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MBA K723 Winter 2013

Data Mining and Business Intelligence


Yufei Yuan Course Web Site
http://avenue.mcmaster.ca

Instructor

Dr. Yufei Yuan Professor of Information Systems E-mail: yuanyuf@mcmaster.ca Phone: (905) 525-9140 x23982 Office: DSB A204 Office Hours: Tuesdays 10:30 - 11:30 pm. Personal Web Site:

http://www.business.mcmaster.ca/msis/profs/yuan/

TA

Sonia Camacho (PhD student)


camachsm@mcmaster.ca Office: DSB A211 Tel: (905) 525-9140 x 26048 Office hour: by appointment

Let us get to know each other

Introduce your self What is your background and interests? Why do you want to take this course? What do you expect from this course?

Course Objective

Understand the basic concepts and applications of business intelligence Understand the process of data mining Learn basic data mining technologies Learn how to use business intelligence to solve business problems

The Business Value of BI

In todays highly competitive business environment, the quality and timeliness of business information for an organization is not the choice between profit and loss it may be a question of survival or bankruptcy.

The business value of the course


Data mining and business intelligence is a very important topic not only for MBA students in IS area but also for MBA students in other areas such as finance, marketing, operations management, healthcare etc. It will help students to advance in their future career.

The technology trends

based on a survey of over 4,000 information technology (IT) professionals from 93 countries and 25 industries, the IBM Tech Trends Report (2011) identified business analytics as one of the four major technology trends in the 2010s.

Use of BI in industry

In a survey of the state of business analytics by Bloomberg Businessweek (2011), 97 percent of companies with revenues exceeding $100 million were found to use some form of business analytics.

Job market

A report by the McKinsey Global Institute (Manyika et al. 2011) predicted that by 2018, the United States alone will face a shortage of 140,000 to 190,000 people with deep analytical skills, as well as a shortfall of 1.5 million data-savvy managers with the know-how to analyze big data to make effective decisions.

Comments from Hal Varian, Chief Economist at Google and emeritus professor at the University of California, Berkeley

So whats getting ubiquitous and cheap? Data. And what is complementary to data? Analysis. So my recommendation is to take lots of courses about how to manipulate and analyze data: databases, machine learning, econometrics, statistics, visualization, and so on.

Teaching Philosophy

Self-motivated active learning Learn from both business and technology perspective Learning by doing. Combination of theory and practice To be sensitive to the real world business problems

Textbooks

Efraim Turban, Ramesh Sharda, Jay E. Aronson, David King, Business Intelligence: A Managerial Approach, Pearson Prentice Hall, 2008. Galit Shmueli, Nitin Patel, and Peter Bruce,

Data Mining for Business Intelligence: Concepts, Technologies, and Applications in Micorsoft Office Excel with XLminer, John Wiley
& Sons, Inc. 2006, (ISBN 0-470-08485-5)

Course evaluation

Assignments

30%
1: 2: 3: 4: Data warehouse modeling (7.5%) Decision tree analysis (7.5%) Association analysis (7.5%) Neural Networks (7.5%)

Assignment Assignment Assignment Assignment

Research Paper 35%

Proposal 5%, presentation 10%, report 20%

Final Exam

35%

Research Project
Investigate business applications, new trends, and issues in data mining and business intelligence
Business intelligence applications in a special field Business intelligence case studies Advances of data mining technologies Security and privacy issues of data mining New trends of business intelligence Issues and challenges of BI

Questions? Suggestions?

Agenda

What is BI? What are the applications of BI? What are the benefits of BI? What are the components of BI? How to implement BI?

What is Business Intelligence?

Business intelligence (BI) refers to skills, knowledge, technologies, applications and practices used to help a business to acquire a better understanding of the market behavior and business context. For this purpose it employs collection, integration, analysis, interpretation and presentation of business information. http://en.wikipedia.org/wiki/Business_Intelligence

Typical BI applications

Customer segmentation Propensity to buy Customer profitability Fraud detection Customer attrition Channel optimization
Source: Ziama and Kasher (2004)

Customer segmentation

What market segments do my customers fall into, and what are their characteristics? Personalize customer relationships for higher customer satisfaction and retention. How to do it?

Propensity to buy

Which customers are most likely to respond to my promotion? Target customers based on their need to increase their loyalty to your product line. Also, increase campaign profitability by focusing on the most likely to buy. How to do it?

Customer profitability

What is the lifetime profitability of my customer? Make individual business interaction decision based on the overall profitability of customers How to do it?

Fraud detection

How can I tell which transactions are likely to be fraudulent? Quickly determine fraud and take immediate action to minimize cost. How to do it?

Customer attrition

Which customer is at risk of leaving? Prevent loss of high-value customers and let go of lower-value customers. How to do it?

Channel optimization

What is the best channel to reach my customer in each segment? Interact with customers based on their preference and your need to manage cost. How to do it?

Benefit of BI
A survey based on 510 corporations (Eckerson 2003) Time savings (61%) Single version of truth (59%) Improved strategies and plans (57%) Improved tactical decisions (56%) More efficient processes (55%) Cost savings (37%)

A High level architecture for BI

BI architecture and components

Data warehouse Business analytics Data mining Automated decision tools Business performance management Dashboards Visualization tools

Data Warehouse

The idea of a data warehouse is to put a wide range of operational data from internal and external sources into one place so it can be better utilized by executives, line of business managers and other business analysts. Data Warehouse is an integrated, subjectoriented, time-variant, non-volatile database that provides support for decision making.

Business Analytics

Often refers to OLAP (Online Analytical Processing) Software tools that allow users to create on-demand reports and queries and conduct analysis of data

Data Mining

A class of information analysis based on databases that looks for hidden patterns in a collection of data which can be used to predict future behavior With data mining, it is possible to better manage product warranties, predict purchases of retail stock, unearth fraud, determine credit risk, and define new products and services.

Automated Decision Systems

Rule-based systems that provide a solution usually in one functional area to a specific repetitive management problem in one industry. e.g. automated loan approval, intelligent price setting.

Business performance management (BPM)

based on the balanced scorecard methodology a framework for defining, implementing, and managing an enterprises business strategy by linking objectives with factual measures

Dashboard

Provide a comprehensive visual view of corporate performance measures, trends, and exceptions from multiple business areas A visual presentation of critical data for executives to view. It allows executives to see hot spots in seconds and explore the situation

http://www.idashboards.com/live-dashboard-previews.shtml

Visualization

Visualization is the graphical presentation of information, with the goal of providing the viewer with a qualitative understanding of the information contents. Understanding may involve detection, measurement, and comparison, and is enhanced via interactive techniques and providing the information from multiple views and with multiple techniques.

Dashboards

A visual presentation of critical data for executives to view. It allows executives to see hot spots in seconds and explore the situation.

BI process

BI for competitive advantage

Using BI to achieve and sustain competitive advantage. Competitive intelligence (CI)


An ethical and legal business practice The focus is on the external business environment. A process involved in gathering information, converting it into intelligence and then utilizing this in business decision making

The Mobile era

As reported prominently in an October 2011 article in The Economist (2011), the number of mobile phones and tablets (about 480 million units) surpassed the number of laptops and PCs (about 380 million units) for the first time in 2011. The number of mobile connected devices would reach 10 billion in 2020.

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