Role of business analytics in Decision making

Introduction:
The word analytics has come into the foreground in last decade or
so. The proliferation 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.

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.

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.

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.

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.

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.

Challenges:
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.
 The amalgamation of an increasingly complicated world,
the vast proliferation of data and the pressing desire to stay at the forefront of competition
has prompted organizations to focus on using analytics for driving strategic business
decisions. Business analytics is allowing managers to understand the dynamics of their
business, anticipate market shifts and manage risks. Rather than “going with gut” when
maintaining inventory, pricing solutions, or hiring talent, companies are embracing analytics
and systematic statistical reasoning to make decisions that improve efficiency, risk
management and profits.
Data and analytics are disrupting existing business
models and ecosystems. Proliferation of new data sets and introduction of massive data
migration capabilities are undermining existing information and technological silos. From
using granular data to personalize products and services to scaling digital platforms to
match buyers and sellers, companies are using business analytics to enable more faster and
facts-based decision making. In fact, studies show that data driven organizations not only
make better strategic decisions, but also enjoy high operational efficiency, improved
customer satisfaction, and robust profit and revenue levels. Recent research also shows that
data-centered organizations are twenty-three times more likely to acquire customers, six
times as likely to retain those customers, and nineteen times as likely to be profitable as a
result.
Analytical practitioners today have a vast array of
analytical capabilities and techniques at their disposal. These range from the most
fundamental techniques, “descriptive analytics”, which involve preparing the data for
subsequent analysis, to “predictive analytics” that provide advanced models to forecast and
predict future, to the top-notch of analytics called “prescriptive analytics” that utilize
machine-based learning algorithms and dynamic rule engines to provide interpretations and
recommendations. With their diverse use cases and applications, it is no longer a surprise
that these techniques are now finding way into customer, workforce, supply-chain, finance
and risk strategies at an organizational level.
Data is the new oil- and the best way for companies
to access and understand it is to digitize their processes. Digitizing customer interactions can
provide troves of information, which companies can feed into strategy, sales, marketing,
and product development. Detailed and granular data can enable companies to micro-target
their customers and to personalize their products and services. Further internal digitization
generates data that managers can use to improve their operations, including routing and
transportation, resource allocation and scheduling, capacity planning and manufacturing.
These trends are also causing many companies to converge their “Business Intelligence” and
“Operation Research” units on the common ground of predictive and advanced analytics.
Both communities are now using statistical and mathematical techniques to attack strategic
business problems and systemize decision making.
 Data analytics, with its far-reaching use cases and
diverse applications, is now emerging as the keystone of strategic business decision making.
From enabling businesses to make consumer-oriented marketing decisions to helping them
address key operational inefficiencies, analytics is radically changing the perception towards
the importance of data. Advanced statistical models are furthering this cause by providing
valuable insights out of unconventional data sets and by enabling companies to explore new
business territories. The next few sections explore the vast and diverse opportunities that
data and analytics bring to businesses today.

Making most out of consumer patterns:

