Fundamentals of

Analytics
 MODULE 1
ANALYTICS IN PRACTICE
•Understand the definition and concepts of analytics

•Identify and understand the different kinds of questions

that analytics could answer

•Learn and describe the different practices on analytics

•Identify the different business users and their

challenges
•Identify the different trends in business analytics

•Identify the different applications of analytics

•Identify the different kinds of questions that analytics

could answer

•Apply the different practices on analytics

 MODULE 1 – SUBTOPIC 1
WHAT IS ANALYTICS?
Business analytics begins with
a data set (a simple collection
of data or a data file) or
commonly with a database (a
collection of data files that
contain information on people,
locations, and so on).
•As databases grow, they need to be stored
somewhere.

•Technologies such as computer clouds (hardware

and software used for data remote storage, retrieval,
and computational functions) and data warehousing
(a collection of databases used for reporting and
data analysis) store data.
•Database storage areas have become so large that
a new term was devised to describe them.

•Big data describes the collection of data sets that

are so large and complex that software systems are
hardly able to process them .
•They define little data as anything that is not big
data. Little data describes the smaller data
segments or files that help individual businesses
keep track of customers.

•As a means of sorting through data to find useful

information, the application of analytics has found
new purpose.
•ANALYTICS

•BUSINESS ANALYTICS

•BUSINESS INTELLIGENCE
Analytics can be defined as 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.
• Simply, analytics convert data into useful
information. Analytics is 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
• There are many types of analytics, and there is a
need to organize these types to understand their
uses.
•We will adopt the three categories ( descriptive ,
predictive , and prescriptive ) that the Institute of
Operations Research and Management Sciences
(INFORMS) organization ( www.informs.org )
suggests for grouping the types of analytics (see
Table 1.1 ).
• These types of analytics can be viewed
independently.
• For example, some firms may only use descriptive
analytics to provide information on decisions they
face.
• Others may use a combination of analytic types to
glean insightful information needed to plan and
make decisions.
The purposes and methodologies used for each of the
three types of analytics differ, as can be seen in Table 1.2 .
It is these differences that distinguish analytics from
business analytics .

Whereas 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
• In addition, the three types of analytics are applied
sequentially (descriptive, then predictive, then
prescriptive).
•Therefore, business analytics (BA) can be defined as 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.
 Descriptive analytics answers the
Descriptive Analytics questions what happened and
why it happen

Predictive analytics answers the

Predictive Analytics
question what will happen

Prescriptive analytics anticipates

Prescriptive Analytics what will happen, when it
happened, and also why it
happened
These are just an overview of the three types of
analytics primarily used in business

“You can look at a series of points on a two-

dimensional graph, for example, and notice a
pattern or relationship. Are there outliers in a
pattern that require explanation? Are some values
out of range? “
“Visual analysis helps us to “stay close to the data”
using “exploratory data analysis (EDA),” an
approach that the great statistician John Tukey
made respectable and Edward Tufte further
popularized by helping people create clear visual
representations of their data.
You may remember from your college statistics
course that “measures of central tendency”—
means, medians, and modes (everybody always
forgets what a mode is; it’s simply the category
with the highest frequency)—are useful ways to
express what’s going on in data. Sometimes
analysis simply means a visual exploration of data
in graphic form.
 Predictive analytics

Prescriptive analytics

Descriptive analytics
 Provides and
Data Analyze Generate
(Descriptive
Model)
Reports

Smart Decisions

Process involved using Descriptive Analytics.

Reasons *anyone* working with data should do
EDA:
(1) Gain intuition about the data
(2) Make comparisons between distributions
(3) Sanity checking– make sure the data is on the
scale you think is, in the format you thought it
should be
(4) Finding out where data is missing or there are
outliers
(5) Summarizing the data
qData: We need data to be collected, data repository is
needed to access for essential data.
qAnalyze: We need to analyze the data we collected,
Analyze Data Model to assess and query the data
collected in the process.
qGenerate Reports: Business Users can choose the
required reports. (Sales, Financial, Distributions,
Inventory, etc.).
qSmart Decisions: We need to decide the ways on how
we analyzed the data. Analytics can allow Managers to
create a better and smarter decisions.
Figure 1-1 Degree of Complexity
 MODULE 1 – SUBTOPIC 2
WHERE DOES
ANALYTICS APPLIED?
Policing/Security Customer Interactions
Transportation City Planning
Fraud and Risk Detection Healthcare
Manage Risk Travel
Delivery Logistics Energy Management
Web Provision Internet/Web Search
Proper Spending Digital Advertisement
• 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.

THE POWER OF INFORMATION

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.
ØIncrease retention and conversion rate
ØIncrease productivity and market share
ØIncrease wallet share
ØIncrease customer satisfaction
ØIncrease average order size/number
of products
ØIncrease average spend per customer
ØDecrease operational costs
ØDecrease time-to-decision
ØOptimize human capital
“When There’s 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’s 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.
qEnvironment - We all know that the economic environment has
been more intense and challenging than ever before.

qCompetition - 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.

qCustomers - 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
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.
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