latrobe.edu.

au

Principles of Business Analytics

BUS5PB, Lecture 2
(S1, 2024)

La Trobe University CRICOS Provider Code Number 00115M

 Topic 2: Digital
Transformation and
Analytics in
Organisations

2
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Learning objectives
• Digital Transformation
• Analytics environment: tools and data
• Anatomy of decisions
• Analytics and strategy
• Analytics components
• Organisational structures
• Analytics Roles
• Modernize Data Analytic Architectures
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Digital Transformation (DT)

• “A process that aims to improve an entity by triggering significant changes to its
properties through combinations of information, computing, communication, and
connectivity technologies”
• Vial, Gregory. "Understanding digital transformation: A review and a research agenda." The journal of strategic information systems
28.2 (2019): 118-144.

• Entity can be an organisation, society, an industry

• Transformation is defined as an “improvement” and it is an “expected” outcome that is not guaranteed

• Technology is a not a single but a combination of information, computing, communication, and connectivity.

• A transformation/disruption/fundamental rethink of the use of technology, people and processes to improve or optimise
business/organisational performance.

• Examples: Paperless offices, on-premise to cloud, digital/social media marketing, lights-out manufacturing
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Digital transformation is not…

• Digital transformation is not ‘only’ about having a website, an app or Twitter

account or a chatbot...

• How does an organisation determine its value proposition in the digital

age?

• Who is a digital customer and what is a digital customer experience?

• How does internal organisational culture deliver digital effectiveness?

• What Analytics, AI and Automation innovations drive digital leadership?

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DT in practice (Westerman et al 2014)

• Interviewed 157 executives in 50 companies generating $1 billion or more in

annual sales, across 15 countries. Half of the interviewees were business
leaders such as C suite or managers, and the other half were technology
leaders

• Customer experience (CX)

• Operational processes

• Business models
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DT - Customer experience (CX)

• Customer understanding – social media channels, social media listening,

online communities, prosumer value co-creation

• Top-line growth - increase in revenue from core business operations, such

as, portable devices, sensors, dashboards, personalised portals

• Customer touch points – 180 to 360 touch points, product/service lifetime

journey as well as customer’s own lifetime journey
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DT - Operational processes

• Process digitisation – business process automation, robotic process

automation, self-service, chatbot based engagement

• Worker enablement – flexible hours, hot-desking, collaboration and

networking tools,

• Performance management – analytics and data-driven insights at all levels of

management and stakeholder engagement
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DT - Business models

• Digital modifications – digital shop front, digital services, digital self-help, while
also maintaining physical presence

• New digital businesses – online only, ecommerce (Amazon) to crowd sourced

gig economy (Uber, AirBnB etc)

• Digital globalisation - multinational to fully global operations (FAMGA)

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Digital Transformation (Bonnet & Westerman 2021)

• Emphasis on employee experience (expanded), business model innovation, and
digital platform (new) as enablers of the other elements and further innovation.

• Read the original article to understand and describe the following elements,

• Multisided platform businesses

• Customer intelligence

• Future-readying

• Flex-forcing

• How would you improve/revise the digital platform elements?

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Digital Platforms - A data lake architecture

[ Source: Coates (2017) ]

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Digital Platforms - A data lake architecture on the cloud

[ Source: BlueGranite (2020) ]

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Analytics in organisations - decision-making

Organisations make decisions concerning all aspects of its business, at
strategic, tactical and operational levels.

Decisions are made affecting

• revenues,
• profit margins,
• reputation,
• goodwill,
• and sustainability.
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Decision-making: Examples
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Changing context for decision-making

Business Organisation Decisions
Environmental Responses and
Factors Support

• Strategic planning, • Analysis,

• Globalisation, • Real-time response, • decisions,
Pressures • predictions
• Consumer demands, • Agility,
• Government regulations, • Increase productivity,
Opportunities
• Markets and competitions, • Partners' collaboration, Integrated
• Technology and • New vendors, computerised
innovation, decision
• New business models, support
• etc.
• etc.

Business Analytics
[Source: Turban et al., 2014]
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Effective decisions
Effective decisions are choices that move an organisation closer to
an agreed set of goals in a timely manner.

Three key elements:

1. A set of goals to work toward.
2. Means to measure if a chosen course is
moving toward or away from those
goals.
3. Information based on those measures
must be provided (feedback) to the
decision maker in a timely manner.
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Who are the decision makers?

