Data Analytics

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What is Data Analytics?

Analytics is the use of:

data,
information technology,
statistical analysis,
quantitative methods, and
mathematical or computer-based models
to help managers gain improved insight about their business
operations and make better, fact-based decisions.
Business Analytics (BI) is a subset of Data Analytics
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What is Business Analytics?

Business Analytics Applications

 Management of customer relationships
 Financial and marketing activities
 Supply chain management
 Human resource planning
 Pricing decisions
 Sport team game strategies

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What is Business Analytics?

Importance of Business Analytics

 There is a strong relationship of BA with:
- profitability of businesses
- revenue of businesses
- shareholder return
 BA enhances understanding of data
 BA is vital for businesses to remain competitive
 BA enables creation of informative reports

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Scope of Business Analytics

 Descriptive analytics
- uses data to understand past and present
 Predictive analytics
- analyzes past performance
 Prescriptive analytics
- uses optimization techniques

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Scope of Business Analytics

Retail Markdown Decisions

 Most department stores clear seasonal inventory by reducing prices.
 The question is:
When to reduce the price and by how much?
 Descriptive analytics: examine historical data for similar products
(prices, units sold, advertising, …)
 Predictive analytics: predict sales based on price
 Prescriptive analytics: find the best sets of pricing and advertising to
maximize sales revenue

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MANAGEMENT OF CUSTOMER RELATIONSHIPS
Example: Personalized Shopping Experience
Imagine you're a regular customer at an online store. Each time you visit,
the website recommends products based on your previous purchases
and browsing history. This is achieved through analytics that analyze
your preferences, leading to a tailored shopping journey and enticing you
to make more purchases.
FINANCIAL AND MARKETING ACTIVITIES
Example: Smart Credit Card Offers
You receive a credit card offer with a perfect credit limit and interest
rate tailored just for you. How does the bank know? Analytics! By
evaluating your financial history, spending patterns, and credit score,
they create a personalized offer that suits your needs and financial
situation.
SUPPLY CHAIN MANAGEMENT
Example: Zero Stockouts, Zero Waste
Think about your favorite grocery store. With analytics, they can
anticipate exactly how many apples, bread loaves, and milk cartons
they need each day. This prevents running out of items (stockouts)
and ensures they don't overstock, reducing waste and saving costs.
HUMAN RESOURCE PLANNING
Example: Empowering Employee Retention
Envision an HR department using analytics to predict which employees
might be considering leaving. By identifying trends in employee
satisfaction surveys, performance metrics, and job history, they can
proactively address concerns, create a better work environment, and
retain valuable talent.
Data for Business Analytics

 DATA
- collected facts and figures
 DATABASE
- collection of computer files containing data
 INFORMATION
- comes from analyzing data

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Data for Business Analytics

 Metrics are used to quantify performance.

 Measures are numerical values of metrics.
 Discrete metrics involve counting
- on time or not on time
- number or proportion of on time deliveries
 Continuous metrics are measured on a continuum
- delivery time
- package weight
- purchase price
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Data for Business Analytics
A Sales Transaction Database File

Records

Figure 1.1

Entities Fields or Attributes

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 What is Big Data?
• Information from multiple internal and external sources:
• Transactions
• Social media
• Enterprise content
• Sensors
• Mobile devices

• Companies leverage data to adapt products and services to:

• Meet customer needs
• Optimize operations
• Optimize infrastructure
• Find new sources of revenue
• Can reveal more patterns and anomalies
Types of Data
• When collecting or gathering data we collect data from
individuals cases on particular variables.
• A variable is a unit of data collection whose value can vary.
• Variables can be defined into types according to the level of
mathematical scaling that can be carried out on the data.
• There are four types of data or levels of measurement:
1. Categorical (Nominal) 2. Ordinal
3. Interval 4. Ratio
Data for Business Analytics

Classifying Data Elements in a Purchasing Database

Figure 1.2

Copyright © 2013 Pearson Education, Inc. publishing as

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Prentice Hall
Data for Business Analytics
(continued)
Classifying Data Elements in a Purchasing Database

Figure 1.2

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Copyright © 2013 Pearson Education, Inc. publishing as

