Business Analytics BA4206 MBA-II Sem/I-Year

Business Analytics Lecture Notes

L1.The Definition of Business Analytics

Business analytics is the process of transforming data into insights to improve business decisions.
Data management, data visualization, predictive modeling, data mining, forecasting simulation, and
optimization are some of the tools used to create insights from data. Yet, while business analytics
leans heavily on statistical, quantitative, and operational analysis, developing data visualizations to
present your findings and shape business decisions is the end result. For this reason, balancing
your technical background with strong communication skills is imperative to do well in this field.

At its core, business analytics involves a combination of the following:

identifying new patterns and relationships with data mining;

using quantitative and statistical analysis to design business models;

conducting A/B and multi-variable testing based on findings;

forecasting future business needs, performance, and industry trends with predictive modeling; and

Communicating your findings in easy-to-digest reports to colleagues, management, and customers.

L2.Business Analytics Terminology: Glossary

The definition of the critical business analytics terminology might vary depending on your source.
Here are the key terms and their basic definitions.

1. Data Mining

It systematically analyzes huge datasets to generate insightful information, identify patterns, and
uncover hidden correlations.

2. Predictive Analytics

This type of advanced analytics determines what is most likely to happen on the basis of historical
data using machine learning, statistical techniques, or data mining.

3. Prescriptive Analytics

Prescriptive Analytics is related to guided analytics, wherein your analytics is prescribing you
towards a specific action to be taken. It effectively combines predictive analytics and descriptive
analytics to drive decision-making.

4. Descriptive Analytics

Descriptive Analytics involves informing you about past events by analyzing historical data and
identifying patterns. Several organizations at a certain level of maturity in their analytics journey
are already performing a degree of descriptive analytics.
Business Analytics BA4206 MBA-II Sem/I-Year

5. Big Data

Big data is a large and complex data set that contains unstructured and structured data, arriving in
rising velocity and volumes.

6. Business Intelligence

Business Intelligence implements services and software, helping business users make better-
informed decisions by forwarding dashboards and reports to help them analyze certain data and
actionable information.

7. Data Visualization

Data Visualization refers to representing information and data through diagrams, tables, charts, or
pictures to connect information, similar to how the human brain grasps information and identifies
outliers accurately, precisely, and quickly.

8. Machine Learning

It is a process of the practical application of artificial intelligence where a system utilizes

information and data to study and improve over time by recognizing relationships, optimization,
patterns, and trends.

9. Artificial Intelligence

Artificial Intelligence imitates the human intelligence process but through machines. It combines
robust data sets with computer science to enable problem-solving through the rapid learning
capabilities of the machines.

10. KPI (Key Performance Indicator)

It measures performance over a certain time for a specific objective. KPI offers a team of
organizations to aim for milestones to monitor progress and insights for making better decisions.

L3.Process of Business Analytics With Examples

Business analytics is a systematic approach to analyzing data and deriving actionable insights to
drive informed decision-making, optimize processes, and achieve strategic objectives. Below is a
step-by-step explanation of the business analytics process, illustrated with examples for better
understanding.

1) Define Objectives and Scope:

Example: A retail company aims to increase sales and improve customer satisfaction. The objective
is to analyze customer purchasing behavior, identify trends, and develop targeted marketing
strategies to enhance customer engagement and loyalty.

2) Data Collection and Integration:

Business Analytics BA4206 MBA-II Sem/I-Year

Example: The retail company collects data from various sources, including point-of-sale (POS)
systems, customer relationship management (CRM) platforms, online transactions, and social
media channels. Data integration tools like Talend or Apache Kafka are used to consolidate and
unify data from these disparate sources into a centralized data repository.

3) Data Exploration and Preparation:

Example: Data analysts explore the collected data to identify patterns, trends, and correlations
related to customer preferences, purchasing behavior, and product preferences. They clean,
preprocess, and transform the data using tools like Python or R, addressing missing values, outliers,
and inconsistencies to ensure data quality and readiness for analysis.

4) Data Analysis and Modeling:

Example: Data scientists apply statistical analysis and machine learning algorithms to analyze
customer data, develop predictive models, and identify factors influencing sales and customer
satisfaction. They use tools like IBM SPSS or SAS to perform regression analysis, clustering, and
classification to uncover insights, forecast trends, and make data-driven recommendations.

