bUsIness AnaLYtICs IMPACTS AND CHALLENGES
Lesson #1 Benefits:
CHAPTER 1: INTRODUCTION TO BUSINESS ANALYTICS o Reduced costs
o Better risk management
Business Analytics is the use of: o Faster decisions
o Better productivity; and
Data
o Enhanced bottom-line performance such as
Information technology
profitability and customer satisfaction
Statistical analysis
Quantitative methods; and Challenges:
Mathematical or computer-based models
o lack of understanding of how to use analytics
to help managers gain improved insights about their o competing business priorities
business operations and make better, fact-based o insufficient analytical skills
business decisions. o difficulty in getting good data and sharing
information
EXAMPLES OF APPLICATIONS o not understanding the benefits versus
Pricing perceived costs of analytics studies.
o setting prices for consumer and industrial goods, SCOPE OF BUSINESS ANALYTICS
government contracts, and maintenance contracts. Descriptive Analytics: shows “what happened”. This
Customer Segmentation uses historic business data to understand past and
current business performance and make informed
o identifying and targeting key customer groups in decisions.
retail, insurance, and credit card industries.
Predictive Analytics: purpose is to predict “what is
Merchandising likely to happen”. Predicts the future by examining
o determining brands to buy, quantities, and historical data, detecting patterns or relationships in
allocations. these data, and then extrapolating these relationships
forward in time.
Location
Diagnostic Analytics: addressed the “why things
o finding the best location for bank branches and happened”. This is used by firms to identify patterns
ATMs, or where to service industrial equipment. of behavior and make deep connections within the
data they have collected. To be effective, this must be
Social Media
detailed, specific, and accurate.
o understand trends and customer perceptions;
Prescriptive Analytics: purpose is to know “what
o assist marketing managers and product designers.
should be done next”. It identifies the best alternatives
A VISUAL PERSPECTIVE OF BUSINESS ANALYTICS to minimize business risks or maximize business
objectives. It is however the most costly in terms of
skills required and resources to be used.
EXAMPLE 1.1: RETAIL MARKDOWN DECISIONS
➢ Most department stores clear seasonal inventory
by reducing prices.
➢ Key question: When should price be reduced and
by how much to maximize profits?
Potential Applications of Analytics:
Descriptive Analytics: examine historical data for
similar products (prices, units sold, advertising,
etc.)
Lesson #1 Benefits:
CHAPTER 1: INTRODUCTION TO BUSINESS ANALYTICS o Reduced costs
o Better risk management
Business Analytics is the use of: o Faster decisions
o Better productivity; and
Data
o Enhanced bottom-line performance such as
Information technology
profitability and customer satisfaction
Statistical analysis
Quantitative methods; and Challenges:
Mathematical or computer-based models
o lack of understanding of how to use analytics
to help managers gain improved insights about their o competing business priorities
business operations and make better, fact-based o insufficient analytical skills
business decisions. o difficulty in getting good data and sharing
information
EXAMPLES OF APPLICATIONS o not understanding the benefits versus
Pricing perceived costs of analytics studies.
o setting prices for consumer and industrial goods, SCOPE OF BUSINESS ANALYTICS
government contracts, and maintenance contracts. Descriptive Analytics: shows “what happened”. This
Customer Segmentation uses historic business data to understand past and
current business performance and make informed
o identifying and targeting key customer groups in decisions.
retail, insurance, and credit card industries.
Predictive Analytics: purpose is to predict “what is
Merchandising likely to happen”. Predicts the future by examining
o determining brands to buy, quantities, and historical data, detecting patterns or relationships in
allocations. these data, and then extrapolating these relationships
forward in time.
Location
Diagnostic Analytics: addressed the “why things
o finding the best location for bank branches and happened”. This is used by firms to identify patterns
ATMs, or where to service industrial equipment. of behavior and make deep connections within the
data they have collected. To be effective, this must be
Social Media
detailed, specific, and accurate.
o understand trends and customer perceptions;
Prescriptive Analytics: purpose is to know “what
o assist marketing managers and product designers.
should be done next”. It identifies the best alternatives
A VISUAL PERSPECTIVE OF BUSINESS ANALYTICS to minimize business risks or maximize business
objectives. It is however the most costly in terms of
skills required and resources to be used.
EXAMPLE 1.1: RETAIL MARKDOWN DECISIONS
➢ Most department stores clear seasonal inventory
by reducing prices.
➢ Key question: When should price be reduced and
by how much to maximize profits?
Potential Applications of Analytics:
Descriptive Analytics: examine historical data for
similar products (prices, units sold, advertising,
etc.)