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Prentice Hall
 Categorical (Nominal) data
• Nominal or categorical data is data that comprises of categories that cannot be
rank ordered – each category is just different.
• The categories available cannot be placed in any order and no judgement can be
made about the relative size or distance from one category to another.
 Categories bear no quantitative relationship to one another
 Examples:
- customer’s location (America, Europe, Asia)
- employee classification (manager, supervisor,
associate)
• What does this mean? No mathematical operations can be performed on the data
relative to each other.
•Therefore, nominal data reflect qualitative differences rather than quantitative
ones.
 Ordinal data
• Ordinal data is data that comprises of categories that can be rank ordered.
• Similarly with nominal data the distance between each category cannot be
calculated but the categories can be ranked above or below each other.
 No fixed units of measurement
 Examples:
- college football rankings
- survey responses
(poor, average, good, very good, excellent)
• What does this mean? Can make statistical judgements and perform limited
maths.
 Interval and ratio data
• Both interval and ratio data are examples of scale data.
• Scale data:
• data is in numeric format ($50, $100, $150)
• data that can be measured on a continuous scale
• the distance between each can be observed and as a result measured
• the data can be placed in rank order.
 Interval data

• Ordinal data but with constant differences between

observations
• Ratios are not meaningful
• Examples:
• Time – moves along a continuous measure or seconds,
minutes and so on and is without a zero point of time.
• Temperature – moves along a continuous measure of
degrees and is without a true zero.
• SAT scores
Ratio data

• Ratio data measured on a continuous scale and does have a

natural zero point.
 Ratios are meaningful
 Examples:
• monthly sales
• delivery times
• Weight
• Height
• Age
Conditions that Lead to Analytics-based
Organizations

• The nature of the industry

• Seizing an opportunity
• Responding to a problem
 The Nature of the Industry: Online Retailers

BI Applications
• Analysis of clickstream data
• Customer profitability analysis
• Customer segmentation analysis
• Product recommendations
• Campaign management
• Pricing
• Forecasting
• Dashboards
 The Nature of the Industry
• Online retailers like Amazon.com and Overstock.com are high
volume operations who rely on analytics to compete.
• When you enter their sites a cookie is placed on your PC and all
clicks are recorded.
• Based on your clicks and any search terms, recommendation
engines decide what products to display.
• After you purchase an item, they have additional information
that is used in marketing campaigns.
• Customer segmentation analysis is used in deciding what
promotions to send you.
• How profitable you are influences how the customer care center
treats you.
• A pricing team helps set prices and decides what prices are
needed to clear out merchandise.
• Forecasting models are used to decide how many items to
order for inventory.
• Dashboards monitor all aspects of organizational performance
IDENTIFYING INSURANCE FRAUD
Opportunity
 Save and make money by reducing fraudulent auto insurance claims

Data & Analytics

 Predictive analytics against years of historical claims and coverage data
 Text mining adjuster reports for hidden clues, e.g. missing facts, inconsistencies,
changed stories

Results
 Improved success rate in pursuing fraudulent claims from 50% to 88%; reduced
fraudulent claim investigation time by 95%
 Marketing to individuals with low propensity for fraud

What **“dark data” is just laying around that can transform business processes?

**Operational data that is not being used. Consulting and market research company
Gartner Inc. describes dark data as "information assets that organizations collect,
process and store in the course of their regular business activity, but generally fail to
use for other purposes."
QUALITY IMPROVEMENT
Opportunity
 Move from manual to automated inspection of burger bun production to ensure and
improve quality

Data & Analytics

 Photo-analyze over 1000 buns-per-minute for color, shape and seed distribution
Continually adjust ovens and process automatically

Results
 Eliminate 1000s of pounds of wasted product per year; speed production; save
energy; Reduce manual labor costs
MOST POPULAR ANALYTICS TOOLS
Popular Analytics Software Top Companies Using Them
Open Source
Facebook, Google, Ford, Deloitte,
Opportunity
Accenture, Cognizant, HSBC,
Morgan Stanly, etc.
Facebook, Google, Netflix, Amazon,
etc.
Results Microsoft, Amazon, Alibaba, etc.
Commercial
Fiat Chrysler Automobiles NV,
Volkswagen AG, China Mobile Ltd,
etc.
Google, Facebook, Twitter, Netflix.,
Accenture, etc.
Nike, Coca-Cola, Skype, The World
Bank, Wells Fargo, etc.