Chapter No 1– Introduction to Business

Analytics

BDS153
Business Analytics
 Course Objectives:
 Upon successful completion of this course, the student will be able to:
 In this course, student will learn to identify, evaluate, and capture opportunities
in which business analytics can be used to improve performance and support
important decisions, to use data to develop insights and predictive capabilities
using data mining and forecasting techniques, to use optimization in order to
support decision-making in the presence of a large number of alternatives and
business constraints and to explore the challenges that can arise in
implementing such systems.

Recommended Books:
 Essentials of Business Analytics, 1st Edition
by Jeffrey D. Camm , James J. Cochran , Michael J. Fry , Jeffrey W. Ohlmann , David R.
Anderson
ISBN-13: 978-1285187273
ISBN-10: 9781285187273
 RapidMiner: Data Mining Use Cases and Business Analytics
Applications, 1st Edition
(Chapman & Hall/CRC Data Mining and Knowledge Discovery Series)
ISBN-13: 978-1482205497
ISBN-10: 1482205491
Marks Distribution

 Quiz & Assignments = 15 marks

 Presentation = 15 marks
 Mid-Term Examination = 30 marks
 Final Examination = 40 marks
 Total………………………………… = 100 marks
Course Outline
Week
Topic to be Covered
No.
1 Introduction to Business Analytics
2 Descriptive Statistics
3 Exploratory Data Analysis
4 Introduction to Rapid Miner
5 Data Preparation
6 Predictive Modeling (Basic Techniques including Regression, Logistic
Regression, and KNN)
7 Predictive Modeling (Advance Techniques including MLP and SVM)
8 Model Evaluation Techniques
Mid Term Examination
10 Model Visualization Techniques
11 Time Series Analysis
12 Clustering (Basic Techniques including K-mean and its variants)
13 Clustering (Advance Techniques including Agglomerative Hierarchical Clustering
and its variants)
14 Optimization Techniques (Linear Optimization)
15 Optimization Techniques (Nonlinear Optimization)
16 Case Study (Business Analytics) and Project Presentation
Final Examination
Introduction
 Three developments stimulate recent explosive growth in the use
of analytical methods in business applications:
 First development:

 Technological advances—scanner technology, data collection through e-

commerce, Internet social networks, and data generated from personal
electronic devices—produce incredible amounts of data for businesses
 Businesses want to use these data to improve the efficiency and
profitability of their operations, better understand their customers, price
their products more effectively, and gain a competitive advantage
Introduction

 Three developments stimulate recent explosive growth in the

use of analytical methods in business applications: (contd.)
 Second development:
 Ongoing research has resulted in numerous methodological
developments, including:
 Advances in computational approaches to effectively handle and explore
massive amounts of data
 Faster algorithms for optimization and simulation
 More effective approaches for visualizing data
Introduction

 Three developments stimulate recent explosive growth in the

use of analytical methods in business applications: (contd.)
 Third development:
 The methodological developments were paired with an explosion in
computing power and storage capability
 Better computing hardware, parallel computing, and cloud computing

have enabled businesses to solve big problems faster and more

accurately than ever before
Decision Making
Decision Making

 Managers’ responsibility:
To make strategic, tactical, or operational decisions
 Strategic decisions:
 Involve higher-level issues concerned with the overall direction of the
organization
 Define the organization’s overall goals and aspirations for the future
Decision Making

 Tactical decisions:
 Concern how the organization should achieve the goals and
objectives set by its strategy
 Are usually the responsibility of midlevel management

 Operational decisions:
 Affect how the firm is run from day to day
 Are the domain of operations managers, who are the closest to the

customer
Decision Making

Decision making can be defined as the following process:

1. Identify and define the problem
2. Determine the criteria that will be used to evaluate alternative
solutions
3. Determine the set of alternative solutions
4. Evaluate the alternatives
5. Choose an alternative
Decision Making

