Insights From Your Data

BUSINESS ANALYTICS

Jointly Organized By University Of Management & Technology & Institute Of Research Promotion www.irp.edu.pk

CTD, IRP offers you a one day workshop on basic orientation of business analytics. The workshop will equip you to understand and apply basic concepts to perform your research and analysis tasks. Workshop Objectives: To understand basics of Business Analytics To orient in process of Business Analytics To learn variety of tools and techniques in Business Analytics

To apply Business Analytics in functions of business and institutions

Business Analytics (BA)

Business analytics (BA) is the practice of iterative, methodical exploration of an organizations data with emphasis on statistical analysis. Business analytics is used by companies committed to data-driven decision making.

Cont

BA is used to gain insights that inform business decisions and can be used to automate and optimize business processes. Data-driven companies treat their data as a corporate asset and leverage it for competitive advantage.

Successful business analytics depends on: data quality, skilled analysts who understand the technologies and the business, and an organizational commitment to data-driven decision making.

General Perceptions About BA

In December 2008, Computerworld invited IT and business professionals to participate in a survey on business analytics. According to the survey results:

Business Intelligence (BI) products (54%) are most frequently cited as the category of products that respondents said first comes to mind when they think of the term business analytics, following distantly by PM (18%) and the general category of analytics (11%). Thirteen percent of respondents do not use the term business analytics in their organization.

Survey: General Perceptions About BA

BI vs BA
Business intelligence (BI) is an important aspect of an organizations strategic framework. But what is beyond BI? Some indicators point to business analytics, a progression from BI, as the next step. Business analytics is predictive as well as historical, which requires a cultural shift to the acceptance of a proactive, fact-based decision-making environment, providing organizations with new insights and better answers faster. Many IT and business professionals still continue to define business analytics in broad generalizations. In this perspective, it is important to know the difference between BI and BA

BI vs BA
Business Intelligence and Business Analytics are often used interchangeably, but there are some key differences:
BI vs BA
Answers the questions:

Business Intelligence
What happened? When? Who? How many?

Business Analytics
Why did it happen? Will it happen again? What will happen if we change x? What else does the data tell us that never thought to ask? Statistical/Quantitative Analysis Data Mining Predictive Modeling Multivariate Testing

Includes:

Reporting (KPIs, metrics) Automated Monitoring/Alerting (thresholds) Dashboards Scorecards OLAP (Cubes, Slice & Dice, Drilling) Ad hoc query

Business Analytics, A Progression From BI

Recognizing the growing popularity of business analytics, business intelligence application vendors are including some BA functionality in their products. More recently, data warehouse appliance vendors have started to embed BA functionality within the appliance. Major enterprise system vendors are also embedding analytics, and the trend towards putting more analytics into memory is expected to shorten the time between a business event and decision/response.

What Is BA In-fact?
Business analytics (BA) refers to the skills, technologies, applications 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. In contrast, Business Intelligence (BI) traditionally focuses on using a consistent set of metrics to both measure past performance and guide business planning, which is also based on data and statistical methods.

Challenges Faced During Data Analytics

Analytics is dependent on data. The most important factor to the successful implementation of business analytics practices is 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. Unfortunately, businesses were not experts in data analysis and statistics. They were expert in their particular domains, and were even visionaries per say to have identified the need for business intelligence. However, they relied on data analysts to extract information from data. Business users imparted domain knowledge to the analysts, and then waited for them to derive information. The analysis involved several iterations. Time was required to perform these iterations, but businesses needed to collect, analyze and directly act on results. They required instant decision-making. Due to this evident gap in relevant analytics, and business needs; analytics meant long cycle times. There was a need for business area expertise that could help them reduce decision delivery times. The necessity heralded a move towards deeper collaboration between business users and analysts.