In an increasingly custom making most out of consumer patterns:
In an increasingly customer-oriented era,
organizations have amassed wealth of consumer information and data. In order to remain
competitive, it is imperative for organizations to use these consumer insights to shape their
products, solutions and buying experiences. Research from Mckinsey suggests that
organizations that are using their consumer behaviour insights strategically are
outperforming their peers by 85 percent in sales growth margins and by more than 25
percent in gross margins. Hence, it is important for managers to consider the strategic
importance of consumer information.er oriented era, organizations have amassed wealth of
consumer information and data. In order to remain competitive, it is imperative for
organizations to use these consumer insights to shape their products, solutions and buying
experiences. Research from Mckinsey suggests that organizations that are using their
consumer behaviour insights strategically are outperforming their peers by 85 percent in
sales growth margins and by more than 25 percent in gross margins. Hence, it is important
for managers to consider the strategic importance of consumer information.
A comprehensive and refined understanding
of customers through thoughtful market segmentation can offer managers insightful
narrative about buying habits and preferences. A telecom company, for instance, can use
advanced and predictive analytical models to reduce customer churn and measure
effectiveness of marketing campaigns. Similarly, an online retailer can understand its web
presence by seeking answers to questions such as the mix of new and returning visitors,
bounce rate and average session duration. Such questions offer crucial insights into what
types of content over what channels and formats are likely to have greatest impact on key
consumer segments.
In addition, pattern data can also generate
valuable customer insights that can be used to direct marketing expenditures. An
automotive seller, for instance, studied its consumers’ purchasing and behavioural history
and discovered that majority of its high segment consumers were far more likely to rely on
dealer distributors for product recommendations and less likely to be influenced by trade
show exhibitions and marketing collaterals. This in turn helped the marketers to reallocate
budgets. Therefore, business analytics enables managers to gain competitive intelligence on
market conditions, target consumers more successfully and optimize processes.
Using data to drive performance:
While organizations spend considerable time
analysing consumer data and frontline monetization opportunities, it is equally imperative
to focus on improving productivity and performance. Data and analytics can play a huge role
in reducing inefficiency and streamlining business operations. For instance, reporting and
analytical dashboards can identify data correlations and provide managers with detailed
insights to perform cost valuations, peer benchmarking and pricing segmentation. Similarly,
using analytics to measure key performance metrics across areas such as operational
excellence, product innovation and workforce planning can produce calculated insights to
solve complex business scenarios.
Business analytics can also improve the way
organizations attract, retain and develop talent. For example, a consulting group in Asia
recently decided to undergo a major restructuring process. As a part of this initiative, the
leadership wanted to identify employees with high potential to succeed and gain a greater
understanding into key indicators of performance. The analytics team began by streamlining
data points such as professional history, education background, performance, age, marital
status, and demographics. After running the collated data though multiple regression
models, the team was able to identify the employee profiles that had best chances of
succeeding in particular roles. The research and analysis also suggested the key roles that
had the most impact on the company’s overall growth. As a consequence, the company
restructured around the key functional roles and talent groups.
Another area where data analytics is providing a
unique value proposition is Supply Chain. Supply chains are great places to look for strategic
opportunities and advantages, partly because of their intricate nature and partly because of
their significant contribution to a company’s cost structure. By putting analytics to use,
companies can not only identify hidden inefficiencies in existing structures in order to
generate greater cost savings but can also analyse significant supply chain investments and
decisions by performing risk modelling and assessments. Managers can then dive deep into
specific improvement opportunities such as inventory management, channel management,
procurement and logistics.

Managing risk through analytics:

Organizations today are exposed to immense risk
from structured data- such as databases and unstructured data- such as websites, blogs, and
social media channels. By leveraging risk analytics, companies can find themselves in a
better position to quantify, measure and predict risk. Managers need to see risk analytics as
an enterprise-wide approach and should develop ways to pull data across different
organization levels and functions into one central platform. By establishing a standard
baseline for measuring and managing risk, companies will be able to incorporate risk
considerations into their core strategic decision-making process and predict likely scenarios.
Banks are leading this analytical space by discovering
new ways to exploit transactional and behavioural consumer data. In fact, they are routinely
going beyond the conventional structured information such as credit score reports and are
also looking out for unconventional sources of information such as loyalty card consumer
data, and government information. By capturing such massive data sets, banks are able to
increase the accuracy, reach and predictability of their credit risk models. From identifying
high risk payments before they are executed to predicting the likelihood of a customer
defaulting a mortgage payment, risk models are leading the way by providing advanced and
valuable insights. Therefore, companies should focus on enhancing and exploring operating
business models.
Advanced data models will make risky business
decisions more uniform, enhance the quality of data and provide greater agility to address
unconventional data requirements. By becoming more risk intelligent, managers will be
more adept at dealing with uncertainty and strategic at decision making.

