Fundamentals of Business Analytics Reviewer

Lesson 1.1
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.
- These decisions define the organization’s overall goals and aspirations for the future.
Tactical decisions - Concern how the organization should achieve the goals and objectives set by its
strategy.
- Usually the responsibility of midlevel management.
Operational Decisions - Affect how the firm is run from day to day.
- The domain of operations managers, who are the closest to the customer.
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
Common approaches to making decisions
• Tradition
• Intuition
• Rules of thumb
• Using the relevant data available
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.
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
Business Analytics - the art of assembling the data gathered through Business Intelligence in such a way
that it can be analyzed by people.
- It is comprised of the tools with which people can disseminate the data that’s been collected, to
produce meaningful conclusions (Fulton, 2013).
- the use of data, information technology, statistical analysis, quantitative methods, and mathematical
or computer-based models to help managers gain improved insight into business operations and make
better, fact-based decisions (Evans, 2012).
Fundamentals of Business Analytics Reviewer

- the study of data through statistical and operations analysis, the formation of predictive models, the
application of optimization techniques, and the communication of these results to customers, business
partners, and college executives (Galleto, 2018).
- refers to the broad use of various quantitative techniques such as statistics, data mining, optimization
tools, and simulation supported by the query and reporting mechanism to assist decision-makers in
making more informed decisions within a closed-loop framework seeking continuous process improvement
through monitoring and learning (Min, 2017).
Business analytics help us answer the following fundamental questions critical for decision making:
- What happened?
- Why did a certain event take place?
- Will the same event take place?
- What will happen if we change what we used to do?
- How can we ensure that our changed practices actually work?
Business Intelligence - combining aspects of reporting, data exploration and ad hoc queries, and
sophisticated data modeling and analysis
- the process of collecting information from all sources to make data-driven decisions in an organization
(Fulton, 2013, Galleto, 2018).
- the process of combining aspects of reporting, monitoring and alerting, dashboards, scorecards, and ad
hoc query data exploration (Capistrano, 2018, Galleto, 2018).
- Over the past few years, it has evolved to include more processes and activities to help improve
performance. These processes include:
Data mining: Using databases, statistics, and machine learning to uncover trends in large datasets.
Reporting: Sharing data analysis to stakeholders so they can draw conclusions and make decisions.
Performance metrics and benchmarking: Comparing current performance data to historical data to track
performance against goals, typically using customized dashboards.
Descriptive analytics: Using preliminary data analysis to find out what happened.
Querying: Asking the data-specific questions, BI pulling the answers from the datasets.
Statistical analysis: Taking the results from descriptive analytics and further exploring the data using
statistics such as how this trend happened and why.
Data visualization: Turning data analysis into visual representations such as charts, graphs, and histograms
to more easily consume data.
Visual analysis: Exploring data through visual storytelling to communicate insights on the fly and stay in
the flow of analysis.
Data preparation: Compiling multiple data sources, identifying the dimensions and measurements, and
preparing them for data analysis.
Why is business intelligence important?
- Business intelligence can help companies make better decisions by showing present and historical data
within their business context.
Fundamentals of Business Analytics Reviewer

Lesson 1.2
A Categorization of Analytical Methods

Descriptive Analytics - It encompasses the set of techniques that describes what has happened in the past.
- It answers the questions what happened and why it happens
Examples - data queries, reports, descriptive statistics, data visualization (data dashboards), data mining
techniques, and basic what-if spreadsheet models.
Data query - It is a request for information with certain characteristics from a database.
Data dashboards - Collections of tables, charts, maps, and summary statistics that are updated as new
data become available.

Predictive Analytics - It consists of techniques that use models constructed from past data to predict the
future or ascertain the impact of one variable on another
- It answers the question what will happen
Survey data and past purchase behavior may be used to help predict the market share of a new product.

Techniques used in Predictive Analytics:

Data Mining - Used to find patterns or relationships among elements of the data in a large database; often
used in predictive analytics.
Simulation - It involves the use of probability and statistics to construct a computer model to study the
impact of uncertainty on a decision.
Prescriptive Analytics - It indicates a best course of action to take
- anticipates what will happen, when it happened, and also why it happened
Models used in prescriptive analytics
Optimization Model - Models that give the best decision subject to constraints of the situation.

