Video5 NotesAnalytical Methods for Internal and External

Processes

Sam, Nethra Sambamoorthi, Ph.D

Internal and External Analytical Opportunities

• Internal – Processes that do not involve external transaction involving consumers or

vendors or partners and their behavior, attitudes, and/or interaction data• Activity based costing(allocating costs of resources which are technically non-

dividable)• Bayesian inference (to predict revenues)• Bio-simulation (e.g: in pharmaceutical “in silico” research)• Combinatorial optimization (eg: optimizing product portfolio )• Constraint analysis (for product configuration)• Experimental design (for web site configuration)• Future value analysis (market capitalization into current vs. future value and

future growth)• Monte Carlo simulation (for R&D project valuation)• Multiple regression analysis (how non-financial factors affect the financial

performance)• Neural Network analysis (to predict onset of disease)• Textual analysis (to assess intangible capabilitlies)• Yield analysis (in semiconductor manufacturing)

Internal and External Analytical Opportunities

• External– Processes that involve external transaction, or behavior,

or interaction data• Marketing analytics

– CHAID, Conjoint analysis, Lifetime analysis, market experiments, multiple regression analysis, price optimization, time series experiments, market basket analysis, brand management, customer life cycle and life time value

• Supply chain analytics– Capacity planning– Demand-supply matching– Location analysis– Modeling to simulate, explore contingencies, and optimize supply

chains– Routing– Scheduling

Method What question is being answered? Key Reference Bayesian Inference As I get new data, how can I use it to update the intelligence in a

continuous manner? This is a great tool for real time update of probabilities

http://blog.crmportals.com/2012/07/28/real-time-analytics-basics-bayesian-updating-part-i/

Yield analysis Yield analysis, ROI from media investments where multiple campaigns interact and separating out the effects of such campaign requires a sophisticated random coefficients regression model. Yield analysis is also very popular in manufacturing, investments, and food production

Algorithms and software for yield analysis in Media analysis

Experimental design What is the best way to collect data that systematically controls the variation in dependent variable, by various levels of independent variables and specific repetitions, so that the conclusions are valid with specific Type I and Type II error probabilities?

Experimental design,basic statistics, andsample size determination

Future Value Analysis; Present Value Analysis; IRR, Annuities, Discounting

How to estimate return on investment on a portfolio of investment instruments?

Reference

Neural Network analysis How does human brain makes decisions based on various inputs and the expected outputs are connected to the inputs that could get inspiration on how brain networks comprising of neurons, dendrites work together and triggers get incorporated?

http://www.crmportals.com/Neural_Networks_Basics_presentation.pdf

Monte-carlo simulation How to estimate statistical quantities in complex equations involving probabilistic distributions whose definitive parameter values are not known.

http://en.wikipedia.org/wiki/Monte_Carlo_method

Combinatorial Optimization

How to find an optimal subset of units from a finite set of units? Since the exhaustive search means exponential list of combinations of feasible solutions , the problem becomes computationally infeasible- routing and shortest path problems, matching and assignment problems, VLSI design problems, traveling salesman problems, knapsack problems, scheduling problems, network optimization problems (network flows, transportation problems), sequence alignment problems in DNA sequencing, (mixed-)integer linear or nonlinear programming and many more.. (taken from first reference mentioned on the right hand side)

http://www.unibw.de/lrt1/gerdts/lehre/co.pdf http://www2.informatik.hu-berlin.de/alcox/lehre/lvws1011/coalg/combinatorial_algorithms.pdf

Text Analytics Analysis of documents, speeches, sentences, phrases, and words. The patterns of relationship and insights that are not represented by numerical systems but texts. a set of linguistic, statistical, and machine learning techniques that model and structure the information content of textual sources for business intelligence, exploratory data analysis, research, or investigation.[1

text mining; (Wikipedia)

Multiple Regression Analysis

“Statistical procedure that attempts to assess the relationship between a dependent variable and two or more independent variables. Examples: Total factory overhead (the dependent variable) is related to both labor-hours and machine-hours (the independent variables). Sales of a popular soft drink (the dependent variable) is a function of various factors, such as its price, advertising, taste, and the prices of its major competitors (the independent variables). “ See the whole collection of things on the right of the web page

Regression analysis. (Answer.com)

Marketing Mix vs. Promotion mix analysis

“Business intelligence of mixing and matching Four Ps: product, price, place (of distribution), and promotion, in marketing. Any one may be enhanced, deducted, or changed in some degree in order to create the strategy necessary to efficiently and effectively allocate budget for marketing mix.

