FUNDAMENTALS AND BUSINESS ANALYTICS

MODULE 1
Subtopic 1 – WHAT IS ANALYTICS?
WHAT IS BUSINESS ANALYTICS?
➢ Begins with a data set or commonly with a database
• Data set – a simple collection of data or data file
• Database – collection of data files that contain information on people, location, and so on.
➢ *As database grow, they need to be stored somewhere.
➢ Store Data
• Computer clouds – hardware and software used for data remote storage, retrieval, and
computational functions.
• Data warehousing – collection of databases used for reporting and data analysis
➢ Big data describes the collection of data sets that are so large and complex that software
systems are hardly able to process them.
➢ Little data define as anything that is not big data. It is the smaller data segments or files that
help individual businesses keep track of customers.
THREE TERMS IN BUSINESS LITERATURE ARE OFTEN RELATED TO ONE ANOTHER:
➢ Analytics – process that involves the use of statistical techniques, information system software,
and operations research methodologies, to explore, visualize, discover and communicate
patterns or trends in data.
• Statistical Techniques – measures of central tendency, graphs, and so on
• Information system software – data mining, sorting routines
• Operations research methodologies – linear programming
- Analytics convert data into useful information. It is an older term commonly applied to all
disciplines, not just business.
- Typical example
Weather measurement – collected and converted into statistics, which in turn predict
weather patterns.
-Types of Analytics
▪ Descriptive – the application of simple statistical techniques that describes what is
contained in a data set or database.
▪ Predictive – an application of advance statistical, information software, or
operations research methods to identify predictive variables and build predictive
models to identify trends and relationships not readily observed in a descriptive
analysis.
▪ Prescriptive – an application of decision science, management science, and
operations research methodologies to make best of use of allocable resources.
- Operations research methodologies – applied mathematical techniques
➢ Purpose of Analytics
• Analytics is focused on generating insightful information from data sources, business
analytics goes the extra step to leverage analytics to create an improvement in measurable
business.
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Descriptive – to identify possible trends in large data sets or databases. The purpose is to
get a rough picture of what generally the data looks like and what criteria might have
potential for identifying trends or future business behavior.
• Predictive – to build predictive models designed to identify and predict future trends.
• Prescriptive – to allocate resources optimally to take advantage of predicted trend or future
opportunities.
➢ What do we mean by Analytics?
• Descriptive – answers the questions what happened and why it happens.
• Predictive – answers the question what will happen.
• Prescriptive – anticipates what will happen, when it happened, and also why it happened.
• Data – Analyze (Descriptive Model) – Provides and Generate Reports
• *Process involved using Descriptive Analytics
• Reasons *anyone* working with data should do EDA:
- Gain intuition about the data
- Make comparisons between distributions
- Sanity checking– make sure the data is on the scale you think is, in the format you
thought it should be.
- Finding out where data is missing or there are outliers
- Summarizing the data
• Data - We need data to be collected, data repository is needed to access for essential data.
• Analyze - We need to analyze the data we collected, Analyze Data Model to assess and
query the data collected in the process.
• Generate Reports - Business Users can choose the required reports. (Sales, Financial,
Distributions, Inventory, etc.).
• Smart Decisions - We need to decide the ways on how we analyzed the data. Analytics can
allow Managers to create a better and smarter decisions.
➢ What kind of questions can analytics answer?
• Prescriptive
- Stochastic Optimization – how can we achieve the best outcome including the effects
of variability?
- Optimization – how can we achieve the best outcome?
• Predictive
- Predictive modeling – what will happen next if?
- Forecasting – What if these trends continue?
- Simulation – what could happen…?
- Alerts – what actions are needed?
• Descriptive
- Query/drill down – what exactly is the problem?
- Ad hoc reporting – how many, how often, where?
- Standard reporting – what happened?
Most companies today have massive amounts of data at their disposal. We can see this by just accessing
the net, social media and other surveys out there holds a very vest amount of Data.
Subtopic 2 – WHERE DOES ANALYTICS APPLIED?
WHERE DOES ANALYTICS APPLIED?
➢ Policing/Security
➢ Transportation
➢ Fraud and Risk Detection
➢ Manage Risk
➢ Delivery Logistics
➢ Web Provision
➢ Proper Spending
➢ Customer Interactions
➢ City Planning
➢ Healthcare
➢ Travel
➢ Energy Management
➢ Internet/Web Search
➢ Digital Advertisement
THE POWER OF INFORMATION
➢ Information has always been power, but the past few decades have seen a subtle shift occur,
fundamentally altering the way we perceive it
➢ It has been only relatively recently that the amount of data available to us has outstripped our
ability to investigate that data.
METRICS AND MEASUREMENTS
➢ Metrics will translate the business challenges into operational measures that can be monitored
over time, not only for analytics impact, but for the entire company.
➢ Objective means by which your company can measure progress and business analytics impact.
• Increase retention and conversion rate
• Increase productivity and market share
• Increase wallet share
• Increase customer satisfaction
• Increase average order size/number of products
• Increase average spend per customer
• Decrease operational costs
• Decrease time-to-decision
• Optimize human capital
WHEN IS ANALYTICS NOT PRACTICAL?
➢ When there is NO Data - Some decisions must be made before data can be gathered
systematically. When a firefighter is in a burning building, trying to decide whether the floor is
about to collapse, he has to “gather data” rapidly by observing his surroundings. He’s unlikely to
perform a logistic regression analysis.
➢ When there is NO precedent - If something has never been done before, it’s hard to get data
about it. The obvious analytical response in such a situation is to perform a small-scale
randomized test on the idea and see if it works.
 ➢ When the Decision Maker Has Considerable Experience - Sometimes a decision maker has
made a particular decision often enough to have internalized the process of gathering and
analyzing data.
➢ When the Variables Can’t be Measured - Some decisions are difficult to make analytically
because the key variables in the analysis are hard to measure with rigor.
THE CHALLENGES OF BUSINESS ANALYTICS
➢ Environment - We all know that the economic environment has been more intense and
challenging than ever before.
➢ Competition - Part of addressing competitive threats is to monitor and stay one step ahead of
your competition—tracking, analyzing, and integrating everything you know about your
competitors into the analytics of your own company.
➢ Customers - Another business challenge that's leading to an increase in companies relying on
business analytics to drive their strategy is that customers are becoming more fickle, and loyalty
to products and services is rarer than ever before.’
THE SECRET OF SUCCESS
➢ Possibly the best-guarded secret in business analytics is that in practice, they must:
• Establish business analytic culture
• Understand analytic in play
• Recognize the insights as a competitive advantage.