1.
1: Overview of Business Analytics 1
Data and analytics capabilities have made a leap forward.
• Growing availability of vast amounts of data.
• Improved computational power.
• Development of sophisticated algorithms.
Colleges/universities have curriculum emphasizing business
analytics.
Data and analytics capabilities have changed the way
businesses make decisions.
• Companies need data-savvy professionals.
• Turn data into insights and action.
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1.1: Overview of Business Analytics 2
Business analytics (data analytics) involves extracting information and
knowledge from data.
• Improve the bottom line.
• Enhance the customer experience.
• Develop better marketing strategies.
• Deepen customer engagement.
• Enhance efficiency and reduce expenses.
• Identify emerging markets.
• Mitigate risk and fraud.
Business analytics is widely applied.
• Marketing.
• Human resource management.
• Economics.
• Finance.
• Health, sports, and politics.
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1.1: Overview of Business Analytics 3
Business analytics is a broad topic.
• Statistics.
• Computer Science.
• Information Systems.
Business analytics differs from data science.
• Data science: develop applications for end users.
• Business analytics: data analyses for business applications.
Business analytics combines qualitative reasoning with quantitative
tools.
• Identify key business problems.
• Translate data analysis into decisions.
• Improve business performance.
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1.1: Overview of Business Analytics 4
Business analytics begins with understating the business
context.
• Ask the right questions.
• Identify the appropriate analysis.
• Communicate information.
Numerical results are not very useful unless they are
accompanied with clearly stated actionable business
insights.
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1.1: Overview of Business Analytics 5
There are three different types of analytics techniques.
• Descriptive analytics: What has happened?
• Predictive analytics: What could happen in the future?
• Prescriptive analytics: What should we do?
Turning data-driven recommendations into action also
requires thoughtful consideration and organizational
commitment beyond developing descriptive and predictive
analytical models.
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1.1: Overview of Business Analytics 6
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1.1: Overview of Business Analytics 7
Descriptive Analytics: what has happened?
• Gather.
• Organize.
• Tabulate.
• Visualize.
• Summarize.
Descriptive information can be presented in a number of
formats.
• Written reports.
• Tables.
• Graphs.
• Maps.
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1.1: Overview of Business Analytics 8
Descriptive analytics is referred to as business intelligence (B
I).
• Access and manipulate data through reports, dashboards,
application and visualization tools.
• Uses past data integrated from multiple sources.
• Inform decision making and identify problems and solutions.
Examples.
• A firm’s marketing expenses and sales.
• Financial reports.
• Crime rates across regions and time.
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1.1: Overview of Business Analytics 9
Predictive Analytics: what could happen in the future?
• Use historical data to make predictions.
• Analytical models help identify associations.
• Associations used to estimate the likelihood of a favorable outcome.
• Commonly considered advanced predictions.
• Build models that help an organization understand what might happen in
the future.
• Use statistics and data mining.
Examples.
• Identifying customers who are most likely to respond to specific
marketing campaigns.
• Transactions that are likely to be fraudulent.
• Incidence of crime at certain regions and times.
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1.1: Overview of Business Analytics 10
Prescriptive Analytics: what should we do?
• Optimization and simulation algorithms to provide advice.
• Explore several possible actions.
• Suggest course of action.
• Commonly considered advanced predictions.
• Build models that help an organization understand what might
happen in the future.
• Use statistics and data mining.
Examples.
• Scheduling employees’ works hours.
• Select a mix of products to manufacture.
• Choose an investment portfolio.
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1.2: Types of Data 1
An important first step for making decisions is to find the right
data and prepare it.
• Compilation of facts, figures, or other content.
• Numerical and nonnumerical.
• All types and formats are generated from multiple sources.
• Often we have a large amount of data.
• Even small data can give insights.
Data that have been organized, analyzed, and processed in
a meaningful and purposeful way become information.
Use a blend of data, contextual information, experience, and
intuition to derive knowledge.
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1.2: Types of Data 2
It is not feasible to collect data that comprise a population of
all elements of interest.
• Too expensive.
• It is impossible.
A sample is a subset of the population and is used for
analyses.
Traditional statistical techniques use sample information to
draw conclusions about the population.
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1.2: Types of Data 3
Cross-sectional data.
• Collected by recording a characteristic of many subjects at the same
point in time.
