Data Driven Decision Making

CSIT 129
Module 1
 Data Driven Decision Making :
• Three sources of Knowledge:
• Experience – Experience can help in making decisions but, it can be over
emphasized.
• Clients – It can be not true all the times
• Data – Decisions based on data is seemed to be accurate and scientific as its based
on facts.
• Analytics is a field which combines following into one - 1. Data, 2. Information
technology, 3. Statistical analysis, 4. Quantitative methods and 5. Computer-based
models • This all are combined to provide decision makers all the possible
scenarios to make a well thought and researched decision.
• Meaning of Business Analytics • Business analytics (BA) refers to – “The skills,
technologies, practices for continuous developing new insights and understanding
of business performance based on data and statistical methods”. – “the practice of
exploration of an organization’s data with emphasis on statistical analysis. Business
analytics is used by companies committed to data-driven decision making.
• The statistical analysis of the data a business has acquired in order to make
decisions that are based on evidence rather than a guess”. – “A combination of data
analytics, business intelligence and computer programming. It is the science of
analysing data to find out patterns that will be helpful in developing strategies
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• Evolution of Business Analytics • Business analytics has been existence since very
long time and has evolved with availability of newer and better technologies. • It
has its roots in operations research, which was extensively used during World War
II. Operations research was an analytical way to look at data to conduct military
operations. • Over a period of time, this technique started getting utilized for
business. Here operation’s research evolved into management science. Again, basis
for management science remained same as operation research in data, decision
making models.
• As the economies started developing and companies became more and more
competitive, management science evolved into- – Business intelligence, – Decision
support systems and into – PC software
• SIGNIFICANCE AND USAGES OF BUSINESS ANALYITCS • To make data-
driven decisions • Converts available data into valuable information. • Eliminate
guesswork • Get faster answer to questions • Get insight into customer behavior •
Get key business metrics reports when and where needed
• Scope of Business Analytics • Business analytics has a wide range of application
and usages- – Descriptive analysis – Predictive analysis – Prescriptive analysis
• Descriptive Analysis • This branch of Business Analytics analyses and finds answer
to the question- “What has happened in the past?”. • Descriptive analysis/ statistics
performs the function of “describing” or summarizing raw data to make it easily
understandable and interpretable by humans.
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• Predictive Analytics • This branch of Business Analytics, uses forecasting
techniques and statistical models to find out- What is going to happen in future? •
Predictive analysis helps us in predicting the future course of events and taking
necessary measures for the same.
• Predictive analysis employ- – Predictive modelling and Machine learning
techniques. • Predictive modeling uses statistics to predict outcomes. • Machine
learning(ML) statistical is the scientific study of algorithms and models that
computer systems use to perform a specific task without using explicit instructions,
relying on patterns and inference instead. Machine learning algorithms build a
mathematical model based on sample data, known in order to make predictions or
decisions without being explicitly programmed to perform the task.
• Prescriptive Analytics • This branch of Analytics, makes use of optimization and
simulation algorithms to find answer to the question- “What should we do?”. •
Prescriptive Analysis is used to give advices on possible outcomes. • This is a
relatively new field of analytics that allows users to recommend several different
possible solutions to the problem and to guide them about the best possible course
of action.
• USERS OF BUSINESS ANALYITCS 1. Students 2. Business man 3. Accountants
and Auditors 4. Organization/Companies/Group of industries/ Small firm
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• MAIN SOFTWARE USED FOR BUSINESS ANALYITCS 1. MS-EXCEL 2.
SPSS 3. R 4. SAS 5. E-views
• SPSS- – SPSS Statistics is a software package used for statistical analysis. Long
produced by SPSS Inc., it was acquired by IBM in 2009. The current versions
(2014) are officially named IBM SPSS Statistics. • MS-EXCEL- – Microsoft Excel
is a spreadsheet application developed by Microsoft for Microsoft Windows. It
features calculation, graphing tools, pivot tables, and a macro programming
language called Visual Basic for Applications.
• Components of Business Analytics • There are 6 major components/categories in
any analytics solution:
• Components of Business Analytics - Data Mining, Text Mining, Forecasting,
Predictive Analytics, Optimization,Visualization.
• Data Mining – Create models by uncovering previously unknown trends and
pattern in vast amounts of data e.g. detect insurance claims frauds, Retail Market
basket analysis. • There are various statistical techniques through which data
mining is achieved. – Classification (when we know on which variables to classify
the data e.g. age, demographics) – Regression – Clustering (when we don’t know
on which factors to classify data) – Associations & Sequencing Models
• Text Mining – Discover and extract meaningful patterns and relationships from text
collections. E.g. – Understand sentiments of Customers on social media
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• websites like Twitter, Face book, Blogs, Call centre scripts etc. which are used to
improve the Product or Customer service or understand how competitors are doing.
• Forecasting – Analyze & forecast processes that take place over the period of time.
E.g. – Predict seasonal energy demand using historical trends, – Predict how many
ice creams cones are required considering demand
• Predictive Analytics – Create, manage and deploy predictive scoring models. E.g. –
Customer churn & retention, – Credit Scoring, – Predicting failure in shop floor
machinery
• Optimization– Use of simulations techniques to identify scenarios which will
produce best results. E.g. – Sale price optimization, – Identifying optimal Inventory
for maximum fulfilment & avoid stock outs.
