MODULE 2: FUNDAMENTALS OF ANALYTICS

Subtopic 1 – BUILDING ANALYTICS CULTURE

ANALYTICS AS AN INTEGRAL PART OF THE DECISION-MAKING ECOSYSTEM

➢ Critical key components for a successful analytics solution:

• Data collection
• Integration with multiple data sources
• Ability to create and manage single source of truth (unique identifiers).
• Hardware sizing, performance considerations, and scalability.

THREE TYPES OF ANALYTICS

➢ Descriptive – What has happened?

➢ Predictive – What will happen
➢ Prescriptive – What should happen
*Build models that help predict the unknown future
*Build models that help predict the best course of action

DESCRIPTIVE ANALYTICS

➢ Provide information about the past state or performance of a business and its environment.
➢ Provides regular reports for events that already happened and ad hoc reports to help examine
facts about what happened, where, how often, and with how many.

PREDICTIVE ANALYTICS

➢ Helps predict (based on data and statistical techniques) with confidence what will happen next
so that you can make well-informed decisions and improve business outcomes.
➢ Uses simulation models to suggest what could happen.

PRESCRIPTIVE ANALYTICS

➢ Recommends high-value alternative actions or decisions given a complex set of targets, limits,
and choices.
➢ Predicts future outcomes and suggests courses of actions to take so that you can benefit from
those predictions.

WHERE TO START-IDENTIFY THE OPPORTUNITIES

➢ Two fundamental approaches to finding business opportunities

• Outside-In Thinking: Keeping tabs on what others in your industry are doing.
- What makes the business trick?
- Where does the next breakthrough await?
• Inside-Out Think: Keeping a systematic inventory of the key business processes
- How are key decisions made within?
- What are the key business decisions?
- How they can be made more process-oriented?
SAMPLES OF MOST COMMON BUSINESS CHALLENGES

➢ Increase market share (customer acquisition)

➢ Increase customer intimacy
➢ Increase customer satisfaction and retention
➢ Increase customer wallet share growth
➢ Increase customer profitability
➢ Increase traffic and conversion
➢ Increase employee productivity and performance
➢ Reduce cost.

BUILDING AN ANALYTICS CULTURE

➢ Do individuals use gut instincts more than they rely on facts, number?
➢ Does everyone in the organization understand and appreciate how they use analytics to
substantiate their decisions?

TO
BUILD:
MANAGERS TO USE:
Top-
Down Bottom-
Up

EMPLOYEES

➢ DEFINE >>> ASSESS >>> SELECT >>> IMPLEMENT

Analytics Solution Life Cycle
➢ Specifics places where you do establish it (or first establish it) should be:
• Endowed with a great deal of data that is not fully utilized
• Important to the business success
• Led by a manager who already understands the importance of analytics
• Blessed with a cadre of people who have some analytical skills
- Search for the truth
- Find or identify patterns and get to root causes
- Make data as granular as possible in their analysis
- Seek data, not just stories, to analyze a question or issue
- Value negative results as well as positive
- Use the results of analyses to make decision and take actions
- Are pragmatic about trade-offs in decision making
➢ Analytical culture – the sum total of a series of individual attributes and behaviors that get
repeated over time. People in an analytical culture demonstrate a set of common attributes. In
our research and experience, they:
 • Search for the Truth – Analytically minded people don’t accept traditional actions as
“given”, but try to find out what’s really true about how a business operates. They use
analytics and data not to appear rational and objective, but to actually be rational and
objective about the business environment. In their quest for truth, they are intent on
applying rigorous objective logic, without preconditions or bias.
• Find or identify Patterns and Get to Root Causes – Work at identifying patterns in data or
real-world situations, regardless of your level of ability. Identifying root causes for problems
is not just an individual’s task, but one that can be built into a corporate culture.
• Make data as Granular as Possible in Their Analysis - better analytics usually result from
more detailed data and analysis. If there is an average in your business, try to “de-average”
and understand its variations. If you’re using zip code data, try to get census tract or even
household data. If you’re working with households, try to learn more about the individuals
who make up the household.
• Seek Data, Not Just Stories, to Analyze a Question or Issue – Non-analytical cultures use
stories and anecdotes to support their decisions; analytical cultures seek data. They know
that anecdotal evidence may be interesting, but it often isn’t representative.
• Value Negative results as Well as Positive - Since an analytical orientation is the application
of the scientific method to business, one key principle of the scientific method applies:
negative results are just as useful as positive ones. That is, if you find out that an
intervention doesn’t work—it doesn’t lift sales or get a customer to buy something from
you—that’s just as useful as knowing that something does work. A culture that is not
receptive to negative results will lead people to skew results in a positive direction—a highly
unfortunate cultural attribute!
• Use the Results of Analyses to Make Decisions and Take Actions - Making decisions based
on power and politics rather than on objective analysis is a cancer on the organizational
culture. It suggests that if you are powerful enough in the hierarchy, you’ll get your way.
• Are Pragmatic About Trade-offs in Decision Making - The best practitioners in analytical
cultures are pragmatic about this trade-off, gathering data and employing analytics, when
possible, but not delaying unnecessarily to wait for them. If the decision needs to be made
quickly, they make it quickly based on experience and the best data available.”