The conclusion:

In this volatile environment of data driven

disruption, business managers need to look through two lenses at the same time. Firstly,
they have to identify high risk and rewarding opportunities such as entering new markets
and changing existing business models. Secondly, they have to maintain their focus on
including analytics into their core business decision making process. By embedding data
analytics into their core strategy, business managers can streamline internal business
processes, identify unfolding consumer trends, interpret and monitor emerging risks, and
build mechanisms for constant feedback and improvement. Driving analytical
transformations will thereby enable companies to gain competitive edge and stay at the
forefront of digital disruption.
 Business analytics in various functional areas

Companies study the pattern of their consumers:

their lifestyle, spending patterns, likes and dislikes through mundane activities such as clicks
and shares on social networking sites like Facebook, Twitter and Instagram. This data helps
them develop their advertising strategy and target the apt audience. In some cases, these
data trends might be useful to the intelligence agencies and defence department too.

Various functional areas:

 Finance:
BA is of utmost importance to the finance sector. Data Scientists are
in high demand in investment banking, portfolio management, financial planning,
budgeting, forecasting, etc.
For example:
Companies these days have a large amount of financial data. Use of
intelligent BA tools can help use this data to determine the products’ prices. Also, on the
basis of historical information BAs can study the trends on the performance of a particular
stock and advise the client on whether to retain it or sell it.

 Marketing:
Studying buying patterns of consumer behaviour, analysing trends,
help in identifying the target audience, employing advertising techniques that can appeal to
the consumers, forecast supply requirements, etc.
For example:
Use BA to gauge the effectiveness and impact of a marketing
strategy on the customers. Data can be used to build loyal customers by giving them exactly
what they want as per their specifications.

 HR Professionals:
HR professionals can make use of data to find information about
educational background of high performing candidates, employee attrition rate, number of
years of service of employees, age, gender, etc. This information can play a pivotal role in
the selection procedure of a candidate.
For example:
HR manager can predict the employee retention rate on the
basis of data given by BA.
  CRM:
BA helps one analyse the key performance indicators, which
further helps in decision making and make strategies to boost the relationship with the
consumers. The demographics, and data about other socio-economic factors, purchasing
patterns, lifestyle, etc., are of prime importance to the CRM department.
For example:
The company wants to improve its service in a particular
geographical segment. With data analytics, one can predict the customer’s preferences in
that particular segment, what appeals to them, and accordingly improve relations with
customers.

 Manufacturing:
BA can help you in supply chain management, inventory
management, measure performance of targets, risk mitigation plans, improve efficiency in
the basis of product data, etc.
For example:
The Manager wants information on performance of a
machinery which has been used past 10 years. The historical data will help evaluate the
performance of the machinery and decide whether costs of maintaining the machine will
exceed the cost of buying a new machinery.

 Credit Card Companies:

Credit card transactions of a customer can
determine many factors: financial health, life style, preferences of purchases, behavioral
trends, etc.
For example:
Credit card companies can help the retail sector by
locating the target audience. According to the transaction’s reports, retail companies can
predict the choices of the consumers, their spending pattern, preference over buying
competitor’s products, etc. This historical as well as real-time information helps them direct
their marketing strategies in such a way that it hits the dart and reaches the right audience.

Other than above, BA is helpful in various areas such as

the fraud detection, health-care, defence, sales, etc. Like Mohit, if you’re fascinated by
numbers, and want a challenging job role, you should definitely have a career in the field of
business analytics. Data can be an intelligent tool to foster your brand name in the
economic market. BA lets you exploit this opportunity to make better business decisions.
 Various types of packages and their functions in Business
Analytics

Open Source Analytics Tools:

Here are the 5 most popular open source analytics tools:

 R:
R is now the most popular analytics tool in the industry. It
has surpassed SAS in usage and is now the tool of choice even for companies that
can easily afford SAS. Over the years, R has become a lot more robust. It handles
large data sets much better than it used to, say even a decade earlier. It has also
become a lot more versatile.

1800 new packages were introduced in R between April

2015 and April 2016. The total number of R packages is now over 8000. There are some
concerns about the sheer number of packages but this has certainly added a lot to R’s
capabilities. R also integrates very well with many Big Data platforms which has contributed
to its success.