Coping With Challenges: The Emerging Trends There are indications of immense growth for an industry that is dominated by a business need for knowledge discovery. Analytic firms have shifted their focus from serving everyone, to serving a particular industry. It helps industry gain domain knowledge that only businesses in a particular industry possessed. It also allows sharing of best practices and integrating crossindustry experience. Domain knowledge has helped realizing the potential of analytics not as an afterthought reaction, but as a preemptive action. The industry has plunged into optimization of inter and intrabusiness functions. The industry has moved from reliance on data mining experts to business users. Industry gurus describe it as descriptive

The Need For Change

The Future Trends (1 of 2)

Business analytics will take information from operational and tactical decision-making input to a level where strategic decision-making feeds on analytics. Value add through analytics would not just be a discovery; it will be a function with results measured and acted upon. The industry will employ multiple data sources to identify information that are not inherent in a single data source. Information systems covering an entire supply chain will replace the need for individual information systems, and inter-business analytics replacing the value-addition rendered from intra-business analytics. Approach towards analytics will move from reactive to proactive and then real-time.

The Future Trends (2 of 2)

Integration efforts will focus on return on investment with increasing need for analytic results as a starting point towards the critical next steps of action and measurement. With the tip of iceberg recognized, it is the beginning of new era in business. It appears quantitative not just qualitative inputs will make an organization successful in the market place. Use of relevant data will tell stories of success and failures, and help identify arenas for future growth.

Types Of Analytics
Reporting or Descriptive Analytics Modeling or Predictive analytics Data-Driven Strategy Clustering Affinity grouping

Uses Of Business Analytics (1 of 2)

Davenport argues that businesses can optimize a distinct business capability via analytics and thus better compete. He identifies these characteristics of an organization that are apt to compete on analytics:

One or more senior executives who strongly advocate factbased decision making and, specifically, analytics Widespread use of not only descriptive statistics, but also predictive modeling and complex optimization techniques Substantial use of analytics across multiple business functions or processes Movement toward an enterprise level approach to managing analytical tools, data, and organizational skills and capabilities.

Uses Of Business Analytics (2 of 2)

Examples of BA uses include:
Exploring data to find new patterns and relationships (data mining) Explaining why a certain result occurred (statistical analysis, quantitative analysis) Experimenting to test previous decisions (A/B testing, multivariate testing) Forecasting future results (predictive modeling, predictive analytics)

Eight Levels Of Analytics

Not all analytics are created equal. Like most software solutions, you will find a range of capabilities with analytics, from the simplest to the most advanced. In the spectrum shown on the coming slides, your competitive advantage increases with the degree of intelligence.

1. STANDARD REPORTS Answer the questions: What happened? When did it happen? Example: Monthly or quarterly financial reports. We all know about these. They're generated on a regular basis and describe just "what happened" in a particular area. They're useful to some extent, but not for making long-term decisions.

2. AD HOC REPORTS Answer the questions: How many? How often? Where? Example: Custom reports that describe the number of hospital patients for every diagnosis code for each day of the week. At their best, ad hoc reports let you ask the questions and request a couple of custom reports to find the answers.

3. QUERY DRILLDOWN (OR OLAP) Answers the questions: Where exactly is the problem? How do I find the answers? Example: Sort and explore data about different types of cell phone users and their calling behaviors. Query drilldown allows for a little bit of discovery. OLAP lets you manipulate the data yourself to find out how many, what color and where.

4. ALERTS Answer the questions: When should I react? What actions are needed now? Example: Sales executives receive alerts when sales targets are falling behind. With alerts, you can learn when you have a problem and be notified when something similar happens again in the future. Alerts can appear via e-mail, RSS feeds or as red dials on a scorecard or dashboard.

5. STATISTICAL ANALYSIS Answers the questions: Why is this happening? What opportunities am I missing? Example: Banks can discover why an increasing number of customers are refinancing their homes. Here we can begin to run some complex analytics, like frequency models and regression analysis. We can begin to look at why things are happening using the stored data and then begin to answer questions based on the data.

6. FORECASTING Answers the questions: What if these trends continue? How much is needed? When will it be needed? Example: Retailers can predict how demand for individual products will vary from store to store. Forecasting is one of the hottest markets and hottest analytical applications right now. It applies everywhere. In particular, forecasting demand helps supply just enough inventory, so you dont run out or have too much.

7. PREDICTIVE MODELING Answers the questions: What will happen next? How will it affect my business? Example: Hotels and casinos can predict which VIP customers will be more interested in particular vacation packages. If you have 10 million customers and want to do a marketing campaign, who's most likely to respond? How do you segment that group? And how do you determine who's most likely to leave your organization? Predictive modeling provides the answers.