• Is it only the CEO, President, Chairperson?
• Absolutely brilliant strategic plans can go wrong because of poor decisions
made by those responsible for their implementation.
• Important to have effective decision makers throughout an organisation.
• A change from the past where lower-level managers worked to only implement
high-level decisions.
• Effective decision-making at every level leads to success.
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Three key elements at many levels

The three key elements to effective decisions are applicable to
any level of an organisational hierarchy.
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Decision examples across domains…

• Bank: credit and risk decisions.

• Fast-moving consumer goods: supply chain and financial decision.
• Fast food restaurant chain: marketing and performance management
decisions.
• Department store: merchandising and loyalty decisions.
• Real estate: marketing and finance decisions.
• Health insurance: claims and disease management decisions.
• Hospital: critical care decisions and resource management.
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Linking decisions and analytics

Three different levels of relationships

between analytics and decision-making:
• Automated
• Structured human
• Loosely coupled
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Loosely coupled analytics and decisions

• Information made accessible via a data platform with reporting features — e.g. a data
warehouse with BI tools.
• Actual use of the information and analytics for any particular decision is voluntary and
based on individual initiative.
• No account or record of what information or analysis was used for which decisions, either
before or after decisions are made.
• Reminiscent and reflective of how BI / decision-support systems (DSS) works.
• Providers of information can be external (consultants or IT department).
• They supply information without regard to issues — such as managerial psychology,
organisational politics and decision rights.
• A single platform can support a variety of decisions, which is productive and efficient for
the information providers.
• Loosely-coupled decisions are more appropriate in such environments.
• Information providers are not obliged to ensure that the decision is effective.
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Structured human decision-making

• A decision-making environment, not just a data platform with reporting features.
• Example 1: database/warehouse with analytics technology
• Example 2: relational database and external data sources
• Example 3: data warehouse, BI tools, analytics tools and contextual data feeds.
• Decision still made by managers and/or professionals.
• Environment provides specific information for targeted decisions, detailed contexts
and/or analytics capabilities.
• Extra features create stronger links between analytics and decisions.
• Narrower focus on specific decisions (not generalised).
• Additional effort required to create the decision-making environment.
• A record of decision effectiveness integrated back into the loop for performance
management.
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Automated decisions
• Tightly coupled analytics with decisions.
• Example: Data warehouses with embedded predictive and prescriptive analytics capabilities
and machine learning for continuous improvement.
• Decision process must be sufficiently structured and reducible.
• Time consuming and expensive — which decisions to automate and business impact.
• Frequent manual evaluation of actual vs expected decisions (high responsibility for information
providers).
• Highly reliant on information accuracy, precision in data warehouse design and
implementation.
• Direct, automated decision-making in contrast to artificial intelligence and expert systems from
couple of decades ago. (Yield management systems from 1980 for automated pricing
decisions in airlines.)
• Machine learning algorithms for trading of equities, currencies, and other financial assets.
• Automated credit scoring to screen mortgage, credit card applications.
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Strategic decisions vs operational decisions

• Strategic decisions deal with planning and policy making.
• When a telecommunication company decides to introduce very cheap off-peak
tariffs to attract callers away from the peak times, rather than install extra
equipment to cope with increasing demand.
• A large supermarket chain deciding to open its stores on Sundays.
• A general 20 percent price reduction for one month in order to increase
market share.
• Operational decisions focus on daily operation of a business.
• How many unfulfilled orders are there?
• On which items are we out of stock?
• What is the status of a particular order?
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Analytics for strategic decisions

• Analytics is generally used for strategic decisions, though it is equally
applicable at lower levels of management.
• And how do we use business intelligence / business analytics at the strategic
level?
• When we know what we are looking for …
• Layout-led Discovery
• Data-led Discovery
• Discovering new questions and answers …
• Analytics
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Layout-led discovery

• When the question we want answered is known and we have a good idea
where that answer is going to be found.
• Example: A printed report of sales volumes by region.
• Will only provide answers that the report designer has included.
• Highly-dependable and credible information.
• No ability to further explore or drill down.
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Data-led discovery

• When the question is known, but we don’t know exactly where to look for our
answer.
• Example: We want to look up sales by product in an unusually low sales
region X.
• The information we find determines where we want to go next.
• The developer of this type of solution cannot know everywhere the report
user may want to go.
• Instead, the developer must provide an interactive environment that enables
the user to navigate at will.
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Analytics

• When the data contain trends, correlations, and dependencies at a level of

detail that would be impossible for a human being to notice using either
layout-led or data-led discovery.
• Example: Which N number of products would sell best together?

