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
Data is a collection of facts, such as numbers, words, measurements,
observations or even just descriptions of things.

Information
Data that is (1) accurate and timely, (2) specific and organized for a
purpose, (3) presented within a context that gives it meaning and
relevance, and (4) can lead to an increase in understanding and decrease
in uncertainty.
(source: http://www.businessdictionary.com/definition/information.html#ixzz3TBSQ34pB)

Knowledge
Facts, information, descriptions, or skills, which is acquired through
experience or education by perceiving, discovering, or learning.
Derived from information but it is richer and more meaningful than
information.

Slide 3
Data-Information-Knowledge-Wisdom
The DIKW Continuum
What is DATA?
What is INFORMATION?
What is KNOWLEDGE?

Wisdom

Knowledge

Information

Data
Slide 4
 Sample Examination Question: Data,
Information and Knowledge

Figure 1
Comparative Analysis % Sales:% Profit Contribution

45.00%

40.00%

35.00%

30.00%

25.00% Sum of % Sales Per Product

20.00% Sum of % Profit

15.00%

10.00%

5.00%

0.00%
BEER RTDs SPIRITS WINE

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)
Database Model Base

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.

Data Trends Let Businesses Spot New Opportunities

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
Cell Address operators

Labels

Numbers
Text
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
Spreadsheet 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