Introduction to Business Analytics

Unit – 2: Introduction to Business Analytics

Prof. Sinzy Silvester
What is Business Analytics?
• Business Analytics (BA) is the process by which businesses use statistical methods and
technologies for analyzing historical data in order to gain new insight and improve strategic
decision-making.
• BA is the combination of skills, technologies, and practices used to examine an organization's data
and performance as a way to gain insights and make data-driven decisions in the future using
statistical analysis.
• The goal of BA is to narrow down which datasets are useful and which can increase revenue,
productivity, and efficiency.
• BA can be leveraged to accurately predict future events that are related to the actions of consumers,
market trends, and also assist in creating more efficient processes that could lead to an increase in
revenue.
• while business analytics leans heavily on statistical, quantitative, and operational analysis,
developing data visualizations to present your findings and shape business decisions is the end
result
Essentials of Business Analytics (BA)
BA is typically used to:
• Analyze data from a variety of sources. This could be anything from cloud applications to
marketing automation tools and CRM (Customer Relationship Management) software
• Use advanced analytics and statistics to find patterns within datasets. These patterns can help you
predict trends in the future and access new insights about the consumer and their behavior
• Monitor KPIs (Key Process Indicators) and trends as they change in real-time. This makes it easy
for businesses to not only have their data in one place but to also come to conclusions quickly and
accurately
• Support decisions based on the most current and updated information
• With BA providing such a vast amount of data that you can use to back up your decisions, you can
be sure that you are fully informed for not one, but several different scenarios
Real-Time examples of Business Analytics
Some examples of companies using business analytics to better their business and serving the
customers better.
1. OTT Platforms
One excellent example of business analytics software in action is the Over-The-Top (OTT) platforms
like Netflix, Prime, HotStar, etc. These platforms suggest you the right movies and series for your
viewing based on the movies and series you have watched. And their predictions are mostly correct
even when it comes to dealing with something as unpredictable as human behavior
2. Amazon
When you purchase a product, the web page also shows you similar products and the products others
have purchased along with the product you are purchasing. For example, if you buy a wallet, amazon
will also display pictures of belts and shoes as many people buy these things together. Business
analytics is behind the display of these products. No wonder Amazon is the biggest e-tailer in the
world
Key Terminologies in Business Analytics
There are many terms that get thrown around in the field of analytics. It is very important to know
and understand those terminologies
• Analytics – Analytics can simply be defined as the process of breaking a problem into simpler
parts and using inferences based on data to drive decisions. Analytics is not a tool or a technology;
rather it is a way of thinking and acting
• Business Analytics – This term refers to the application of analytics specifically in the sphere of
business. It includes subsets like – Industries which rely extensively on analytics include –
Marketing analytics, Risk analytics, Fraud analytics, CRM analytics, Loyalty analytics, Operations
analytics, HR analytics
• Predictive Analytics – Predictive analytics is one of the most popular analytics terms. Predictive
analytics is used to make predictions on the likelihood of occurrence of an event or determine some
future patterns based on data. Remember it does not tell whether an event will happen. It only
assigns probabilities to the future events or patterns
• Big data analytics – When analytics is performed on large data sets with huge volume, variety and
velocity of data it can be termed as big data analytics
Key Terminologies in Business Analytics
• Data Mining – Data mining is the term that is most interchangeably used with “Analytics”. Data
Mining is an older term that was more popular in the nineties and the early 2000s. However, data
mining began to be confused with OLAP and that led to a drive to use more descriptive terms like
“Predictive analytics”
• Data Science – Data science and data analytics are mostly used interchangeably. However,
sometimes a data scientist is expected to possess higher mathematical and statistical sophistication
than a data analyst
• Machine learning – involves using statistical methods to create algorithms. It replaces explicit
programming which can become cumbersome due to the large amounts of data, inflexible to adapt
to the solution requirements
• Algorithm – Usually refers to a mathematical formula which is output from the tools. The formula
summarizes the model Ex:Amazon recommendation algorithm gives a formula that can
recommend the next best buy
Key Terminologies in Business Analytics
• OLAP – Online analytical processing refers to descriptive analytic techniques of slicing and dicing
the data to understand it better and discover patterns and insights. The term is derived from another
term “OLTP” – online transaction processing which comes from the data warehousing world
• Analytics platform – Software that provides for the computation required to carry out the
statistical methods, descriptive and inquisitive queries, machine learning, visualization and Big
data (which is software plus hardware). Ex: SAS, R, Tableau, Hadoop etc
• Clickstream analytics/ Web analytics – Analysis on user imprints created on the web Ex:
Number of clicks, probability to buy based on search times of a particular word etc
• Text analytics – Usually refers to analysing unstructured (not tabulated) data in the form of
continuous text. Ex: Facebook data analysis, twitter analysis etc
• Location analytics – With advanced GPS and location data available location analytics has
become quite popular Ex: Offers based on customer location, insurance risk calculations based on
proximity to hazards
Stages and Components of Business Analytics
 Components of Business Analytics
1.Data Aggregation: Before analysis, data must be accumulated, streamlined and cleaned up
to escape replication, and filtered to eliminate incomplete data. Data can be aggregated
from transactional data and volunteer data.
2.Data Mining: In order to recognize and acknowledge prior unidentified data trends and
patterns, models are designed through massive data. Data mining exploits various
statistical techniques to obtain interpretation such as classification, regression technique,
and clustering.
3.Text Mining: Data is also assembled in the form of textual information from social media
websites, call center scripts, blog comments, etc, to drive powerful connections indexes
that are used to develop new items most in-demand, promote user services and
experiences, and analyze opponent performance.
4.Forecasting: Future events or behaviors based on previous data can be forecasted
by scrutinizing processes that take place during a particular season or period. For
example, retail sales for the holiday, and energy consumption for a city in summer.
5.Optimization: Organizations are continuously revealing the best possible
opportunities and promising actions via designing interesting simulation
techniques like to identify peak sales price and spike in-demand to scale
production, major opportunities slots for sales, promotions, and new items.
6.Data Visualization: Knowledge and observation extracted from data can be
conferred with extremely interactive graphs
3 Stages of Analytics

