Business Computing 1

Business Analytics:
What is Business Analytics?
Textbook:
Chapter 2, Making Knowledge Work;
Chapter 3, Business Information Systems, pp 55-63
(Richardson et al., 2011)

What you will learn:

Understand the data-information-knowledge
continuum
Introduction to Business Information Systems
Decision support systems

Introduction to Business Analytics

Descriptive Analytics
Predictive Analytics
Prescriptive Analytics

Analytics using Spreadsheets

Slide 2

The Data, Information and Knowledge Continuum

Data
Facts and figures without any real context or meaning.

Information
Data that has been made meaningful and helps someone understand
something.

Knowledge
Information that has been incorporated into someones view of the world.

Explaining Big Data

http://www.youtube.com/watch?v=7D1CQ_LOizA
Slide 3

Data-Information-Knowledge-Wisdom
The DIKW Continuum
What is DATA?
What is INFORMATION?
What is KNOWLEDGE?

n
di
n
a
st act
r
de mp
n
I
U

Wisdom

Str
u
Co cture
nt e
xt

Information

Data
Slide 4

n
atio
plic
Ap sage
U

Knowledge

Sample Examination Question: Data,

Information and Knowledge
Figure 1

Slide 5

Sample Examination Question: Data,

Information and Knowledge
Identify examples of data, information, and knowledge that can be recognised
in the charts above (see Figure 1).

Data:

Information:

Knowledge:

Slide 6

What is an Information System?

Systems that use information technology to
capture data and transmit, store, retrieve,
manipulate, and/or display information
(Beech & Chardwick, 2005)

Slide 7

What is a Decision Support System (DSS)?

A DSS is a type of Information System that
includes a model based set of procedures for
processing data, to support judgments that must
be made when making decisions (What-IF ?)
Characteristics
A DSS incorporates both data and models
Designed to ASSIST managers to take decisions
Relevant to Semi-structured tasks

Slide 8

Decision Support Systems (DSS)

Model Base

Database

User Interface

User

Some DSS Examples:

Example: Home Loan Calculator-

(http://www.anz.com/aus/personal/home-loans/calculators-tools/How-much-can-I-borrow/default.asp)

Example: Car Loan Repayments(http://www.gemoney.com.au/en/calculators_tools/car_loan_repayment_calculator.html)

Slide 9

Business Analytics
refer to the application of various technologies to enable
analytical processing, data mining, performance
management, and reporting, so supporting better
business decision-making
We will look at how such systems can be built using
Spreadsheets.
In your Workshops you will learn more of this as you design and
build a spreadsheet system for Hammer Wines.

Business Analytics: Drive smarter decisions

http://www.youtube.com/watch?v=pu3dKKzGOVU
Slide 10

Business Analytics
Why is Business Analytics important?

To see how smarter analytics, and the insights derived

from it, lets various industries and businesses spot new
opportunities, and uncover hidden connections, watch the
following video.

http://www.youtube.com/watch?v=HbHTvqZE3D8

Slide 11

Forms of Business Analytics

Business Analytics takes three forms:
Descriptive Analytics: The use of data to understand past
and current business performance and so make informed
decisions.
Predictive Analytics: Analysis of past performance in an effort
to predict the future by examining historical data, detecting
patterns or relationships in these data (i.e. creating a model),
and then extrapolating these relationships forward in time.
Prescriptive Analytics: Using a model where the output of the
model can be optimised (maximised) by adjusting the input
alternatives, so prescribing what the best decision is.

Slide 12

Analytics using Spreadsheets:

Introduction to the Excel Spreadsheet
The Spreadsheet is a powerful tool that can be employed to analyse tables of
business data, employing Business Analytics techniques.
Spreadsheets are widely used in business
They allow employees to manipulate data, and develop and solve models that
support business data analysis
They support powerful commercial add-ins
They provide many means for visualising data and communicating the results of
analysis
They are widely used to support decision making in areas such as marketing,
finance, and business operations

Slide 13

Analytics using Spreadsheets:

Formulas are made up of:
functions, numbers, cell references
(Link cells & worksheets), arithmetic
operators

Cell Address

Labels
Text

Numbers

YOU WILL GET TO DESIGN AND BUILD THIS SPREADSHEET IN THE STUDIO/WORKSHOPS!!

Slide 14

Analytics using Spreadsheets:

Example: Descriptive Analytics Analysis at Hammer Wines
The Problem Situation
Marilyn and Colin Hammer at Hammer Wines have questions about:
The performance of their sales staff
The states of Australia that are most profitable and those that are not
The products that are generating revenue and those that are not

What data do they have?

