UNIT 1

Understanding Business Analytics

Introduction – Meaning of Analytics-Evolution of Analytics-Need of Analytics- Business

Analytics vs. Business Analytics – Categorization of Analytical Models – Data Scientist vs.
Data Engineer vs. Business Analyst – Business Analytics in practice- Types of Data- Role of
Business Analyst.

Introduction

The word analytics has come into the foreground in last decade or so. The increase of the
internet and information technology has made analytics very relevant in the current age.
Analytics is a field which combines data, information technology, statistical analysis,
quantitative methods and computer-based models into one.

This all are combined to provide decision makers all the possible scenarios to make a well
thought and researched decision. The computer-based model ensures that decision makers are
able to see performance of decision under various scenarios.

Meaning

Business analytics (BA) is a set of disciplines and technologies for solving business problems
using data analysis, statistical models and other quantitative methods. It involves an iterative,
methodical exploration of an organization's data, with an emphasis on statistical analysis, to
drive decision-making.

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
modelling; and

 Communicating your findings in easy-to-digest reports to colleagues, management,

and customers.

Definition

 Business analytics (BA) refers to the skills, technologies, and practices for
continuous iterative exploration and investigation of past business performance to
gain insight and drive business planning. Business analytics focuses on developing
new insights and understanding of business performance based on data and statistical
methods.

 Business Analytics is the process of transforming data into insights to improve

business decisions. Data management, data visualization, predictive modelling, data
 mining, forecasting simulation, and optimization are some of the tools used to create
insights from data.

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, etc.

 Analytics have been used in business since the management exercises were put into
place by Frederick Winslow Taylor in the late 19th century.
 Henry Ford measured the time of each component in his newly established assembly
line. But analytics began to command more attention in the late 1960s when
computers were used in decision support systems.
 Since then, analytics have changed and formed with the development of enterprise
resource planning (ERP) systems, data warehouses, and a large number of other
software tools and processes.
In later years the business analytics have exploded with the introduction of computers. This
change has brought analytics to a whole new level and has brought about endless
possibilities. As far as analytics has come in history, and what the current field of analytics is
today, many people would never think that analytics started in the early 1900s with Mr. Ford
himself.
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.

 Scope of Business Analytics

Business analytics has a wide range of application and usages. It can be used for
descriptive analysis in which data is utilized to understand past and present situation. This
kind of descriptive analysis is used to asses’ current market position of the company and
effectiveness of previous business decision.

It is used for predictive analysis, which is typical used to asses’ previous business
performance.

Business analytics is also used for prescriptive analysis, which is utilized to formulate
optimization techniques for stronger business performance.

For example, business analytics is used to determine pricing of various products in a

departmental store based past and present set of information.
 How business analytics works

Before any data analysis takes place, BA starts with several foundational processes:
 Determine the business goal of the analysis.
 Select an analysis methodology.
 Get business data to support the analysis, often from various systems and sources.
 Cleanse and integrate data into a single repository, such as a data warehouse or data
mart.

 Need/Importance of Business Analytics

 Business analytics is a methodology or tool to make a sound commercial decision.

Hence it impacts functioning of the whole organization. Therefore, business analytics
can help improve profitability of the business, increase market share and revenue and
provide better return to a shareholder.
 Facilitates better understanding of available primary and secondary data, which again
affect operational efficiency of several departments.
 Provides a competitive advantage to companies. In this digital age flow of
information is almost equal to all the players. It is how this information is utilized
makes the company competitive. Business analytics combines available data with
various well thought models to improve business decisions.
 Converts available data into valuable information. This information can be presented
in any required format, comfortable to the decision maker.

For starters, business analytics is the tool your company needs to make accurate decisions.
These decisions are likely to impact your entire organization as they help you to improve
profitability, increase market share, and provide a greater return to potential shareholders.

While some companies are unsure what to do with large amounts of data, business analytics
works to combine this data with actionable insights to improve the decisions you make as a
company

Essentially, the four main ways business analytics is important, no matter the industry, are:
 Improves performance by giving your business a clear picture of what is and isn’t
working
 Provides faster and more accurate decisions
 Minimizes risks as it helps a business make the right choices regarding consumer
behaviour, trends, and performance
 Inspires change and innovation by answering questions about the consumer.

