Introduction to Data Science

Data Science and Business

Frank Hopfgartner

WeST Institute
[email protected]
Intended Learning Outcome
At the end of this lecture, you will be able to
• Recognise that organisations can make use of data to support
many activities, including decision-making and automation
• Describe how data science can be applied in business for
activities including business intelligence, data mining and
advanced analytics
• Recognise the benefits of being data-driven as well as
potential barriers to transformation and adoption
Outline
• Motivation
• The bigger picture – digital transformation
• Transforming business with data, analytics and AI
• Transformation and being data-driven and analytical
• Summary
Business
• Organisations are groups of people,
acting together, in pursuit of common Products
goals or objectives
Services
• A business is an organisation where Business Customer
people work together to make
and sell products or services to Money
customers
• Typically, businesses work to make a
profit (e.g., private, public, cooperatives, “A business is a social group
etc.) that differs from other social
• But can also be a non-profit business groups in only one way:
Businesses must have
• Businesses operate in specific sectors, customers.” (Peter Drucker)
e.g., health, manufacturing, government,
etc.
Structure
Environment
globalisation | technology
• At the most basic level, businesses perform
operations (transactions)
• Sales, production ... Management
ownership | structure
• These operations are controlled/guided through strategy | culture

management hierarchies Operations

• Decision makers marketing

purchasing production/
finance service
• Organisations exist in complex environment personnel delivery
subject to change innovation

• Business has to fit into the community it serves

• Business will influence and contribute to society (vice- IS and IT
infrastructure

versa)
• Poses new threats and opportunities Whiteley, D. (2004) Introduction to Information
Systems by David Whiteley, Palgrave Macmillan
 Functional areas of business

https://courses.lumenlearning.com/wm-introductiontobusiness/chapter/reading-functional-areas-of-business/
 Being Data-Driven and Analytical
• “Every business can benefit from becoming more
analytical across the board – in how it understands
its customers, performs its operations, and makes
its decisions.”
• “If we want to make better decisions and take the
right actions, we have to use analytics. Putting
analytics to work is about improving performance
in key business domains using data and analysis.
For too long managers have relied on their intuition
or their “golden gut” to make decisions.”
Becoming analytical means the use of analysis, data and systematic reasoning to
make decisions, i.e. support and inform decision-making
Benefits of being analytical
• Davenport et al. highlight a number of
benefits of managers and organisations
being analytical
• Help manage and steer the business in
turbulent times
• Know what’s really working
• Leverage investments in IT and information
• Cut costs and improve efficiency
• Manage risk https://www.local.gov.uk/our-support/guidance-and-
resources/data-and-transparency/better-use-data
• Anticipate changes in market conditions
• Have a basis for improving decisions over time
 “In this book, we will view the ultimate goal of
data science as improving decision making, as
this generally is of direct interest to business”

- Provost & Fawcett

“Data is the foundation of a data-driven

organization. If you don’t have timely, relevant
and trustworthy data, decision markers have
no alternative than to make decisions by gut.”

- Carl Anderson
Decision making
• Key use of data is to support and inform
decision-making
• Decision-making occurs at various levels
• Operational
• Tactical
• Strategic
• Decision-making steps include
• Problem identification
• Finding alternative solutions
• Making and evaluating a choice
• Data and information are key ingredient in the
decision- making process
• Having high quality data crucial
Interesting and insightful
report that shows how
managers in modern
organisations are using data to
improve decision-making

The Evolution of Decision Making:

How Leading Organizations are
Adopting a Data-Driven Culture
Predictice analytics
... probably
Machine
Programs biggest use case
with hand-
Learning Statistics crafted rules is predictive
analytics to
support
decision-making

http://machinelearningbook.com/
 “No matter how good your data
From Data to action and analysis are, they won't
have much impact unless they
are embedded in a good story”.
– T. Davenport
You
Theories
Believes & values
Making sense

Gain Take
Deeper Understandung

Data Science,
Understanding Communicate
BI, data insights action
Analytics,
etc.
Others

