Chapter 1 analytics

Analytics
From Wikipedia, the free encyclopedia
For the ice hockey term, see Analytics (ice hockey).
Analytics is the discovery, interpretation, and communication of meaningful patterns in data.
Especially valuable in areas rich with recorded information, analytics relies on the simultaneous
application of statistics, computer programming and operations research to quantify performance.
Organizations may apply analytics to business data to describe, predict, and improve business
performance. Specifically, areas within analytics include predictive analytics, prescriptive
analytics, enterprise decision management, descriptive analytics, cognitive analytics, retail analytics,
store assortment and stock-keeping unit optimization, marketing optimization and marketing mix
modeling, web analytics, call analytics, speech analytics, sales force sizing and optimization, price
and promotion modeling, predictive science, credit risk analysis, and fraud analytics. Since analytics
can require extensive computation (see big data), the algorithms and software used for analytics
harness the most current methods in computer science, statistics, and mathematics.[1]

Contents
[hide]

 1Analytics vs. analysis

 2Application of analytics
o 2.1Marketing optimization
o 2.2People analytics
o 2.3Portfolio analytics
o 2.4Risk analytics
o 2.5Digital analytics
o 2.6Security analytics
o 2.7Software analytics
 3Challenges
 4Risks
 5See also
 6References
 7External links

Analytics vs. analysis[edit]

Analytics is multidisciplinary. There is extensive use of mathematics and statistics, the use of
descriptive techniques and predictive models to gain valuable knowledge from data—data analysis.
The insights from data are used to recommend action or to guide decision making rooted in business
context. Thus, analytics is not so much concerned with individual analyses or analysis steps, but
with the entire methodology. There is a pronounced tendency to use the term analytics in business
settings e.g. text analytics vs. the more generic text mining to emphasize this broader
perspective.[citation needed] There is an increasing use of the term advanced analytics,[citation needed] typically
used to describe the technical aspects of analytics, especially in the emerging fields such as the use
of machine learningtechniques like neural networks to do predictive modeling.

Application of analytics[edit]
Marketing optimization[edit]
Marketing has evolved from a creative process into a highly data-driven process. Marketing
organizations use analytics to determine the outcomes of campaigns or efforts and to guide
decisions for investment and consumer targeting. Demographic studies, customer segmentation,
conjoint analysis and other techniques allow marketers to use large amounts of consumer purchase,
survey and panel data to understand and communicate marketing strategy.
Web analytics allows marketers to collect session-level information about interactions on a website
using an operation called sessionization. Google Analytics is an example of a popular free analytics
tool that marketers use for this purpose. Those interactions provide web analytics information
systems with the information necessary to track the referrer, search keywords, identify IP address,
and track activities of the visitor. With this information, a marketer can improve marketing
campaigns, website creative content, and information architecture.
Analysis techniques frequently used in marketing include marketing mix modeling, pricing and
promotion analyses, sales force optimization and customer analytics e.g.: segmentation. Web
analytics and optimization of web sites and online campaigns now frequently work hand in hand with
the more traditional marketing analysis techniques. A focus on digital media has slightly changed the
vocabulary so that marketing mix modeling is commonly referred to as attribution modeling in the
digital or marketing mix modeling context.
These tools and techniques support both strategic marketing decisions (such as how much overall to
spend on marketing, how to allocate budgets across a portfolio of brands and the marketing mix)
and more tactical campaign support, in terms of targeting the best potential customer with the
optimal message in the most cost effective medium at the ideal time.
People analytics[edit]
People analytics, also called HR analytics, is the application of analytics to help companies
manage human resources.[citation needed] The aim is to discern which employees to hire, which to reward
or promote, what responsibilities to assign, and similar human resource problems.[2] HR analytics is
becoming increasingly important to understand what kind of behavioral profiles would succeed and
fail. For example, an analysis may find that individuals that fit a certain type of profile are those most
likely to succeed at a particular role, making them the best employees to hire.
Portfolio analytics[edit]
A common application of business analytics is portfolio analysis. In this, a bank or lending agency
has a collection of accounts of varying value and risk. The accounts may differ by the social status
(wealthy, middle-class, poor, etc.) of the holder, the geographical location, its net value, and many
other factors. The lender must balance the return on the loan with the risk of default for each loan.
The question is then how to evaluate the portfolio as a whole.
The least risk loan may be to the very wealthy, but there are a very limited number of wealthy
people. On the other hand, there are many poor that can be lent to, but at greater risk. Some
balance must be struck that maximizes return and minimizes risk. The analytics solution may
combine time series analysis with many other issues in order to make decisions on when to lend
money to these different borrower segments, or decisions on the interest rate charged to members
of a portfolio segment to cover any losses among members in that segment.
Risk analytics[edit]
Predictive models in the banking industry are developed to bring certainty across the risk scores for
individual customers. Credit scores are built to predict individual’s delinquency behavior and widely
used to evaluate the credit worthiness of each applicant. Furthermore, risk analyses are carried out
in the scientific world and the insurance industry. It is also extensively used in financial institutions
like Online Payment Gateway companies to analyse if a transaction was genuine or fraud. For this
purpose they use the transaction history of the customer. This is more commonly used in Credit
Card purchase, when there is a sudden spike in the customer transaction volume the customer gets
a call of confirmation if the transaction was initiated by him/her. This helps in reducing loss due to
such circumstances.
Digital analytics[edit]
Digital analytics is a set of business and technical activities that define, create, collect, verify or
transform digital data into reporting, research, analyses, recommendations, optimizations,
predictions, and automations.[3] This also includes the SEO (Search Engine Optimization) where the
keyword search is tracked and that data is used for marketing purposes. Even banner ads and clicks
come under digital analytics. A growing number of brands and marketing firms rely on digital
analytics for their digital marketing assignments, where MROI (Marketing Return on Investment) is
an important key performance indicator (KPI).
Security analytics[edit]
Security analytics refers to information technology (IT) to gather and analyze security events to
understand and analyze events that pose the greatest risk.[4] Products in this area include security
information and event management and user behavior analytics.
Software analytics[edit]
Main article: Software analytics
Software analytics is the process of collecting information about the way a piece of software is used
and produced.

Challenges[edit]
In the industry of commercial analytics software, an emphasis has emerged on solving the
challenges of analyzing massive, complex data sets, often when such data is in a constant state of
change. Such data sets are commonly referred to as big data. Whereas once the problems posed by
big data were only found in the scientific community, today big data is a problem for many
businesses that operate transactional systems online and, as a result, amass large volumes of data
quickly.[5]
The analysis of unstructured data types is another challenge getting attention in the industry.
Unstructured data differs from structured data in that its format varies widely and cannot be stored in
traditional relational databases without significant effort at data transformation.[6] Sources of
unstructured data, such as email, the contents of word processor documents, PDFs, geospatial data,
etc., are rapidly becoming a relevant source of business intelligence for businesses, governments
and universities.[7] For example, in Britain the discovery that one company was illegally selling
fraudulent doctor's notes in order to assist people in defrauding employers and insurance
companies,[8] is an opportunity for insurance firms to increase the vigilance of their unstructured data
analysis. The McKinsey Global Institute estimates that big data analysis could save the American
health care system $300 billion per year and the European public sector €250 billion.[9]
These challenges are the current inspiration for much of the innovation in modern analytics
information systems, giving birth to relatively new machine analysis concepts such as complex event
processing, full text search and analysis, and even new ideas in presentation.[10] One such innovation
is the introduction of grid-like architecture in machine analysis, allowing increases in the speed of
massively parallel processing by distributing the workload to many computers all with equal access
to the complete data set.[11]
Analytics is increasingly used in education, particularly at the district and government office levels.
However, the complexity of student performance measures presents challenges when educators try
to understand and use analytics to discern patterns in student performance, predict graduation
likelihood, improve chances of student success, etc. For example, in a study involving districts
known for strong data use, 48% of teachers had difficulty posing questions prompted by data, 36%
did not comprehend given data, and 52% incorrectly interpreted data.[12] To combat this, some
analytics tools for educators adhere to an over-the-counter data format (embedding labels,
supplemental documentation, and a help system, and making key package/display and content
decisions) to improve educators’ understanding and use of the analytics being displayed.[13]
One more emerging challenge is dynamic regulatory needs. For example, in the banking industry,
Basel III and future capital adequacy needs are likely to make even smaller banks adopt internal risk
models. In such cases, cloud computing and open source programming language R can help
smaller banks to adopt risk analytics and support branch level monitoring by applying predictive
analytics.[citation needed]

Risks[edit]
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The main risk for the people is discrimination like price discrimination or statistical
discrimination. See Scientific American book review of "Weapons of math destruction"
There is also the risk that a developer could profit from the ideas or work done by users, like this
example: Users could write new ideas in a note taking app, which could then be sent as a custom
event, and the developers could profit from those ideas. This can happen because the ownership of
content is usually unclear in the law.[14]
If a user's identity is not protected, there are more risks; for example, the risk that private information
about users is made public on the internet.
In the extreme, there is the risk that governments could gather too much private information, now
that the governments are giving themselves more powers to access citizens' information.
Further information: Telecommunications data retention

Business analytics
From Wikipedia, the free encyclopedia
Not to be confused with Business analysis.

