Questions

• What are the 4 types of data?

• Why data is so important to a company?
• What Is
– BA
– BI
– Data Science
– Data Mining
• BI Vs BA
• Why is Analytics important in business?
• What do business analytics do?
• What are the types of business analytics?
• What tools are used in business analytics?
• Why is data analytics important for businesses today?
 Introduction
• Tsunami of Data. Doubles each year.
– 90% of world’s data created in last 3-4 years.
– Facilitated by more storage.
– Facilitated by more tools to analyze.
– Complex: because its not just more but its
different. New sources of data. Unstructured.
– Complex: shortage of talent.

• Business Analytics: use of data to improve

business decisions.
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 From Data to Insight
• Data are often viewed as the low level of
abstraction from which information and then
knowledge and intelligence can be derived.
• The term “data” means different things to
different people.
– To computer scientists, “raw data” means bits and
bytes or strings of zeros and ones.
– Journalists think of data as facts.
– In the business intelligence or analytics context, data
mean a set of measurements on a set of records. For
example, marketing data might include measurements
on a million customers that include customer
demographics,
 From Data to Insight
• Generating insights from data requires transforming the data in its
raw form into information that is comprehensible to humans.

• Human experts, no matter how much domain expertise and

experience they possess, do not have the capacity to extract
patterns or insights from such large amounts of data without the
aid of analytics software and knowledge.

• Our focus is on transforming data into actionable insights.

• Is there any insight, knowledge or information that is currently
hidden within the wealth of accumulated data that would improve
business processes, uncover new growth potential, etc.? This is the
birth of business analytics.

“Do you know what you do not know?”

 From Business Intelligence to
Business Analytics
• Today’s data-rich organizations seek methods for extracting value
from their data. Management no longer asks if data hold value, but
instead how value can be created from the company’s data.

• Fact-based decision making is not a new concept. But with the new
volumes of data, there is a need for new methods and technologies
to generate intelligence.

• A decade ago, business intelligence was an umbrella term

introduced to describe a variety of technologies that support data-
based decision making.

• Reports are currently still the most popular form of data analysis in
the business world. Reports come in various formats such as PDF,
HTML and most popularly — Microsoft Excel.
 From Business Intelligence to
Business Analytics
• A main challenge with BI is that it does not form a closed
loop where the generated insights lead to action, which in
turn leads to changes in Key Performance Index (KPI). Two
reasons for non-action are the lack of timeliness and the
lack of an actionable process.

• Business analytics, a relatively new term, was coined to

address this gap in the business intelligence realm.

• Google Analytics, currently the most widely used Web

Analytics service, is a powerful reporting and visualization
tool of web usage statistics
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 Common difference between BI & BA
Business Intelligence Business Analytics
Focused mostly on Reporting /Descriptive Diagnostic Analytics – data-driven insights
– Structure reporting Predictive Analytics – predicts a likely
outcome of an event
Prescriptive Analytics- Prescribing or
proposing possible actions to deal with a
predictive outcome
Catalogue past data, Drill-down query Predicts future trends, to uncover
patterns and trends
What has happened, when, who, how What will likely happen? What’s next?
many
KPIs, Dashboard, Scorecards, OLAP, Adhoc Predictive modeling, Data Mining,
Quantitative Analysis
Example – BI can tell you how many loans Example – BA can tell you “why” the no.
were approved in Q1 across all your of loans has decreased in Q1
channels, product lines.

The objective of BI & BA remains fundamentally unchanged –

to provide business with decision support
 What is Business Analytics?
• Business Analytics: the use of data,
information technology, statistical analysis,
quantitative methods and mathematical or
computer-based models to aid business
managers gain insights about their business
operations.

Using Data to Gain Business Insights.

• Business Analytics is a set of techniques and
processes that can be used to analyse data to
improve business performance through fact-
based decision-making.
• Business Analytics is the subset of Business
Intelligence, which creates capabilities for
companies to compete in the market effectively
and is likely to become one of the main functional
areas in most companies.
• Analytics companies develop the ability to
support decisions through analytic reasoning.
 a recent study has also revealed that more than 59% of the organizations do not have
information required for decision-making.