5) Data Visualization and Reporting:

Example: The data insights are visualized using interactive dashboards and reports created with
tools like Tableau or Microsoft Power BI. The dashboards display key metrics, KPIs, and
visualizations such as sales trends, customer segmentation, and product performance, enabling
stakeholders to explore data, identify patterns, and make informed decisions.

6) Insight Interpretation and Action Planning:

Example: Based on the insights derived from the data analysis and visualization, the retail
company develops actionable strategies and initiatives to enhance customer engagement, optimize
product offerings, and improve sales performance. For instance, they launch targeted marketing
campaigns, introduce personalized promotions, and enhance product recommendations to drive
customer satisfaction and loyalty.

7) Implementation and Monitoring:

Example: The retail company implements the recommended strategies and initiatives, closely
monitoring their effectiveness, impact, and ROI. They track key performance indicators (KPIs) such
as sales growth, customer retention rates, and marketing campaign performance, using tools like
Google Analytics or Adobe Analytics to measure, evaluate, and optimize their efforts continuously.

L4.Why is business analytics important?

Business analytics is important for several reasons:

Data-driven decision-making: Business analytics provides organizations with the tools and insights
needed to make data-driven decisions. By using data to inform decision-making, organizations can
optimize their operations, improve efficiency, and achieve their goals more effectively.
Business Analytics BA4206 MBA-II Sem/I-Year

Competitive advantage: Business analytics enables organizations to gain a competitive advantage

by identifying opportunities and risks in the market, predicting customer behavior, and optimizing
their operations. This can help businesses stay ahead of the competition and drive growth.

Improved performance: By analyzing data and identifying areas for improvement, organizations
can optimize their operations and improve performance. This can lead to increased efficiency, cost
savings, and higher profits.

Better customer insights: Business analytics can help organizations better understand their
customers by analyzing customer behavior, preferences, and trends. This can help businesses tailor
their products and services to meet customer needs and increase customer satisfaction.

Risk management: Business analytics can help organizations identify and mitigate risks by
analyzing data and predicting potential outcomes. This can help businesses make more informed
decisions and reduce the likelihood of negative consequences.

5. Relationship of BA Process and Organization Decision-Making Process

The BA process can solve problems and identify opportunities to improve business performance. In
the process, organizations may also determine strategies to guide operations and help achieve
competitive advantages. Typically, solving prob lems and identifying strategic opportunities to
follow are organization decision-making tasks. The latter, identifying opportunities can be viewed
as a problem of strategy choice requiring a solution. It should come as no surprise that the BA
process described in closely parallels classic organization decision-making processes. As depicted
in the business analytic process has an inherent relationship to the steps in typical organization
decision-making processes.
Business Analytics BA4206 MBA-II Sem/I-Year

The organization decision-making process (ODMP) developed by Elbing (1970) and presented
in Figure 1.2 is focused on decision making to solve problems but could also be applied to finding
opportunities in data and deciding what is the best course of action to take advantage of them. The
five-step ODMP begins with the perception of disequilibrium, or the awareness that a problem
exists that needs a decision. Similarly, in the BA process, the first step is to recognize that databases
may contain information that could both solve problems and find opportunities to improve
business performance. Then in Step 2 of the ODMP, an exploration of the problem to determine its
size, impact, and other factors is undertaken to diagnose what the problem is. Likewise, the BA
descriptive analytic analysis explores factors that might prove useful in solving problems and
offering opportunities. The ODMP problem statement step is similarly structured to the BA
predictive analysis to find strategies, paths, or trends that clearly define a problem or opportunity
for an organization to solve problems. Finally, the ODMP’s last steps of strategy selection and
implementation involve the same kinds of tasks that the BA process requires in the final
prescriptive step (make an optimal selection of resource allocations that can be implemented for
the betterment of the organization).

L6.What is a competitive advantage in business analytics?

