An Overview of

Business
Intelligence,
Analytics, and
Decision Support

CHAPTER ONE
 Chapter Objectives
1. Understand today’s turbulent business
environment and describe how organizations
survive and even excel in such an environment
2. Understand the need for computerized support
of managerial decision making
3. Understand an early framework for managerial
decision making
4. Learn the conceptual foundations of the
decision support systems (DSS) methodology

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 Chapter Objectives (cont’d)
5. Describe the Business Intelligence (BI)
methodology and concepts and relate them to
DSS
6. Describe the concept of work systems and its
relationship to decision support
7. List the major tools of computerized decision
support
8. Understand the major issues in implementing
computerized support systems

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 INTRODUCTION
▪ Business Intelligence and Analytics is the light to see what is
behind the data, make it clear to understand, visualize and
interpret it into decisions and actionable models.
▪ Combination of technical skills like programming and data
modeling + soft skills like communication, analytical thinking and
problem-solving are the essence of any business analyst.
▪ Analytics: The use of mathematics, statistics, predictive
modeling, and machine learning to find meaningful patterns in a
data set.

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Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall
 Changing Business Environment &
Computerized Decision Support

▪ Companies are moving aggressively to computerized

support of their operations  BI
▪ Business Pressures–Responses–Support Model:
1. Business Pressures result from today's competitive
business climate
2. Responses (actions taken) to counter the pressures (or
to take advantage of the opportunities available in the
environment)
3. Support to better facilitate the process and enhances
the response actions taken by org’s

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 Managerial Decision Making

Environment in which
org’s operate today is
becoming more and
more complex

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 Managerial Decision Making

Environment Factors Organizational Response Support

• Increased number of Pressure • Preventative measures • Integrated
infection (mask, hygiene, testing stations
• Increased Mortality distancing, lockdown …) • Integrated
Opportunity • Law enforcement hospitals
Rates
• Increase Medical capacity
facilities capacity utilization
• Increase medical staff • BI, dashboard.
• Training
• Vaccinations

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Managerial Decision Making

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Business Environment Factors

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 Organizational Responses
▪ Reactive, Anticipative, Adaptive or Proactive
▪ Managers may take actions, such as:
• Employ strategic planning, (long term)
• Use new and innovative business models.
• Restructure business processes.
• Participate in business alliances.
• Improve corporate information systems.
• … more [in your book]
▪ These and other response actions are frequently facilitated
by computerized Decision Support System (DSS).

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 Managerial Decision Making

▪ Management  Decision Making

▪ Decision making → selecting the best solution
from two or more alternatives

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 Managerial Decision Making
▪ The nature of managers’ work (Roles) can be classified in
three major categories, Mintzberg’s (2008):
1) Interpersonal. Figurehead, leader, liaison
2) Informational. Monitor, disseminator, spokesman
3) Decisional. Entrepreneur, disturbance handler, resource allocator,
negotiator
▪ To perform these roles, managers need info that is
delivered efficiently and in a timely manner to their PC’s
and to mobile devices.
▪ Many managerial activities in all roles revolve around
decision making. Managers, especially those at high
managerial levels, are primarily decision makers.
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 Managerial Decision Making
▪ Managers usually make decisions by following a four-step
process (a.k.a. the scientific approach):
1. Defining the problem (a decision situation that may
deal with some difficulty/problem or with an opportunity)
2. Building (design) a model that describes the real-
world problem (CH 10) based on huge amount of data.
3. Identifying possible solutions (alternatives) to the
modeled problem and evaluating the solutions
4. Comparing, choosing, and recommending a
potential solution to the problem

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Difficulties in following the decision process

1. Technology, IS, advanced search engines, and globalization

result in more and more alternatives
2. Government regulations, changing consumer demand,
political instability  more uncertainty
3. Trial and error learning is costly and difficult
4. Environments are growing more complex
>>> The need for computer support is vital!
➢ Computer applications have moved from transaction
processing and monitoring activities  problem analysis
and solution applications; Web-based technologies
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Managerial Decision Making- Trial & error Example

https://www.nytimes.com/video/movies/100000004879618/anatomy-of-a-scene-the-founder.html
Ch.2 16
Types/Forms of Data & knowledge