• These relationships can be discovered using data mining techniques.

• Where layout-led discovery and data-led discovery usually start with
summarised data, data mining works at the highest level of details.
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Planning and strategy for better decisions

• Different organisations have different business models, different focuses and different
cultures — as such the same application of analytics will rarely be effective in two
different contexts.
• Competitive advantage is gained from differentiation / customisation — not
replication.
• To understand how business analytics could be applied effectively in diverse
scenarios and different organisations — let us look at organisational planning
strategies and the role business analytics can play in such strategy.
• Traditional view — SWOT analysis
• External view — Porter’s five forces
• Internal view
• Customer view
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SWOT: Analysis based strategic planning

A study undertaken by an organisation to
identify its internal strengths and
weaknesses, as well as its external
opportunities and threats.
• Strengths: competencies and assets
• Weaknesses: gaps in competencies,
strengths
• Opportunities: external conditions that
(if harnessed well) can lead to success
• Threats: potential changes in external
What is the role of business analytics in
environment, preventing opportunities
such an organisation?
being realised
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Analytics: Critical enabler with SWOT analysis

• Creating strengths and neutralising weaknesses (by matching and converting
strategies).
• Organisation focused on market growth — identify flexible and relevant pricing, one-
to-one marketing.
• Organisation focused on reducing criminal activities — identify optimal resource
allocation to maximise detection rates.
• Model potential impact of different threats — for mitigating or neutralising threats.
• Simulation modelling, stress testing, constraint analysis to predict upper and lower
impacts.
• Prioritise threats in the planning process and add focus where needed.

Be faster and smarter than the competitors to achieve sustainable competitive advantage.
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Porter's: Five forces based strategic planning

Five forces influencing market Generic strategies

Michael E. Porter (Harvard Business School)

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Analytics: Counteracting force against Porter's five forces

Cost leadership strategy
• Identify balance between price and Better target distinct groups of
demand (pricing analytics)
customers
• Supply chain optimisation
• Increase differentiation in
Differentiation strategy customer treatment patterns
• Retention analytics • Optimise pricing structures
• Direct marketing
• Improved automation to reduce
• Upsell modelling cost
Segmentation strategy • Scale for managing more
• Segmentation modelling complex market strategies
• Behaviour analysis
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Internal (resource) view based planning

• Considered as an alternative to Porter’s five forces — but could be complementary.
• View an organisation as a construct of resources and competencies.
• Competitive advantage is achieved by reconfiguring the internal factors to add value or
differentiate from competitors.
• Acquire and develop — Valuable, Rare, Inimitable, Non-substitutable (VRIN) resources
within an organisation.

Strategic planning
• Understand the resources available (especially VRIN)
• Identify available competencies and core capabilities
• Profile profit-making capacities of resources and capabilities — develop strategies
• Identify resource or capability gaps and invest to strengthen or create
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Analytics: Enabling internal view based planning

• Good use of business analytics is highly aligned with unique organisational
characteristics.
• Technology and resources are much more portable between organisations.
• Example: A market analytics team may develop competencies and processes (over
years) tailoring them heavily to the organisation's unique information ecosystem —
including specific segmentation, market insight, predictive models, deployment skills
and individuals, technological platforms, organisational structures, cross-team
relationships.
• Sustainable competitive advantage comes from creating an organisational culture that
focusses on leveraging business analytics within large variety of processes.

Business analytics transforms the organisation by creating a culture of

smarter, faster, more effective and distinctive decision making — almost
impossible to replicate.
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Customer view based planning

• Customers at the forefront of strategy.
• Competitive advantage comes from establishing a high level of customer
bonding thus discouraging them from moving to competitors.