Business analytics for organizations is becoming a competitive advantage and is now necessary to
apply business analytics, particularly its subset of predictive business analytics. When business
analytics initiatives are adopted correctly businesses are guaranteed success. The use of business
analytics is a skill that is gaining mainstream value due to the increasingly thinner margin for
decision error. It is there to provide insights, predict the future of the business, and inferences from
the treasure chest of raw transactional data, that is internal and external data that many
organizations now store (and will continue to store) as soft copy. Hence, businesses should
prioritise analytics efforts to differentiate themselves from their competition to gain a bigger
market share through high-value opportunities.
Business Analytics BA4206 MBA-II Sem/I-Year

Business analytics enables differentiation through the various analytics models. It is primarily
about driving change through analytics priorities. Business analytics drives competitive advantage
by generating economies of scale, economies of scope, and quality improvement. Taking advantage
of economies of scale is the first way organizations achieve comparative cost efficiencies and drive
competitive advantage against their peers. Taking advantage of the economies of scope is the
second-way organizations achieve relative cost efficiencies and drive competitive advantage
against their peers.

L7.Managing Business Analysis Resources?

Establishing Credibility as a New Manager

While an experienced business analysis professional generally won’t have to prove themselves in
the business analysis field, they do have to prove themselves as a manager to build credibility with
the team. That means gaining the confidence from team members that you are assigning work
fairly, evaluating performance fairly, and providing support when challenges arise. This is a new
skill to develop and the transition from being an individual contributor to a leader requires focus
and determination. To date, I haven’t found a resource effective at communicating how to make this
transition. I think part of the challenge is that this relies on soft skills and relationship skills. I feel
the best way to learn how to be a manager is to rely on good role models in your past and ideally
have a mentor to use as a sounding board.

As an experienced manager, leading a business analysis team for the first time, your new team may
be naturally skeptical until you prove yourself. One key tip I have for you is that business analysis
professionals are all curious and love to learn. If you approach your new role with curiosity, learn
what your team does, and understand how they do it, you will start earning respect quickly. I
suggest job shadowing each of your team members for a day to see first-hand what they do and
why. Ask many questions and immerse yourself in their day.

L8.Data and Technology

Augmented Analytics: Organizations are adopting the power of machine learning to automate data
preparation and presentation and produce rapid outcomes in data-driven domains. Augmented
analytics also automatically provides insights that users may not have considered by analyzing user
behavior. And with the help of augmented analytics, users can instantly gain insights by receiving
answers to their data questions in natural language.

Predictive Analytics: It is widely embraced by organizations to solve problems in an insightful and

structured manner. Organizations use this tool to forecast future behaviours for greater
profitability, minimize risks, improve business operations, etc.

This strategy is extremely efficient in correcting analyzed assembled data to predict customer
response. This enables organizations to define the steps they must practice by identifying a
customer’s next move before they even do it.

Cloud services: 34% of enterprises are now using cloud-based services, whereas 71% of IT leaders
say they find a cloud-based deployment model when evaluating new analytics tools. Various
Business Analytics BA4206 MBA-II Sem/I-Year

providers and platforms offer cloud services that have eased business concerns about handling and
storing today’s big data. This technology is here to stay.

Edge Computing: It has determined connectivity and delay threats combined with data travel and
has transformed technology with IoT-enabled smart devices. Edge computing will build up its
position with more significant drones, wearable technology, and autonomous vehicles.

It provides an increase to Data Streaming, including real-time data Streaming and processing
without containing latency. It enables the devices to respond immediately. Edge computing is an
efficient way to process massive data by consuming less bandwidth usage. It can reduce the
development cost for an organization and help the software run in remote locations.

XOps: XOps allow data and analytics professionals to operationalize their processes to obtain
defined goals that align with business priorities. The purpose of XOps is to gain effectiveness and
markets of scale. XOps is accomplished by implementing DevOps best practices.

Therefore, assuring performance, reusability, and repeatability while conquering technology,

process replication and allowing automation. These innovations would allow prototypes to be
balanced, with adjustable design and agile orchestration of supervised systems.

Behavioural Analytics: Organizations currently use it extensively for personalization, customer

intelligence, and marketing. However, efforts are to explore more ways of user behaviour analytics,
especially in innovative city projects, traffic pattern identification, tracking medical shipments and
cold storage for breaches, etc.

Internet of Things (IoT): The IoT market was growing fast and expected to expand four times its
size by 2022, owing to further advancements in data processing and advanced analytics. IoT data
analytics is the analysis of huge data volumes generated by connected devices.