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 Structured Vs. Unstructured Data
▪ Dataset is a collection of samples, which can be structured
or unstructured.
• Structured (organized) data: highly organized and formatted
data/samples, usually as a table method (rows and columns).
Structured data can be considered as observations and
characteristics. Structured data is commonly referred to as Tabular
Data.
• Unstructured (unorganized) data: a free entity that does not
follow any standard organization. Unstructured data has 80-90%
of the world's data.
▪ Semi-structured data is info that consists of unstructured
data but still has some structure to it.
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 Types of Decisions
1. Structured https://www.youtube.com/watch?v=siMgr-PwXaI

 Repetitive and routine

 Involve definite procedure for handling them so do not have to
be treated as new  mainly ADS (not DSS), SOPs, Rules, etc.
2. Semi-structured
 Only part of problem has clear-cut answer provided by accepted
procedure. A mix of certainty and uncertainty.
3. Unstructured
 Decision maker must provide judgment to solve problem.
 Novel (new), important, nonroutine. High uncertainty!!
 Many variables.
 No well-understood or agreed-upon procedure for making them.
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 Structured Decision

Example: A store has requested a manufacturer to produce

pants and sports jackets.
For materials, the manufacturer has 750 m² of cotton textile and
1,000 m² of polyester. Every pair of pants (1 unit) needs 1 m² of
cotton and 2 m² of polyester. Every jacket needs 1.5 m² of cotton
and 1 m² of polyester.

The price of the pants is fixed at 50 and the jacket,40.

What is the number of pants (x) and jackets (y) that the
manufacturer must give to the stores so that these items obtain a
maximum sale?

Z= 50.x + 40.y to be maximized

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Semi-structured Decision

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 Information Requirements of
Key Decision-Making Groups in a Firm
Types of Decisions

Decision Support continuum

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 An Early Framework for
Computerized Decision Support

Figure 1.2 The Decision Support Matrix 1-24

 An Early Framework for
Computerized DS-Types of control
▪ Operational control is the efficient and effective execution
of specific tasks. Examples: scheduling computer storage backups,
planning next week’s company cafeteria menu
▪ Management control is the acquisition and efficient use of
resources to accomplish organizational objectives. Examples:
hiring a production coordinator, planning an advertising program.
▪ Strategic planning is defining long-range goals and policies
for resource allocation. Examples: choosing which of three new
products to develop, deciding whether to outsource customer
telephone support to a region with lower labor costs than where it is
now based.

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 An Early Framework for
Computerized Decision Support
The Decision Support Matrix
▪ The initial purpose of this matrix was to suggest
different types of computerized support to
different cells in the matrix
• For semistructured decisions and unstructured decisions,
conventional MIS and management sciences (MS) tools are
insufficient. ➔ Human intellect and a different approach
to computer technologies are necessary;
• They proposed the use of a Supportive information systems
called: Decision Support Systems (DSS)

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 An Early Framework for
Computerized Decision Support
Computer Support for Structured Decisions
▪ MGT Science (MS) / Operations Research (OR)
The application of a scientific approach and mathematical
models to the analysis and solution of managerial decision
situations (e.g., problems, opportunities; make-or-buy decision is
one category. Other examples of categories are capital budgeting,
allocation of resources, distribution, procurement, planning, and
inventory control decisions. GPS route planning determines the
fastest and best route between two points by analyzing and
comparing multiple possible options)
▪ Since 1960’s
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 An Early Framework for
Computerized Decision Support

Computer Support for Structured Decisions

▪ Automated Decision Systems (ADS) – CH 11
A business rules-based system that uses intelligence to
recommend solutions to repetitive decisions (e.g., pricing
of hotel rooms, airline tickets; Revenue Mgt “RM”)

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Why use computerized DSS? (Benefits)
▪ Improved data management
▪ Managing giant DW
▪ Speedy and consistent computations
▪ Improved communication and collaboration
▪ Increased productivity of group members
▪ Quality support
▪ Agility support
▪ Overcoming cognitive limits in processing & storing info
▪ Using the Web
▪ Anywhere, anytime support
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 TYPES of DSS – Most Common