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help improve this article by adding citations to reliable sources.
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2010) (Learn how and when to remove this template message)

Business analytics (BA) refers to the skills, technologies, practices for continuous iterative
exploration and investigation of past business performance to gain insight and drive business
planning.[1] Business analytics focuses on developing new insights and understanding of business
performance based on data and statistical methods. In contrast, business intelligence 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.[citation needed]
Business analytics makes extensive use of statistical analysis, including explanatory and predictive
modeling,[2] and fact-based management to drive decision making. It is therefore closely related
to management science. Analytics may be used as input for human decisions or may drive fully
 automated decisions. Business intelligence is querying, reporting, online analytical
processing (OLAP), and "alerts."
In other words, querying, reporting, OLAP, and alert tools can answer questions such as what
happened, how many, how often, where the problem is, and what actions are needed. Business
analytics can answer questions like why is this happening, what if these trends continue, what will
happen next (that is, predict), what is the best that can happen (that is, optimize).[3]

Contents
[hide]

 1Examples of application
 2Types of analytics
 3Basic domains within analytics
 4History
 5Challenges
 6Competing on analytics
 7See also
 8References
 9Further reading

Examples of application[edit]
Banks, such as Capital One, use data analysis (or analytics, as it is also called in the business
setting), to differentiate among customers based on credit risk, usage and other characteristics and
then to match customer characteristics with appropriate product offerings. Harrah’s, the gaming firm,
uses analytics in its customer loyalty programs. E & J Gallo Winery quantitatively analyses and
predicts the appeal of its wines. Between 2002 and 2005, Deere & Company saved more than $1
billion by employing a new analytical tool to better optimize inventory.[3] A telecoms company that
pursues efficient call center usage over customer service may save money.

Types of analytics[edit]
 Decision Analytics: supports human decisions with visual analytics that the user models to
reflect reasoning.[4]
 Descriptive Analytics: gains insight from historical data with reporting, scorecards, clustering etc.
 Predictive Analytics: employs predictive modelling using statistical and machine
learning techniques
 Prescriptive Analytics: recommends decisions using optimisation, simulation, etc.

Basic domains within analytics[edit]

 Behavioral analytics
 Cohort Analysis
 Collections analytics
 Contextual data modeling - supports the human reasoning that occurs after viewing "executive
dashboards" or any other visual analytics
 Cyber analytics
 Enterprise Optimization
 Financial services analytics
 Fraud analytics
 Health care analytics
 Marketing analytics
 Pricing analytics
 Retail sales analytics
 Risk & Credit analytics
 Supply Chain analytics
 Talent analytics
 Telecommunications
 Transportation analytics

History[edit]
Analytics have been used in business since the management exercises were put into place
by Frederick Winslow Taylor in the late 19th century. Henry Ford measured the time of each
component in his newly established assembly line. But analytics began to command more attention
in the late 1960s when computers were used in decision support systems. Since then, analytics
have changed and formed with the development of enterprise resource planning (ERP)
systems, data warehouses, and a large number of other software tools and processes.[3]
In later years the business analytics have exploded with the introduction to computers. This change
has brought analytics to a whole new level and has brought about endless possibilities. As far as
analytics has come in history, and what the current field of analytics is today, many people would
never think that analytics started in the early 1900s with Mr. Ford himself.

Challenges[edit]
Business analytics depends on 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.[3]
Previously, analytics was considered a type of after-the-fact method of forecasting consumer
behavior by examining the number of units sold in the last quarter or the last year. This type of data
warehousing required a lot more storage space than it did speed. Now business analytics is
becoming a tool that can influence the outcome of customer interactions.[5] When a specific customer
type is considering a purchase, an analytics-enabled enterprise can modify the sales pitch to appeal
to that consumer. This means the storage space for all that data must react extremely fast to provide
the necessary data in real-time.

Competing on analytics[edit]
Thomas Davenport, professor of information technology and management at Babson College 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:[3]

 One or more senior executives who strongly advocate fact-based 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
See also
WHAT IS BUSINESS ANALYTICS?
Last update: January 12, 2018Molly GalettoBlog1 comment
A Definition of Business Analytics

Business Analytics is “the study of data through statistical and operations analysis, the formation
of predictive models, application of optimization techniques, and the communication of these
results to customers, business partners, and college executives.” Business Analytics requires
quantitative methods and evidence-based data for business modeling and decision making; as
such, Business Analytics requires the use of Big Data.

Big Data: An Overview

SAS describes Big Data as “a term that describes the large volume of data – both structured and
unstructured – that inundates a business on a day-to-day basis.” What’s important to keep in
mind about Big Data is that the amount of data is not as important to an organization as the
analytics that accompany it. When companies analyze Big Data, they are using Business
Analytics to get the insights required for making better business decisions and strategic moves.

Benefits of Data-Driven Decision Making with Business Analytics

Companies use Business Analytics (BA) to make data-driven decisions. The insight gained by
BA enables these companies to automate and optimize their business processes. In fact, data-
driven companies that utilize Business Analytics achieve a competitive advantage because they
are able to use the insights to:

 Conduct data mining (explore data to find new patterns and relationships)
 Complete statistical analysis and quantitative analysis to explain why certain results occur
 Test previous decisions using A/B testing and multivariate testing
 Make use of predictive modeling and predictive analytics to forecast future results
Business Analytics also provides support for companies in the process of making proactive
tactical decisions, and BA makes it possible for those companies to automate decision making in
order to support real-time responses.

The Differences Between Business Intelligence and Business Analytics

 Business Intelligence (BI) and Business Analytics
are similar, though they are not exactly the same. Business Intelligence involves the process of
collecting data from all sources and preparing it for Business Analytics. Business Intelligence is
more of a first step for companies to take when they need the ability to make data-driven
decisions. Business Analytics, on the other hand, is the analysis of the answers provided by
Business Intelligence. While Business Intelligence answers what happened, Business Analytics
answers why it happened and whether it will happen again. Business Intelligence includes
reporting, automated monitoring and alerting, dashboards, scorecards, and ad hoc query;
Business Analytics, in contrast, includes statistical and quantitative analysis, data mining,
predictive modeling, and multivariate testing.

Challenges with Business Analytics

Penn State University’s John Jordan described the challenges with Business Analytics: there is
“a greater potential for privacy invasion, greater financial exposure in fast-moving markets,
greater potential for mistaking noise for true insight, and a greater risk of spending lots of money
and time chasing poorly defined problems or opportunities.” Other challenges with developing
and implementing Business Analytics include…

 Executive Ownership – Business Analytics requires buy-in from senior leadership and a
clear corporate strategy for integrating predictive models
 IT Involvement – Technology infrastructure and tools must be able to handle the data and
Business Analytics processes
 Available Production Data vs. Cleansed Modeling Data – Watch for technology
infrastructure that restrict available data for historical modeling, and know the difference
between historical data for model development and real-time data in production
 Project Management Office (PMO) – The correct project management structure must be in
place in order to implement predictive models and adopt an agile approach
 End user Involvement and Buy-In – End users should be involved in adopting Business
Analytics and have a stake in the predictive model
 Change Management – Organizations should be prepared for the changes that Business
Analytics bring to current business and technology operations
 Explainability vs. the “Perfect Lift” – Balance building precise statistical models with being
able to explain the model and how it will produce results
Business Analytics Best Practices

Adopting and implementing Business Analytics is not something a company can do overnight.
But, if a company follows some best practices for Business Analytics, they will get the levels of
insight they seek and become more competitive and successful. We list some of the most
important best practices for Business Analytics here, though your organization will need to
determine which best practices are most fitting for your needs.

 Know the objective for using Business Analytics. Define your business use case and the
goal ahead of time.
 Define your criteria for success and failure.
 Select your methodology and be sure you know the data and relevant internal and external
factors
 Validate models using your predefined success and failure criteria
Business Analytics is critical for remaining competitive and achieving success. When you get
BA best practices in place and get buy-in from all stakeholders, your organization will benefit
from data-driven decision making.