8. OPTIMIZATION Answers the question: How do we do things better? What is the best decision for a complex problem? Example: Given business priorities, resource constraints and available technology, determine the best way to optimize your IT platform to satisfy the needs of every user. Optimization supports innovation. It takes your resources and needs into consideration and helps you find the best possible way to accomplish your goals.

The Best Analytics For Your Business Problem ???

The majority of analytic offerings available today fall into one of the first four areas, which report historical data on what happened in the past but no insight about the future. For simple business problems, these analytic solutions will be all you need. But if you're asking more complex questions or looking for predictive insight, you need to look at the second half of the spectrum. Even better, if you can learn to use these technologies together and identify what type of analytics to use for every individual situation, you'll really be increasing your chances for true business intelligence.

BUSINESS ANALYTICSLEADING TO COMPETITION

Competitor Analysis: What, Why And How???

Competitor Analysis is an important part of the strategic planning process. Competitor analysis has several important roles in strategic planning: To help management understand their competitive advantages/disadvantages relative to competitors To generate understanding of competitors past, present (and most importantly) future strategies To provide an informed basis to develop strategies to achieve competitive advantage in the future To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?

What Questions Should Be Asked When Undertaking Competitor Analysis??? The following is a useful list to bear in mind:
Who are our competitors? (see the section on identifying competitors further below) What threats do they pose? What is the profile of our competitors? What are the objectives of our competitors? What strategies are our competitors pursuing and how successful are these strategies? What are the strengths and weaknesses of our competitors? How are our competitors likely to respond to any changes to the way we do business?

Sources Of Information For Competitor Analysis

Davidson (1997) described how the sources of competitor information can be neatly grouped into three categories:
1. Recorded data: this is easily available in published form either internally or externally. Good examples include competitor annual reports and product brochures; Observable data: this has to be actively sought and often assembled from several sources. A good example is competitor pricing; Opportunistic data: to get hold of this kind of data requires a lot of planning and organization. Much of it is anecdotal, coming from discussions with suppliers, customers and, perhaps, previous management of competitors.

2.

3.

The Table Below Lists Possible Sources Of Competitor Data Using Davidsons Categorization:

Recorded Data
Annual report & accounts Press releases Newspaper articles Analysts reports Regulatory reports Government reports

Observable Data
Pricing / price lists Advertising campaigns Promotions Tenders Patent applications

Opportunistic Data
Meetings with suppliers Trade shows Sales force meetings Seminars / conferences Recruiting ex-employees Discussion with shared distributors Social contacts with competitors

Presentations / speeches

Cont

Davidson likens the process of gathering competitive data to a jigsaw puzzle. Each individual piece of data does not have much value. The important skill is to collect as many of the pieces as possible and to assemble them into an overall picture of the competitor. This enables you to identify any missing pieces and to take the necessary steps to collect them.

What Businesses Need To Know About Their Competitors???

Coming slides show the kinds of competitor information that would help businesses complete some good quality competitor analysis. However, an important challenge in competitor analysis is working out how to obtain competitor information that is reliable, up-to-date and available legally.

What businesses probably already know their competitors Overall sales and profits Sales and profits by market Sales by main brand Cost structure Market shares (revenues and volumes) Organization structure Distribution system Identity / profile of senior management Advertising strategy and spending Customer / consumer profile & attitudes Customer retention levels

What businesses would really like to know about competitors Sales and profits by product Relative costs Customer satisfaction and service levels Customer retention levels Distribution costs New product strategies Size and quality of customer databases Advertising effectiveness Future investment strategy Contractual terms with key suppliers Terms of strategic partnerships

REVIEW YOUR BUSINESS PERFORMANCE ???

Conduct A Competitor Analysis

The type of competitor information that will be really useful to you depends on the type of business you are and the market you're operating in. Questions to ask about your competitors include: who they are? what they offer? how they price their products? what the profile and numbers of their customers are compared with yours? what their competitive advantages and disadvantages are compared with yours? what their reaction to your entry into the market or any product or price changes might be?
You will probably find it useful to do a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. This will show you how you are doing in relation to the market in general and specifically your closest competitors. See the page in this guide on models for your strategic analysis.