Sales figures for the year ending June 2013 (see next slide)

Slide 15

Analytics using Spreadsheets:

Example: Descriptive Analytics Analysis at Hammer Wines
Sales figures for year ending June 2013

Slide 16

Analytics using Spreadsheets:

Example: Descriptive Analytics Analysis at Hammer Wines
Some of the questions that could be answered, using
DESCRIPTIVE analytics, based upon these figures:
The performance of sales staff:
Which sales representatives achieved the target set by management, and which were
under target?
How much commission did each sales representative earn?

The states of Australia that are most profitable and those that are
not:
Which states of Australia produced the highest/lowest sales?

The products that are generating revenue and those that are not:
Which product is achieving the highest sales?
Which product is achieving the lowest sales?

Slide 17

Some Sample Excel Functions that can be used

SUM (range) finds the sum of values in a range of cells
IF (condition, value if true, value if false) a logical function that return one value if the
condition is true and another if the condition is false
VLOOKUP (lookup-value, table_array, col_index_num) looks up a value in the left-most
column of a table and returns a value in the same row for a column you specify. The table
must be sorted in an ascending order.
AVERAGE (range) finds the average of the values in a range of cells
MAX (range) finds the largest value in a range of cells
MIN (range) finds the smallest value in a range of cells
COUNTIF (range) finds the number of cells within a range that meets a specified
criterion
SUMIF(range, criteria, sum_range) - sums the values in a range (sum_range) where the
values in an associated range (range) meet a criteria (criteria) that has been specified.

Slide 18

Analytics using Spreadsheets:

Example: Descriptive Analytics at Hammer Wines
Business Question: Which sales representatives achieved the
target set by management, and which were under target?

FUNCTION USED:
IF

Slide 19

Analytics using Spreadsheets:

Example: Descriptive Analytics at Hammer Wines
Business Question: How much commission did each sales
representative earn?

FUNCTION USED:
VLOOKUP

Slide 20

Analytics using Spreadsheets:

Example: Descriptive Analytics at Hammer Wines
Business Question: Which states of Australia produced the
highest/lowest sales?

FUNCTION USED:
SUMIF

Slide 21

Analytics using Spreadsheets:

Example: Descriptive Analytics at Hammer Wines
Business Question: Which products are producing the highest
revenue, and which are producing the lowest revenue?

FUNCTION USED:
SORTING (by %
Contribution to Sales)

Slide 22

Analytics using Spreadsheets:

Predictive Analytics What if Analysis
Spreadsheets support PREDICTIVE ANALYTICS
Analyse past performance to predict the future by examining
historical data, detecting patterns or relationships in these data,
and then extrapolating these relationships forward in time
This is sometimes called What if Analysis. We ask, based upon
past performance, what if a particular scenario takes place how
will our business be affected? For example:
What if demand for our products continues to grow as it has in
the past?
What if suppliers prices go up by 5%?
What if

Slide 23

Analytics using Spreadsheets:

Example: Predictive Analytics at Hammer Wines
Business Question: Suppose that Hammer Wines plans to expand and will
take a bank loan. They will assume that for a loan of $500,000, they will make
fortnightly repayments, over 10 years, and that during that time the Banks
interest rate will be constant at 6.3% p.a.
How much should the accountants set aside for each repayment?

FUNCTION USED:
PMT (use Excel Help to
research how this Excel
function works)

Slide 24

Analytics using Spreadsheets:

Example: Prescriptive Analytics at Hammer Wines
Business Question: How well do you understand the idea of using a
PREDICTIVE/PRESCRIPTIVE model for Business Analytics and how Excel can
support this?
Suppose that, instead of the circumstances shown on the previous slide, Hammer
Wines management said that, instead of locking the loan to 10 years, they were
willing to make it longer, but that the maximum amount they could repay each
fortnight was $2000.

So they want to work backwards. They know the required output ($2000
repayment per fortnight) , and they want to use a model to tell them what the
input must be to achieve this result. They want the Information System to
PRESCRIBE what they must do now!

Excel includes the ability to do this It is called GOAL SEEK

Slide 25

Analytics using Spreadsheets:

Example: Prescriptive Analytics at Hammer Wines

EXCEL Feature used:

GOAL SEEK:
set the required final
value and work
backwards, to prescribe
what the input must be in
order to achieve that
final value
Slide 26

Piazza Challenge
Before the next workshop, see if you can work out how you could use a tool such as
Excel for PREDICTIVE ANALYTICS
The Scenario: Suppose that you are in charge of the online sales of products at Hammer
Wines, and you need to predict how online sales might grow in future years.
You ask the question: What if the Internet continues to grow as in the past, how many
Internet users there will be in 2015, who could potentially visit our companys site?
Available Data: You have these figures showing the past growth in Internet users:

Date

Number of Internet Users

December 1995

16 million

December 2000

361 million

December 2005

1018 million

December 2010

2260 million

June 2012

2405 million

December 2015

????

BEFORE THE NEXT Workshop Using some form of information technology (e.g.
Excel), how many Internet users would you estimate there will be by December
2015?
Slide 27

Thank you

Slide 28