Further Reading:

For further information on Business Analytics, check out the posts below:

 26 Data Analysis Experts Reveal the #1 Business Problem That Can Be Solved with
Predictive Analytics Tools and Software
 30 Customer Experience Experts Reveal the Top Ways Customer Analytics Can Improve
Ann Organization’s Bottom Line
 Big Data Analytics: Defined By Value

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 a 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.

Business analytics examples

Business analytics techniques break down into two main areas. The first is
basic business intelligence. This involves examining historical data to get a sense of how
a business department, team or staff member performed over a particular time. This is
a mature practice that most enterprises are fairly accomplished at using.

The second area of business analytics involves deeper statistical analysis. This may
mean doing predictive analytics by applying statistical algorithms to historical data to
make a prediction about future performance of a product, service or website design
change. Or, it could mean using other advanced analytics techniques, like cluster
analysis, to group customers based on similarities across several data points. This can
be helpful in targeted marketing campaigns, for example.

Specific types of business analytics include:

 Descriptive analytics, which tracks key performance indicators to understand the

present state of a business;

 Predictive analytics, which analyzes trend data to assess the likelihood of future
outcomes; and

 Prescriptive analytics, which uses past performance to generate recommendations

about how to handle similar situations in the future.

While the two components of business analytics -- business intelligence and advanced
analytics -- are sometimes used interchangeably, there are some key differences
between these two business analytics techniques:
 Business analytics vs. data science

The more advanced areas of business analytics can start to resemble data science, but
there is a distinction. Even when advanced statistical algorithms are applied to data
sets, it doesn't necessarily mean data science is involved. There are a host of business
analytics tools that can perform these kinds of functions automatically, requiring few
of the special skills involved in data science.

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True data science involves more custom coding and more open-ended questions. Data
scientists generally don't set out to solve a specific question, as most business analysts
 do. Rather, they will explore data using advanced statistical methods and allow the
features in the data to guide their analysis.

Business analytics applications

Business analytics tools come in several different varieties:

 Data visualization tools

 Business intelligence reporting software

 Self-service analytics platforms

 Statistical analysis tools

 Big data platforms

Self-service has become a major trend among business analytics tools. Users now
demand software that is easy to use and doesn't require specialized training. This has
led to the rise of simple-to-use tools from companies such as Tableau and Qlik,
among others. These tools can be installed on a single computer for small applications
or in server environments for enterprise-wide deployments. Once they are up and
running, business analysts and others with less specialized training can use them to
generate reports, charts and web portals that track specific metrics in data sets.

Margaret Rouse asks:

How is your company implementing
business analytics in its operations?
Join the Discussion

Once the business goal of the analysis is determined, an analysis methodology is

selected and data is acquired to support the analysis. Data acquisition often involves
extraction from one or more business systems, data cleansing and integration into a
single repository, such as a data warehouse or data mart. The analysis is typically
performed against a smaller sample set of data.

Analytics tools range from spreadsheets with statistical functions to complex data
mining and predictive modeling applications. As patterns and relationships in the data are
uncovered, new questions are asked, and the analytical process iterates until the
business goal is met.

Deployment of predictive models involves scoring data records -- typically in

a database-- and using the scores to optimize real-time decisions within applications
and business processes. BA also supports tactical decision-making in response to
unforeseen events. And, in many cases, the decision-making is automated to support
real-time responses.

Learn Analytics using a business case

study : Part I
BUSINESS ANALYTICS BUSINESS INTELLIGENCE
SHARE
TAVISH SRIVASTAVA , FEBRUARY 24, 2014 / 8
Best way to learn analytics is through experience and solving case studies. Here, I will
present you a complete business model and take you through a step by step process of
how analytics is set up in a new business, how is it used in daily processes and some of
the advanced analytics techniques which a business can use to make meaningful
segmentation and prediction to optimize its marketing & sales campaign.

Background :

You have recently started a Video CD rent shop. After 2 months you realize that there is
tough competition in the market and you need to make a more customer centric strategy
to stand out in the market. Hence, you want to collect the most granular details of your
customer behavior and build strategy accordingly.

Learn Analytics using a business case

study : Part II
BUSINESS ANALYTICS BUSINESS INTELLIGENCE
SHARE
TAVISH SRIVASTAVA , MARCH 2, 2014 / 6
The sequel episode, of most trilogies, is often the most interesting. This is because the first
episode builds a foundation, of the overall plot, and includes many mandatory but non-
interesting events, but by the second episode, the director has to build sufficient interest to ensure
that the viewer is hooked to the entire season. We assume that you have gone through the first
part of this case study (http://bit.ly/CDcasePart1). Let’s make this article more interesting by
creating a near-life simulation of the newly built business.

A quick Recap :

You have recently started a Video CD rental shop. After 2 months you realize that there is tough
competition in the market and you need to create a more customer centric strategy to stand out.
You have already built all the datasets and collected data for the first 2 months. You stand in the
third month and want to maximize your profit, using data analytics.

Month 3 :
Here are some high level metrics indicating health of your business :

Your shop is just like all other shops and your product is no different either. Why will your
customer see you differently? As of now, you have burnt around INR 32k and earned only 6.75k.
This is what happens in almost all new businesses. You have no loyal customers yet; and
customer acquisitions are always costly. But starting month 2, you need to stop following the
old-school way of doing business.

Let’s think of all possible changes you might want to bring to your business. Following are
some of them which are on top of my head :

1. Customise the theme basis what customers may like

2. Customise the banners basis the localities you are going to place them in.
3. Identify the most popular genre and stock more CDs pertaining to the same.
4. Map and profile localities which get you more business & profits. Identify more such
localities for more customer acquisitions.

Now, you might have noticed that all the solutions above general in nature, and do not require
any predictive modeling. This is because the business just 3 months old, and probably doesn’t
have much data to build predictive models. But there is still a lot you can do to build the business
further.

1. Make theme more customer-centric :

The Current Situation: As of now you have put up a banner of Hindi Comedy movies and have
stacked Hindi Action movies in the front counter. Is this the right display for your target
audience?
Assumption : The profile spread of your current portfolio and the future acquisition will be
similar.

Idea: Imagine a new customer looking for an English Action movie looks at two competing CD
shops. He will make a perception that the probability of finding a CD of his choice is more in the
shop with banner of English movies.
Analysis : Our target should be, to display more genres that people will want to rent. People,
who would like to rent a CD, may not really be interested in Hindi Comedy and Hindi Action
movies. Since the movies available in each genre are similar, and the choice of movie genre is
not restricted by availability, the two categories, which stand out are Hindi Romantic and English
Action. Hence, both, the banner and the display should correspond to only these two categories.

2. Make each advertising banner focused to local taste :

The second pointer is very similar to first analysis. But here you break the audience basis the
locality or area they belong to, and decide on the most popular genre in the area. This thought
process should govern your marketing banners strategy.

3. Genre wise Inventory/Stock optimization :

The third pointer is derived from the same analysis, as described in point 2. Our analysis showed
that people prefer Hindi Romantic and English Action movies. Now, after revising the display
and banners, the client base would expect a larger variety corresponding to these two genres,
even more. Hence, stocking the same number of CDs, in each genre, may not be required and
wouldn’t be justified.

4. Target most profitable societies for acquisition :

The fourth pointer however needs a slightly different analysis. This pointer would need us to
identify areas with the highest profitability. The tricky part is, that you would need to find out the
profit at an individual customer level. In the table below, the cost incurred on a society is the cost
of installing the customised banners. The revenue generated, is calculated by multiplying INR
13, with the CDs rented in total by the society. In the data below, we have assumed that the same
amount of money was spent in marketing, in 5 different societies.

If we had not done this calculation, we may have assumed that targeting a high standard society,
would be most profitable because the number of CDs bought by each customer was higher. But
from this analysis it is clear that the conversion rate in such a society is also less. Hence, it is best
to target the Medium standard society.

Note that this rank order might change with time. Given the trends, with time the number of
repeat customers in high standard society might raise significantly higher, but the same cannot be
concluded as of now. Hence you will want to market more and acquire more customers from
medium class societies.

Here is a summary of strategies we recommend for the month 3 :

1. Change the banner and front desk of movie genre to English Action and Hindi Romantic

2. Put customized banners in different kinds of societies, according to the society’s taste

3. Stock more titles in the English Action and Hindi Romantic genre.

4. Market the business, more in Medium standard societies similar to “HEWO society”.

Month 5 :

Here are some of the high level metrics for your business :
You see a good improvement in the total sales and the net loss you make month on month. If the
trend goes, you would start making a profit over the month on month, running costs in the next 1
or 2 months. This itself is an insight, and the first step towards prediction. Since you are
ambitious, you would want to introduce some cutting edge marketing strategy. Here is what you
can do:

1. Identify most valuable customers, send movie reviews & other value added services to
these customers
2. Innovate, and come up with new services like home delivery, weekly packages,
promotional packages etc. to targeted customers
3. Create targeted marketing campaigns for each type of new product.
4. Create a website to promote your shop and collect information of trailers viewed by the
customers.
5. Create an optimized inventory management system to make sure you are never stocked
out
6. Create proper retention/win-back processes

As you might have observed, all the pointers are customer level marketing tools. Now we are not
talking at the portfolio level, but have drilled down to the customer level. This is because now
you have about 750 customers’ data to play with. The thumb rule here is, that customer analytics
should be done on a statistically significant number, which in most of the industries is taken to be
at least 500. We will talk about customer level analysis in the next article and take each of the
pointers one by one to find some key insights and frame strategies from the 5th month onwards.