Common approaches to making decisions

 Tradition
 Intuition

 Rules of thumb

 Using the relevant data available

Business Analytics
Defined
Business Analytics Defined

Business analytics:
 Scientific process of transforming data into insight for making better
decisions
 Used for data-driven or fact-based decision making, which is often

seen as more objective than other alternatives for decision making

Business Analytics Defined

Tools of business analytics can aid decision making by:

 Creating insights from data
 Improving our ability to more accurately forecast for planning

 Helping us quantify risk

 Yielding better alternatives through analysis and optimization

A Categorization on
Analytical Methods and
Models
Descriptive Analytics
Predictive Analytics
Prescriptive Analytics
 A Categorization of Analytical
Methods and Models
Descriptive analytics: Encompasses the set of techniques
that describes what has happened in the past; examples:
 Data queries
 Reports
 Descriptive statistics
 Data visualization (including data dashboards)
 Data-mining techniques
 Basic what-if spreadsheet models
 Dataquery: A request for information with certain
characteristics from a database
 A Categorization of Analytical
Methods and Models
Predictive analytics: By using statistics to forecast future
outcomes with statistical models and machine learning
techniques, these analytics provide context and clarity for
future decisions.
 A Categorization of Analytical
Methods and Models
Techniques used in Predictive Analytics:
 Linear regression
 Time series analysis

 Data mining is used to find patterns or relationships among elements of

the data in a large database; often used in predictive analytics

 Simulation involves the use of probability and statistics to construct a

computer model to study the impact of uncertainty on a decision

 A Categorization of Analytical
Methods and Models
Prescriptive Analytics: These analytics build on descriptive
and prescriptive analytics to recommend specific actions that
ensure the best or most profitable customer reactions and
business outcomes possible.
 Optimization models: Models that give the best decision subject to
constraints of the situation
Big Data
Volume

Velocity

Variety

Veracity
Big Data

Big data: A set of data that cannot be managed, processed, or

analyzed with commonly available software in a reasonable
amount of time
 Represents opportunities
 Presents challenges in terms of data storage and processing,

security, and available analytical talent

 More companies are hiring data scientists who know how to

process and analyze massive amounts of data

Figure 1.2: The 4 Vs of Big Data
Big Data

 The four Vs have led to new technologies

 Hadoop: An open-source programming environment that supports
big data processing through distributed storage and processing over
multiple computers
 MapReduce: A programming model used within Hadoop that
performs two major steps: the map step and the reduce step
 Data security: The protection of stored data from destructive
forces or unauthorized users
Business Analytics in
Practice
Financial Analytics Supply-Chain Analytics
Human Resource (HR) Analytics Analytics for Government and Nonprofits
Marketing Analytics Sports Analytics
Health Care Analytics Web Analytics
Figure 1.3:
The Spectrum of Business Analytics
Business Analytics in Practice

 Predictive and prescriptive analytics are sometimes referred to

as advanced analytics
 Financial analytics
 Use of predictive models to:
 Forecast future financial performance
 Assess the risk of investment portfolios and projects
 Construct financial instruments such as derivatives
 Construct optimal portfolios of investments
 Allocate assets
 Create optimal capital budgeting plans
 Simulation is also often used to assess risk in the financial sector
Business Analytics in Practice

Human resource (HR) analytics

 New area of application for analytics
 The HR function is charged with ensuring that the organization:

 Has the mix of skill sets necessary to meet its needs

 Is hiring the highest-quality talent and providing an environment that retains it
 Achieves its organizational diversity goals
Business Analytics in Practice

Marketing analytics
 Marketing is one of the fastest growing areas for the application of
analytics
 A better understanding of consumer behavior through the use of

scanner data and data generated from social media has led to an
increased interest in marketing analytics
Business Analytics in Practice

Marketing analytics (contd.)