 Essentials of business analytics

Business analytics has many use cases, but when it comes to commercial organizations, BA is
typically used to:
 Analyze data from a variety of sources. This could be anything from cloud
applications to marketing automation tools and CRM software.
  Use advanced analytics and statistics to find patterns within datasets. These patterns
can help you predict trends in the future and access new insights about the consumer
and their behaviour.
 Monitor KPIs and trends as they change in real-time. This makes it easy for
businesses to not only have their data in one place but to also come to conclusions
quickly and accurately.
 Support decisions based on the most current information. With BA providing such a
vast amount of data that you can use to back up your decisions, you can be sure that
you are fully informed for not one, but several different scenarios.

 Data for Analytics

 Business analytics uses data from three sources for construction of the business
model. It uses business data such as annual reports, financial ratios, marketing
research, etc. It uses the database which contains various computer files and
information coming from data analysis.

Benefits of implementing BA in your organization

Apart from having applications in various arenas, following are the benefits of Business
Analytics and its impact on business –

 Accurately transferring information

 Consequent improvement in efficiency
 Help portray Future Challenges
 Make Strategic decisions
 As a perfect blend of data science and analytics
 Reduction in Costs
 Improved Decisions
 Share information with a larger audience
 Ease in Sharing information with stakeholders
 Challenges

Moreover, any technology is subject to its own set of problems and challenges. Following are
the challenges in implementing business analytics in an organization.

 Lack of technical skills in employees

 Fuss over acceptance of BA by staff
 Data Security and Maintenance
 Integrity of Data
 Delivering relevant information in the given time
 Inability to address complex issues
 Costs involved in implementing BA
 Investment of staff time in implementation of BA
 Lack of a proper strategy to implement BA

 Business analytics can be possible only on large volume of data. It is sometime

difficult obtain large volume of data and not question its integrity.

 Business analytics depends on sufficient volumes of high-quality data.

  The difficulty in ensuring data quality is integrating and reconciling data across
different systems, and then deciding what subsets of data to make available.

 Previously, analytics was considered a type of after-the-fact method

of forecasting consumer behaviour by examining the number of units sold in the last
quarter or the last year. This type of data warehousing required a lot more storage
space than it did speed.

 Now business analytics is becoming a tool that can influence the outcome of customer
interactions. When a specific customer type is considering a purchase, an analytics-
enabled enterprise can modify the sales pitch to appeal to that consumer. This means
the storage space for all that data must react extremely fast to provide the necessary
data in real-time.

 Application

Business analytics has a wide range of application from customer relationship

management, financial management, and marketing, supply-chain management, human-
resource management, pricing and even in sports through team game strategies.

In healthcare, business analysis can be used to operate and manage clinical information
systems. It can transform medical data from a bewildering array of analytical methods into
useful information. Data analysis can also be used to generate contemporary reporting
systems which include the patient's latest key indicators, historical trends and reference
values.

 Decision analytics: supports human decisions with visual analytics that the user
models to reflect reasoning.
 Descriptive analytics: gains insight from historical data with reporting,
scorecards, clustering etc.
 Predictive analytics: employs predictive modelling using statistical and machine
learning techniques
  Prescriptive analytics: recommends decisions using optimization, simulation, etc.

 Behavioural analytics
 Cohort analysis
 Competitor analysis
 Cyber analytics
 Enterprise optimization
 Financial services analytics
 Fraud analytics
 Health care analytics
 Key Performance Indicators (KPI's)
 Marketing analytics
 Pricing analytics
 Retail sales analytics
 Risk & Credit analytics
 Supply chain analytics
 Talent analytics
 Telecommunications
 Transportation analytics
 Customer Journey Analytics
 Market Basket Analysis

 Business Analysis vs. Business Analytics

The aim of business analytics is data and reporting—examining past business performance
and forecasting future business performance. On the other hand, the business analysis
focuses on functions and processes—determining business requirements and suggesting
solutions.

 Business Analysis: Definition and Activities

Business analysis is the practice of assisting firms in resolving their technical difficulties by
understanding, defining, and solving those issues.

The activities that are carried out while performing Business Analysis:

 Company analysis: Business analysis aims at figuring out the requirements of a firm
in general and its strategic direction and determining the initiatives that will enable
the business to address those strategic goals.
 Requirements planning and management: It focuses on planning the requirements
of the development process, identifying what the top priority is for execution, and
managing the changes.
 Requirements elicitation: It outlines techniques for collecting needs from relevant
members of the project team.
 Requirements analysis and documentation: It explains how to establish and define
the needs in detail to allow them to be effectively carried out by the team.
  Requirements communication: Business analysis explains methods to help
stakeholders have a shared understanding of the needs and how they will be carried
out.
 Solution assessment and validation: It also explains how a business analyst can
execute a suggested solution, how to support the execution of a solution, and how to
evaluate possible flaws in the implementation.

