Business analytics

Role of Data Analytics in Decision Making

What makes decision making difficult and challenging? Uncertainty is probably the number one
challenge. If we knew how much the demand will be for our product, we could do a much better job
of planning and scheduling production. If we knew exactly how long each step in a project will take
to be completed, we could better predict the project’s cost and completion date. If we knew how
stocks will perform, investing would be a lot easier. Another factor that makes decision making
difficult is that we often face such an enormous of alternatives that we cannot evaluate them all.
What is the best combination of stocks to help me meet my financial objectives? What is the best
product line for a company that wants to maximize its market share?

Here Business Analytics plays its role, Business analytics is the scientific process of transforming data
into insight for making better decisions.3 Business analytics is used for data-driven or fact-based
decision making, which is often seen as more objective than other alternatives for decision making.

Business Analytics in Practice

Business analytics involves tools as simple as reports and graphs, as well as some that are as
sophisticated as optimization, data mining, and simulation.

Financial Analytics

Applications of analytics in finance are numerous and pervasive. Predictive models are used to
forecast future financial performance, to assess the risk of investment portfolios and proj ects, and to
construct financial instruments such as derivatives. Prescriptive models are used to construct optimal
portfolios of investments, to allocate assets, and to create optimal capital budgeting plans.

Human Resource (HR) Analytics

A relatively new area of application for analytics is the management of an organization’s human
resources (HR). The HR function is charged with ensuring that the organization (1) has the mix of skill
sets necessary to meet its needs, (2) is hiring the highest-quality talent and providing an environment
that retains it, and (3) achieves its organizational diversity goals.

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. As a result, de scriptive, predictive, and prescriptive
analytics are all heavily used in marketing. A better understanding of consumer behavior through
analytics leads to the better use of advertis ing budgets, more effective pricing strategies, improved
forecasting of demand, improved product line management, and increased customer satisfaction and
loyalty.

Health Care Analytics

The use of analytics in health care is on the increase because of pressure to simultaneously control
cost and provide more effective treatment. Descriptive, predictive, and prescriptive analytics are
used to improve patient, staff, and facility scheduling; patient flow; purchas ing; and inventory
control.
Supply Chain Analytics

Companies can benefit from better inventory and processing control and more efficient supply
chains. Analytic tools used in this area span the entire spectrum of analytics.

Analytics for Government and Nonprofits

Government agencies and other nonprofits have used analytics to drive out inefficiencies and
increase the effectiveness and accountability of programs.

Sports Analytics

The use of analytics for player evaluation and on-field strategy is now common, especially in
professional sports. Examples are professional sports teams that use analytics to assess players for
the amateur drafts20 and to decide how much to offer players in contract negotiations etc.

Web Analytics

Web analytics 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. Web analytics obviously has huge implications
for promoting and selling products and services via the Internet. 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.

Data
Data are the facts and figures collected, analysed, and summarized for presentation and
interpretation.

Types of Data
1. Population and Sample Data
Data can be categorized in several ways based on how they are collected and the type
collected. In many cases, it is not feasible to collect data from the population of all elements
of interest. In such instances, we collect data from a subset of the population known as a
sample.
2. Quantitative and Categorical Data
*Data are considered quantitative data if numeric and arithmetic operations, such as
addition, subtraction, multiplication, and division, can be performed on them.
*If arithmetic operations cannot be per formed on the data, they are considered categorical
data. We can summarize categorical data by counting the number of observations or
computing the proportions of observations in each category.
3. Cross-Sectional and Time Series Data
*Cross-sectional data are collected from several entities at the same, or approximately the
same, point in time.
*Time series data are collected over several time periods. Graphs of time series data are
frequently found in business and economic publications.
Such graphs help analysts understand what happened in the past, identify trends over time,
and project future levels for the time series.
 Data can be categorized into several types based on its characteristics and usage. The main
types of data are:

1. Structured Data: This type of data is highly organized and follows a specific format. It is
typically found in relational databases and can be easily analysed using SQL queries.
Examples include tables of numbers, dates, and categories.
2. Unstructured Data: Unstructured data lacks a specific format or structure. It includes text,
images, audio, and video files. Analysing unstructured data often requires natural language
processing (NLP) and other advanced techniques to extract insights.
3. Semi-structured Data: Semi-structured data has some organization but doesn't fit neatly
into tables or relational databases. It often uses tags, hierarchies, or metadata for
organization. Examples include XML and JSON files.
4. Temporal Data: Temporal data includes a time component, making it essential for time-
series analysis. Examples include stock prices, weather data, and sensor readings collected
over time.
5. Spatial Data: Spatial data is associated with geographic locations. It includes maps, GPS
coordinates

Sources of Data
Data necessary to analyse a business problem or opportunity can often be obtained with an
appropriate study; such statistical studies can be classified as either experimental or observational.

1. In an Experimental study, a variable of interest is first identified. Then one or more other
variables are identified and controlled or manipulated so that data can be obtained about
how they influence the variable of interest.
2. Nonexperimental, or observational, studies make no attempt to control the variables of
interest. A survey is perhaps the most common type of observational study.

A Categorization of Analytical Methods and Models

Descriptive Analytics encompasses the set of techniques that describes what has happened in the
past. Examples are data queries, reports, descriptive statistics, data visualization including data
dashboards, some data-mining techniques, and basic what-if spreadsheet models.