Organizations can derive several benefits from it such as optimize operations, control processes
automatically, engage more customers, and empower employees. The combination of IoT and data
analytics has already proven beneficial in retail, healthcare, telematics, manufacturing, and smart
cities. However, its true value for organizations has yet to be fully realized.

Graph Analytics: This technology is used to organize relationships in big data and find the strength
and direction of such relationships. There is a solid case to apply it to areas such as detecting
financial crimes, conducting research in bioinformatics, logistics optimization, etc.

Blockchain Technology: According to reports, the global blockchain market size is predicted to
grow from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, with an annual growth rate (CAGR)
of 67.3% during 2020–2025. With the success of cryptocurrencies that use blockchain technology,
data scientists and business organizations are analyzing blending big data with blockchain
technology to advance processes and build better fraud detection mechanisms.

Organization Structures “Why Is Business Analytics Important?” most organizations are

hierarchical, with senior managers making the strategic planning decisions, middle-level managers
making tactical planning decisions, and lower-level managers making operational planning
decisions. Within the hierarchy, other organizational structures exist to support the development
Business Analytics BA4206 MBA-II Sem/I-Year

and existence of groupings of resources like those needed for BA. These additional structures
include programs, projects, and teams. A program in this context is the process that seeks to create
an outcome and usually involves managing several related projects with the intention of improving
organizational performance. A program can also be a large project. A project tends to deliver
outcomes and can be defined as having temporary rather than permanent social systems within or
across organizations to accomplish particular and clearly defined tasks, usually under time
constraints. Projects are often composed of teams. A team consists of a group of people with skills
to achieve a common purpose. Teams are especially appropriate for conducting complex tasks that
have many interdependent subtasks.

L10.Information Policy for managing firm's data resource

Every business, regardless of size, requires a comprehensive information policy. Data are a critical
asset for any firm, necessitating clear guidelines on their management, organization, access, and
modification. An information pol icy outlines the organization's regulations concerning the
handling, distribution, acquisition, standardization, classification, and cataloging of information. An
effective information policy is essential for safeguarding a company's data assets and ensuring their
proper use, supporting both operational efficiency and strategic decision-making.

Key Components of an Information Policy

 Rules for Data Management: Establishes how data should be organized, maintained, and who
has the authority to access or modify it.
Business Analytics BA4206 MBA-II Sem/I-Year

 Procedures and Accountabilities: Specifies procedures for sharing and disseminating

information, identifies which users and departments can access information, and outlines
distribution limitations.
Responsibility for Information: Assigns the duty of updating and maintaining accurate
information to designated individuals or units.

L11.How to Determine Data Quality: 6 Standards & Dimensions

The Data Quality Assessment Framework (DQAF) is a set of data quality dimensions, organized into
six major categories: completeness, timeliness, validity, integrity, uniqueness, and consistency.

These dimensions are useful when evaluating the quality of a particular dataset at any point in time.
Most data managers assign a score of 0-100 for each dimension, an average DQAF.

1. Completeness

Completeness is defined as a measure of the percentage of data that is missing within a dataset. For
products or services, the completeness of data is crucial in helping potential customers compare,
contrast, and choose between different sales items. For instance, if a product description does not
include an estimated delivery date (when all the other product descriptions do), then that “data” is
incomplete.

2. Timeliness

Timeliness measures how up-to-date or antiquated the data is at any given moment. For example, if
you have information on your customers from 2008, and it is now 2021, then there would be an
issue with the timeliness as well as the completeness of the data.
Business Analytics BA4206 MBA-II Sem/I-Year

When determining data quality, the timeliness dimension can have a tremendous effect — either
positive or negative — on its overall accuracy, viability, and reliability.

3. Validity

Validity refers to information that fails to follow specific company formats, rules, or processes. For
example, many systems may ask for a customer’s birthdate. However, if the customer does not
enter their birthdate using the proper format, the level of data quality becomes automatically
compromised. Therefore, many organizations today design their systems to reject birthdate
information unless it is input using the pre-assigned format.

4. Integrity

Integrity of data refers to the level at which the information is reliable and trustworthy. Is the data
true and factual? For example, if your database has an email address assigned to a specific
customer, and it turns out that the customer actually deleted that account years ago, then there
would be an issue with data integrity as well as timeliness.

