Unit I: Business Analytics

SUCHITRA PANDEY (FPM)

FACULTY BBAU
 Business Analytics

 Business analytics is a broad field that encompasses the use of data, statistical algorithms, and
technologies to extract insights and support decision making in organizations. It involves the
collection, analysis, and interpretation of data to help organizations identify trends, measure
performance, and optimize processes. The goal of business analytics is to turn data into
actionable insights that can inform strategy and drive improvements. This is achieved through a
combination of descriptive, diagnostic, predictive, and prescriptive analytics, which provide
different levels of insight and support different types of decision making.
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 Descriptive analytics

 This can be termed as the simplest form of analytics. The mighty size of big data is beyond
human comprehension and the first stage hence involves crunching the data into
understandable chunks. The purpose of this analytics type is just to summarise the findings and
understand what is going on. Among some frequently used terms, what people call as
advanced analytics or business intelligence is basically usage of descriptive statistics (arithmetic
operations, mean, median, mode, percentage, etc.) on existing data. It is said that 80% of
business analytics mainly involves descriptions based on aggregations of past performance. It is
an important step to make raw data understandable to investors, shareholders and managers.
 This way it gets easy to identify and address the areas of strengths and weaknesses such that it
can help in strategizing. The two main techniques involved are data aggregation and data
mining stating that this method is purely used for understanding the underlying behavior and
not to make any estimations.
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 Data aggregation is the process of collecting and combining data from multiple sources into a
single, manageable format for analysis, while data mining involves using complex algorithms to
discover patterns, trends, and insights within large datasets to inform decision making.
Essentially, data aggregation is a preliminary step to prepare data for more advanced analysis
through data mining techniques.
 By mining historical data, companies can analyze the consumer behaviors and engagements
with their businesses that could be helpful in targeted marketing, service improvement, etc. The
tools used in this phase are MS Excel, MATLAB, SPSS, STATA, etc.
 Diagnostic Analytics

 Diagnostic analytics is used to determine why something happened in the past. It is

characterized by techniques such as drill-down, data discovery, data mining and correlations.
Diagnostic analytics takes a deeper look at data to understand the root causes of the events. It
is helpful in determining what factors and events contributed to the outcome. It mostly uses
probabilities, likelihoods, and the distribution of outcomes for the analysis.
 In a time series data of sales, diagnostic analytics would help you understand why the sales
have decrease or increase for a specific year or so. However, this type of analytics has a limited
ability to give actionable insights. It just provides an understanding of causal relationships and
sequences while looking backward.
 A few techniques that uses diagnostic analytics include attribute importance, principle
components analysis, sensitivity analysis, and conjoint analysis. Training algorithms for
classification and regression also fall in this type of analytics.
 Predictive (Inferential) Analytics

 Predictive analytics is used to predict future outcomes. However, it is important to note that it
cannot predict if an event will occur in the future; it merely forecasts what are the probabilities
of the occurrence of the event. A predictive model builds on the preliminary descriptive
analytics stage to derive the possibility of the outcomes.
 Hence, predictive analytics includes building and validation of models that provide accurate
predictions. Predictive analytics relies on machine learning algorithms like random forests, SVM,
etc. and statistics for learning and testing the data. Usually, companies need trained data
scientists and machine learning experts for building these models. The most popular tools for
predictive analytics include Python, R, RapidMiner, etc.
 The prediction of future data relies on the existing data as it cannot be obtained otherwise. If
the model is properly tuned, it can be used to support complex forecasts in sales and marketing.
It goes a step ahead of the standard BI in giving accurate predictions.
 Prescriptive Analytics

 The basis of this analytics is predictive analytics but it goes beyond the three mentioned above
to suggest the future solutions. It can suggest all favorable outcomes according to a specified
course of action and also suggest various course of actions to get to a particular outcome.
Hence, it uses a strong feedback system that constantly learns and updates the relationship
between the action and the outcome.
 The computations include optimisation of some functions that are related to the desired
outcome. For example, while calling for a cab online, the application uses GPS to connect you
to the correct driver from among a number of drivers found nearby. Hence, it optimises the
distance for faster arrival time. Recommendation engines also use prescriptive analytics.
 The other approach includes simulation where all the key performance areas are combined to
design the correct solutions. It makes sure whether the key performance metrics are included in
the solution. The optimisation model will further work on the impact of the previously made
forecasts. Because of its power to suggest favorable solutions, prescriptive analytics is the final
frontier of advanced analytics or data science, in today’s term
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 personalized product recommendations on e-commerce platforms like Amazon,

 optimizing inventory levels in a supply chain based on demand forecasts,
 suggesting the best route for a delivery driver using traffic data,
 adjusting pricing strategies based on market trends, and
 providing tailored financial advice to customers based on their spending patterns;
essentially, any situation where data analysis recommends specific actions to optimize outcomes.
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 The four techniques in analytics may make it seem as if they need to be implemented
sequentially. However, in most scenarios, companies can jump directly to prescriptive analytics.
As for most of the companies, they are aware of or are already implementing descriptive
analytics but if one has identified the key area that needs to be optimised and worked upon,
they must employ prescriptive analytics to reach the desired outcome.
 Business Research