BI for four types of promotion that support marketing objectives, including advertising, personal (face-to-face) selling, publicity (nonpaid advertising such as news bulletins or magazine articles), and sales promotions (product displays, trade shows and other sales events, dealer allowances, coupons, contests, and a variety of other promotions that don't fit into the other three types). The relative importance of each varies, depending upon the market and the product. For example, personal selling is more important in business-to-business sales than in consumer sales.” (answer.com)

Some terminology Extract the understanding from this accenture brochureAvinash Kaushik blog post

http://www-bcf.usc.edu/~tellis/mix.pdf

My post

Web analytics The analysis and reporting of Web site activity. Web analytics software reports the number of unique visitors, page views, banners clicked, most common navigation paths taken, most downloaded files and so on. Although reporting is commonly done in a batch mode at the end of a period, Web analytic software may also be able to report in real time

Avinash Kaushik Web analytics 2.0

Point of sale real time analytics

Category management, inventory and out of stock analysis, new product tracking, exception and trend analysis, co-selling and complementary selling, floor and analysis of 4P

How a company has created real time platform for real time POS

Retrospective vs. Prospective analysis

”prospective study watches for outcomes, such as the development of a disease, during the study period and relates this to other factors such as suspected risk or protection factor(s). A retrospective study looks backwards and examines exposures to suspected risk or protection factors in relation to an outcome that is established at the start of the study. …Most sources of error due to confounding and bias are more common in retrospective studies than in prospective studies” (statisticalhelp.com)

https://en.wikipedia.org/wiki/Retrospective_cohort_study

Media usage vs. marketing messaging channel analysis or optimization or attribution modeling

Time, space, and content consumption across more than 20 media channels. Mix and match of traditional and new media channels including social networks and smart phones. Desired and responsive media identification and offerings, also called attribution analysis

Avinash Kaushik blog post

Location analytics Analytics that integrates the current location of the consumer at any point in time and the consumer’s needs taking advantage of the latest information of the consumer and leveraging for marketing and analytics purposes

See how a company has implemented. http://locate.ly/

Market basket analysis Data intelligence of items being purchased together, activities happening together, events happening together – Analysis of associations

http://blog.crmportals.com/2015/01/05/market-basket-analysis-a-recomender-system-with-many-business-possibilities/

BI Part 1 and BI Part 2

Five Stages of Analytic Competition

Elements of BI architecture

Figure 8.1 – Competing on Analytics – The New Science Winning

Strategic Metrics, KPIs, KLIs, Dashboards, Graphical Tools

Sam, Nethra Sambamoorthi, Ph.D

Importance of Distinctive Capability and Strategic Metric

• A strategic metric captures the essence of the (1) vision, (2) budget, and (3) distinct products/services (4) the opportunity segment– It is impossible for organizations to create products or services to all

the consumers. They have to be selective to serve sub-populations called value-segment. The metric that connects the segment and the distinctive products and services for growth purposes is the strategic metric.

– A smart organization knows how to differentiate itself in the market place based on distinct products and services and the segment it wants to serve

Think: Can the strategic metric be refined by analytics?

Long List of KPIs – Where is the Beef?“Business Analytics for Managers: Taking Business Intelligence Beyond Reporting”, by Thurland and Laursen, 2010

Key Performance Indicators(KPI) and Key Leverage Indicators(KLI) – Where is the Beef?

KPIs are passive, after the fact output measurements and they are dependent on things to happen. KPIs are lag indicatorsKLI is what you need and KLI is directly related to your strategic metric. You can leverage them to get your strategic metric to raise up or go down. KLI’s lead indicators

Dashboard Input• The dashboard is a quick and visual way of capturing and presenting the current status of the operations/sales/production/logistics in an organization. The

dashboards should stimulate discussions, warn if status, trends, and exceptions have potential negative effect on the key stakeholder measurements. To be effective, dashboards have to satisfy the following best practices.

• There are different layers of dashboards (CEO/board related, Sales/customer engagement, Finance/HR/Production/logistics) and variations of this depending on the vertical and the company

• Dashboards are not just reports of an analytical work nor a SQL output from IT department; it is a one screen shot capturing trends, exceptions, warnings and alerts, opportunities, and reasons and insights for divergence from goals metrics, that would communicate critical aspects of a particular layer in few bullet points on a frequent basis (at least daily).

• Most of the coverage in single screen shot dashboards are visuals of KPIs, Key Performance Indicators

• Well understood KPIs that are critical for the operations are used and full disclosure regarding the data quality, source, and updates.

• There is more value in the time trends of KPIs - use as much as possible

• The current trend is to have Dashboards updated daily if not in real time – now imagine what kind of metrics and how it should not be a long list of unintuitive series of numbers that will kill interest in the dashboard. Gone are the days of quarterly and monthly updates

• Current trend is, also for Dashboard to have space for real time feeds from twitter/facebook and other relevant social network for customer input and challenges.

• Dashboards affords drill downs where we can have more detailed metric specific reports

• Every day summary message has be in bullet points for actions and follow-ups, that is consistently evolving smoothed for randomness

• In summary, dashboard goes beyond analytics at the hand of a top notch analyst’s input to the organization connecting the trends, exceptions, warnings, alerts, opportunities, and distills in few sentences the expected actions and follow-ups for the Sr. Management on a daily basis using KPIs, with some of the input points coming not only from competitive actions, consumer experience, production, logistics, marketing, finance, HR, and facility management, but also weather impacts, health trends, national security, and macro economic trends, so that the management is fully aware of what is going on and how to keep the metrics for the goals under control.

Some reasonable dashboards are- http://www.enterprise-dashboard.com/tag/insurance-marketing-dashboard/

10.2% reduction in production

5.6% in recommendation

Widgets International – Production, Sales, Customer Satisfaction, and Profitability

DRAFT

Graphical Objects For Dashboard Creation

Open the word document

Graphical objects, Their Usability, and How to Draw or What tool to use