End Notes :

In this part of the case study, we looked at framing initial portfolio level strategies, and how
data guides us to take some key initial decisions in a new business. Next, we will look at some
interesting customer level strategies which can be derived using data sources mentioned in part I
of the case study.

The reason we have segregated customer level analytics from porfolio level analytics is that the
two analysis are done with very different mind sets. In the portfolio level, we focused more on
mass media and themes. Whereas, in the customer level, you will focus more on targeted
marketing, engagement and other key strategies.

Did you find the article useful? Share with us how you would have approached making strategies
mentioned in the article. Do let us know your thoughts about this article in the box below.

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TAVISH SRIVASTAVA , MARCH 9, 2014 / 8
Data based analytics and intelligence practices typically continue to grow complex over
time. This is because we get more data over time, computational power is becoming
cheaper by the day and businesses are facing situations where they can either innovate
or perish.

Same applies to our case study. There are various levels of complex analysis which can
be applied to this business once we start getting more and more customer information /
data. In this concluding part of the case study, we will talk about framing targeted
marketing strategies through propensity modelling or simple segmentation.

[stextbox id=”section”]A quick Recap : [/stextbox]

You have recently started a Video CD rent shop. After 2 months you realize that there is
tough competition in the market and you need to make a more customer-centric strategy
to stand out in the market. You have already built all the datasets and collected data for
first 2 months (Read part 1 here). After 2 months, you used insights from portfolio data to
define your mass market strategy and acquisition target localities (Read Part 2 here).

Now, you are in 5th month and business has grown to 750 customers. You have 4 months
of data now and are wondering how to make your strategies even more customer-centric?

[stextbox id=”section”] Month 5 : [/stextbox]

Here are some high level metrics for your business :

Till this point, all your analysis has been on portfolio level. You, want to create a more
granular optimized marketing strategy. Here, we will use one the best industry approach
to classify our customer portfolio into meaningful segments and then define targeted
strategies for each of them.

Predictive modelling is still out of reach because of relatively small size of portfolio and
data points.

Targeted engagement Strategy :

Step 1 : Form group using RFM approach :

This is one of the best and most commonly used technique. It is very quick to implement
and its flexibility makes it easy to apply it across industries. This technique can be used
in multiple ways. Following is a demonstrative example:

THE R : R stands for measuring Recency. In this case, we will take into account the
number of days since the customer took the last CD. We will score each customer based
on the band he qualifies.

THE F : F stands for frequency. In this case, we will want to know the total number of CDs
a customer has rented in his entire lifetime with us. Again we will band the frequency and
score accordingly

The M : M stands for Monetary. Because, in our case each product costs the same,
monetary parameter will behave very similar to frequency, there is no use of this metric.

Let us consider a case, customer X has bought 8 CDs in total and bought his last CD 6
days before. His total score becomes 8/10. Similarly, we score each of the customers.
First thing you need to check is the distribution and the stability of the score. Following
is the distribution of scores as on month 4 and month 5:
Both the curves are approximately normally distributed and have similar proportion of
population in each score band.

Step 2 : Find the profile of each customer using scores of 2 months :

For example, a customer with high score in both the months fall into loyal bucket (1st
quadrant).
Step 3 : Find the right strategy for each of the groups

Loyal customers : These are the customer who were highly valuable and are still highly
valuable. This segment is our loyal base and it is important to delight these customers
because they give us a constant stream of revenue. All our customer delight /
engagement strategies need to focus on these customers. Let’s list down a few of these
possible engagement for “Up-selling” :

1. Based on the preferred genre, send updates of new releases or newly acquired CDs.

2. Send weekly updates of star rating on new movies of preferred genre.

3. Send festive promotional offers to up-sell.

4. Give free delivery services.

Grow customers : These customers are showing a growing pattern and are becoming
more and more engaged with us. The right strategy with these customer is to delight
them and grow their engagement further. We again add these customer to the up-sell
group. A similar strategy as of Loyal customer might be helpful in making them more
engaged.
Win back customers : These customers are showing a declining pattern in terms of
engagement/revenue. Here we need some different set of strategies to arrest their likely
attrition and bring them back. If we think about it, there are possibly 2 reasons for their
possible attrition:

a) They are now shopping from other shops

b) They have declined their overall requirement

Let’s try to list down some strategies to increase their wallet share or transfer their
demand from other vendors to our store :

1. Win back offers : Give promotional offers to get them back on books. Offers like ” Buy
2 CDs a month and get third 50% off” will differentiate us from other vendors.

2. Customer specific engagements : Customer all wants to be treated deferentially. A

simple promo offer like ” Get 25% off on next CD” might not work as good as ” We know
you like watching Romantic movies. Here is “If Only” one of the best in genre 15% off only
for you”.

Other strategies :

There can be many other data driven strategies, which can be implemented at this point
in time. Some of these strategies are as follows :

1. Inventory optimization model based on past demand trends

2. X-sell of other rental services to loyal customers like renting home theatre.

3. Mutually share data with Home theater store and bring off-us customers with profile
similar to loyal customer on board.

[stextbox id=”section”] End Notes : [/stextbox]

Strategies discussed in this article are meant to be food for thought for the viewers. These
are by no means comprehensive. If you have examples of techniques, which you
implemented in your industry and can be useful for this case study, please share them
for benefit of wider community.

At some point in future, I will also cover how can this business use predictive modelling
once it starts operating on a larger scale.

If you like what you just read & want to

continue your analytics learning, subscribe
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our facebook page.
Share this:

Business case layout :

This business case have been broken down into 3 articles. Following is a plot of the
articles and each article will be strongly dependent on findings in the previous articles:

1. How do you collect data so as to capture all the important information?

2. Deep dive into customer behavior and using basic data analysis with business
knowledge to optimize daily operations : Click here to directly move to this
part https://www.analyticsvidhya.com/blog/2014/03/learn-analytics-business-case-study-
part-ii/

3. How do you use data with advanced analytics to make your marketing/sales startegies
more targeted?

Case study part I :

Did you ever wonder why do you deal with so many datamarts in your company. Let’s try
to understand as the owner of the busienss what all data sources do you need.

1. Transactions Table :

You rent out Video CDs and the most important data for you will be transactional data.
Transactional data is by far the richest data throughout all industries. Each row in
transactional data corresponds to one transaction made. This transaction mostly are
monetary transaction. To identify each transaction, you need a distinct transaction code
associated with each transaction. What other fields can you think of to be captured along
with each transaction. Following is a small list of such variables :

1. Transaction ID

2. Customer ID : Identifying the customer to whom you have rented out the CD

3. Rent due : How much does the customer need to pay as rent

4. Issue date : When was the movie rented out

5. Recieved date : When was the movie recieved. Blank if CD is still due
6. Movie ID : Identifying the movie

Following is a sample transactional data set :

2. Product Table :

If you have transaction table, you basically have the linkage between the customers and
the products. But why does transaction table not have the discription of products? The
simplest reason for the same is that total number of products are limited in any industry,
and the same product is repeated throughout the transactions table. If we add description
in every single line, it adds enormously to the overall size of transaction table, which
anyway is huge. Hence, we keep the products table seperate and merge it with required
transactions for specific analysis.

Product table is unique on product id, which maps to transactions table. What other
parameters can you think of that make sense for you to include? Following is a list of
possible variables :

1. Movie ID : Unique ID of movie

2. Origin yearmonth : When was the CD bought?

3. Genre of movie

4. Language of movie

5. Star Cast of movie

6. Movie name
Note : Product ID generally can be decoded to know product details. For example, here
H denotes “Hindi” and E denotes “English”. This coding makes the analysis simpler.

