Example – Bharat Shoes Co.(BSC) Ltd.
• BSC had been a catalogue-based retail seller of
running shoes and apparel
• Decided to change from catalogue-based sales
to Internet-based sales
• Decided that it should also establish retail
stores in the malls and downtown areas of
major cities
• ??????? Types of decision
• This is a strategic decision that will take the
firm in a new direction that it hopes will
complement its Internet-based strategy
• The middle level managers will have to make a
variety of tactical decisions in support of this
strategic decision
– How many new stores to open this year?
– Where to open these new stores?
– How many distribution centres will be needed to
support the new stores?
– Where to locate these distribution centres?
• Operations managers will need to make day-
to-day decisions
– How many pairs of each model and size of shoes
to order from the distribution centres?
– How to schedule their sales personnel?
Process of decision making
• Identify and define the problem
• Determine the criteria that will be used to
evaluate alternative solutions
• Determine the set of alternative solutions
• Evaluate the alternatives
• Choose an alternative
Approaches to decision making
• Tradition (“We’ve always done it this way”)
• Intuition (“gut feeling”)
• Rules of thumb (e.g. Restaurant – As a
restaurant owner, I schedule twice the
number of waiters and cooks on holidays)
• Managerial experience and intuition are
valuable inputs to making decisions
• What if relevant data were available to help us
make more informed decisions?
• With the vast amounts of data now generated
and stored electronically, it is estimated that
the amount of data stored in businesses grow
more than doubles every two years.
• How can managers convert these data into
knowledge that they can use to be more
efficient and effective in managing their
businesses
• What makes decision making difficult and
challenging?
• ????????
• Uncertainty is probably the number one
challenge
• Enormous number of alternatives that we
cannot evaluate them all
• What is the best combination of stocks to help
me meet my financial objectives?
• What is the best product line for a company
that wants to maximize its market share?
• How should an airline price its tickets so as to
maximize revenue?
• Answer to these questions can be made by
BUSINESS ANALYTICS
Business Analytics
• Scientific process of transforming data into
insights for making better decisions
• Business analytics is used for data-driven or
fact-based decision making
• Business Analytics is a combination of Data
Analytics, Business Intelligence (BI) and
Computer Programming. It is the science of
analysing data to find out patterns that will be
helpful in developing strategies.
• Business analytics can aid decision making by
creating insights from data
• Improve our ability to more accurately
forecast planning, by helping us quantify risk,
and by yielding better alternatives through
analysis and optimization
• Interactive Data Corporation (IDC) estimates
that Data creation will reach 163 zetabytes by
2025. Big Corporations, Governments,
Entrepreneurs and almost everyone else is
using Data Science to generate insights by
unearthing patterns and by decoding this
data.
Business Analytics Process
Business Problem Framing
• This is the first thing you do before you start
your analysis. Even before you begin your
analysis, you should understand the purpose
of your analysis. Here you try to understand
what the business is and what the business is
trying to achieve. You formulate the business
problem.
Analytics Problem Framing
• Here you reformulate the business problem
with respect to analytics. You develop a
proposed set of factors and its relationship to
output. Also, you define a metric of success of
your model.
Data
• Here you identify and select your data for
analysis and its source. You work to clean the
data and make it analysis ready. You also find
relationships between data and report them.
Methodology Selection and Model Building
• Once your data is worked on, you decide
which method to use for your analysis. This is
decided based on your data and the type of
analysis you have to perform. You make
multiple models and compare them based on
the metrics you decided on.
Deployment
• You validate your model to check if your
model is giving accurate predictions. Once
validated and reported, you deploy your
model on company’s system which then will
perform analysis on every new incoming data.
When a model is deployed, it has to be
constantly monitored for accuracy.
Categories of Business Analytics
• Descriptive analytics
• Predictive analytics
• Prescriptive analytics
Descriptive analytics
• Encompasses the set of techniques that describes
what has happened in the past
• Examples are data queries, reports, descriptive
statistics, data visualisation including data
dashboards, some data mining techniques, and
basic what-if models
• Descriptive analysis performs the function of
“Describing” or summarizing raw data to make it
easily understandable and interpretable by
humans.
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
• For example, past data on product sales may be
used to construct a mathematical model to
predict future sales
• Linear regression, time series analysis, some
data-mining techniques and simulation are often
used in predictive analytics
Prescriptive analytics
• It uses input data to determine a best course
of action i.e. the output of a prescriptive
model is a best decision
• Techniques include simulation, decision
analysis, and optimization
• Examples are portfolio models in finance,
supply network models in operations, price
markdown models in retailing
Topics of interest

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Business Analytics

Dr. S. Somokanta Singh

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