1. Model-oriented DSS:
Quantitative models used
to generate a recommended
solution to a problem (e.g.,
Accounting & Fin systems, OR
models)
2. Data-oriented DSS: Support
ad-hoc reporting and queries

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 The Concept of DSS
▪ The term DSS content-free expression that means different
things to different people; thus, there is no universally accepted
definition of DSS. It can be viewed as a conceptual
methodology!
▪ Two definitions:
• DSS – “interactive computer-based systems, which help decision
makers utilize data and models to solve unstructured problems”
Gorry and Scott-Morton, 1971
• DSS – “couple the intellectual resources of individuals with the
capabilities of the computer to improve the quality of decisions”
Keen and Scott-Morton 1978

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 The Concept of DSS
▪ DSS as an Umbrella (broad) term: Describes any
computerized system that supports decision making
in an organization
• DSS as a specific application, e.g., marketing, finance, and
accounting, a supply chain management (SCM), etc.
• The architecture of DSS (see next slide):
1) Data
2) Models manipulate data as related to a specific situation
3) Knowledge component (e.g., ES)
4) Users
5) User interface
▪ Evolution of DSS (Tools)  Business Intelligence
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The Architecture of DSS

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 A Brief History of BI

▪ The term BI was coined by the Gartner Group in the mid-

1990s
▪ However, the concept is much older, it has its roots in:
• 1970s - MIS reporting - static/periodic, 2D reports
• 1980s - Executive Information Systems (EIS/ESS)
• 1990s – OLAP: dynamic, multidimensional, ad-hoc
reporting ➔ coining of the term “BI” see below video
• 2010s - Inclusion of AI and Data/Text Mining
capabilities; Web-based Portals/Dashboards, Big Data,
Social Media, Analytics
• 2020s - yet to be seen
https://www.youtube.com/watch?v=2ryG3Jy6eIY 1-34
 Definition of BI

▪ BI is an umbrella term that combines tools,

architectures, databases, analytical tools, applications
and methodologies
▪ BI is a content-free expression, so it means different
things to different people
▪ BI's major objective is to enable easy access to
data (and models) to provide business mgr’s with the
ability to conduct analysis to make decisions
▪ BI helps transform data ➔ information (& knowledge)
➔ decisions, and finally ➔ action
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Benefits of BI

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 The Business Intelligence Environment

Six most important elements in the BI environment

1. Data from business environment
2. BI infrastructure
3. Business analytics toolset
4. Managerial users and methods
5. Delivery platform. MIS, DSS, ESS
6. User Interface.
 The BI Environment
2

3
1

6
5

Six most important elements in the BI environment

Predefined BI Production Reports

Business Functional Area Production Reports

Sales Sales forecasts, sales team performance, cross selling,
sales cycle times
Service/Call Center Customer satisfaction, service cost, resolution rates,
churn rates
Marketing Campaign effectiveness, loyalty and attrition, market
basket analysis
Procurement and Support Direct and indirect spending, off-contract purchases,
supplier performance
Supply Chain Backlog, fulfillment status, order cycle time, bill of
materials analysis
Financials General ledger, accounts receivable and payable, cash
flow, profitability
Human Resources Employee productivity, compensation, workforce
demographics, retention
 The Architecture of BI

A BI system has four major components:

1. A data warehouse, with its source data
2. Business analytics, a collection of tools for
manipulating, mining, and analyzing the data in the DW
3. Business Performance Management (BPM) for
monitoring and analyzing performance
4. A user interface (e.g., dashboard)

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 A High-Level Architecture of BI

1 2 3

Figure 1.4 A High-Level Architecture of BI.

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 A Framework for BI

▪ BI is an evolution of decision support concepts over time

• Then: Executive Information System (EIS/ESS)
• Now: Everybody’s Information System (BI)
▪ BI systems are enhanced with additional visualizations,
alerts and performance measurement capabilities
▪ The term BI emerged from industry

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 A Framework for BI

Data Warehouse (DW)

▪ Originally, included historical data that were
organized and summarized, so end users could
easily view or manipulate data and information.
▪ Today, some data warehouses include current
data as well, so they can provide real time
decision support.