Change

Kitchin, R. (2014) The Data Revolution, SAGE Publications Ltd

 Data and organisations
YESTERDAY

Data
Science

TODAY
TOMORROW

Source: Watson, R.T. (2006). Data Management: Databases and Organisations (5th Edition), John Wiley & Sons Inc., p. 11
Business Intelligence & analytics
• Business intelligence and analytics (BI&A)
• Human process that captures, collects, integrates, stores, and analyses data to
support business decision-making
• BI&A software aims to provide relevant and timely (i.e., quality) information to
managers
• BI&A tools and processes
• Capture, collect, integrate, store, and analyse data
• Generate information to support business decision-making
• BI tools commonly make use of dashboard – graphic representation of organisational
performance
• BI&A provides framework that helps businesses to transform data into
actionable insights
 Insight Action
More data-driven

https://sensecorp.com/data-science-pyramid/
 Operational
view

Analytical
view

Source: Rob, P. & Coronel, C.M. (2000) Database Systems: Design, Implementation and Management, Course Technology,
Thomson Learning, p. 585.
 BI&A architectures
• Sometimes referred to as decision support systems
• BI&A systems composed of data, people, processes, technology and
management of components
• Focuses on strategic and tactical use of information
• Key performance indicators (KPIs)
• Measurements that assess a company’s effectiveness or success in reaching goals
(e.g., sales targets)
• Multiple tools from different vendors can be integrated into a single BI
framework
• Data warehousing and data mining tools are common technologies for
DSS/BI
Hsinchun Chen, Roger H. L. Chiang, and Veda C. Storey. 2012. Business intelligence and analytics: from big data to big
impact. MIS Q. 36, 4 (December 2012), 1165-1188
 Analysis tools/ applications
OLAP
SQL
Data Mining
Data Visualisation

Source: Rob, P. & Coronel, C.M. (2000) Database Systems: Design, Implementation and Management, Course Technology, Thomson
Learning, p. 571.
 Infrastructure for analysis, e.g., Azure

https://docs.microsoft.com/en-gb/azure/architecture/browse/
However, the reality…
• “Companies, government and non-profits, in sophisticated economies
and developing nations alike .... collect and store a lot of data, but
they don’t analyse the information to inform their decision-making.”
(Davenport, 2010)
• “In survey of the state of business analytics by Bloomberg
Businessweek (2011), 97% of companies with revenues > $100 million
were found to use some form of business analytics” (Chen et al.,
2012)

The use of data-driven decision-making increases firm performance and can

differentiate high-performing firms from others (Brynjolfsson et al., 2011)
From reporting and alerting to analytics

“Many organizations think that simply

because they generate a lot of reports or
have many dashboards, they are data-
driven. Although those activities are part
of what an organization does, they are
typically backward-looking. That is, they
are often a declaration of past or present
facts without a great deal of context,
without causal explanation of why
something has or has not happened, and
without recommendations of what to do
next. In short, they state what happened
but they are not prescriptive.”
Outline
• Motivation
• The bigger picture – digital transformation
• Transforming business with data, analytics and AI
• Transformation and being data-driven and analytical
• Summary
Digital transformation
• Digital transformation is the adoption of
digital technology by a company to create new
– or modify existing – business processes,
culture and customer experiences to meet
changing business and market requirements
• Common goals for its implementation are to
improve efficiency, value or innovation
• More than simply digitalising operations -
develop new business models that leverage
new technologies and data
https://www.forbes.com/sites/forbestechcou
• Enhance human processes with digital ncil/2022/09/09/demystifying-digital-
technologies transformation/?sh=1073ce302925
Driving forces and effects
 Part of a Journey

https://www.jisc.ac.uk/guides/digital-strategy-framework-for-university-leaders/what-is-digital-transformation
 Does it work?

https://www.thepowermba.com/en/digital-transformation/examples
Outline
• Motivation
• The bigger picture – digital transformation
• Transforming business with data, analytics and AI
• Transformation and being data-driven and analytical
• Summary
Common Data
Science Tasks

Source: Data Science Concepts & Practice (p. 25)

How businesses can use Data Science
 Data Science is being put to use across
industries

https://data-flair.training/blogs/data-science-use-cases/
Use of AI and ML

McKinsey. Notes from the AI

frontier: Insights from
hundreds of use cases, 2018
 Use of Big Data

http://www.atkearney.com/strategic-it/ideas-insights/article/- /asset_publisher/LCcgOeS4t85g/content/big-data-and-the-
creative- destruction-of-today-s-business-models/10192
General areas for use of analytics
• Customer relationships
• Segment customers and identify the ‘best’ ones, better understand customer
behaviours, predict needs and offer targeted promotion, predicting customer churn
• Supply chain and operations
• Optimisation of inventory levels and delivery routes, inventory segmentation to
ensure right products are available in right quantities
• Human resources
• Use of analytics in hiring and retaining employees, maximise sales and profits (e.g.
identify which employees should work at which times)
• Finance and accounting
• Identify factors driving business performance and reduce risk, develop profiles of
good and bad credit risk
 Supply Chains (IBM’s solution)

https://www.technologyreview.com/s/614658/strengthening-links-in-the-supply-chain/
 Data Science (in
red) is being used
by businesses to
support and
improve daily
operations …

https://adsp.ai/
Data Science and ML can impact the business
 Comprehensive guide to the
different types of data science
projects being undertaken by local
government in the UK