5. Uniqueness

Uniqueness is a data quality characteristic most often associated with customer profiles. A single
record can be all that separates your company from winning an e-commerce sale and beating the
competition.

Greater accuracy in compiling unique customer information, including each customer’s associated
performance analytics related to individual company products and marketing campaigns, is often
the cornerstone of long-term profitability and success.

6. Consistency

Consistency of data is most often associated with analytics. It ensures that the source of the
information collection is capturing the correct data based on the unique objectives of the
department or company.

For example, let’s say you have two similar pieces of information:

the date on file for the opening of a customer’s account vs.

the last time they logged into their account.

The difference in these dates may provide valuable insights into the success rates of current or
future marketing campaigns.

Determining the overall quality of company data is a never-ending process. The most crucial
components of effective data quality management are the identification and resolution of potential
issues quickly and proactively.
 Business Analytics BA4206 MBA-II Sem/I-Year

Understanding Data Quality Intersections

When assessing data quality, it's important to consider how different aspects of quality can affect
each other. For example, the completeness of data can impact its timeliness. Incomplete data may fail
to capture the full picture of events, impacting time to insight. Also, the accuracy of data can be
linked to its reliability, especially if it doesn't follow certain rules. Thus, it's crucial to consider these
connections for a thorough understanding of data quality and to make sure the data is accurate,
reliable, and useful for decision-making.

L12.What Is Descriptive Analytics?

Descriptive analytics is a branch of data analytics that focuses on summarizing and interpreting
historical data to gain insights and understand patterns, trends, and relationships within the data. It
involves using various statistical and visualization techniques to describe and present data
meaningfully.
The primary objective of descriptive analytics is to provide a clear and concise understanding of
what has happened in the past. This helps organizations and individuals answer questions such as
‘What happened?’, ‘When did it happen?’, and ‘How did it happen?’. In other words, descriptive
analytics mines historical data to unveil actionable information for decision-making and anomaly
detection purposes.
Let’s understand descriptive analytics with an example.
Imagine you have a basket full of different types of fruits: apples, bananas, oranges, and grapes. You
want to analyze the fruits in the basket and understand some basic information about them.
In descriptive analytics, you would start by examining the fruits and collecting data about them. You
might count the number of each type of fruit, note their colors, and record their sizes. This data
collection process helps you gather information about what is in the basket.

L13.What is data visualization?

Data visualization is the representation of information and data using charts, graphs, maps, and
other visual tools. These visualizations allow us to easily understand any patterns, trends, or outliers
in a data set.

Data visualization also makes data accessible to the general public or specific audiences without
technical knowledge. For example, a government health agency might provide a map of vaccinated
regions.

The purpose of data visualization is to help drive informed decision-making and to add colorful
meaning to an otherwise bland database.

Benefits of data visualization

Data visualization can be used in many contexts in nearly every field, like public policy, finance,
marketing, retail, education, sports, history, and more. The benefits of data visualization include:
 Storytelling: People are drawn to colors and patterns in clothing, arts and culture, architecture, and
more. Data is no different—colors and patterns allow us to visualize the story within the data.
 Business Analytics BA4206 MBA-II Sem/I-Year

 Accessibility: Information is shared in an accessible, easy-to-understand manner for a variety of

audiences.
 Visualize relationships: It’s easier to spot the relationships and patterns within a data set when the
information is presented in a graph or chart.
 Exploration: More accessible data means more opportunities to explore, collaborate, and inform
actionable decisions.

L14.1. What do you mean by descriptive statistics?

Descriptive statistics refers to a set of methods used to summarize and describe the main features
of a dataset, such as its central tendency, variability, and distribution. These methods provide an
overview of the data and help identify patterns and relationships.

2. What is descriptive statistics. Explain with examples.

Descriptive statistics are methods used to summarize and describe the main features of a dataset.
Examples include measures of central tendency, such as mean, median, and mode, which provide
information about the typical value in the dataset. Measures of variability, such as range, variance,
and standard deviation, describe the spread or dispersion of the data. Descriptive statistics can also
include graphical methods, including histograms, box plots, and scatter plots, to visually represent
the data.

