BUSINESS ANALYTICS

2

“THE EXTENSIVE USE OF DATA , STATISTICAL AND QUANTITATIVE ANALYSIS,

EXPLANATORY AND PREDICTIVE MODELS, AND FACT-BASED MANAGEMENT TO DRIVE

DECISIONS AND ACTIONS.”

DAVENPORT AND HARRIS (2007) COMPETING ON ANALYTICS:

THE NEW SCIENCE OF WINNING

3

4

Back in Business, by Ronald K. Klimberg and Virginia Miori, OR/MS Today, Vol 37, No 5, October 2010, [http://www.informs.org/ORMS-Today/Public-Articles/October-Volume-37-Number-5/Back-in-Business]

“The essence of analytics lies in the application of logic and mental processes to find meaning in data.”

5

ANALYTICS

• Big Data

• Big Money

• Big Change

• Big Benefits

• Big Demand

6

7

8

Data Explosion http://tedxtalks.ted.com/video/TEDxPhilly-Robert-J-Moore-The-d

9

10

11Competing on Analytics by Thomas Davenport, HBR (January 2006)

12http://www.moneyball-movie.com/ trailer

13

http://movies.yahoo.com/feature/moneyball.html

Competing on Analytics by Thomas Davenport, HBR (January 2006)

14

CHANGES IN THE ANALYTICAL LANDSCAPE

Analytical Modelers Management

Historically…

Historically, analytics have typically been handled in the “back office,” and information was shared only by a few individuals.

Models

SAS, Advanced Business Analytics Course

15

CHANGES IN THE ANALYTICAL LANDSCAPE

Analytical Modelers

CustomerService

Retail

Logistics

Promotions

OPERATIONS TARGET

Customers

Stockholders

Suppliers

Employees

Now…

Now analytics are being pushed out to the “front office” and are directly impacting company performance. There are clear, tangible benefits that management will track. Data mining is a critical part of business analytics.

Proliferation of Models

SAS, Advanced Business Analytics Course

16

THE DATA

Experimental Opportunistic

Purpose Research Operational

Value Scientific Commercial

Generation Actively Passivelycontrolled observed

Size Small Massive

Hygiene Clean Dirty

State Static Dynamic

SAS, Advanced Business Analytics Course

17

THE METHODOLOGY: WHAT WE LEARNED NOT TO DO

• Prediction is more important than inference.• Metrics are used “because they work,” not based on

theory.• p-values are rough guides rather than firm decision

cutoffs.• Interpretation of a model might be irrelevant.• The preliminary value of a model is determined by its

ability to predict a holdout sample.• Long-term value of a model is determined by its ability to

continue to perform well on new data over time.• Models are retired as customer behavior shifts, market

trends emerge, and so on.

SAS, Advanced Business Analytics Course

18

USING ANALYTICS INTELLIGENTLY

• Intelligent use of analytics results in the following:• Better understanding of how technological, economic,

and marketplace shifts affect business performance• Ability to consistently and reliably distinguish between

effective and ineffective interventions• Efficient use of assets, reduced waste in supplies, and

better management of time and resources• Risk-reduction via measurable outcomes and

reproducible findings• Early detection of market trends hidden in massive data• Continuous improvement in decision making over time

SAS, Advanced Business Analytics Course

19

20

21

22

23

Co

mp

etit

ive

Ad

van

tag

e

Basic Reporting What happened?

Ad Hoc Reporting How many, how often, where?

Dynamic Reporting Where exactly are the problems?

Reporting with Early Warning What actions are needed?

Basic Statistical Analysis Why is this happening?

Forecasting What if these trends continue?

Predictive Modeling What will happen next?

Decision Optimization What is the best decision?

Data Information Intelligence

Advanced Analytics

Basic Analytics

Reporting

Decision Support Decision Guidance

Achieving Success with AnalyticsSAS, Advanced Business Analytics Course

24

25

26

HIRING SUCCESS

27

28

QUAN 4630: Business Analytics

29

30

31

OPPORTUNISTIC DATA

• Operational data is typically not collected with data analysis in mind.

• Multiple business units produce a silo-based data system.

• This makes business analytics different from experimental statistics and especially challenging.

SAS, Advanced Business Analytics Course