• Establish ecosystem with such

system economics that moving to
alternative market offerings create
• Relevancy or understanding through disincentives
segmentation
• Make things easier through effective
delivery
• Increase breadth of dealings via
horizontal breadth • Become cost leader — innovation
economies of scale
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Importance of the customer

• According to Peter Drucker*, there is only one valid definition of a business

purpose: ‘to create a customer’
• For any business to thrive it must pursue a strategy that:
1. Gains more customers
2. Keeps existing customers
3. Increases the frequency and value of transactions

*Peter Drucker is a well known management consultant, writer, and

business thinker (1909 – 2005). He is also known as the man who
invented ‘management’.
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Analytics: Enabling customer view based planning

Pursuing best product strategy
• Supply chain optimisation
• Process improvement via six-sigma methodologies
• Analyse total cost of service delivery
Total customer solutions strategy
• Target customers via segmentation models
• Customer profitability measurement
• Cross-sell and up-sell models for horizontal breadth
System lock-in strategy
• Large-scale test-and-learn exercises to identify highly marketable products
• Highly scalable exchanges which link large numbers of interested parties
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Implementing business analytics strategy

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A high-level view of BA architecture

[Source: Turban et al., 2014]

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Distilling the components

Business Intelligence / Business Analytics:
• An umbrella term that includes architectures,
tools, databases, applications and
methodologies.
• These can be grouped into:
• Data warehouses and data marts
• Online analytical processing (OLAP)
• Querying and reporting
• Analytics and data mining
• Business performance management
• Dashboards and benchmarking
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Data warehouse versus data mart

• The cornerstone of medium-to-large BI / BA systems.

• Eradicates organisational silos to present a single version of the truth.
• In the past — included only historical data that was organised and summarised
for producing end-user reporting.
• Today — include access to current data for real-time decision support.
• Structured on the dimensional model of a business process.
• A warehouse is also the source for querying, reporting and OLAP.
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Data warehouse versus data lake

[Source: AWS (2021)]

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Analytics and data mining

• An umbrella term to refer to a suite of computer algorithms from fields — such as

statistics, machine learning, data mining, and artificial intelligence.
• Transform data into insights.
• Identify causes, make predictions and decision optimisation.
• Emerging field of big data analytics where unstructured data is also introduced
into the decision-making process.
• Unstructured data include text, images, audio / video.
• Overcome the silos created by the nature of data.
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Business performance management (BPM)

• Also referred to as corporate PM or enterprise PM.
• An umbrella term to describe the methodologies, metrics, processes and
systems used to monitor and manage the business performance of an
enterprise in achieving one or more pre-selected goals.
• Encompasses all the processes, information, and systems used by managers
to set strategy, develop plans, monitor execution, forecast performance, and
report results with a view to achieving sustainable success no matter how
success may be defined.
• Loop activity: measurement —> evaluation —> adjustment
• Methods: Six Sigma, balanced scorecard, activity-based costing.
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Dashboard and benchmarking

• A dashboard provides a comprehensive graphical / pictorial view of corporate
performance measures, trends, and exceptions.
• This can extend from organisational level to department and all the way down to
employee.
• Dashboards facilitate benchmarking across the hierarchy.
• A dashboard will retrieve data in real-time from a data warehouse or reporting
interface.
• Categories of dashboards:
• Strategic, analytical, operational
• Quantitative, qualitative
• Example: Council of Australian Government (COAG) Performance Dashboard
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Evaluating Analytics tools - Gartner Magic Quadrants

• https://www.gartner.com/en/research/magic-quadrant

• Leaders, Visionaries, Niche Players and Challengers

• Well-established but also known for contentious rankings

• Two axes - “Completeness of vision” vs “ability to execute” (something like strategic vs operational)

• Leaders – leading both criteria

• Challengers – high execute, low vision (limited future potential)

• Visionaries – low execute, high vision (small and dynamic)

• Niche players – low on both (new entrants)

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Gartner Magic Quadrant: Analytics and BI

2019 2020 2021

[ Source: Gartner, Inc. ]

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Gartner Magic Quadrant: Data Science and ML

2019 2020 2021

[ Source: Gartner, Inc. ]

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Analytics Tools

[ Source: Piatetsky, KDnuggets (2019a) ]

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Analytics Tools (associations)

[ Source: Piatetsky, KDnuggets (2019b) ]

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Data Types (analysed)

[ Source: Piatetsky, KDnuggets (2017) ]

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Top-10 Data Science Tools (2000-2019)

[ Source: DataDaft (2020) ]

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Team structures for analytics

How should we best organise our analysts?