In a recent article based on a survey of nearly 3000 executives, MIT Sloan Management
Review reported that there is striking correlation between an organization’s analytics
sophistication and its competitive performance.
• The biggest obstacle to adopting analytics is the
lack of knowhow about using it to improve
business performance.
• Business Analytics uses statistical, operations
research and management tools to drive business
performance.
• Business Analytics helps companies to find the
most profitable customer and allows them to
justify their marketing effort, especially when the
competition is very high.
Companies such as
• CAPITAL ONE has managed a profit of close to $1 billion in their
credit card business in the recent past, whereas many of their
competitors have shown a loss of several millions in credit card
business.
The success of Capital One is attributed to its analytical strength.

• STAPLES invented the office super store concept and became the
world's largest office products company.
Staples over years discovered that the best way to grow its business
and build loyalty was to analyze the purchasing patterns of its core
customers and target them with relevant, profit generating offers.
To do that, Staples is using Business Analytics for predictive
modeling and customer insight to fine tune its marketing campaigns
• There is significant evidence from the corporate
world that the ability to make better decisions
improves with analytical skills.
• According to new research, relevance of effective
data management and business analytics is
growing and being considered strategic and
discussed at board-room level.
• This course is designed to provide in-depth
knowledge of business analytic techniques and
their applications in improving business
processes and decision-making.
 Definition
• Business analytics (BA) is the practice of
iterative, methodical exploration of an
organization's data, with an emphasis on
statistical analysis. Business analytics is used
by companies committed to data-driven
decision-making.
 Business analytics examples

BA is used
– to gain insights that inform business decisions and can
be used to automate and optimize business processes.
– Data-driven companies treat their data as a corporate
asset and leverage it for a competitive advantage.
– Successful business analytics depends on data quality,
skilled analysts who understand the technologies and
the business, and an organizational commitment to
data-driven decision-making.
• Business analytics techniques break down into
two main areas.
• The first is basic business intelligence.
– This involves examining historical data to get a
sense of how a business department, team or staff
member performed over a particular time.
– This is a mature practice that most enterprises are
fairly accomplished at using.
• The second area of business analytics involves deeper
statistical analysis.
• This may mean doing predictive analytics by applying
statistical algorithms to historical data to make a
prediction about future performance of a product,
service or website design change.
• Or, it could mean using other advanced analytics
techniques, like cluster analysis, to group customers
based on similarities across several data points.
• This can be helpful in targeted marketing campaigns,
for example.
• Specific types of business analytics include:
– Descriptive analytics, which tracks key
performance indicators to understand the present
state of a business;
– Predictive analytics, which analyzes trend data to
assess the likelihood of future outcomes; and
– Prescriptive analytics, which uses past
performance to generate recommendations about
how to handle similar situations in the future.
Key Performance Indicators - Key performance indicators (KPIs) are
business metrics used by corporate executives and other managers to track and
analyze factors deemed crucial to the success of an organization.
BI Vs BA
 Business analytics applications

• Data visualization tools

• Business intelligence reporting software
• Self-service analytics platforms
• Statistical analysis tools
• Big data platforms
 Business Analytics Tool
• R Programming (open source)
• Tableau Public (open source)
• Python (open source)
• SAS
• Apache Spark
• Excel
• RapidMiner
• KNIME (open source)
• QlikView
• Splunk
 Scope of Business Analytics

• Business analytics has a wide range of application and usages. It

can be used for descriptive analysis in which data is utilized to
understand past and present situation. This kind of descriptive
analysis is used to asses’ current market position of the company
and effectiveness of previous business decision.
• It is used for predictive analysis, which is typical used to asses’
previous business performance.
• Business analytics is also used for prescriptive analysis, which is
utilized to formulate optimization techniques for stronger business
performance.
• For example, business analytics is used to determine pricing of
various products in a departmental store based past and present
set of information.
• Marketing analytics measures integrated online and offline
marketing effects.
• Marketing analytics help organizations make faster, data-
driven business decisions that focus on real customer
feedback.
• Business analytics is used to evaluate operations across
organizations and can be implemented in any department,
be it sales, product development or even customer service.
• Business analytics solutions generally use data, statistical
and quantitative analysis, and fact-based data to measure
past performances to guide business planning for an
organization.
 Why companies need business
analytics
• Determine best solutions
• Validating business needs
• Evaluating the benefits of the solution they analyze
• Marketing trends
• Understand their customer group
• Analyze and solve business problems and opportunities
 Evolution: Where are we now?
• Still in emerging stage.
– 97% of companies (over $100M) use BA.
– Mainly reporting and spreadsheets.
– Intuition still drives most business decisions.
– Cautious Adaptation.
• Companies desire: bottom line impact.
• Roadblocks to adaptation
– DATA (accuracy, consistency, access, volume)
– Lack of analytic talent.
– Role of culture.