i. Descriptive Analytics: An application of a prime statistical technique that

explains what a dataset contains, the main two techniques used are data
aggregation and data mining that signify this method is used for understanding
the elemental behavior and not to make predictions.
ii. Predictive Analytics: An advanced statistical application or a research method
to figure out predictive variables and make predictive models determining
patterns and relationships among variables.
iii. Prescriptive Analytics: An application of decision system, management
science and operation research methodologies to conduct appropriate use of
admissible resources.
7-Step Representation of Business Analytics Process
Step 1: Address the Business Problems

• Initially, business problems need to be addressed, the purpose of applying analytics is

sometimes designated categorically or broken into parts. So, relevant data is selected
to address these business problems by business users or business analysts equipped
with domain knowledge.
• Some examples are: keeping modeling for a postpaid subscription, fraud detection for
credit cards, or customer analysis of a mortgage portfolio. Business experts define
perimeters for the analytical process which is crucial for assuring general
understanding of the goal.
Step 2: Identify Potential Interest from Data

• All sources of data having potential interest are required to identify. The key asset in
this step is the more the data, the better it is. All the data will then be accumulated
and consolidated in a data warehouse or data mart or at a spreadsheet file.
• Some exploratory data analysis is executed to do the computation for missing data,
removing outliers, and transforming variables.
• For example, time-series analysis graphs are plotted to figure out some patterns or
outliers, scatter plots are used to find correlation or non-linearity
Step 3: Inspect the Data

• Once moving to the analytics step, an analytical model will be predicted on the
prepared and transformed data using statistical analysis techniques like correlation
analysis and hypothesis testing.
• The analyst figures out all parameters in connection with the target variable. The
business expert also performs regression analysis to make simple predictions
depending upon the business objective.
• In this step, data is also often reduced, divided, crumbled and compared with
various groups to derive powerful insights from data.
Step 4: Interpretation and Evaluation by Experts

• Finally, after obtaining model results, business experts interpret and evaluate them.
Results may be clusters, rules, relations, or trends known as analytical models
derived from applying analytics.
• Experts use predictive techniques like decision tree, logistics regression to reveal
the patterns and insights that show the relationship and invisible indication of the
most persuasive variables.
Step 5: Optimization of Best Possible Solution

• Once the analytical model has been validated and approved, the analyst will apply
predictive model coefficients and conclusions to drive “what-if” conditions, using the
defined to optimize the best solution within the given limitations and constraints.
• Necessary considerations are how to serve model output in a user-friendly way, how
to integrate it, how to confirm the monitoring of the analytical model accurately. An
optimal solution is chosen based on the lowest error, management objectives, and
identification of model coefficients that are associated with the company’s goals.
Step 6: Decision Making and Estimate Conclusions

• Analysts then would make decisions and endure action based on the conclusions
derived from the model in accordance with the predefined business problems.
• Span of period is accounted for the estimation of conclusion; all the favorable and
opponent consequences are measured in this duration to satisfy the business needs.
Step 7: Upgrade Performance System

• At last, the outcome of decision, action and the conclusion conducted from the
model are documented and updated into the database. This helps in changing and
upgrading the performance of the existing system.
• Some queries are updated in the database such as “were the decision and action
impactful?” “ what was the return on investment ?”, ”how was the analysis group
compared with the regulating class?”. The performance-based database is
continuously updated once the new insight or knowledge is extracted.
Steps in Business Analytics Process of a firm
Relationship of Business Analytics Process &
Organisation Decision Making Process
• The BA process can solve problems and identify opportunities to improve
business performance
• In the process, organizations may also determine strategies to guide operations and
help achieve competitive advantage (refers to factors that allow a company to
produce goods or services better or more cheaply than its rivals)
• Typically, solving problems and identifying strategic opportunities to follow are
organization decision-making tasks
The organization decision-making process (ODMP) developed by Elbing (1970) and presented in
Figure is focused on decision making to solve problems but could also be applied to finding
opportunities in data and deciding what is the best course of action to take advantage of them.
Diverse opportunities that data and analytics bring to
businesses today
• Making most out of consumer patterns
• Using data to drive performance
• Managing risk through analytics
• Provide a better customer experience
• Improve overall performance
• Conduct better risk assessment and management
Future of Business Analytics and changes expected
• AI, Machine Learning and Big Data implementation will play a huge role in providing quality
services and ensuring business progress
• Data quality management is poised to become a crucial digital trend
• As consumers become more conscious of privacy and receptive to personalized services, business
analytics will pave the way for better and secure customer experience
• Predictive and prescriptive analytical approaches will force companies to rethink traditional models
favoring unconventional technologies that increase sustainability and chances of success
• Business analytics is expected to significantly impact marketing, sales, customer experience,
finance, risk management, HR, and social media practices, among others
• Business professionals with an in-depth understanding of business analytics are better positioned to
be industry leaders
Conclusion
• Business analytics is one of those industries that is rapidly expanding and will
undoubtedly be there for a long time
• This is an excellent moment to engage in business analytics, whether as an
organization to reap future advantages or as a person to understand it in order to
use their services
• It identifies consumer patterns, evaluates potential hazards, and creates feedback
and improvement mechanisms. As a result, driving analytical changes can assist
businesses in remaining at the forefront of the digital revolution