• Analysts, projects and data are frequently found scattered across the organisation.
• A clear trend toward centralisation of all three elements.
• Skilled and experienced analysts are a scarce and high-demand resource.
• A central agency can work on most important projects, including cross-functional
and enterprise-wide projects.
• Facilitates the development of analyst skills as there’s an increased opportunity to
connect and learn from one another.
• Attractive for new recruitment — demonstrates organisational commitment.
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Purpose and design

• Team structures serve two purposes:
• Current projects: effectively assigning and deploying individuals to projects.
• Future projects: developing ‘analytics health’ (skills and experience) as well as
teamwork.
• These two goals are interrelated and also in conflict — why?
• Raises two key questions:
• What is the optimal structure for above purposes, current and future
projects?
• What are the necessary and best ways to coordinate across such groups?
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Common structures
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Common structures (explained)

Centralised — a single business unit / department.
• Effective management and prioritisation of individuals.
• Develop skills and build community.
• Can create a void between analysts and business functions.

Consulting — similar to centralised but instead of being

deployed into projects, the projects “hire” analysts.
• A market-driven model, so analysts have to make the market
demand smart.
• Analysts may end up working for highest bidder instead of
business value / strategic advantage.
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Common structures (explained)

Functional or “best home” — the analysts are grouped into the
business unit or function that is the primary provider of analytic
projects.
• Provides services as consultants to rest of organisation.
• Many financial services and manufacturing firms maintain this
model.
• A well-established analyst group in functions such as marketing
or risk management.
• Can move around as a unit across functions as projects are
completed.
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Common structures (explained)

Centre of excellence — less centralised approach with some
organisation-level coordination.
• Analysts are based primarily in business functions and units,
but their activities are coordinated by a small central group.
• The COEs are responsible for training, technology adoption
and facilitating communication.
• An analytics version of the Gartner-promoted “business
intelligence competency centre”
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Common structures (explained)

Decentralised — analysts are associated with business units
and functions without a corporate reporting or consolidating
structure.
• Difficulties setting up enterprise priorities, develop and deploy
staff effectively
• Most appropriate in a diversified multi-business corporation
where the businesses have little in common.
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Analytics roles in a organisation

• Data Analyst
o These professionals transform business questions into data queries.
o They know how business operates and the strategic objectives of the
organisation
o Use data to derive insights from the research activities and communicate
findings to senior management for decision-making
• Data Engineer
o Responsible for getting data into analytics platforms which allow the data
scientists to analyse the data and utilise
o Collect data from different sources and publish core datasets after cleaning
and transforming
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• Business Analyst
o Use data to identify problems and make strategic business decisions to solve
the identified problems
o Do not perform a deep technical analysis of the data
o Operates at conceptual level, defining strategy and communicating with
stakeholders, and are concerned with the business implications of data
o They have extensive experience and knowledge on how business operates
• Chief Data Officer
o The Chief Data Officer oversees operations of the entire data team and reports
directly to the CEO or the CTO
o Data architects
o Design, create, and manage an organization’s data architecture
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Data Scientist
• Data driven decision making strategy and the rise of artificial intelligence increase in
demand for the data scientist jobs
• These professional work more technical aspects of data who manage statistics,
deep learning, and machine learning
• Design data modelling processes to build algorithms and predictive models and
perform custom analysis
• Require skills
• Statistical analysis
• Machine learning
• Programming
• Computer science

Source
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References
• Stubbs, E. (2011). The Value of Business Analytics: Identifying the Path to Profitability (1st Edition).
• Provost, F. and Fawcett, T. (2013). Data Science for Business (1st Edition).
• Davenport, T. H. and Harris, J. G. (2017). Competing on Analytics: The New Science of Winning (Revised
Edition).
• Davenport. T. H., Harris, J. G. and Morison, R. (2010). Analytics at Work: Smarter Decisions, Better Results.
• Turban, E., Sharda, R. and Delen, D. (2014). Business Intelligence and Analytics: Systems for Decision Support
(10th Edition).
• Holsapple, C., Lee-Post, A. and Pakath, R.(2014). A unified foundation for business analytics, Decision Support
Systems 64(1), pp. 130–141. https://doi.org/10.1016/j.dss.2014.05.013
• Accenture (2017). Launching an insights-driven transformation: Building and sustaining analytics capabilities
across the enterprise. https://www.accenture.com/t20170313T040939__w__/us-en/_acnmedia/PDF-
10/Accenture-Analytics-Operating-Model-Web.pdf, last accessed on 25 July 2021.
• Miranda, M. G. (2018). Building an effective analytics organization, McKinsey's Special Edition on Advanced
Analytics in Banking. https://www.mckinsey.com/industries/financial-services/our-insights/building-an-effective-
analytics-organization, last accessed on 25 July 2021.
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Workshop Preparation
 Thank you
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