Analytics still in emerging stage.

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Importance: Aids Business Performance

 Strong relationship between business analytics

and business performance.
Importance

 Understanding data supports better business

decisions.

 Fast pace of change: information becoming

more vital for businesses to remain
competitive.

Better understanding : Better decisions. 29

Importance: Tsunami of Data
• “Every two days
now we create as
much information
as we did from the
dawn of civilization
up until 2003,
according to
Schmidt. “
– Eric Schmidt, CEO of
Google

Tsunami of Data. 30
Importance: Data Source is Different

The sources of data are changing. 31

Importance: Profitable

•$10.66 : "In
a recent report,
Nucleus Research
found that for every
dollar a company
spends on analytics,
it gets back $10.66."

– Source: Nucleus Research

High Rate of Return. 34

Application : Overview
Source: Thomas Davenport: Competing on Analytics : Harvard Business Review: January 2006

Function Description Exemplars

Supply Simulate and optimize supply chain flow; reduce Dell, Wal-Mart,
Chain inventory and stock-outs. Amazon.
Customer Indentify customers with greatest profit potential; Harrah’s, Capital
Service increase likelihood that they will want the product or One, Barclays.
service offering; retain their loyalty.
Pricing Identify the price that will maximize yield or profits Progressive,
Marriot.
Product / Detect quality problems early and minimize them. Honda, Intel.
Service
Financial Better understand the drivers of financial MCI, Verizon.
performance and the effect of nonfinancial factors.

Applications inVersion
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of business. 35
Application : Customer Relations

•14 : the average

number of reward
tags a person in
the US has.
• Understand
customer patterns
to better serve
customers.

High Rate of Return.

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Application : Marketing: Cross Selling

•Suggest :
Most have
experienced being the
target of cross selling
on websites whether
is Amazon or Netflix.

High Rate of Return.

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Application : Supply Chain

• $43B : Value of
WalMart inventory. 1%
improvement = $430 M.

• 90% : Percent of
American who live with
15 minutes of a
WalMart. (US accounts
for about 60% of global
sales)

Large opportunity as small % improvements = big savings.

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Application : Pricing

• 3,700 : properties
in 70 countries, Marriott
International offers global
travelers hospitality
choices across 18 brands.

• ~65% : occupancy
rate. Data Driven pricing
strategies can deliver
major results.

Dynamic Pricing, Web Content.

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Application : Entertainment
• Pain Threshold : Harrah’s
knows your specific pain threshold
and at what point you’ll have lost
enough to quit.
• Harrah’s staff in the back room
tracks everything and when the
computer flags someone coming
close to their limit, a member of
Harrah’s floor staff approaches the
soon-to-give-up gambler and
intervenes, offering a free steak
dinner, or another $15 credit or
even tickets to a show that evening.
The result: the gambler keeps
gambling.

Real Time Customer Data to Drive Results.

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Application : Product Placement
• Product Placement :
• Milk ?
• Health Food?
• Pancake Syrup?
• Picnic Items?
• High Profit Margin Items?

Real Time Customer Data to Drive Results.

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Application : Staffing
• Number of Employees,
Skills (Technical
Support), Hours of
Work :
• Provide special level of service
for most profitable
customers?
• What is an acceptable wait
time for customers?

Real Time Customer Data to Drive Results.

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Application : Financial: Fraud

•~ $190B
Merchants in the
United States are
losing a year to
credit card fraud
Source: according to a 2009
Lexis Nexis

Real Time Customer Data to Drive Results.

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Example 1.1 Retail Markdown
• When to markdown
Seasonal Inventory?
• What Factors to consider?
• What Data would you
desire?