 Python:
Python has been a favourite of programmers for long. This
is mainly because it’s an easy to learn language that is also quite fast. However, it
developed into a powerful analytics tool with the development of analytical and
statistical libraries like numpy, scipy etc. Today it offers a comprehensive coverage of
statistical and mathematical functions.

Increasingly, we are seeing programmers and other tech

folks moving into analytics. Most of these guys are already familiar with Python and
therefore it has become a tool of choice for many data scientists.

 Apache Spark:
Spark is another open source processing engine that is
built with a focus on analytics, especially on unstructured data or huge volumes of
data. Spark has become tremendously popular in the last couple of years. This is
 because of various reasons – easy integration with the Hadoop ecosystem being one
of them. Spark has its own machine learning library which makes it ideal for analytics
as well.

 Apache Storm:
Storm is the Big Data tool of choice for moving data
or when the data comes in as a continuous stream. Spark works on static data. Storm
is ideal for real time analytics or stream processing.

 PIG and HIVE:

Pig and Hive are integral tools in the Hadoop
ecosystem that reduce the complexity of writing MapReduce queries. Both these
languages are like SQL (Hive more so than Pig). Most companies that work with Big
Data and leverage the Hadoop platform use Pig and/or Hive.

Commercial Analytics Tools:

The 5 most popular paid analytics tools:

 SAS:
SAS continues to be widely used in the industry. Some
flexibility on pricing from the SAS Institute has helped its cause. SAS continues to be
a robust, versatile and easy to learn tool. SAS has added tons of new modules. Some
of the specialized modules that have been added in the recent past are – SAS
analytics for IOT, SAS Anti-money Laundering, and SAS Analytics Pro for Midsize
Business.

 Tableau:
Tableau is an easy to learn tool that does an
effective job of slicing and dicing your data and creating great visualizations and
dashboards. Tableau can create better visualizations than Excel and can most
definitely handle much more data than Excel can. If you want interactivity in your
plots, then Tableau is surely the way to go.

 Excel:
Excel is of course the most widely used
analytics tool in the world. I have seldom come across a data scientist who does not
use Excel. Whether you are an expert in R or Tableau, you will still use Excel for the
 grunt work. Non-analytics professionals will usually not have access to tools like SAS
or R on their machines. But everyone has Excel. Excel becomes vital when the
analytics team interfaces with the business steam.

 QlikView:
QlikView and Tableau are essentially vying for the top
spot amongst the data visualization giants. QlikView is supposed to be slightly faster
than Tableau and gives experienced users a bit more flexibility. Tableau has a more
intuitive GUI and is easier to learn.

 Splunk:
Splunk is more popular than some of the more known
names like Cloudera and Hortonworks. It started as a ‘Google for log files’ which
means its primary use was to process machine log files data. It has now become
much more than that. Splunk has great visualization options and a web interface
makes it easy to use.

Top Companies Using the Most Popular Analytics Tools:

 Data visualization in R
This visualization (originally created using Tableau) is a great example of how data
visualization can help decision makers. Imagine telling this information to an investor
through a table. How long do you think you will take to explain it to him?
With ever increasing volume of data in today’s world, it is impossible to tell stories without
these visualizations. While there are dedicated tools like Tableau, QlikView and d3.js,
nothing can replace a modeling / statistics tools with good visualization capability. It helps
tremendously in doing any exploratory data analysis as well as feature engineering. This is
where R offers incredible help.
R Programming offers a satisfactory set of inbuilt function and libraries (such as ggplot2,
leaflet, lattice) to build visualizations and present data. In this article, I have covered the
steps to create the common as well as advanced visualizations in R Programming. But,
before we come to them, let us quickly look at brief history of data visualization. If you are
not interested in history, you can safely skip to the next section.
Brief History of Data Visualization:
Historically, data visualization has evolved through the work of noted practitioners. The
founder of graphical methods in statistics is William Playfair. William Playfair invented four
types of graphs: the line graph, the bar chart of economic data , the pie chart and the circle
graph. Joseph Priestly had created the innovation of the first timeline charts, in which
individual bars were used to visualize the life span of a person (1765). That’s right timelines
were invented 250 years and not by Facebook!
Among the most famous early data visualizations is Napoleon’s March as depicted
by Charles Minard. The data visualization packs in extensive information on the effect of
temperature on Napoleon’s invasion of Russia along with time scales. The graphic is notable
for its representation in two dimensions of six types of data: the number of Napoleon’s
troops; distance; temperature; the latitude and longitude; direction of travel; and location
relative to specific dates
Florence Nightangle was also a pioneer in data visualization. She drew coxcomb charts for
depicting effect of disease on troop mortality (1858).
The use of maps in graphs or spatial analytics was pioneered by John Snow. It was map of
deaths from a cholera outbreak in London, 1854, in relation to the locations of public water
pumps and it helped pinpoint the outbreak to a single pump.
R Programming lets you learn this art by offering a set of inbuilt functions and libraries to
build visualizations and present data. Before the technical implementations of the
visualization, let’s see first how to select the right chart type.