 Dictionary definition of research is a careful investigation or inquiry specifically through search for
new facts in any branch of knowledge.
 In simple words, research is an art of scientific investigation. Research is defined as human
activity based on intellectual application in the investigation of matter. The primary purpose for
applied research is discovering, interpreting, and the development of methods and systems for
the advancement of human knowledge.
 “Research refers to the systematic method consisting of enunciating the problem, formulating a
hypothesis, collecting the facts or data, analysing the facts and reaching certain conclusions
either in the form of solution(s) towards the concerned problem or in certain generalizations for
some theoretical formulation.” (Kothari and Garg)
 According to Fred Kerlinger, research is an organized enquiry designed and carried out to
provide information for solving problem.
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 Therefore, research is an original contribution to the existing stock of knowledge making for its
advancement. It is pursuit of truth with the help of study, observation, comparison and
experiment. Research is the search for knowledge through objective and systematic method of
finding solution to a problem.
Steps in business research

 Business Problem Definition/research question

 Research Design
 Data collection and Preparation
 Data analysis and interpretation
 Research report
 Management Decision
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 Research Problem

 Business Problem Definition/research question: Problem-solving in business is defined as

implementing processes that reduce or remove obstacles that are preventing you or others
from accomplishing operational and strategic business goals. In business, a problem is a
situation that creates a gap between the desired and actual outcomes. In addition, a true
problem typically does not have an immediately obvious resolution.
 Defining problem accurately is more an art than the science say Gibson.
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 You might want to test an observation:

why so many contestants have really unpleasant personalities on the show.
Hypothesis: Percentage of people with narcissistic personality disorder will be higher at the audition
than the general level in the population.
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Research problem:
Theoretical in nature: Focusing on research area that is lacking in some way. Grow the overall body
of knowledge.
Applied in nature: Focusing on finding a practical solution to current real world problems in an
organization or industry.
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Research Design
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 The only way to infer causality is through comparing two controlled situations: one in which the
cause is present and one in which the cause is absent. This is what experimental methods strive
to do: to provide a comparison of situations (usually called treatments or conditions) in which
the proposed cause is present or absent. As a simple case, we might want to look at the effect
of feedback style on learning about statistics. I might, therefore, randomly split some students
into three different groups, in which I change my style of feedback in the seminars on my
course: This random assignment of students is important, but we’ll get to that later. Group 1
(supportive feedback): During seminars I congratulate all students in this group on their hard
work and success. Even when they get things wrong, I am supportive and say things like ‘that
was very nearly the right answer, you’re coming along really well’ and then give them a nice
piece of chocolate.
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 Group 2 (harsh feedback): This group receives seminars in which I give relentless verbal abuse
to all of the students even when they give the correct answer. I demean their contributions and
am patronizing and dismissive of everything they say. I tell students that they are stupid,
worthless, and shouldn’t be doing the course at all. In other words, this group receives normal
university-style seminars.☺ Group 3 (no feedback): Students are not praised or punished,
instead I give them no feedback at all. The thing that I have manipulated is the feedback style
(supportive, harsh or none). As we have seen, this variable is known as the independent
variable and, in this situation, it is said to have three levels, because it has been manipulated in
three ways (i.e., the feedback style has been split into three types: supportive, harsh and none).
The outcome in which I am interested is statistical ability, and I could measure this variable using
a statistics exam after the last seminar. As we have seen, this outcome variable is the
dependent variable because we assume that these scores will depend upon the type of
teaching method used (the independent variable). The critical thing here is the inclusion of the
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no feedback’ group because this is a group in which our proposed cause (feedback) is absent,
and we can compare the outcome in this group against the two situations in which the proposed
cause is present. If the statistics scores are different in each of the feedback groups (cause is
present) compared to the group for which no feedback was given (cause is absent), then this
difference can be attributed to the type of feedback used. In other words, the style of feedback
used caused a difference in statistics scores
Reliability and Validity
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 One way to try to ensure that measurement error is kept to a minimum is to determine properties
of the measure that give us confidence that it is doing its job properly. The first property is
validity, which is whether an instrument measures what it sets out to measure. The second is
reliability, which is whether an instrument can be interpreted consistently across different
situations. Validity refers to whether an instrument measures what it was designed to measure
(e.g., does your lecturer helpfulness rating scale actually measure lecturers’ helpfulness).
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THANK YOU