• Recording a characteristic of many subjects at the same point in time.
Time series data.
• Collected over several time periods focusing on certain groups
of people, specific events, or objects.
• Hourly, daily, weekly, monthly, quarterly, or annual observations.
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1.2: Types of Data 4
Team name Wins Losses Winning Percentage
Milwaukee Bucks 60 22 0.732
Toronto Raptors* 58 24 0.707
Philadelphia 76ers 51 31 0.622
Boston Celtics 49 33 0.598
Indiana Pacers 48 34 0.585
Brooklyn Nets 42 40 0.512
Orlando Magic 42 40 0.512
Detroit Pistons 41 41 0.500
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1.2: Types of Data 5
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1.2: Types of Data 6
Structured data.
• Reside in a predefined, row–column format.
• Spreadsheet or database applications.
• Enter, store, query, and analyse.
• Numerical information that is objective and not open to
interpretation.
Historically, companies relied mostly on structured data.
• High cost to store and process.
• Performance limitations.
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1.2: Types of Data 7
Unstructured data.
• Do not conform to a predefined, row–column format.
• Textual.
• Multimedia content.
• Do not conform to database structures.
Human- or machine-generated.
• Structured human: price, income, retail sales.
• Structured machine: sensors, speed cameras, web server logs.
• Unstructured human: email, text, social media, presentations.
• Unstructured machine: satellite images, video data, camera
images.
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1.2: Types of Data 8
Businesses generate and gather more and more data at an
increasing pace: Big Data.
• A massive volume of structured and unstructured data.
• Extremely difficult to manage, process, and analyze using
traditional data processing tools.
• Present great opportunities to gain knowledge and game-
changing intelligence.
Does not imply complete (population) data.
Big data may not be used when available.
• Inconvenient and computationally burdensome.
• Benefits may not justify costs.
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1.2: Types of Data 9
• gartner.com has a widely accepted definition of big data.
• “[H]igh-volume, high-velocity and/or high-variety
information assets that demand cost-effective, innovative
forms of information processing that enable enhanced
insight, decision making, and process automation.”
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1.2: Types of Data 10
There are three characteristics of big data.
• Volume: immense amount of data compiled for a single or multiple
sources.
• Velocity: generated at a rapid speed, management is a critical issue.
• Variety: all types, forms, granularity, structure or unstructured.
Additional characteristics.
• Veracity: credibility and quality of the data, reliability.
• Values: methodological plan for formulating questions, curating
the right data, and unlocking hidden potential.
Having a plethora of data does not guarantee that useful
insights or measurable improvements will be generated.
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1.3: Variables and Scales of Measurement 1
A variable is a characteristic of interest that differs in kind or degree among various
observations (records).
There are two types of variables: categorical and numerical.
Categorical.
• Also called qualitative.
• Represent categories.
• Labels or names to identify distinguishing characteristics.
• Arithmetic operations on the labels/values are not meaningful.
• Coded into numbers for data processing.
• Example: marital status.
Numerical.
• Also called quantitative.
• Represent meaningful numbers.
• Arithmetic operations are meaningful.
• Discrete: assumes a countable number of values.
• Example: number of children in a family.
• Continuous: assumes an uncountable number of values within an interval.
• Example: investment returns.
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1.3: Variables and Scales of Measurement 2
Analysis techniques depend on the type of data.
There are four major scales: nominal, ordinal, interval, ratio.
Nominal.
• Categorical.
• Least sophisticated.
• Values differ by label or name.
• Example: marital status.
Ordinal.
• Categorical.
• Reflect labels or name, but can be ranked.
• Cannot interpret the difference between the ranked values.
• Example: reviews from 1 star (poor) to 5 stars (outstanding).
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1.3: Variables and Scales of Measurement 3
Interval.
• Numerical.
• Categorize and rank, differences are meaningful.
• Zero value is arbitrary and does not reflect absence of
characteristic.
• Ratios are not meaningful.
• Example: temperature.
Ratio (numerical).
• Numerical.
• Most sophisticated.
• A true zero point, reflects absence of characteristic.
• Ratios are meaningful.
• Example: profits.
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1.3: Variables and Scales of Measurement 4
• Example: The owner of a ski resort gathers data on
tweens.
• Music: nominal.
• Food quality: ordinal.
• Closing time: interval.
• Own money spent: ratio.
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