CHAPTER 12 Business Analytics

CHAPTER OUTLINE 12.1 Managers and Decision Making 12.2 What Is Business Intelligence? 12.3 Business Intelligence Applications for Data Analysis 12.4 Business Intelligence Applications for Presenting Results 12.5 Business Intelligence in Action: Corporate Performance Management

LEARNING OBJECTIVES 1. Explain different ways in which IT supports managerial decision making. 2. Provide examples of different ways that organizations make use of business intelligence.

LEARNING OBJECTIVES (continued) 3. Explain the value that different BI applications provide to large and small businesses. 4. Offer examples of how businesses and government agencies can use different BI applications to analyze data.

LEARNING OBJECTIVES (continued) 5. Explain how your university could use CPM to effect solutions to two campus problems at your university.

Chapter Opening Case

12.1 Managers and Decision Making Management Management is a process by which organizational goals are achieved through the use of resources (people, money, energy, materials, space, time).

The Manager’s Job and Decision Making Managers have three basic roles (Mintzberg 1973) Interpersonal roles Informational roles Decisional roles Managers have three basic roles: Interpersonal roles: figurehead, leader, liaison Informational roles: monitor, disseminator, spokesperson Decisional roles: entrepreneur, disturbance handler, resource allocator, negotiator.

The Manager’s Job & Decision Making (continued) Decisions and Decision making Decision refers to a choice that individuals and group make among two or more alternatives. Decision making is a systematic process composed of three major phases: intelligence, design and choice (Simon 1977), with the implementation phase added later.

Decision Making Process

Why Managers Need IT Support The number of alternatives to be considered constantly increases. Decisions must be made under time pressure. Decisions are more complex. Decision makers can be in different locations and so is the information.

A Framework for Computerized Decision Analysis Lower-level managers usually perform the structured and operational-control oriented tasks in cells 1, 2, and 4. (Blue color above). Middle managers and staff usually perform the tasks in cells 3, 5, and 7. (Orange color above). Senior executives usually perform the tasks in cells 6, 8, and 9. (Yellow color above.)

Problem Structure The first dimension deals with the problem structure, where the decision making processes fall along the continuum ranging from highly structured to highly unstructured decisions. Highly structured Higly unstructured Semistructured Structured problems are routine and repetitive problems for which standard solutions exist. Unstructured problems are fuzzy, complex problems for which there are no cut-and-dried solutions. Semistructured problems are problems in which only some of the decision process phases are structured. Order entry Loan approval Building new plant

The Nature of Decisions The second dimension of decision support deals with the nature of decisions Operational control Management control Strategic planning Operational control involves executing specific tasks efficiently and effectively. Management control involves decisions concerning acquiring and using resources efficiently in accomplishing organizational goals. Strategic planning involves decisions concerning the long range goals and policies for growth and resource allocation.

12.2 What Is Business Intelligence? Business Intelligence (BI) refers to applications and technologies for consolidating, analyzing, and providing access to vast amounts of data to help users make better business and strategic decisions. Clicking on the logos above will take you to each company’s home page.

Can We Predict the Weather? (IT’s About Business 12.2)

The Scope of Business Intelligence Larger organizations: Data mining, predictive analytics, dashboards Smaller organizations: Excel spreadsheets

How Organizations Use BI Develop few, related BI applications Data mart Develop infrastructure to support enterprisewide BI Enterprise data warehouse Support organizational transformation

12.3 Business Intelligence Applications for Data Analysis Multidimensional Analysis or Online Analytical Processing (OLAP) Data Mining Decision Support Systems

Multidimensional Analysis or Online Analytical Processing (OLAP) (1) Provides users with a look at what is happening or what has happened. (2) Allows users to analyze data in such a way that they can quickly answer business questions. Example of Data Cube

Data Mining Data Trends, behaviors, unknown patterns Data mining refers to the process of searching for valuable information in a large database, data warehouse, or data mart. Data mining performs two basic operations: Predicting trends and behaviors; Identifying previously unknown patterns and relationships. Trends, behaviors, unknown patterns

Data Mining (continued) Used in Targeted Marketing

How Business Intelligence Works

Decision Support Systems (DSS) DSS capabilities Sensitivity analysis What-if analysis Goal-seeking analysis Decision support systems (DSSs) are computer-based information systems that combine models and data in an attempt to solve semistructured and some unstructured problems with extensive user involvement. Sensitivity analysis is the study of the impact that changes in one (or more) parts of a model have on other parts. What-if analysis is the study of the impact of a change in the assumptions (input data) on the proposed solution. Goal-seeking analysis is the study that attempts to find the value of the inputs necessary to achieve a desired level of output.

DSS Example Go to the Blue Nile Web site (www.bluenile.com) Click on Search for diamonds Select a shape of diamond You will see 4 slider bars (which Blue Nile calls filters): cut, clarity, carats, and color Have the women in the class specify a diamond that they would “ideally like to have” (men do not participate now) The women are performing what if and sensitivity analysis Now, clear the filters and have the men specify a price that they would like to pay (ideally) The men are performing goal seeking analysis These two processes will lead to an interesting discussion in class!

12.4 Business Intelligence Applications for Presenting Results Dashboards Data Visualization Technologies Geographic Information Systems Real-Time BI

Digital Dashboard (example) Digital Dashboards: Provide rapid access to timely information. Provide direct access to management reports. Are very user friendly and supported by graphics.

Digital Dashboard (example)

Digital Dashboard Demo http://www.informationbuilders.com/rfr/qtdemo/AdvVis_ExecDash/AdvVis_ExecDash.html

A Bloomberg Terminal

Management Cockpit The management cockpit is a strategic management room that enables top-level decision makers to pilot their businesses better. The environment encourages more efficient management meetings and boosts team performance via effective communication. Key performance indicators and information relating to critical success factors are displayed graphically on the walls of the meeting room. External information can be easily imported to the room to allow competitive analysis.

Data Visualization Systems The Power of Visualization Even though a picture is “worth a thousand words,” we have to be very careful about just what we are seeing. Remember, on the Internet, it is “user beware!” Data visualization is the process of presenting data to users in visual formats, thereby making IT applications more attractive and understandable to users. The link above takes you to a short video from Dove.

New York City Police Department Command Center Data visualization in action

Example of data visualization Hans Rosling at the TED Talks This is an outstanding 21-minute video that illustrates data visualization.

Geographic Information System

GIS for existing land use

GISMO GISMO is a geographic information system developed for the city of Corvallis, Oregon. Clicking on the link above will present an interactive demonstration of GISMO.

Real-Time BI (IT’s About Business 12.4)

Reality Mining Reality mining allows analysts to extract information from usage patterns of mobile phones and other wireless devices. Clicking on the logos above will take you to the respective company home pages.

12.5 Business Intelligence in Action: Corporate Performance Management Corporate performance management is involved with monitoring and managing an organization’s performance according to key performance indicators.

Chapter Closing Case