 A better understanding of consumer behavior through marketing
analytics leads to:
 Better use of advertising budgets
 More effective pricing strategies
 Improved forecasting of demand
 Improved product line management
 Increased customer satisfaction and loyalty
Figure 1.4: Google Trends for Marketing, Financial,
and Human Resource(HR) Analytics, 2006–2015
Business Analytics in Practice

 Health care analytics

 Descriptive, predictive, and prescriptive analytics are used to
improve:
 Patient, staff, and facility scheduling
 Patient flow
 Purchasing
 Inventory control
 Use of prescriptive analytics for diagnosis and treatment
Business Analytics in Practice

 Supply chain analytics

 The core service of companies such as UPS and FedEx is the
efficient delivery of goods, and analytics has long been used to
achieve efficiency
 The optimal sorting of goods, vehicle and staff scheduling, and

vehicle routing are all key to profitability for logistics companies such
as UPS, FedEx, and others like them
 Companies can benefit from better inventory and processing control

and more efficient supply chains

Business Analytics in Practice

 Analytics for government to:

 Drive out inefficiencies
 Increase the effectiveness and accountability of programs

 Analytics
for nonprofit agencies to ensure their effectiveness
and accountability to their donors and clients
Business Analytics in Practice

 Sports analytics
 Professional sports teams use to:
 Decide how much to offer players in contract negotiations
 The use of analytics for off-the-field business decisions is also
increasing rapidly
 Using prescriptive analytics, franchises across several major sports

dynamically adjust ticket prices throughout the season to reflect the

relative attractiveness and potential demand for each game
Business Analytics in Practice

Web analytics
 The analysis of online activity, which includes, but is not limited to,
visits to web sites and social media sites such as Facebook and
LinkedIn
 Leading companies apply descriptive and advanced analytics to

data collected in online experiments to determine the best way to:

 Configure web sites
 Position ads
 Utilize social networks for the promotion of products and services
Business analytics tools
and why they matter
Business Analytics Tools

With a comprehensive business analytics tool, your company

can analyze
historical and real-time data,
trends,

patterns to inform decisions that affect your organization positively.

What business analytics
offers
Business Analytics

 The definition of business analytics is exactly what it sounds

like:
 Any software or solution that discovers and evaluates
business data with a combination of
 skills,
 technologies,
 and practices to conduct a statistical analysis.
Business Analytics Tools

 IT analysts and business intelligence (BI) managers use

business analytics with tools that review complex processes,
algorithms, and broader data sets.
 Business analytics tools serve as any applications or software
solutions that inspect and analyze business data while
presenting any possible solutions.
Business Analytics Tools

 Having the right business analytics tools helps your company

gather the right information needed to understand
 past developments,
 predict future events and its subsequent possible challenges,
 and find a way to turn those hurdles into actionable items that result
in positive business accomplishments.
 Some elements of business analytics include:
Business Analytics Tools
 Some elements of business analytics include:
 Data aggregation
 Data mining
 Forecasting
 Text mining
 Visualization

 Using digital tools helps take your data analysis to the next level so your
company can better define its future.
Reasons why managers and analysts use
business analytics tools:
 Understand business performance.
 Explain the results from your data and why they
happened.
 Identify weaknesses.
 Fix potential problems before they arise.
 Alert decision makers to potential events that may affect
the organization.
 Forecast results based on possible business decisions.
Top Business Analytics
Tools Used by Companies
Today
Reasons why managers and analysts use
business analytics tools:
 Power BI
 Domo
 RapidMiner
 Tableau Big Data Analytics
 KNIME
 Microstrategy
 Splunk
 QlikView
Power BI
 Microsoft makes Power BI among the many business analytics tools.
 It offers dynamic visualizations with self-service business intelligence
features,
 Allowing end users to create dashboards and reports independently
without assistance.
Create amazing data experiences
 Easily connect to, model, and visualize your data,
 Creating memorable reports personalized with your KPIs and brand.
 Get fast, AI-powered answers to your business questions—even
when asking with conversational language.
Power BI