• Visualization– Enhanced exploratory data analysis & output of modelling results
with highly interactive statistical graphics
 Data types and Structures
• What is data?- Collection of facts •Can be structured & / or Unstructured
• What is analytics - Science of examining raw data impacting organization’s
decisions •Enabling new products and enabling new markets(e.g. Uber, Zomato)
• How data analytics affecting business - Disrupting existing markets •Increased
efficiency •Manage risks & drive innovation
• Descriptive statistics used in censuses taken by the Babylonians and Egyptians
between 4500 and 3000 B.C. • In addition, the Roman Emperor Augustus (27 B.C.—
A.D. 17) conducted surveys on births and deaths of the citizens of the empire, as
well as the number of livestock each owned and the crops each citizen harvested
yearly.
• Data: the information that has been collected from an experiment, a survey, a
historical record, etc.
• Data and Data everywhere, but what is data? Data is a collection of facts, such as
numbers, words, measurements, observations or even just descriptions of things. •
There are software in market which will help you identify the type of the data, but it
is important to have at least a basic understanding of the different types of data. • In
this article, you will have an basic understanding of different types of data.
• T Y P E S O F D A T A – 1. Quantitative – Continuous, Discrete 2. Qualitative -
Binomial (Binary), Nominal and Ordinal
• Quantitative • Numerical information (numbers) • deals with numbers and things you
can measure objectively:
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dimensions such as height, width, and length. Temperature and humidity. Prices. Area
and volume.
Qualitative • Descriptive information (describing/categorizing something) • deals with
characteristics and descriptors that can't be easily measured, but can be observed
subjectively—such as smells, tastes, textures, attractiveness, and color.
• Quantitative data can be Continuous or Discrete Continuous • represent
measurements • For example, you can measure the height at progressively more
precise scales: meters, centimeters, millimeters, and beyond; so height is
continuous data. Discrete • represent items that can be counted • For example, total
number of males in a group of 10, it can be 0 to 10 (finite case), you can't have 2.5
males, or 4.7 females. NOTE: if I measure height of males in a group of 10, then
the data becomes “Continuous data”
• Qualitative data can be of three types • Categorical data represent characteristics
such as a person’s gender, marital status or hometown. Categorical data can take on
numerical values (such as “1” indicating male and “2” indicating female), but those
numbers don’t have mathematical meaning. • Binary data is a data whose unit can
take on only two mutually exclusive categories (in accordance with the binary
numeral system and Boolean algebra): right/wrong, true/false, or accept/reject. •
Nominal scales are used only for labeling, without any quantitative value, such as
color of each ball in a basket full of colored balls, Name of your school, type of car.
•
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• Ordinal or Ordered data mixes numerical and categorical data. The data fall into
categories, but the numbers placed on the categories have meaning. For example,
rating a restaurant on a scale from 0 (lowest) to 4 (highest) stars gives ordinal data.
Ordinal data are often treated as categorical, where the groups are ordered when
graphs and charts are made. However, unlike categorical data, the numbers do have
mathematical meaning. For example, if you survey 100 people and ask them to rate
a restaurant on a scale from 0 to 4, taking the average of the 100 responses will
have meaning. This would not be the case with categorical data.
• TYPES OF DATA 1) PRIMARY DATA : Are those which are collected a fresh
and for the first time and thus happen to be original in character and known as
Primary data. 2) SECONDARY DATA : Are those which have been collected by
someone else and which have already been passed through the statistical process
are known as Secondary data.
• COLLECTION OF PRIMARY DATA • There are several methods of collecting
primary data, particularly in surveys and descriptive researches. In descriptive
research, we obtain primary data either through observation or through direct
communication with respondents in one form or another or through personal
interviews.
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• COLLECTION OF SECONDARY DATA • These are already available i.e. they
refer to the data which have already been collected and analyzed by someone else. •
Secondary data may either be published or unpublished data. Researcher must be
very careful in using secondary data, because the data available may be sometimes
unsuitable.
• Methods of data Collection :Primary Data • 1) OBSERVATION METHOD :
Observation method is a method under which data from the field is collected with
the help of observation by the observer or by personally going to the field. • In the
words of P.V. Young, “Observation may be defined as systematic viewing, coupled
with consideration of seen phenomenon.”
• Statistics : Definition. A collection of tools and techniques that are used to convert
data into meaningful information. Statistics is the study of collecting, organizing
and summarizing data, used to convert data into a meaningful information.
• What does a statistician do? • Collects numbers or data • Systematically organizes
or arranges the data • Analyzes the data…extracts relevant information to provide a
complete numerical description • Infers general conclusions about the problem
using this numerical description.
• Population: Population: is the universal set of all objects under study. A population
is any entire collection of people, animals, plants or things from which we may
collect data. It is the entire group we are interested in, which we wish to describe or
draw conclusions about.
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• A variable is a characteristic or attribute that can assume different values.  A
statistic is a characteristic or measure obtained by using the data values from a
sample.
• A parameter is a characteristic or measure obtained by using all the data values
from a specific population.
• Data consists of the Collection, Organization, Summarization and Presentation of
data.
• Summarize, describe and characterize the sample being studied.
• Determine if the sample is normally distributed (bell curve) most statistical tests
require the sample to have normal distribution  Determine if the sample can be
compared to the larger population  Are displayed as tables, charts, percentages,
frequency, distributions and reported as measures of central tendency.
• Various methods of collecting data are employed by social scientists. Here we will
discuss the varied dimensions relevant to : data generation and attempt to arrive at
an abstract typology involving stimuli, responses and setting for data collection.
The task of data collection begins after a research problem has been defined and
research design /plan chalked out.