3. Customer Table :

The other hand of transaction table is the customer table. Using the above two tables,
you almost have everything except the details of the customer. While making any kind of
customer centric strategy, its very essential to consider the customer profile.This table
helps you find the customer profile. This table is unique on customer id. What other
parameters can you think of that make sense for you to include? Following is a list of
possible variables :

1. Customer ID : Unique ID of customer

2. Age

3. Gender

4. Area : Area where the customer lives

5. Package : Package customer has enrolled to

6. Enrol_date : When did the customer make his first transaction

7. Name
Note : Similar to Product ID, Customer ID also generally can be decoded to
know customer details.

4. Engagement Tracker :

All the three tables together can be used to create any kind of analysis to build marketing
and sales strategy. What they do not cover is the engagement you had with your
customers till date. Say, I called Kunal 1 week back to tell him about a movie X. Now, it
might not be the best idea to call Kunal again this week to tell about the same movie.
Hence, we need to keep a track on all kinds of engagement we have with our customer
on daily basis. This is similar to transactions table but this include all the non-monetary
interactions we have with out customers till date. These interactions can be inbound or
outbound. This table is unique on engagement_id. What other parameters can you think
of that make sense for you to include? Following is a list of possible variables :

1. Engagement id : Unique engagement identification

2. Inbound flag : 1 if inbound, 0 if outbound

3. Type of engagement : Code for the type of engagement

4. Product ID : ID of product in question

5. Derived tables :

Because the data sizes become huge with time, it is always recommended to keep some
monthly snapshots handy. One of such table can be transactions data rolled up at
customer level. Following is a list of such possible variables :
1. Customer ID

2. # lifetime transactions : No. of transactions made by customer till date

3. Enrol date

4. # English Movies : No. of English movies taken by customer till date

5. Last engement date

6. Last transaction date

Such derived tables come very handy to make quick analysis. Say, you have acquired 10
new english movies and want to market them. You might want to market these movies to
customers who watch english movies, who responded to recent engagements and who
have done recent transactions. For such a targeting list, imagine the process you might
need to follow. Following is a possible way to achieve the same :
Imagine how easy this analysis gets if you have the derived monthly snapshot handy.

Graph schemas:

The article till now focuses on use of traditional relational databases. Graph based
databases (e.g. Neo4j) are a strong alternate to these traditional databases. They add a
lot of flexibility to your database, where you can change the schema very easily.

This kind of flexibility is required in case your data formats can change and you can not
have much control on it. Also, you can add new structures and relationships very quickly.
Before we go in these details, a typical graph schema in this case would look something
like:
Blue nodes represent customers, Red represent movies and Green represents various
package available. Every edge is a relationship in between nodes. For example, if a
customer rents out a movie, we can draw an edge between the 2.

Now by calculating things like number of edges from a node, you can look at things like
most active customer, most rented and least rented movies. You can also start looking at
what kind of customers are renting what kind of movies.

P.S. Like all data model designs, there are various alternates to this design and you
should choose the best depending on your usage.

End Notes :

We discussed relational database and graph database for representing a typical business
problem. The data tables we discussed in this article is almost parallel to datamarts in
any industry. We will look at some interesting strategies which can be derived using these
data sources for the CD rental business case. Some of these strategies which are very
basic in nature and needs more of business sense than modelling will be discussed in the
next article. This will make you understand how effective strategies can be built if you mix
business knowledge with simple data analysis.Knowledge of data is very essential
regardless of the industry you work for. To view the next part of this case study
click https://www.analyticsvidhya.com/blog/2014/03/learn-analytics-business-case-
study-part-ii/

Did you find the article useful? Share with us any other problem statements you can think
of. Do let us know your thoughts about this article in the box below.

If you like what you just read & want to

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Next part of case study: Learn Analytics using a business case study: Part II

Decision-making
From Wikipedia, the free encyclopedia
(Redirected from Decision making)

This article is about decision making as analyzed in psychology. For a broader discipline,
see Decision theory.
 Sample flowchart representing a decision process to add a new article to Wikipedia.

In psychology, decision-making is regarded as the cognitive process resulting in the selection of a

belief or a course of action among several alternative possibilities. Every decision-making process
produces a final choice, which may or may not prompt action.
Decision-making is the process of identifying and choosing alternatives based on
the values, preferences and beliefs of the decision-maker.

Contents
[hide]

 1Overview
 2Problem analysis
o 2.1Analysis paralysis
o 2.2Information overload
o 2.3Post-decision analysis
 3Decision-making techniques
o 3.1Group
o 3.2Individual
 4Steps
o 4.1GOFER
o 4.2DECIDE
o 4.3Other
o 4.4Group stages
 5Rational and irrational
 6Cognitive and personal biases
 7Cognitive limitations in groups
 8Cognitive styles
o 8.1Optimizing vs. satisficing
o 8.2Intuitive vs. rational
o 8.3Combinatorial vs. positional
o 8.4Influence of Myers-Briggs type
 9Neuroscience
 10In adolescents vs. adults
 11See also
 12References

Overview[edit]
Decision-making can be regarded as a problem-solving activity terminated by a solution deemed to
be optimal, or at least satisfactory. It is therefore a process which can be more or
less rational or irrational and can be based on explicit or tacit knowledge and beliefs.
Human performance has been the subject of active research from several perspectives:

 Psychological: examining individual decisions in the context of a set of needs, preferences and
values the individual has or seeks.
 Cognitive: the decision-making process regarded as a continuous process integrated in the
interaction with the environment.
 Normative: the analysis of individual decisions concerned with the logic of decision-making,
or communicative rationality, and the invariant choice it leads to.[1]
A major part of decision-making involves the analysis of a finite set of alternatives described in terms
of evaluative criteria. Then the task might be to rank these alternatives in terms of how attractive
they are to the decision-maker(s) when all the criteria are considered simultaneously. Another task
might be to find the best alternative or to determine the relative total priority of each alternative (for
instance, if alternatives represent projects competing for funds) when all the criteria are considered
simultaneously. Solving such problems is the focus of multiple-criteria decision analysis (MCDA).
This area of decision-making, although very old, has attracted the interest of many researchers and
practitioners and is still highly debated as there are many MCDA methods which may yield very
different results when they are applied on exactly the same data.[2] This leads to the formulation of
a decision-making paradox.
Logical decision-making is an important part of all science-based professions, where specialists
apply their knowledge in a given area to make informed decisions. For example, medical decision-
making often involves a diagnosis and the selection of appropriate treatment. But naturalistic
decision-making research shows that in situations with higher time pressure, higher stakes, or
increased ambiguities, experts may use intuitive decision-making rather than structured approaches.
They may follow a recognition primed decision that fits their experience and arrive at a course of
action without weighing alternatives.[citation needed]
The decision-maker's environment can play a part in the decision-making process. For example,
environmental complexity is a factor that influences cognitive function.[3] A complex environment is
an environment with a large number of different possible states which come and go over
time.[4] Studies done at the University of Colorado have shown that more complex environments
correlate with higher cognitive function, which means that a decision can be influenced by the
location. One experiment measured complexity in a room by the number of small objects and
appliances present; a simple room had less of those things. Cognitive function was greatly affected
by the higher measure of environmental complexity making it easier to think about the situation and
make a better decision.[3]
Research about decision-making is also published under the label problem solving, in particular in
European psychological research.[5]

Problem analysis[edit]
This section needs additional citations for verification. Please
help improve this article by adding citations to reliable sources.
Unsourced material may be challenged and removed. (July
2015) (Learn how and when to remove this template message)

It is important to differentiate between problem analysis and decision-making. Traditionally, it is

argued that problem analysis must be done first, so that the information gathered in that process
may be used towards decision-making.[6][page needed]
Characteristics of problem analysis

 Problems are merely deviations from performance standards

 Problems must be precisely identified and described
 Problems are caused by a change from a distinctive feature
 Something can always be used to distinguish between what has and hasn't been affected by a
cause
 Causes of problems can be deduced from relevant changes found in analyzing the problem
 Most likely cause of a problem is the one that exactly explains all the facts, while having the
fewest (or weakest) assumptions (Occam's razor).
Characteristics of decision-making

 Objectives must first be established

 Objectives must be classified and placed in order of importance
 Alternative actions must be developed
 The alternatives must be evaluated against all the objectives
 The alternative that is able to achieve all the objectives is the tentative decision
 The tentative decision is evaluated for more possible consequences
 The decisive actions are taken, and additional actions are taken to prevent any adverse
consequences from becoming problems and starting both systems (problem analysis and
decision-making) all over again
 There are steps that are generally followed that result in a decision model that can be used to
determine an optimal production plan[7]
 In a situation featuring conflict, role-playing may be helpful for predicting decisions to be made
by involved parties[8]
Analysis paralysis[edit]
Main article: Analysis paralysis
Analysis paralysis is the state of over-analyzing (or over-thinking) a situation so that a decision or
action is never taken, in effect paralyzing the outcome.
Information overload[edit]
Main article: Information overload
Information overload is "a gap between the volume of information and the tools we have to
assimilate" it.[9] Excessive information affects problem processing and tasking, which affects
decision-making.[10] Crystal C. Hall and colleagues described an "illusion of knowledge", which
means that as individuals encounter too much knowledge it can interfere with their ability to make
rational decisions.[11]
Post-decision analysis[edit]
Evaluation and analysis of past decisions is complementary to decision-making. See also Mental
accounting and Postmortem documentation.