Business analysis is performed by Functional Analysts, Systems Analysts, Business Analysts,

and Business Requirements Analysts.

 Business Analytics: Definition and Its Applications

Business analytics is also known as data analytics. It is a process of collecting, evaluating,

and drawing valuable outcomes from the enormous amount of data available. Business
analytics is widely used in the following applications:

 Finance
 Marketing
 HR
 CRM
 Manufacturing
 Banking and Credit Cards

Business analytics is performed by Data Scientists and Data Analysts.

 Business Analysis vs. Business Analytics

Most people believe that business analysis and analytics are the same, but they are not! The
primary differences between business analysis and business analytics:

Business Analysis

 It mainly aims at the methods and determining the business needs.

 It is employed to figure out the organizational needs and possible problems to have
productive outcomes.
 Here, the tasks are carried out by Functional Analysts, Systems Analysts, and
Business Analysts.
 Business, functional, and domain skills are needed to perform business analysis.
 The architectural domains for business analysis include enterprise architecture,
process architecture, technology architecture, and organization architecture.

Business Analytics

 It aims at data and reporting.

 It is widely practiced to reckon further stats and make decisions to bring
improvements in the business.
 Here, the tasks are carried out by Data Scientists and Data Analysts.
  Mathematical, statistical, and programming skills are needed for executing business
analytics.
 The architectural domains for business analytics include data architecture, technology
architecture, and information architecture.

 Business Analysis vs. Analytics: Similarities Explained

Business analysis and business analytics have some commonalities. They both:

 Examine and enhance businesses

 Determine solutions to issues
 Establish things based on the requirements

Business analysis is a practice of identifying business requirements and figuring out solutions
to specific business problems. This has a heavy overlap with the analysis of business needs to
function normally and to enhance how they function. Sometimes, the solutions include a
system’s development feature. It can also incorporate business change, process enhancement
or strategic planning, and policy improvement.

On the contrary, business analytics is all about the group of tools, techniques, and skills that
help the investigation of previous business performance. It also aids to gain insights into
future performance. In general, business analytics aims mostly at data and statistical analysis.
Categorization of Analytical Models

4 Types of Business Analytics

There are mainly four types of Business Analytics, each of these types are increasingly
complex. They allow us to be closer to achieving real-time and future situation insight
application. Each of these types of business analytics have been discussed below.
1. Descriptive Analytics
2. Diagnostic Analytics
3. Predictive Analytics
4. Prescriptive Analytics
1. Descriptive Analytics
It summarizes an organisation’s existing data to understand what has happened in the past
or is happening currently. Descriptive Analytics is the simplest form of analytics as it
employs data aggregation and mining techniques. It makes data more accessible to
members of an organisation such as the investors, shareholders, marketing executives,
and sales managers.

It can help identify strengths and weaknesses and provides an insight into customer
behaviour too. This helps in forming strategies that can be developed in the area of
targeted marketing.

2. Diagnostic Analytics
This type of Analytics helps shift focus from past performance to the current events and
determine which factors are influencing trends. To uncover the root cause of events,
techniques such as data discovery, data mining and drill-down are employed. Diagnostic
analytics makes use of probabilities, and likelihoods to understand why events may occur.
Techniques such as sensitivity analysis and training algorithms are employed for
classification and regression.

3. Predictive Analytics
This type of Analytics is used to forecast the possibility of a future event with the help of
statistical models and ML techniques. It builds on the result of descriptive analytics to
devise models to extrapolate the likelihood of items. To run predictive analysis, Machine
Learning experts are employed. They can achieve a higher level of accuracy than by
business intelligence alone.
One of the most common applications is sentiment analysis. Here, existing data collected
from social media and is used to provide a comprehensive picture of an users opinion.
This data is analysed to predict their sentiment (positive, neutral or negative).