Simulation Optimization - Combines the use of probability and statistics to model uncertainty with
optimization techniques to find good decisions in highly complex and highly uncertain settings.
Decision Analysis - Used to develop an optimal strategy when a decision maker is faced with several
decision alternatives and an uncertain set of future events.
- It also employs utility theory, which assigns values to outcomes based on the decision maker’s attitude
toward risk, loss, and other factors.
Fundamentals of Business Analytics Reviewer

A Categorization of Analytical Methods and Model

Optimization Models

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 analytical challenges from a processing point of view and consequently has itself led to an
increase in the use of analytics
- characterized by a large volume of different types of data (e.g. social, web, transaction, etc.) that builds
very quickly.
- It exceeds the reach of commonly used hardware environments and software tools to capture, manage
and process in a timely manner for its users.
Type of Big Data
Structured Data
➢ Stored in tabular format
➢ Clearly defined
➢ Data is stored in a pre-defined data model
Unstructured data
➢ No pre-defined structure
➢ No data model
➢ Data is irregular and ambiguous
Semi-Structured Data
➢ It falls between structured and unstructured data
➢ It is a combination of both
Characteristics of Big Data
• Volume – Data Size
• Velocity – Speed of Change
• Variety – different forms of Data Sources
Fundamentals of Business Analytics Reviewer

• Veracity – Uncertainly of Data

• Volume – Business Value
Lesson 1.3
Business Analytics in Practice;
➢ Finance
➢ Human Resource
➢ Marketing
Business Analytics in Finance
- Financial analytics
• Use of predictive models
• To forecast future financial performance
• To assess the risk of investment portfolios and projects
• To construct financial instruments such as derivatives

Business Analytics in Human Resources

- Human resource (HR) 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, and
• Achieves its organizational diversity goals.

Business Analytics in Marketing

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

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

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.

Sports analytics
• Used for player evaluation and on-field strategy in professional sports.
• To assess players for the amateur drafts and to decide how much to offer players in contract
negotiations.
Fundamentals of Business Analytics Reviewer

• Professional motorcycle racing teams that use sophisticated optimization for gearbox design to gain
competitive advantage.

Web analytics - It is 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, and
• Utilize social networks for the promotion of products and services

Lesson 1.4
Ethical Issues in Business Analytics
Ethics - is a moral principle that somehow guides a person on what is bad and what is good.
- is a principle of conduct that apply to certain individuals or groups.

CODE of ETHICS
- a guide of principles designed to help professionals conduct business honestly and with integrity.
- sets out an organization’s ethical guidelines and best practices to follow for honesty, integrity, and
professionalism.

LEGAL OBLIGATION
- is a term describing a moral or legal duty to perform or not perform an action that is enforced by a
court of law.
- means any obligations relating to the Business, the Property, its occupation, or use which are
imposed by any existing or future statute, statutory instrument, regulation, industry code of
practice, order, notice, or the requirements of any competent authority or court.

Ethical and Legal Consideration in Business Analytics

1.Discrimination and Bias
- happen when our judgment and assumptions are influenced by our own biases.

2.Integrity of Data Analytics

- is the overall accuracy, completeness, and consistency of data. Data integrity also refers to the safety of
data in regard to regulatory compliance

3.Lack of Transparency
- Transparency is another ethical issue that is related to the first two issues that we discussed earlier.
- to provide us access as our means to understand how systems work and affect our lives.
Fundamentals of Business Analytics Reviewer

Data Privacy Law

Ethical Implications of Business Analytics
• Awareness, Disclosure and Privacy
- Disclosure of customer data is prevalent in day-to-day business and the internet via social media
and searches
- Most individuals are unaware that their digital traces can be used to profile them without their
consent and violate their privacy by modelling their preferences, locations, and decisions.
• Data Ownership and Control
- Since data traces can be freely obtained in public domain, data ownership and control is a gray
area.
• Discrimination and Self-Determination
- Data is often used by institutions to profile and segment people based on their demographics and
behaviour.
- This can be used to determine marketing messages, access to products and services, and
interaction.
- It can violate basic human rights by auto-discrimination.
• Liabilities in Algorithmic Decision Making
- Once decisions are automated based on algorithms, human inputs is minimized but the
consequences of those decisions remain.
- If any loss or liability results from the outcomes of these automated decisions, it can be a gray area
on who is accountable.