Decision-making techniques[edit]
Decision-making techniques can be separated into two broad categories: group decision-
making techniques and individual decision-making techniques. Individual decision-making
techniques can also often be applied by a group.
Group[edit]

 Consensus decision-making tries to avoid "winners" and "losers". Consensus requires that a
majority approve a given course of action, but that the minority agree to go along with the course
of action. In other words, if the minority opposes the course of action, consensus requires that
the course of action be modified to remove objectionable features.
 Voting-based methods:
 Majority requires support from more than 50% of the members of the group. Thus, the bar
for action is lower than with consensus.
 Plurality, where the largest block in a group decides, even if it falls short of a majority.
  Range voting lets each member score one or more of the available options. The option with
the highest average is chosen. This method has experimentally been shown to produce the
lowest Bayesian regret among common voting methods, even when voters are strategic.[citation
needed]

 Delphi method is a structured communication technique for groups, originally developed for
collaborative forecasting but has also been used for policy making.
 Dotmocracy is a facilitation method that relies on the use of special forms called Dotmocracy
Sheets to allow large groups to collectively brainstorm and recognize agreement on an unlimited
number of ideas they have authored.
 Participative decision-making occurs when an authority opens up the decision-making process
to a group of people for a collaborative effort.
 Decision engineering uses a visual map of the decision-making process based on system
dynamics and can be automated through a decision modeling tool, integrating big data, machine
learning, and expert knowledge as appropriate.
Individual[edit]

 Decisional balance sheet: listing the advantages and disadvantages (benefits and costs, pros
and cons) of each option, as suggested by Plato's Protagoras and by Benjamin Franklin.[12]
 Simple prioritization: choosing the alternative with the highest probability-weighted utility. This
may involve considering the opportunity cost of different alternatives. See also Decision
analysis.
 Satisficing: examining alternatives only until the first acceptable one is found. The opposite
is maximizing or optimizing, in which many or all alternatives are examined in order to find the
best option.
 Acquiesce to a person in authority or an "expert"; "just following orders".
 Anti-authoritarianism: taking the most opposite action compared to the advice of mistrusted
authorities.
 Flipism e.g. flipping a coin, cutting a deck of playing cards, and other random or coincidence
methods – or prayer, tarot cards, astrology, augurs, revelation, or other forms of divination,
superstition or pseudoscience.
 Automated decision support: setting up criteria for automated decisions.
 Decision support systems: using decision-making software when faced with highly complex
decisions or when considering many stakeholders, categories, or other factors that affect
decisions.

Steps[edit]
A variety of researchers have formulated similar prescriptive steps aimed at improving decision-
making.
GOFER[edit]
In the 1980s, psychologist Leon Mann and colleagues developed a decision-making process called
GOFER, which they taught to adolescents, as summarized in the book Teaching Decision Making
To Adolescents.[13] The process was based on extensive earlier research conducted with
psychologist Irving Janis.[14] GOFER is an acronym for five decision-making steps:[15]

1. Goals clarification: Survey values and objectives.

2. Options generation: Consider a wide range of alternative actions.
3. Facts-finding: Search for information.
4. Consideration of Effects: Weigh the positive and negative consequences of the options.
5. Review and implementation: Plan how to implement the options and implement them.
DECIDE[edit]
In 2008, Kristina Guo published the DECIDE model of decision-making, which has six parts:[16]

1. Define the problem

2. Establish or Enumerate all the criteria (constraints)
3. Consider or Collect all the alternatives
4. Identify the best alternative
5. Develop and implement a plan of action
6. Evaluate and monitor the solution and examine feedback when necessary
Other[edit]
In 2007, Pam Brown of Singleton Hospital in Swansea, Wales, divided the decision-making process
into seven steps:[17]

1. Outline your goal and outcome.

2. Gather data.
3. Develop alternatives (i.e., brainstorming).
4. List pros and cons of each alternative.
5. Make the decision.
6. Immediately take action to implement it.
7. Learn from and reflect on the decision.
In 2009, professor John Pijanowski described how the Arkansas Program, an ethics curriculum at
the University of Arkansas, used eight stages of moral decision-making based on the work of James
Rest:[18]:6

1. Establishing community: Create and nurture the relationships, norms, and procedures that
will influence how problems are understood and communicated. This stage takes place prior
to and during a moral dilemma.
2. Perception: Recognize that a problem exists.
3. Interpretation: Identify competing explanations for the problem, and evaluate the drivers
behind those interpretations.
4. Judgment: Sift through various possible actions or responses and determine which is more
justifiable.
5. Motivation: Examine the competing commitments which may distract from a more moral
course of action and then prioritize and commit to moral values over other personal,
institutional or social values.
6. Action: Follow through with action that supports the more justified decision.
7. Reflection in action.
8. Reflection on action.
Group stages[edit]
According to B. Aubrey Fisher, there are four stages or phases that should be involved in all group
decision-making:[19]

 Orientation. Members meet for the first time and start to get to know each other.
 Conflict. Once group members become familiar with each other, disputes, little fights and
arguments occur. Group members eventually work it out.
 Emergence. The group begins to clear up vague opinions by talking about them.
 Reinforcement. Members finally make a decision and provide justification for it.
It is said that establishing critical norms in a group improves the quality of decisions, while the
majority of opinions (called consensus norms) do not.[20]

Rational and irrational[edit]

In economics, it is thought that if humans are rational and free to make their own decisions, then
they would behave according to rational choice theory.[21]:368–370 Rational choice theory says that a
person consistently makes choices that lead to the best situation for himself or herself, taking into
account all available considerations including costs and benefits; the rationality of these
considerations is from the point of view of the person himself, so a decision is not irrational just
because someone else finds it questionable.
In reality, however, there are some factors that affect decision-making abilities and cause people to
make irrational decisions – for example, to make contradictory choices when faced with the same
problem framed in two different ways (see also Allais paradox).
One of the most prominent theories of decision making is subjective expected utility (SEU) theory,
which describes the rational behavior of the decision maker.[22] The decision maker assesses
different alternatives by their utilities and the subjective probability of occurrence.[22]
Rational decision-making is often grounded on experience and theories exist that are able to put this
approach on solid mathematical grounds so that subjectivity is reduced to a minimum, see
e.g. scenario optimization.

Cognitive and personal biases[edit]

Biases usually affect decision-making processes. Here is a list of commonly debated biases in
judgment and decision-making:

 Selective search for evidence (also known as confirmation bias): People tend to be willing to
gather facts that support certain conclusions but disregard other facts that support different
conclusions. Individuals who are highly defensive in this manner show significantly greater left
prefrontal cortex activity as measured by EEG than do less defensive individuals.[23]
 Premature termination of search for evidence: People tend to accept the first alternative that
looks like it might work.
 Cognitive inertia is the unwillingness to change existing thought patterns in the face of new
circumstances.
 Selective perception: People actively screen out information that they do not think is important
(see also Prejudice). In one demonstration of this effect, discounting of arguments with which
one disagrees (by judging them as untrue or irrelevant) was decreased by selective activation of
right prefrontal cortex.[24]
 Wishful thinking is a tendency to want to see things in a certain – usually positive – light, which
can distort perception and thinking.[25]
 Choice-supportive bias occurs when people distort their memories of chosen and rejected
options to make the chosen options seem more attractive.
 Recency: People tend to place more attention on more recent information and either ignore or
forget more distant information (see Semantic priming). The opposite effect in the first set of data
or other information is termed primacy effect.[26][page needed]
 Repetition bias is a willingness to believe what one has been told most often and by the greatest
number of different sources.
 Anchoring and adjustment: Decisions are unduly influenced by initial information that shapes our
view of subsequent information.
 Groupthink is peer pressure to conform to the opinions held by the group.
 Source credibility bias is a tendency to reject a person's statement on the basis of a bias against
the person, organization, or group to which the person belongs. People preferentially accept
statement by others that they like (see also Prejudice).
 Incremental decision-making and escalating commitment: People look at a decision as a small
step in a process, and this tends to perpetuate a series of similar decisions. This can be
contrasted with zero-based decision-making (see Slippery slope).
 Attribution asymmetry: People tend to attribute their own success to internal factors, including
abilities and talents, but explain their failures in terms of external factors such as bad luck. The
reverse bias is shown when people explain others' success or failure.
 Role fulfillment is a tendency to conform to others' decision-making expectations.
 Underestimating uncertainty and the illusion of control: People tend to underestimate future
uncertainty because of a tendency to believe they have more control over events than they
really do.
 Framing bias: This is best avoided by increasing numeracy and presenting data in several
formats (for example, using both absolute and relative scales).[27]
 Sunk-cost fallacy is a specific type of framing effect that affects decision-making. It involves
an individual making a decision about a current situation based on what they have
previously invested in the situation.[21]:372 An example of this would be an individual that is
refraining from dropping a class that they are most likely to fail, due to the fact that they feel
as though they have done so much work in the course thus far.
 Prospect theory involves the idea that when faced with a decision-making event, an individual is
more likely to take on a risk when evaluating potential losses, and are more likely to avoid risks
when evaluating potential gains. This can influence one's decision-making depending if the
situation entails a threat, or opportunity.[21]:373
 Optimism bias is a tendency to overestimate the likelihood of positive events occurring in the
future and underestimate the likelihood of negative life events.[28] Such biased expectations are
generated and maintained in the face of counter-evidence through a tendency to discount
undesirable information.[29] An optimism bias can alter risk perception and decision-making in
many domains, ranging from finance to health.
 Reference class forecasting was developed to eliminate or reduce cognitive biases in decision-
making.