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 A Framework for BI

Data mining
A process of searching for unknown patterns /
relationships or info in large databases or DW, using
intelligent tools such as neural computing, predictive
analytics techniques, or advanced statistical methods

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 ANALYTICS OVERVIEW

▪ Analytics- is the process of developing actionable decisions or

recommendations for actions based upon insights generated from
historical data.
▪ It is a systematic use and analysis of data to solve problems and
make informed decisions. https://youtu.be/GxpqewgyhQA
▪ It is the connective tissue between data and effective decision
making within an organization
▪ A Simple Taxonomy of Analytics (proposed by INFORMS)
• Descriptive Analytics
• Predictive Analytics
• Prescriptive Analytics

▪ Analytics (a specific room in a house) of Data Science (the house)

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 Business Value of
BI Analytical Applications

1. Customer segmentation
2. Propensity to buy
3. Customer profitability
4. Fraud detection
5. Customer attrition
6. Channel optimization

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A Framework for BI

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Business Analytics Overview

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Business Analytics Overview

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Analytics Overview

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 A Multimedia Exercise
in Business Intelligence

• Teradata University Network (TUN)

www.teradatauniversitynetwork.com

• BSI Videos (Business Scenario

Investigations)
www.youtube.com/watch?v=NXEL5F4_aKA

• Also look for other BSI Videos at TUN

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 Takeaways?
▪ You can use data to make decisions
▪ The decisions may be complex – with
tradeoffs because of capacity - which is
why you may need to automate the
decisions
▪ The rules you use will evolve over time,
be refined
▪ You can measure the consequences of
decisions – good Vs. bad
▪ You can tie decisions to business goals
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 Plan of the Book

x
x

x
x
x x

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 Plan of the Book
• Part I - Decision Making and Analytics: An Overview
– (Chapters 1 & 2)
• Part II - Descriptive Analytics
– (Chapters 3 & 4)
• Part III - Predictive Analytics
– Chapters 5, 6, 7, 8
• Part IV - Prescriptive Analytics
– Chapter 9, 10, 11, 12
• Part V - Big Data and Future Directions for Business
Analytics
– Chapters 13 & 14
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 Chapter Highlights
▪ The business environment is becoming complex and is
rapidly changing, making decision making more difficult.
▪ Businesses must respond and adapt to the changing
environment rapidly by making faster and better decisions.
▪ The time frame for making decisions is shrinking, whereas
the global nature of decision making is expanding,
necessitating the development and use of computerized
DSS.
▪ Computerized support for managers is often essential for
the survival of an organization.
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 Chapter Highlights
▪ An early decision support framework divides decision
situations into 9 categories, depending on the degree of
structuredness and managerial activities. Each category
is supported differently.
▪ Structured repetitive decisions are supported by standard
quantitative analysis methods, such as MS, MIS, and rule-
based Automated Decision Support (ADS).
▪ DSS use data, models, and sometimes KM to find solutions
for semistructured and some unstructured problems.
▪ BI methods utilize a central repository called a DW that
enables efficient data mining, OLAP, BPM, and data
visualization 1-56
 Chapter Highlights
▪ BI architecture includes a DW, business analytics tools
used by end users, and a user interface (e.g. dashboard).
▪ Many org’s employ descriptive analytics to replace their
traditional flat reporting with interactive reporting that
provides insights, trends, and patterns in the
transactional data.
▪ Predictive analytics enable organizations to establish
predictive rules that drive the business out- comes thru
historical data analysis of the existing behavior of the
customers.
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 Chapter Highlights
▪ Prescriptive analytics help in building models that
involve forecasting and optimization techniques based
on the principles of OR and MS to help org’s to make
better decisions.
▪ Big Data analytics focuses on unstructured, large data
sets that may also include vastly different types of data
for analysis.
▪ Analytics as a field is also known by industry- specific
application names s/a sports analytics.

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End of the Chapter

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