Data Visualization in R:
In this article, we will create the following visualizations:
Basic Visualization
1. Histogram
2. Bar / Line Chart
3. Box plot
4. Scatter plot
Advanced Visualization
1. Heat Map
2. Mosaic Map
3. Map Visualization
4. 3D Graphs
5. Correlogram
In R the HistData package provides a collection of small data sets that are interesting and
important in the history of statistics and data visualization.
Selecting the Right Chart Type

There are four basic presentation types:

 Comparison

 Composition

 Distribution

 Relationship
To determine which amongst these is best suited for your data, I suggest you should answer
a few questions like,

 How many variables do you want to show in a single chart?

 How many data points will you display for each variable?

 Will you display values over a period of time, or among items or groups?
In your day-to-day activities, you’ll come across the below listed 7 charts most of the time.
1. Scatter Plot
2. Histogram
3. Bar & Stack Bar Chart
 4. Box Plot
5. Area Chart
6. Heat Map
7. Correlogram
Now let’s see how to use these visualizations in R

1. Scatter Plot
When to use: Scatter Plot is used to see the relationship between two continuous variables.
In our above mart dataset, if we want to visualize the items as per their cost data, then we
can use scatter plot chart using two continuous variables, namely Item Visibility& ItemMRP
as shown below.

2. Histogram

When to use: Histogram is used to plot continuous variable. It breaks the data into bins and
shows frequency distribution of these bins. We can always change the bin size and see the
effect it has on visualization.
From our mart dataset, if we want to know the count of items on basis of their cost, then we
can plot histogram using continuous variable Item MRP as shown below.
3. Bar & Stack Bar Chart

When to use: Bar charts are recommended when you want to plot a categorical variable or
a combination of continuous and categorical variable.
From our dataset, if we want to know number of marts established in particular year, then
bar chart would be most suitable option, use variable Establishment Year as shown below.

. Area Chart

When to use: Area chart is used to show continuity across a variable or data set. It is very
much same as line chart and is commonly used for time series plots. Alternatively, it is also
used to plot continuous variables and analyze the underlying trends.
From our dataset, when we want to analyze the trend of item outlet sales, area chart can be
plotted as shown below. It shows count of outlets on basis of sales.
6. Heat Map

When to use: Heat Map uses intensity (density) of colors to display relationship between
two or three or many variables in a two dimensional image. It allows you to explore two
dimensions as the axis and the third dimension by intensity of color.
From our dataset, if we want to know cost of each item on every outlet, we can plot
heatmap as shown below using three variables Item MRP, Outlet Identifier & Item Type
from our mart dataset.

7. Correlogram

When to use: Correlogram is used to test the level of co-relation among the variable
available in the data set. The cells of the matrix can be shaded or colored to show the co-
relation value.
Darker the colour, higher the co-relation between variables. Positive co-relations are
displayed in blue and negative correlations in red colour. Colour intensity is proportional to
the co-relation value.
From our dataset, let’s check co-relation between Item cost, weight, visibility along with
Outlet establishment year and Outlet sales from below plot.
In our example, we can see that Item cost & Outlet sales are positively correlated while Item
weight & its visibility are negatively correlated.