Cognitive limitations in groups[edit]

Main article: Group decision-making § Group discussion pitfalls
In groups, people generate decisions through active and complex processes. One method consists
of three steps: initial preferences are expressed by members; the members of the group then gather
and share information concerning those preferences; finally, the members combine their views and
make a single choice about how to face the problem. Although these steps are relatively ordinary,
judgements are often distorted by cognitive and motivational biases, include "sins of commission",
"sins of omission", and "sins of imprecision".[30][page needed]

Cognitive styles[edit]
Optimizing vs. satisficing[edit]
Main article: Maximization (psychology)
Herbert A. Simon coined the phrase "bounded rationality" to express the idea that human decision-
making is limited by available information, available time and the mind's information-processing
ability. Further psychological research has identified individual differences between two cognitive
styles: maximizers try to make an optimal decision, whereas satisficers simply try to find a solution
that is "good enough". Maximizers tend to take longer making decisions due to the need to maximize
performance across all variables and make tradeoffs carefully; they also tend to more often regret
their decisions (perhaps because they are more able than satisficers to recognise that a decision
turned out to be sub-optimal).[31]
Intuitive vs. rational[edit]
Main article: Dual process theory
The psychologist Daniel Kahneman, adopting terms originally proposed by the psychologists Keith
Stanovich and Richard West, has theorized that a person's decision-making is the result of an
interplay between two kinds of cognitive processes: an automatic intuitive system (called "System 1")
and an effortful rational system (called "System 2"). System 1 is a bottom-up, fast, and implicit
system of decision-making, while system 2 is a top-down, slow, and explicit system of decision-
making.[32] System 1 includes simple heuristics in judgment and decision-making such as the affect
heuristic, the availability heuristic, the familiarity heuristic, and the representativeness heuristic.
Combinatorial vs. positional[edit]
Styles and methods of decision-making were elaborated by Aron Katsenelinboigen, the founder
of predispositioning theory. In his analysis on styles and methods, Katsenelinboigen referred to the
game of chess, saying that "chess does disclose various methods of operation, notably the creation
of predisposition-methods which may be applicable to other, more complex systems."[33]:5
Katsenelinboigen states that apart from the methods (reactive and selective) and sub-methods
(randomization, predispositioning, programming), there are two major styles: positional and
combinational. Both styles are utilized in the game of chess. According to Katsenelinboigen, the two
styles reflect two basic approaches to uncertainty: deterministic (combinational style) and
indeterministic (positional style). Katsenelinboigen's definition of the two styles are the following.
The combinational style is characterized by:

 a very narrow, clearly defined, primarily material goal; and

 a program that links the initial position with the final outcome.
In defining the combinational style in chess, Katsenelinboigen wrote: "The combinational style
features a clearly formulated limited objective, namely the capture of material (the main constituent
element of a chess position). The objective is implemented via a well-defined, and in some cases,
unique sequence of moves aimed at reaching the set goal. As a rule, this sequence leaves no
options for the opponent. Finding a combinational objective allows the player to focus all his
energies on efficient execution, that is, the player's analysis may be limited to the pieces directly
partaking in the combination. This approach is the crux of the combination and the combinational
style of play.[33]:57
The positional style is distinguished by:

 a positional goal; and

 a formation of semi-complete linkages between the initial step and final outcome.
"Unlike the combinational player, the positional player is occupied, first and foremost, with the
elaboration of the position that will allow him to develop in the unknown future. In playing the
positional style, the player must evaluate relational and material parameters as independent
variables. ... The positional style gives the player the opportunity to develop a position until it
becomes pregnant with a combination. However, the combination is not the final goal of the
positional player – it helps him to achieve the desirable, keeping in mind a predisposition for the
future development. The pyrrhic victory is the best example of one's inability to think positionally."[34]
The positional style serves to:
 create a predisposition to the future development of the position;
 induce the environment in a certain way;
 absorb an unexpected outcome in one's favor; and
 avoid the negative aspects of unexpected outcomes.
Influence of Myers-Briggs type[edit]
According to Isabel Briggs Myers, a person's decision-making process depends to a significant
degree on their cognitive style.[35][page needed] Myers developed a set of four bi-polar dimensions, called
the Myers-Briggs Type Indicator (MBTI). The terminal points on these dimensions
are: thinking and feeling; extroversion and introversion; judgment and perception;
and sensing and intuition. She claimed that a person's decision-making style correlates well with
how they score on these four dimensions. For example, someone who scored near the thinking,
extroversion, sensing, and judgment ends of the dimensions would tend to have a logical, analytical,
objective, critical, and empirical decision-making style. However, some psychologists say that the
MBTI lacks reliability and validity and is poorly constructed.[36][37]
Other studies suggest that these national or cross-cultural differences in decision-making exist
across entire societies. For example, Maris Martinsons has found that American, Japanese and
Chinese business leaders each exhibit a distinctive national style of decision-making.[38]

Neuroscience[edit]
Decision-making is a region of intense study in the fields of systems neuroscience, and cognitive
neuroscience. Several brain structures, including the anterior cingulate cortex (ACC), orbitofrontal
cortex and the overlapping ventromedial prefrontal cortex are believed to be involved in decision-
making processes. A neuroimaging study[39] found distinctive patterns of neural activation in these
regions depending on whether decisions were made on the basis of perceived personal volition or
following directions from someone else. Patients with damage to the ventromedial prefrontal
cortex have difficulty making advantageous decisions.[40][page needed]
A common laboratory paradigm for studying neural decision-making is the two-alternative forced
choice task (2AFC), in which a subject has to choose between two alternatives within a certain time.
A study of a two-alternative forced choice task involving rhesus monkeysfound that neurons in
the parietal cortex not only represent the formation of a decision[41] but also signal the degree of
certainty (or "confidence") associated with the decision.[42] Another recent study found that lesions to
the ACC in the macaque resulted in impaired decision-making in the long run of reinforcement
guided tasks suggesting that the ACC may be involved in evaluating past reinforcement information
and guiding future action.[43] A 2012 study found that rats and humans can optimally accumulate
incoming sensory evidence, to make statistically optimal decisions.[44]
Emotion appears able to aid the decision-making process. Decision-making often occurs in the face
of uncertainty about whether one's choices will lead to benefit or harm (see also Risk). The somatic-
marker hypothesis is a neurobiological theory of how decisions are made in the face of uncertain
outcome. This theory holds that such decisions are aided by emotions, in the form of bodily states,
that are elicited during the deliberation of future consequences and that mark different options for
behavior as being advantageous or disadvantageous. This process involves an interplay between
neural systems that elicit emotional/bodily states and neural systems that map these
emotional/bodily states.[45] A recent lesion mapping study of 152 patients with focal brain lesions
conducted by Aron K. Barbey and colleagues provided evidence to help discover the neural
mechanisms of emotional intelligence.[46][47][48]
Although it is unclear whether the studies generalize to all processing, subconscious processes have
been implicated in the initiation of conscious volitional movements. See the Neuroscience of free
will.
In adolescents vs. adults[edit]
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help improve this article by adding citations to reliable sources.
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2014) (Learn how and when to remove this template message)

