Business Intelligence, Analytics, and Data Science: A
Managerial Perspective
Fourth Edition
Lecture 2
Business
Analytics
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LO1: Business Analytics
1. Business analytics is the process of developing
decisions for actions based upon insights generated
from historical data.
2. Business analytics represents the combination of
computer technology, management techniques, and
statistics to solve real problems.
LO1:
Business
Analytics
LO2: Business Analytics
1. Descriptive analytics refers to knowing what is
happening in the organization and understanding
some underlying trends and causes of such
occurrences.
2. Predictive analytics aims to determine what is
likely to happen in the future. This analysis is
based on data and web mining.
3. Prescriptive analytics recognizes what is going on
as well as the likely forecast and makes decisions to
achieve the best performance possible.
A. Descriptive Analytics
• Descriptive analytics refers to knowing what is happening in the
organization and understanding some underlying trends and causes of
such occurrences.
• Tools used in descriptive analytics include data warehouses and
visualization applications.
• Descriptive analytics gathers more data, often automatically. It makes
results available in real time and allows reports to be customized .
A. Descriptive Analytics Example
• Data warehouse integrates data from multiple sources to know
what is happening in the organization serve as the basis for
developing appropriate reports, queries, alerts, and trends.
• Data visualisation uses multiple dashboards that could assist
users in knowing what is happening in the organization, identifying
issues early, so they could be quickly addressed.
B. Predictive Analytics
• Aims to determine what is likely to happen in the
future (foreseeing the future events).
• Looking at the past data to predict the future.
• Predictive analytics is the use of mining to
determine what is likely to happen in the future.
B. Predictive Analytics Example
1. Predictive analytics to associate healing time with severity of
injury, and treatment offered.
2. Text Mining and Web Mining is a technique used in developing
predictive analytics. Severity of injury and healing time, were
classified for purposes of making decisions about how to handle
injuries and which players might be available to play in the future.
3. Businesses use predictive analytics to forecast whether
customers are likely to switch to a competitor, how likely
customers are to respond to a promotion, and whether a
customer is creditworthy.
C. Prescriptive Analytics
• Aims to determine the best possible decision.
• Uses both descriptive analytics to create the alternatives, and then
determines the best one
• An organization uses prescriptive analytics to identify the decisions or
actions that will optimize the performance, for example, identifying
the best locations for facilities such as bank branches.
C. Prescriptive Analytics Example
1. Simulation optimization: Combines the use of
probability and statistics to model uncertainty with
optimization. Example: Find good decisions in
highly complex and highly uncertain settings.
2. Decision analysis: Used to develop an optimal
strategy when a decision maker is faced with
several decision alternatives. Example: Match
decision towards risk and loss.
LO2:
Business
Value
Chain
Analytics
LO2: Business Value Chain Analytics
EXAMPLE 1
Planning Descriptive Analytics
– A large grocery store chain might be interested in developing a new targeted
marketing campaign that offers a discount coupon.
– By studying historical point-of-sale data, the store may be able to use data mining
to predict which customers are the most likely to respond to an offer on
discounted chips by purchasing higher-margin items such as beer or soft drinks in
addition to the chips, thus increasing the store’s overall revenue.
EXAMPLE 2
Returns Predictive Analytics
– Banks often use simulation to model investment and default risk in order to test
financial and investment product.
LO2: Business Value Chain Analytics
Techniques (Distributing Predictive Techniques): Amazon uses
clustering algorithms to segment customers into different clusters
to be able to target specific promotions to them. The company also
uses association mining techniques to estimate relationships
between different purchasing behaviors. That is, if a customer
buys one product, what else is the customer likely to purchase?
Decision (Distributing Predictive Decision): That helps Amazon
recommend or promote related products. For example, any
product search on Amazon.com results in the retailer also
suggesting other similar products that may interest a customer.
Increasing Business Complexity
(Globalization).
LO3: Forces
Driving Accelerating Market Instability
(COVID- 19)
Business
Analytics
Intensified Speed of Responsiveness.
Diminishing Individual Experience
(Choice).
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LO4: Business Analytics as a Strategic Resource
According to the resource-based theory of the firm, Business
Analytics has become the key strategic resource to offer
products and services that are:
1. Rare
2. Add value
3. Can not be replaced
4. Can not be imitated
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LO4: Business Analytics Helps
Individual (Employee) Community of Practice Organization (Entire
(Professional) Company)
LO4: For the individual, Business Analytics:
1. Helps people do their jobs and save time through better
decision making and problem solving
2. Helps people to keep up to date.
3. Provides challenges and opportunities to contribute.
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LO4: For the Community of Practice, Business
Analytics
1. Develops professional skills
2. Promotes peer-to-peer mentoring
3. Facilitates more effective networking and collaboration
4. Develops professional code of ethics that members can adhere to
5. Develops a common language
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LO4: For the Organization, Business Analytics
1. Helps drive strategy
2. Solves problems quickly
3. Diffuses best practices
4. Improves knowledge embedded in products and services
5. Cross-fertilizes ideas and increases opportunities for innovation
6. Enables organizations to better stay ahead of the competition
7. Builds organizational memory
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LO5: Effective Business Analytics
• 80% - Organizational processes and human factors
• 20% - Technology
PEOPLE
ORGANIZATIONAL
OVERLAPPING PROCESSES
FACTORS
TECHNOLOGY
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LO5: Effective Business Analytics
Descriptive Analytics :
Learning by experience
Predictive Analytics :
Learning by discovery
Prescriptive Analytics :
Learning by doing
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Q1. Descriptive Analytics
• Descriptive analytics refers to knowing what is happening in the organization and
understanding some underlying trends and causes of such occurrences.
• Tools used in descriptive analytics include data warehouses and visualization
applications.
• Descriptive analytics gathers more data, often automatically. It makes results
available in real time and allows reports to be customized.
Q2. Predictive Analytics
1. Aims to determine what is likely to happen in the
future (foreseeing the future events)
2. Looking at the past data to predict the future
3. Predictive analytics is the use of statistical
techniques and data mining to determine what is
likely to happen in the future.
Q3. Prescriptive Analytics
• Aims to determine the best possible decision
• Uses both descriptive and predictive to create the alternatives, and
then determines the best one
• An organization uses prescriptive analytics to identify the decisions or
actions that will optimize the performance of a system. Organizations
have used prescriptive analytics to set prices, create production plans,
and identify the best locations for facilities such as bank branches.
LO2:
Business
Value
Chain
Analytics
LO2:
Business
Value
Chain
Analytics
Q5. Effective Business Analytics
1. Learning by experience: a function
of time and talent.
2. Learning by discovery: undirected
approach in which explore a
problem area with no advance
knowledge.
3. Learning by doing: the most
efficient model
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Class Assignment Part 2
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