Student Input
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Example 1.1a Fraud Example
• Tom lives in Raleigh
• Tom often travels to
Toronto.
• Tom often makes large
purchases on his credit
card.
• What else would you
want to know about
Tom’s purchasing habits?

Student Input
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Scope : Degree of Complexity

Addressing three areas of Analytics.

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Scope : Descriptive

• Descriptive analytics
– Uses data to understand past and present.
– Allow the data to describe the situation.
Scope

– Example: The class average on the last

exam was a 81%.

Descriptive (describes), Predictive (predicts), Prescriptive

(advises)
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Scope : Predictive
• Predictive analytics
– Analysis of past performance.
– Use past performance to forecast future
performance.
Scope

– Example: Make sales calls on customers

who have recently purchased product.
Predictive analytics might indicated that
recent customer are more likely to make
additional purchases vs. customers who
have not visited your firm for a long time.

Descriptive (describes), Predictive (predicts), Prescriptive

(advises)
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Scope : Prescriptive
• Prescriptive analytics
– Use of optimization techniques.
– Analysis of what should be done vs. what is
Scope

happening.
– Use data to arrive at a mathematical
optimal solution.
– Example: What route and frequency a
bank should visit its ATM machines.

Descriptive (describes), Predictive (predicts), Prescriptive

(advises)
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Data : Key Terms
• Data or data set: only a collection of data.
• Database: collection of related data.
Data & Databases

• Field or Attributes: Individual elements.

• Entries or Records: Actual measures.
• Databases provide method to organize.

Customer Customer Invoice

Fields Name Number Number Amount Product Date
Entries or
Records Johnson 100 525 $65.00 Repair 1/15/2013

Helps us organize data.

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Data : Key Terms
• Metric: a unit of measurement that provides a
way to objectively quantify performance.
• Examples:
• The score of a game.
Metric

• A business’s earnings.
• Quality: Defects per million.
• Measurement: the act of obtaining data
associated with a metric.

How we measure performance.

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Data Types

DATA
Variety of Terms

Often called
Often called
Numerical
Character
Qualitative Quantitative

Categorical Ordinal Interval Ratio

Discrete Continuous Discrete Continuous

Data Classifications.
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Data Types
Type Comment Example
Categorical Mutually Exclusive, but not Eye Color, Geographical
ordered, only put into to Regions, Employee
categories Classifications

Ordinal Order or Ranked. Order Hospital Pain Scale,

Matters but the difference College Football
between each doesn’t Rankings
matter
Interval Constant difference but has Time and Temperature
not zero.
Ratio Continuous and has a zero. Sales volumes.

Using Data to Gain Insights.

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 Example 1.2 Sales Transaction Database

Cust ID Region Payment Transaction Code Source Amount Product Time Of Day
10001 East Paypal 93816545 Web $20.19 DVD 22:19
10002 West Credit 74083490 Web $17.85 DVD 13:27
10003 North Credit 64942368 Web $23.98 DVD 14:27
10004 West Paypal 70560957 Email $23.51 Book 15:38
10005 South Credit 35208817 Web $15.33 Book 15:21
10006 West Paypal 20978903 Email $17.30 DVD 13:11
10007 East Credit 80103311 Web $177.72 Book 21:59
10008 West Credit 14132683 Web $21.76 Book 4:04

Which category are each?

Student Input
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 Data for Business Analytics

Example 1.2 A Sales Transaction Database File

Records

Figure 1.1

Entities Fields or Attributes

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 Data for Business Analytics

Example 1.3
Classifying Data Elements in a Purchasing Database

Figure 1.2

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 Data for Business Analytics

Example 1.3 (continued)

Classifying Data Elements in a Purchasing Database

Figure 1.2

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Data Types

Customer Customer Invoice

Fields Name Number Number Amount Product Date
Entries or
Records Johnson 100 525 $65.00 Repair 1/15/2013

Data Type Categorical Ordinal Ordinal Ratio Categorical Interval

Data Types
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Data : Discrete vs. Continuous
• Discrete Metrics
• Either (Y/N) so they can be counted.
• Examples:
• On time deliveries.
Metric

• Pass inspection.
• Order completeness.
• Continuous Metrics
• Based upon a continuous scale of measure.
• Any metric with dollars, time, weight.

Two types of metrics.

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