3. What are the four types of descriptive statistics?

The four types of descriptive statistics are:

 Measures of central tendency

 Measures of variability
 Standards of relative position
 Graphical methods
Measures of central tendency describe the typical value in the dataset and include mean, median,
and mode. Measures of variability represent the spread or dispersion of the data and include range,
variance, and standard deviation. Measures of relative position describe the location of a specific
value within the dataset, such as percentiles. Graphical methods use charts, histograms, and other
visual representations to display data.

L15.5.2 Sampling and Estimation

Sampling and estimation are crucial tools in statistical inference, allowing us to draw conclusions
about entire populations from smaller subsets. By selecting representative samples and using
appropriate estimation techniques, we can make informed decisions based on limited data.
Business Analytics BA4206 MBA-II Sem/I-Year

Understanding sampling methods and estimation procedures is key to interpreting statistical

results accurately. These techniques help us quantify uncertainty, assess the reliability of our
estimates, and make data-driven decisions in various fields, from business to scientific research.

Sampling in Statistical Inference

Concepts and Importance of Sampling

Sampling is the process of selecting a subset of individuals from a population to estimate

characteristics of the entire population allowing for more efficient and cost-effective data
collection compared to measuring the entire population

Sampling is a critical component of statistical inference which involves using sample data to make
generalizations or draw conclusions about the population and the quality and representativeness
of the sample directly impact the accuracy and reliability of these inferences

Key concepts in sampling include:

Target population: the entire group of individuals or objects of interest

Sampling frame: a list or representation of the target population from which the sample is drawn

Sample: the subset of the population selected for analysis

Sampling error refers to the difference between a sample statistic and the corresponding
population parameter due to the inherent variability in the sampling process and reducing
sampling error is a primary goal in designing sampling strategies
Business Analytics BA4206 MBA-II Sem/I-Year

Non-sampling error can also occur due to issues such as measurement error, non-response bias,
or coverage bias which are not directly related to the sampling process but can impact the
accuracy of the sample data

Sampling Techniques

Probability Sampling Methods

Simple random sampling (SRS) is a probability sampling method where each member of the
population has an equal chance of being selected and a sample is chosen randomly from the
sampling frame, ensuring that every possible combination of individuals has an equal likelihood
of being selected

Stratified sampling involves dividing the population into distinct, non-overlapping subgroups
(strata) based on a specific characteristic or variable, randomly sampling from each stratum
independently to ensure adequate representation of each subgroup, and is useful when there are
known differences between subgroups that may impact the variable of interest

Cluster sampling involves dividing the population into clusters (naturally occurring groups),
randomly selecting a subset of these clusters, and including all members within the selected
clusters in the sample, often used when a complete list of the population is not available or when
the population is geographically dispersed

Other Sampling Techniques

Systematic sampling involves selecting every nth element from the sampling frame

Multistage sampling combines multiple sampling techniques in stages

Convenience sampling is a non-probability method where easily accessible individuals are

selected

The choice of sampling technique depends on factors such as the research objectives, population
characteristics, available resources, and desired level of precision, and each method has its
advantages and limitations in terms of representativeness, efficiency, and potential biases

Estimating Population Parameters

Point and Interval Estimation

Point estimation involves using a single value (a sample statistic) to estimate a population
parameter, with common point estimators including the sample mean (for estimating the
population mean) and the sample proportion (for estimating the population proportion)

Interval estimation involves constructing a range of values (a confidence interval) that is likely to
contain the true population parameter with a specified level of confidence, with the width of the
interval depending on the sample size, variability in the data, and the desired confidence level
Business Analytics BA4206 MBA-II Sem/I-Year

Properties of estimators include:

Unbiasedness: the expected value of the estimator equals the true population parameter

Efficiency: the estimator has the smallest variance among all unbiased estimators

Consistency: as the sample size increases, the estimator converges to the true population
parameter

Central Limit Theorem and Standard Error

The central limit theorem states that, under certain conditions, the sampling distribution of the
sample mean approximates a normal distribution as the sample size increases, regardless of the
shape of the population distribution, and is crucial for constructing confidence intervals and
conducting hypothesis tests

The standard error of the mean (SEM) is a measure of the variability in the sampling distribution
of the sample mean, calculated as the population standard deviation divided by the square root of
the sample size, and is used to construct confidence intervals and test hypotheses about the
population mean