Evolution of Data Analytics

Learning Objectives
By the end of this lesson, you will be able to:

• Explain the impact of data analytics on accounting

• Explain data analytics and its life cycle

• Describe the various stages of data analytics

• Outline the benefits of data analytics

Importance of
Data Analytics
 Data Analytics

● Data analytics is the science of extracting trends,

patterns, and relevant information from raw data to
draw conclusions.

● It has multiple approaches, multiple dimensions, and

diverse techniques.
Why Data Analytics?

Data analytics helps in:

● Scientific decision making and effective business

operations.

● Analyzing data, gaining profits, making better use of

resources, and improving managerial operations.
Problems with Traditional
Accounting Methods
Problems with Traditional Accounting Methods

● Accounting was done in the form of

notebooks. This was cumbersome and
tedious.

● Use of excel sheets simplified accounting

but did not solve all problems.
Problems with Traditional Accounting Methods

● SMBs and start-ups face issues in managing and tracking

cash flow.

● A highly accurate and dependable solution is required for

financial management in business.
Problems with Traditional Accounting Methods

● Difficulty in tracking small expenses such as

one-time government tax and regular taxes.

● Requirement of a dedicated financial expert

by SMBs and start-ups.

● Small business owners managing the role of

an HR and payroll expert due to lack of
resources or money.
Problems with Traditional Accounting Methods

● Interpreting and analyzing financial

reports with traditional accounting
methods was difficult.

● The available excel-based macros and

pivot tables did not provide sufficient
insight into the data.
Challenges in Traditional Accounting Methods

● How much inventory must be held?

● How many invoices are overdue?

● How much cash is tied up at work?

● How long does it take to get cash from the customers?

Data Analytics: Impact on Accounting
 Impact of Analytics on Accounting

Uncovers valuable insights Identifies process improvements

Helps in managing risks Adds value to the decision-

making process
How Accountants Use Data Analytics

Auditors Tax accountants Investment advisors

• Deploy continuous • Use data science to • Use big data to find

monitoring analyze complex behavioral patterns
taxations
• Analyze and verify large • Identify investment
data sets • Helps in faster opportunities
investment
• Few errors and precise decisions • Generate higher profit
recommendations margins
Data Analytics: Overview
and Process Flow
 Data Analytics: Definition
Data analytics is the process of examining and analyzing raw data sets to:

● Draw conclusions

● Derive more information

● Improve businesses,
products, and services

In addition to making business decisions, it is used by data scientists and

researchers to verify scientific models and theories.
Data Analytics: Process Flow

1. Define goals

2. Identify measurable metrics

3. List, collect, and extract data from sources

4. Explore and analyze data

5. Interpret and visualize data

6. Infer data for decision-making

 Data Analytics Life Cycle
Operationalize Discovery
Deliver final reports, briefs, Learn about business
codes, and technical domain and assess
documents. available resources.

6 1

Communicate Results Data Preparation

Identify key findings, business 5 Data Analytics 2
Execute ELT (extract, load, and
values, and develop narratives transform).
for stakeholders.

4 3

Model Building Model Planning

Develop data sets for testing, Identify techniques and data

training, and production. to understand variables
relationship.
Types of Data Analytics
 Types of Data Analytics
The four main types of analytics based on the workflow and requirements of data analytics:

Why did this happen? How can we make it happen?

Descriptive Diagnostic Predictive Prescriptive

Analytics Analytics Analytics Analytics

What happened? What will happen?

Descriptive Analytics
 Descriptive Analytics

● Descriptive analytics is designed

● It is the conventional form
to access information about the
of analytics.
past.

● It focuses on the summarized ● Its purpose is to

view of facts. summarize the findings.

 Descriptive Analytics

Data Techniques of Data

Aggregation Descriptive Mining
Analytics

• Data aggregation is the process of gathering and expressing

information in a summarized form.

• Tools used for data aggregation include MS Excel, MATLAB, SPSS, and
STATA.

• Company report is an example of descriptive analytics.

Diagnostic Analytics
Diagnostic Analytics

● Diagnostic analytics helps you identify why

something happened in the past.

● It takes a deeper look at data to understand the

root cause of events.

● It has a limited ability to provide actionable

insights.

● It provides an understanding of causal

relationships and sequences.
Diagnostic Analytics Techniques

Drill-down Data Discovery

Data Mining Correlation

Diagnostic Analytics Techniques

● They can be used to discover a causal relationship between two

or more data sets.

● Diagnostic analytics is helpful for those concerned with day-to-

day operations.

● For example, It helps identify why a sales representative has

sold fewer items than usual.
Predictive Analytics
 Predictive Analytics
Predictive analytics is used in:

● Predicting future outcomes in terms of probability of

an event to occur

● Analyzing sentiments where all opinions posted on

social media are collected to predict a person’s
sentiment

● Identifying target audience for a promotional

campaign

● Forecasting weather, plan-failure prediction, and

travel products recommender system

A predictive model is built on the preliminary descriptive analytics stage.

 Predictive Analytics Tools

Machine learning algorithms such

as random forests, SVM and
statistics.