4. Prescriptive Analytics
Going a step beyond predictive analytics, it provides recommendations for the next best
action to be taken. It suggests all favourable outcomes according to a specific course of
action and also recommends the specific actions needed to deliver the most desired result.
It mainly relies on two things, a strong feedback system and a constant iterative analysis.
It learns the relation between actions and their outcomes. One common use of this type of
analytics is to create recommendation systems.
Business analyst responsibilities

 Analyzing and evaluating the current business processes a company has and
identifying areas of improvement
 Researching and reviewing up-to-date business processes and new IT advancements
to make systems more modern
 Presenting ideas and findings in meetings
 Training and coaching staff members
 Creating initiatives depending on the business’s requirements and needs
 Developing projects and monitoring project performance
 Collaborating with users and stakeholders
 Working closely with senior management, partners, clients and technicians

Types of Data
Qualitative vs. Quantitative Data

1. Quantitative data
 Quantitative data seems to be the easiest to explain. It answers key questions such as
“how many, “how much” and “how often”.
 Quantitative data can be expressed as a number or can be quantified. Simply put, it
can be measured by numerical variables.
 Quantitative data are easily amenable to statistical manipulation and can be
represented by a wide variety of statistical types of graphs and charts such as line, bar
graph, scatter plot, and etc.
Examples of quantitative data:
 Scores on tests and exams e.g. 85, 67, 90 and etc.
  The weight of a person or a subject.
 Your shoe size.
 The temperature in a room.

2. Qualitative data
 Qualitative data can’t be expressed as a number and can’t be measured. Qualitative
data consist of words, pictures, and symbols, not numbers.
 Qualitative data is also called categorical data because the information can be sorted
by category, not by number.
 Qualitative data can answer questions such as “how this has happened” or and “why
this has happened”.
Examples of qualitative data:
 Colors e.g. the color of the sea
 Your favorite holiday destination such as Hawaii, New Zealand and etc.
 Names as John, Patricia..
 Ethnicity such as American Indian, Asian, etc.

Nominal vs. Ordinal Data

3. Nominal data
Nominal data is used just for labelling variables, without any type of quantitative value. The
name ‘nominal’ comes from the Latin word “nomen” which means ‘name’.
The nominal data just name a thing without applying it to order. Actually, the nominal data
could just be called “labels.”
Examples of Nominal Data:
 Gender (Women, Men)
 Hair color (Blonde, Brown, Brunette, Red, etc.)
 Marital status (Married, Single, Widowed)
 Ethnicity (Hispanic, Asian)
 Eye color is a nominal variable having a few categories (Blue, Green, Brown) and there is no
way to order these categories from highest to lowest.
4. Ordinal data
Ordinal data shows where a number is in order. This is the crucial difference from nominal
types of data.
Ordinal data is data which is placed into some kind of order by their position on a scale.
Ordinal data may indicate superiority.
However, you cannot do arithmetic with ordinal numbers because they only show
sequence.
Ordinal variables are considered as “in between” qualitative and quantitative variables.
In other words, the ordinal data is qualitative data for which the values are ordered.
In comparison with nominal data, the second one is qualitative data for which the values
cannot be placed in an ordered.
We can also assign numbers to ordinal data to show their relative position. But we cannot do
math with those numbers. For example: “first, second, third…etc.”
Examples of Ordinal Data:
 The first, second and third person in a competition.
 Letter grades: A, B, C, and etc.
 When a company asks a customer to rate the sales experience on a scale of 1-10.
 Economic status: low, medium and high.

Discrete vs. Continuous Data

In statistics, marketing research, and data science, many decisions depend on whether the
basic data is discrete or continuous.
5. Discrete data
Discrete data is a count that involves only integers. The discrete values cannot be subdivided
into parts.
For example, the number of children in a class is discrete data. You can count whole
individuals. You can’t count 1.5 kids.
 To put in other words, discrete data can take only certain values. The data variables cannot be
divided into smaller parts.
It has a limited number of possible values e.g. days of the month.
Examples of discrete data:
 The number of students in a class.
 The number of workers in a company.
 The number of home runs in a baseball game.
 The number of test questions you answered correctly
6. Continuous data
Continuous data is information that could be meaningfully divided into finer levels. It can be
measured on a scale or continuum and can have almost any numeric value.
For example, you can measure your height at very precise scales — meters, centimeters,
millimeters and etc.
You can record continuous data at so many different measurements – width, temperature,
time, and etc. This is where the key difference from discrete types of data lies.
The continuous variables can take any value between two numbers. For example, between 50
and 72 inches, there are literally millions of possible heights: 52.04762 inches, 69.948376
inches and etc.
A good great rule for defining if a data is continuous or discrete is that if the point of
measurement can be reduced in half and still make sense, the data is continuous.
Examples of continuous data:
 The amount of time required to complete a project.
 The height of children.
 The square footage of a two-bedroom house.
 The speed of cars.