Modifying Data in Excel

1. Sorting and Filtering Data in Excel

2. Conditional Formatting of Data in Excel

Creating Distributions from Data

1. Frequency Distributions for Categorical Data

2. Relative Frequency and Percent Frequency Distributions
3. Frequency Distributions for Quantitative Data
4. Histogram
5. Cumulative Distributions

Measures of Location

1. Mean (Arithmetic Mean)

2. Median
3. Mode
4. Geometric Mean

Measures of Variability

1. Range
2. Variance
3. Standard Deviation
4. Coefficient of Variation

Analysing Distributions

1. Percentiles
2. Quartiles
3. z-scores
4. Empirical Rule
5. Identifying Outliers
6. Box Plots

Measures of Association Between

1. Two Variables
2. Scatter Charts
3. Covariance
4. Correlation Coefficient

Predictive analytics consists of techniques that use models constructed from past data to predict
the future or ascertain the impact of one variable on another. For example, past data on product
sales may be used to construct a mathematical model to predict future sales, which can factor in the
product’s growth trajectory and seasonality based on past patterns.

Prescriptive analytics differ from descriptive or predictive analytics in that prescriptive analytics
indicate a best course of action to take; that is, the output of a prescriptive model is a best decision.
The airline industry’s use of revenue management is an example of a prescriptive analytics. Airlines
use past purchasing data as inputs into a model that recommends the best pricing strategy across all
flights for maximizing revenue.

Big Data
Big data is simply a set of data that cannot be managed, processed, or analysed with commonly
available software in a reasonable amount of time. For example, Walmart handles over one million
purchase transactions per hour. Facebook processes more than 250 million picture uploads per day.

Introduction to Big Data: Doug Laney, a tech analyst at Gartner, first defined Big Data in 2001 as being
“Big data” is high-volume, -velocity and -variety information assets that demand cost-effective,
innovative forms of information processing for enhanced insight and decision making” (Sicular,
2013).Webopedia defines Big Data as “a phrase used to mean a massive volume of both structured
and unstructured data that is so large it is difficult to process using traditional database and software
techniques. ”There exists no precise measurement which describes how much data can be regarded
as big data? Big data can be used in the context of data handling by existing business organizations.
Companies like ebay and Walmart with huge customer bases are handling data in excess of 2.5
Petabyte (PB) to 40 PB. Definition of Big Data 1. According to the Association of Chartered Certified
Accountants (ACCA):“Big data pertains, basically, to an extensive chunk of data that is steadily
gathered and aggregated using tools and technologies such as debit cards, the Internet, social media,
and electronic tags. A majority of the amassed data is unstructured or does not conform to an
explicit and predefined data model”. 2. According to Gartner “Big data are high volume, high velocity,
and/or high variety information assets that require new forms of processing to enable enhanced
decision making, Insight discovery and process optimization”.

Six V ‘s of big data

The Six V ’s of Big Data: The characteristics of Big Data can be described in terms of 6 V’s, which is
explained below:

● Volume: The data generated by machine, network, human interactions on system etc, is in such
huge volumes that it is measured in petabytes or even Exabyte.

● Variety: It consists of both structured and unstructured data. The unstructured data creates
problems for storage, data mining and analysing the data.

● Velocity: The speed of data generation is very fast and it is estimated that the amount of
information man created from the dawn of civilization until 2003 is currently created every two days
(www.dexlabanalytics.com, 2018).

● Veracity: It refers to the biases, noises and abnormality in data. Since Big Data is obtained directly
from source, translation biases are at its minimum. However, data cleansing is done before storing.

● Value: It refers to how meaningfully data can be interpreted for relevant solutions. This determines
whether data is worth being stored or collected?

● Variability: This refers to establishing if the data generated can even be processed even in
conditions of extreme unpredictability.

Big Data Usage

Product development

Companies like Netflix and Procter & Gamble use big data to anticipate customer demand. They
build predictive models for new products and services by classifying key attributes of past and
current products or services and modeling the relationship between those attributes and the
commercial success of the offerings. In addition, P&G uses data and analytics from focus groups,
social media, test markets, and early store rollouts to plan, produce, and launch new products.

Predictive maintenance

Factors that can predict mechanical failures may be deeply buried in structured data, such as the
year, make, and model of equipment, as well as in unstructured data that covers millions of log
entries, sensor data, error messages, and engine temperature. By Analysing these indications of
potential issues before the problems happen, organizations can deploy maintenance more cost
effectively and maximize parts and equipment uptime.

Customer experience

The race for customers is on. A clearer view of customer experience is more possible now than ever
before. Big data enables you to gather data from social media, web visits, call logs, and other sources
to improve the interaction experience and maximize the value delivered. Start delivering
personalized offers, reduce customer churn, and handle issues proactively.

Fraud and compliance

When it comes to security, it’s not just a few rogue hackers—you’re up against entire expert teams.
Security landscapes and compliance requirements are constantly evolving. Big data helps you identify
patterns in data that indicate fraud and aggregate large volumes of information to make regulatory
reporting much faster.

Machine learning

Machine learning is a hot topic right now. And data—specifically big data—is one of the reasons
why. We are now able to teach machines instead of program them. The availability of big data to
train machine learning models makes that possible.

Operational efficiency

Operational efficiency may not always make the news, but it’s an area in which big data is having the
most impact. With big data, you can analyse and assess production, customer feedback and returns,
and other factors to reduce outages and anticipate future demands. Big data can also be used to
improve decision-making in line with current market demand.

Drive innovation

Big data can help you innovate by studying interdependencies among humans, institutions, entities,
and process and then determining new ways to use those insights. Use data insights to improve
decisions about financial and planning considerations. Examine trends and what customers want to
deliver new products and services. Implement dynamic pricing. There are endless possibilities.