Trained data scientists and

machine learning experts building
these models

Popular tools for predictive

analytics: Python, R and
RapidMiner.
Prescriptive Analytics
 Prescriptive Analytics
Prescriptive analytics provides the It creates and updates the
solution for a prediction in the future. relationship between action and
1 2 outcome using a feedback system.

It is used by recommendation It helps in making optimal

engines in companies. 7 3
recommendations during the
decision-making process.

It is the final frontier of 6 4

It helps in mitigating the possible
advanced analytics. risks based on the available
predictive analytics.
5

It has the power to suggest favorable solutions

and ease the decision-making process.
 Prescriptive Analytics

● Predictive analytics is at the budding stage of

implementation and firms have not used its full
potential.

● Advancements in predictive analytics is paving the

way for its development.
Types of Analytics: Example
Types of Analytics: Amazon Example

● Amazon’s revenue increased in the West Coast

Diagnostic
Analytics during the past one year
● Increased spending on sales training

Predictive ● Purchase factors: price, time, weather, and festive

Analytics seasons
● Predicted 10–12 percent increase in revenue
Types of Analytics: Amazon Example

● Spent $20M in different sales training the

Descriptive
Analytics previous year

● Sales trainings fetched good ROI

Prescriptive
Analytics ● Implemented a suitable optimization plan to
maximize revenue
Data Analytics Benefits:
Decision-Making
Data Analytics Benefits: Decision-Making

● Companies use business analytics to enable

faster and facts-based decision making.

● Data-driven organizations make better

strategic decisions.

● Companies enjoy high operational efficiency,

improved customer satisfaction, robust profit
and revenue level.
Data Analytics Benefits: Decision-Making

Data analytics helps you define your target

audience based on:

● Customer age group

● Customer preferences

● Location-based purchases

● Popular brands or products people seek

 Data Analytics Benefits: Decision-Making

Data analytics in e-commerce helps:

● Manage inventory

● Forecast demands

● Identify shopping seasons

● Analyze customer sentiment

● Decide optimum prices

Data Analytics Benefits:
Cost Reduction
Data Analytics Benefits: Cost Reduction

● Data analytics helps understand shopper

behavior by monitoring their browsing
interest.

● Seller identifies shopping pattern and

customer demand.

● Customer data helps companies minimize

failed campaigns and reduce cost
associated with them.
 Data Analytics Benefits: Cost Reduction

Data analytics helps in reducing

marketing and logistics cost.

Marketers use technologies to Marketing campaigns use

evaluate customer behavior measured activities to
and make strategic decisions. plan campaigns.

Predictive analytics is used for better

performance, higher ROI, and faster
success.
Use of Predictive Analytics for Logistics Management

Predictive analytics helps companies in logistics management by:

● Analyzing current and historical facts to make predictions

● Procuring products based on purchase history

● Organizing customers from shopping patterns and demographic details

● Planning inventory and offloading excess stock

 Factors to Consider in Logistics Planning

Seasons Economic conditions

Weather

Data provides several insights such as identifying products that people tend to buy in a particular season.
 Data Analytics Benefits: Case Study

According to a study by IHL group, footwear and clothing worth $642.6 billion are returned to
stores every year.

● Products are returned as consumers miss important information during the purchase.

● Critical information provided through a detailed product specification or product video can
reduce the return rate.

● Data analytics help companies assess the possibility of reducing product return rate.
Case Study: Amazon
 Case Study: Amazon
Amazon uses data analytics to improve efficiency and reduce cost.
Predictive analytics helps to:

Predict what you buy Anticipate shipping

Such predictions help increase sales and reduce shipping, inventory, and
supply chain costs.
 Case Study: Amazon

● Amazon has more than 200 fulfillment centers

worldwide.

● Supply chain and logistics optimization help

companies reduce cost and improve
performance.

● Amazon uses data analytics for choosing the

warehouse closest to the customer and reduces
shipping costs by 10–40 percent.
Case Study: Amazon

● Amazon uses data analytics to attract customers and

increase profits by an average of 25 percent annually.

● Prices are set based on customer activity on a

website, competitors’ pricing, and product availability.

● Product prices typically change every 10 minutes as

data is updated and analyzed.

● Amazon typically offers discounts on the best-selling

items and earns larger profits on less popular items.
Data Analytics:
Other Benefits
 Data Visualization Tools

Power BI

Data
Tableau Visualization
Tools

Logi

Visualization allows decision makers to see connections between multidimensional

data.
It provides new ways to interpret data through graphical representations.
Other Benefits of Data Analytics

● Data analytics helps in Identifying potential

opportunities to streamline operations.

● It identifies potential problems and gives time to

take actions.

● It allows companies to identify operations that

yield the best results.

● It identifies and improves error-prone

operational areas.
Other Benefits of Data Analytics

● Organizations implement data analytics in

product or service development.
● Data analytics helps in understanding current
state of business.

● It provides valuable insights to predict

future outcomes.

● It helps businesses align new process or

products with market needs.

● Data analytics tools are capable of handling

heterogeneous data and providing insights.
 Key Takeaways

• Data analytics is the process of examining and analyzing raw data sets to derive information and
improve business.

• Discovery, data preparation, model planning, model building, communicate results, and
operationalize are the six steps of data analytics life cycle.

• The four stages of data analytics are descriptive analytics, diagnostic analytics, predictive
analytics, and prescriptive analytics.