There Are Three Main Ways To Find Out More About Your Competitors: What they say about themselves - sales literature, advertisements, press releases, shared suppliers, exhibitions, websites, competitor visits, company accounts. What other people say about them - your sales people, customers, local directories, the internet, newspapers, analysts' reports, market research companies. Commissioned market research - if you need more detailed information, you might want to commission specific market research via an organization such as the Market Research Society (MRS).

 The Knowledge Quiz Case Study

Basic Domains Within Analytics

Retail Sales analytics Financial Services analytics Risk & Credit analytics Marketing analytics Collections analytics Fraud analytics Pricing analytics Telecommunications Supply Chain analytics Transportation analytics

3 APPLICATION CASES
Retail Sales Analytics Financial Services Analytics Marketing Analytics

Retail Sales Analytics

Rapid globalization has brought both benefits and challenges to the retail, CPG and transportation sectors. The key to the success of these industries lies in swift decision-making and innovation. Sales resources are precious for any organization, but only when used effectively. This is where data, information and analytics can play a role in helping organizations. See Video for understanding: http://www.youtube.com/watch?v=m5HLJxa5QOU

Key Questions???
Who should I call on today? Which customers could be cross-sold or up-sold? Which markets are we not selling into but should be?
Questions like these plague sales managers continuously. Using

analytical methodology to answer some of these questions is

emerging as a best-practice for sales driven organizations.

Business Analytics For Retail

Gain deep understanding of customers and predict future behavior
See online demo (by IBM) for understanding Business Analytics for retail: http://forms.cognos.com/?elqPURLPage=2293&offid=od_business _analytics_for_retail&mc=-web_ibm_rn_solution.335-1

FINANCIAL SERVICES ANALYTICS

Financial Services Analytics

Competition in the Financial Services industry is marked by a constant need to differentiate and identify profitable niche customer segments and aligns services with them. A key advantage enjoyed by the Financial Services is the ease of availability of accurate account and transactional data for the purpose of analysis. Using of cutting-edge analytics and advanced mathematical modeling techniques, can provide a foundation for you to identify winning business propositions and develop a strong profitability-driven approach to business.

Two Key Areas For Using Analytics In Financial Services Are For The Purposes Of:

Customer acquisition and Portfolio Customer Acquisition Portfolio Analysis

Customer Acquisition And Portfolio Customer Acquisition

Under customer acquisition, analytics can impact your top-line by answering the following questions:

1. What type of leads have higher propensity to become customers? This can help improve the quality of leads and the lead generation process
2. How can the lead-to-customer conversion process be improved? By analyzing the behavior of leads that are responsible for purchases across different sales channels Internet, call center, direct sales insights can be provided on the lead-to-customer conversion process 3. How to measure the effectiveness of a marketing channel? Which marketing channels are more effective than others? By analyzing the sales data from each of these channels, it would be possible to first design an appropriate measure of effectiveness and find the channels that are more effective than others 4. How to measure the effectiveness of promotions / campaigns? 5. How to allocate marketing budget across channels and media vehicles?

Portfolio Analysis

Portfolio analysis in the Financial Services domain can be applied along different dimensions:

Portfolio Analysis
1. Product profitability

What is the profitability of different products? (Based on NPV, expected loss, redemptions, net interest income, economic capital, commissions, fees and economic factors such as interest rates, property prices, inflation etc.)
2. What is the profitability of different brokers / agents? (Commissions, fees, type of products sold, type of customers they serve) 3. Which brokers/agents are better positioned to give more business and more likely to be profitable? (Share of wallet, types of products sold, regions which they serve, customer profiles) 4. What broker/agent segments exist based on profitability and other attributes?

5. Customer profitability

What are the different customer segments based on their profitability and other attributes (demographic & behavioral such as age, gender, income, loan amount, region, ethnicity, marital status, default payment history, types of products

Example:

In the recent past, DecisionCraft has worked with leading mortgage lenders in the UK to analyze the profitability of their portfolio and identify focus product and customer segments. Recently, we have also completed an assignment for UK's largest debt collection agency to analyze collector performance.