Jonathan Bright et al. Data Science for Local

Government, Oxford Internet Institute and
University of Oxford, March 2019
Areas using Data Science
• Areas where example Data Science applications reported

Respondents in survey (N=44)

Outline
• Motivation
• The bigger picture – digital transformation
• Transforming business with data, analytics and AI
• Transformation and being data-driven and analytical
• Summary
Being data-driven and analytical

“In this book, I address two core

questions:
• What does it mean for an
organisation to be data-driven?
• How does an organisation get there?
 The data-driven organisation
In our opinion, a data-driven organization
should possess three things:
• A culture in which everyone buys into
the idea of using data to make business
decisions
• An organizational structure that
supports a data-driven culture
• Technology that supports a data-driven
culture and makes data self-service
Chapter 4: Building a Data-Driven Organization
 • Know what it means to be data-driven
• Embrace new technology
• Disrupt your culture
• Make your organization’s data FAIR:
findable, accessible, interoperable,
reusable
• Build data literacy
• Don’t look at data as a separate part of
the business

https://mitsloan.mit.edu/ideas-made-to-matter/how-to-build-a-data-driven-company
 • Set a data strategy
• Democratize Your Data
• Build a Data-Driven Culture
• Accelerate Speed to Insight
• Measure the Value of Data Science
• Implement a Data Governance
Framework

https://blogs.oracle.com/ai-and-datascience/post/6-steps-to-data-driven-transformation
 According to Gartner CDO Survey,
the top 3 critical success factors of
analytics projects are:
• creation of a data-driven culture,
• data integration and data skills
training within the organization,
• implementation of a data
management and analytics
strategy.
https://thefinancialbrand.com/104418/digital-banking- https://www.gartner.com/en/newsroom/press-releases/2019-
transformation-priorities-trends-predictions/ 06-10-gartner-survey-finds-chief-data-officers-are-prioriti
 Analytics and digital technologies often
overstated in transformation

A similar perspective can be held by companies wanting to become

more data-driven and adopt analytics.
https://hbr.org/2020/02/10-steps-
to-creating-a-data-driven-culture
https://www.mckinsey.com/industries/financial-services/our-insights/building-an-effective-analytics-organization
Developing and maintaining a data-driven
culture
• Data-driven culture starts at the • Make POCs simple and robust, not
top fancy and brittle
• Specialised training should be offered
• Choose metrics with care and just in time
cunning
• Use analytics to help employees, not
• Don’t pigeonhole your data just customers
scientists • Be willing to trade flexibility for
• Fix basic data access issues quickly consistency – at least in the short
term
• Quantify uncertainty • Get in the habit of explaining
analytical choices
 Strategy

https://towardsdatascience.com/how-to-define-and-execute- https://www.gartner.com/en/publications/design-a-data-and-
https://www.gartner.com/en/publications/data- your-data-and- analytics-strategy
ai-strategy-a391676baa42
Digital maturity

Predictive Analytics in Councils

 Putting analytics to work
Davenport et al. (2010) describe success factors for putting analytics to work in the
organisation (DELTA)
• Access to high quality data (D)
• Incorporating analytics at the enterprise level (E)
• Leaders of business are analytical (L)
• Identifying strategic targets for where the business could be improved with
analytics and developing suitable measures to monitor progress (T)
• Use of analysts to bring analytics into the organisation (A)

“If you really want to put analytics to work in an enterprise you need to make them an integral part
of everyday business decisions and business processes – the methods by which work gets done
and value gets created.” (Davenport et al., 2010:121)
https://www.bardess.com/the-bardess-data-science-maturity-curve/
Analytical maturity
Barriers to
becoming data-
driven
• Adopting analytics is a
multistep
• process within an
organization
• Talent remains a
critical constraint
• Access to data has
improved, but
• sharing is not always
seamless
Outline
• Motivation
• The bigger picture – digital transformation
• Transforming business with data, analytics and AI
• Transformation and being data-driven and analytical
• Summary
Summary
• Many organisations are wanting to become more
data- driven and analytical
• Organisations have long implemented systems for
managing data, but far less have successfully Data Science for insights
integrated analytics and AI
ML for predictions
• There are many benefits to being data-driven and
using Data Science and AI for digital transformation AI for automation
• However, there are many challenges (most of them
not technical)
• Data Science has many practical applications,
especially for very specific tasks