(1.2) Business Analytics Defined

• Uncertainty is a significant challenge in decision making
• Knowing the demand for a product would greatly aid in planning and scheduling production
• Knowing the exact duration of each step in a project would help predict the project’s cost and completion date
• If we knew how stocks will perform, investing would be a lot easier.
• The enormous number of alternatives often makes decision making difficult as we cannot evaluate them all
• Business analytics is the scientific process of transforming data into insight for making better decisions
• Business Analytics is used for data-driven or fact-based decision making, which is often seen as more objective than other alternatives
• The tools of business analytics can aid decision making by:

  • Creating insights from data
  • Improving the ability to more accurately forecast for planning
  • Helping quantify risk
  • Yielding better alternatives through analysis and optimization
• A study conducted by researchers at MIT’s Sloan School of Management and the University of Pennsylvania concluded that firms guided by data-driven decision making have:

  • Higher productivity and market value
  • Increased output and profitability
• Some firms and industries use the simpler term analytics,.
• Analytics is often thought of as a broader category than business analytics, encompassing the use of analytical techniques in the sciences and engineering as well.
• Example of enormous alternatives

  • What is the best combination of stocks to help me meet my financial objectives?
  • What is the best product line for a company that wants to maximize its market share?
  • How should an airline price its tickets ‘so as to maximize revenue?
• In the book, we use business analytics and analytics synonymously.