Marketing Analytics
Marketing analytics is the practice of measuring, managing and analyzing marketing performance to maximize its effectiveness and optimize Return on Investment (ROI). Understanding marketing analytics allows marketers to be more efficient at their jobs and minimize wasted web marketing dollars. Beyond the obvious sales and lead generation applications, marketing analytics can offer profound insights into customer preferences and trends. Despite these compelling benefits, a majority of organizations fail to ever realize the promises of marketing analytics. According to a survey of senior marketing executives published in the Harvard Business Review, more than 80% of respondents were dissatisfied with their ability to measure marketing ROI.

Figure 1: A Survey Of Sr. Marketing Executives On Their Marketing Analytics Effectiveness

The Importance Of Marketing Analytics

Marketing analytics, Internet (or Web) marketing analytics in particular, allow you to monitor campaigns and their respective outcomes, enabling you to spend each dollar as effectively as possible. The importance of marketing analytics is obvious: if something costs more than it returns, it's not a good long-term business strategy. In a 2008 study, the Lenskold Group found that companies making improvements in their measurement and ROI capabilities were more likely to report outgrowing competitors and a higher level of effectiveness and efficiency in their marketing. Simply put: Knowledge is power In search marketing in particular, knowledge comes in the form of keywords. Keywords tell you exactly what is on the mind of your current and potential customers. In fact, the most valuable long-term benefit of engaging in paid and natural search marketing is not incremental traffic to your website, it's the keyword data contained within each click, which can be utilized to inform and optimize other business processes.

Cont

Product Design: Keywords can reveal exactly what features or solutions your customers are looking for. Customer Surveys: By examining keyword frequency data, you can infer the relative priorities of competing interests. Industry Trends: By monitoring the relative change in keyword frequencies, you can identify and predict trends in customer behavior. Customer Support: Understand where customers are struggling the most and how support resources should be deployed.

Marketing Analytics: How And Where To Start

The Web is clearly the only game in town. Pakistan has the highest mobile penetration rate in the South Asian region with 108 million mobile subscribers in April 2011. Its teledensity has reached to 69.0 till June 2011. Moreover, Pakistan has one of the fastest-growing Facebook and Twitter-using populations in the world, with over four million Facebook users (Martine, 2011; PTA, 2011). The quickest and easiest way to reach out to this huge market is through paid search marketing, for example, advertising on Google AdWords or through other search engines.

For Other details see Handouts:

Discussion???

Definitions
Data mining is the process of extracting hidden patterns from data. As more data is gathered, with the amount of data doubling every three years data mining is becoming an increasingly important tool to transform this data into information. It is commonly used in a wide range of profiling practices, such as marketing, surveillance, fraud detection and scientific discovery. Data mining: the extraction of predictive information from large databases. Dashboards: Typically, information is presented to the manager via a graphics display called a Dashboard. A BIS (Business Intelligence System) Dashboard serves the same function as a cars dashboard. Specifically, it reports key organizational performance data and options on a near real time and integrated basis. Dashboard based business intelligence systems do provide managers with access to powerful analytical systems and tools in a user friendly environment. Enterprise resource planning (ERP) is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores. Online analytical processing, or OLAP is an approach to quickly answer multi-dimensional analytical queries. OLAP is part of the broader category of business intelligence, which also encompasses relational reporting and data mining. The typical applications of OLAP are in business reporting for sales, marketing, management reporting, business process management (BPM), budgeting and forecasting, financial reporting and similar areas. The term OLAP was created as a slight modification of the traditional database term OLTP (Online Transaction Processing) Multidimensional/ hyper cubes: A group of data cells arranged by the dimensions of the data. For example, a spreadsheet exemplifies a two-dimensional array with the data cells arranged in rows and columns, each being a dimension. A three-dimensional array can be visualized as a cube with each dimension forming a side of the cube, including any slice parallel with that side. Higher dimensional arrays have no physical metaphor, but they organize the data in the way users think of their enterprise. Typical enterprise dimensions are time, measures, products, geographical regions, sales channels, etc. Synonyms: Multi-dimensional Structure, Cube, Hypercube OLAP operations: Slice, Dice, Drill Down/Up, Roll-up, Pivot See this site for all these definitions: http://altaplana.com/olap/glossary.html#SLICE AND DICE