Subtopic 2: ONTEGRATION OF ANALYTICS WITH ACTION AND MEASUREMENT

➢ How do I turn discovered information into action?

➢ How do I know that effect of each action?

ANALYTICS FRAMEWORK PILLARS

➢ Business challenges. Align business analytics initiatives to the most pressing business problems
your organization needs to address. Data foundation. The data foundation that will support the
business analytics process must be strong in terms of reliability, validity, and governance.
➢ Analytics implementation. Ensuring that business analytics solutions are developed and
provided to the enterprise with the end goals in mind is crucial for success.
➢ Insight. Business analytics must transform data from information into intelligence and insight
for the organization.
 ➢ Execution and measurement. Business analytics must be put to work and must lead to
organizational action, as well as provide guidance on how to track the results of the actions
taken.
➢ Distributed knowledge. Business analytics must be communicated in an effective and efficient
manner, as well as made available to as broad a group of stakeholders as is appropriate.
➢ Innovation. Business analytics must be relentlessly innovative, both in analytical approach and
in how it affects the organization, by developing solutions that will "wow" customers.

BUSINESS ANALYTICS IMPLEMENTATION FACTORS

➢ Drivers: Strategy
• Two elements are extremely important to a successful analytics implementation strategy:
focus and commitment.
• The first element of an effective analytics implementation strategy is to focus on addressing
the company's business challenges in order of priority.
- However, in developing the analytics implementation strategic plan, it's especially
important to look back and make sure you are aligned with the company's critical
business challenges with each analytics project. This will ensure that projects remain
focused and avoid expanding in scope unnecessarily.
• The second element that the analytics implementation strategy should have is the
commitment of people outside of the analytics team.
- Commitment from others means they are more likely to devote the time, the budget,
and the resources to the analytics project and have the will to see it through.
- Most successful analytics projects will have at least one other functional group
enthusiastically on board.
➢ Drivers: Metrics and Measurement
• Translate the business challenges into operational measures that can be monitored over
time.
• Well defined objective means by which the company can measure progress and business
analytics impact.
Examples:
- Increase productivity
- Increase market share
- Increase retention rate
- Increase wallet share
- Increase conversion rate
- Increase customer satisfaction
- Increase average order size/number of products
- Increase average spend per customer
➢ Drivers: Change Management
• Must reinforce the importance of business analytics solutions
• Must incorporate end-user needs and input
• Must involve the executive sponsors, as well as the analytics project leaders, reaching into
all project touch points
 • Must also provide a process to support the change and help those affected understand its
impact on the organization
• What is your goal (or business question) for the project?
• What are the risks of not addressing that goal/question?
• When will you meet that goal or answer the business question?
• What is the analytics strategy to do so?
• What impact (benefits) will the solution have on our customer-facing employees?
• How will end users be trained to use the solution?
• What resources are required to achieve your plan?
• Who will be involved in executing your plan, internally or externally?
➢ Facilitators: Integrated Processes
• Aims to optimize the overall success of the analytics initiative and ultimately deliver for the
organization, with the highest impact at the lowest cost.
➢ Enablers: Human Capital Skills Needed
• Project Management
• Data modeling
• Data programming
• Database extraction and manipulation
• Multivariate statistics
• Data mining/exploration
• Data visualization
• Machine learning
• Marketing analytics
• Unstructured data analytics
• Marketing research
• Competitive intelligence
• Data quality/governance
• Web analytics
DELTA Model for Assessing Analytical Capacity
D – Accessible, high-quality data
E – an enterprise orientation
L – analytical leadership
T – a long-term strategic target
A – a cadre of analysis

INTEGRATION OF ANALYTICS WITH ACTION AND MEASUREMENT

➢ Main reasons companies failed to make forward progress included:

• Lack of a clear implementation strategy. Despite great analytics ideas and solutions, if there
is no strategy to put analytics into action across the organization, it will eventually fail.
• Lack of support. If end users, internal customers, and other stakeholders don't understand
the value of analytics and don't support the project, your analytics implementation will
suffer.
• Lack of internal customer experience. An analytics solution cannot be developed without
thinking deeply about the customer experience. Unless customers have been involved
throughout the process, it will be hard to get them committed to using the analytics
solutions or insights you develop.
• Lack of executive sponsorship. The failure of senior executives to recognize that analytics is
important and to resource and empower the analytics function appropriately will result in
the eventual failure of your analytics implementation.
• Lack of analytics leadership. Team leaders who have neither effectively communicated nor
driven strategic analytics projects based on the value of analytics will see their analytics
implementation wither and slowly lose momentum. Analytics leaders must champion their
analytics vision across the organization.
• Lack of collaboration across organizational groups. Analytics "is everyone's business."
Therefore, if your analytics solutions do not involve multiple functional groups, they are less
likely to succeed.
• Lack of integrated processes. If information and knowledge are scattered in silos across the
organization, your analytics implementation will be much more challenging.
• Lack of skilled and focused human capital. If your teams don't have the skills and the
bandwidth to execute and cannot prioritize effectively, your analytics implementation will
fail.
• Lack of measurement or metrics to track outcomes. The outcome key performance
indicators (KPIs) should drive the analytics plan and implementation. If outcome KPIs are not
clear, the implementation might lead to missed opportunities.