During their adolescent years, teens are known for their high-risk behaviors and rash decisions.
Recent research[citation needed] has shown that there are differences in cognitive processes between
adolescents and adults during decision-making. Researchers have concluded that differences in
decision-making are not due to a lack of logic or reasoning, but more due to the immaturity
of psychosocial capacities that influence decision-making. Examples of their undeveloped capacities
which influence decision-making would be impulse control, emotion regulation, delayed
gratification and resistance to peer pressure. In the past, researchers have thought that adolescent
behavior was simply due to incompetency regarding decision-making. Currently, researchers have
concluded that adults and adolescents are both competent decision-makers, not just adults.
However, adolescents' competent decision-making skills decrease when psychosocial capacities
become present.
Recent research[citation needed] has shown that risk-taking behaviors in adolescents may be the product of
interactions between the socioemotional brain network and its cognitive-control network. The
socioemotional part of the brain processes social and emotional stimuli and has been shown to be
important in reward processing. The cognitive-control network assists in planning and self-regulation.
Both of these sections of the brain change over the course of puberty. However, the socioemotional
network changes quickly and abruptly, while the cognitive-control network changes more gradually.
Because of this difference in change, the cognitive-control network, which usually regulates the
socioemotional network, struggles to control the socioemotional network when psychosocial
capacities are present.[clarification needed]
When adolescents are exposed to social and emotional stimuli, their socioemotional network is
activated as well as areas of the brain involved in reward processing. Because teens often gain a
sense of reward from risk-taking behaviors, their repetition becomes ever more probable due to the
reward experienced. In this, the process mirrors addiction. Teens can become addicted to risky
behavior because they are in a high state of arousal and are rewarded for it not only by their own
internal functions but also by their peers around them.
Adults are generally better able to control their risk-taking because their cognitive-control system has
matured enough to the point where it can control the socioemotional network, even in the context of
high arousal or when psychosocial capacities are present. Also, adults are less likely to find
themselves in situations that push them to do risky things. For example, teens are more likely to be
around peers who peer pressure them into doing things, while adults are not as exposed to this sort
of social setting.[49][50]
A recent study suggests that adolescents have difficulties adequately adjusting beliefs in response to
bad news (such as reading that smoking poses a greater risk to health than they thought), but do not
differ from adults in their ability to alter beliefs in response to good news.[51] This creates biased
beliefs, which may lead to greater risk taking.[52]

Decision-making process
Decision making is the process of making choices by identifying a decision, gathering
information, and assessing alternative resolutions.
Using a step-by-step decision-making process can help you make more deliberate, thoughtful
decisions by organizing relevant information and defining alternatives. This approach increases
the chances that you will choose the most satisfying alternative possible.
Download the PDF
Step 1: Identify the decision
You realize that you need to make a decision. Try to clearly define the nature of the decision you
must make. This first step is very important.
Step 2: Gather relevant information
Collect some pertinent information before you make your decision: what information is needed,
the best sources of information, and how to get it. This step involves both internal and external
“work.” Some information is internal: you’ll seek it through a process of self -assessment. Other
information is external: you’ll find it online, in books, from other people, and from other sources.
Step 3: Identify the alternatives
As you collect information, you will probably identify several possible paths of action, or
alternatives. You can also use your imagination and additional information to construct new
alternatives. In this step, you will list all possible and desirable alternatives.
Step 4: Weigh the evidence
Draw on your information and emotions to imagine what it would be like if you carried out each
of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or
resolved through the use of each alternative. As you go through this difficult internal process,
you’ll begin to favor certain alternatives: those that seem to have a higher potential f or reaching
your goal. Finally, place the alternatives in a priority order, based upon your own value system.
Step 5: Choose among alternatives
Once you have weighed all the evidence, you are ready to select the alternative that seems to
be best one for you. You may even choose a combination of alternatives. Your choice in Step 5
may very likely be the same or similar to the alternative you placed at the top of your list at the
end of Step 4.
Step 6: Take action
You’re now ready to take some positive action by beginning to implement the alternative you
chose in Step 5.
Step 7: Review your decision & its consequences
In this final step, consider the results of your decision and evaluate whether or not it has
resolved the need you identified in Step 1. If the decision has not met the identified need, you
may want to repeat certain steps of the process to make a new decision. For example, you might
want to gather more detailed or somewhat different information or explore additional
alternatives.

Using Analytics for Decision

Making – Six Critical Steps
AARON WANG AUGUST 19, 2013 ANALYTICS, BIG DATA, CREDIT UNIONS, DECISION
SUPPORT 0 COMMENTS
Credit union leaders are increasingly interested in using analytics to drive better decisions. A
common question they ask is, “Once I have comprehensive access to all credit union data, how
do I use it effectively?”

Thomas Davenport, co-author of Competing on Analytics, addressed the question in a recent

Harvard Business Review article, Keep Up with Your Quants.

Davenport recommends decision makers need to be most active in the beginning step and ending
step in the analytics process. However, awareness of the middle steps and how to keep them on
track is also important.
1. Recognize the problem or question – Effective problem definition is mandatory. Many times
credit union leaders think they know the problem to be solved only to realize they were
wrong. Not only does the “right” problem need to be identified but it is crucial that leader
clearly explain the details to the analytical team.
2. Review previous findings – Efforts must be made to leverage experience. High achieving
credit unions take the time to document analytics efforts so future projects can easily study
the processes followed and results of the processes. Leaders can help in the process to
evaluate relevant historical material.
3. Model the solution and select the variables – Based on the detailed problem formulation in
Step 1, hypotheses are formed and appropriate data is selected to test the hypothesis. While
this is the analytical team’s strength, the business leader needs to understand their thinking to
avoid being surprised in the last step.
4. Collect the data –This step assumes credit union data has been properly prepared in terms of
integration across the organization, data quality, and ease of access. If the necessary data is
not available, the prior steps are wasted. Efforts need to be taken to solve the data issues and
then re-start the analytics process. Clearly, credit union leaders must take a strategic
perspective on the importance of data and give the organization the opportunity to leverage
important internal information.
5. Analyze the data – The analytics team must be chosen wisely to ensure they have the
knowledge, skills, and experience to apply the best analytical tools to the given situation.
The decision maker needs to understand the capabilities of various analytical tools and be
able to understand the results they yield.
6. Present and act on the results – Now the decision maker takes center stage again and weaves
a compelling story that moves leaders and other and stakeholders to take action and solve the
problem.

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Cultural analytics
From Wikipedia, the free encyclopedia
Cultural analytics is the exploration and research of massive cultural data sets of visual material –
both digitized visual artifacts and contemporary visual and interactive media. Taking on the
challenge of how to best explore large collections of rich cultural content, cultural analytics
researchers developed new methods and intuitive visual techniques which rely on high-
resolution visualization and digital image processing. These methods are used to address both the
existing research questions in humanities, to explore new questions, and to develop new theoretical
concepts which fit the mega-scale of digital culture in the early 21st century.

Contents
[hide]
 1History
 2Current research
 3Methodologies
 4Related methodologies
 5References
 6External links

History[edit]
The term "cultural analytics" was coined by Lev Manovich in 2007. Cultural analytics shares many
ideas and approaches with visual analytics ("the science of analytical reasoning facilitated by visual
interactive interfaces") and visual data analysis:
Visual data analysis blends highly advanced computational methods with sophisticated graphics
engines to tap the extraordinary ability of humans to see patterns and structure in even the most
complex visual presentations. Currently applied to massive, heterogeneous, and dynamic datasets,
such as those generated in studies of astrophysical, fluidic, biological, and other complex processes,
the techniques have become sophisticated enough to allow the interactive manipulation of variables
in real time. Ultra high-resolution displays allow teams of researchers to zoom in to examine specific
aspects of the renderings, or to navigate along interesting visual pathways, following their intuitions
and even hunches to see where they may lead. New research is now beginning to apply these sorts
of tools to the social sciences and humanities as well, and the techniques offer considerable promise
in helping us understand complex social processes like learning, political and organizational change,
and the diffusion of knowledge.[1]
While increased computing power and technical developments allowing for interaction visualization
have made the exploration of large data sets using visual presentations possible, the intellectual
drive to understand cultural and social processes and production pre-dates many of these
computational advances. Charles Joseph Minard's famous dense graphic showing Napoleon's
March on Moscow[2] (1869) offers a 19th-century example. More recently, Pierre Bourdieu's historical
survey of the cultural consumption practices of mid-century Parisians, documented in La Distinction,
foregrounds the study of culture and aesthetics through the lens of large data sets. Most
recently, Franco Moretti's Graphs, maps, trees: abstract models for a literary history.[3] along with
many projects in the Digital Humanities reveal the benefit of large scale analysis of cultural material.

Current research[edit]
To date, cultural analytics techniques have been applied to films, animations, video games, comics,
magazines, books, and other print publications, artworks, photos, and a variety of other media
content. The technology used ranges from open-source programs downloadable on any personal
computer to supercomputer processing and large-scale displays such as the HIPerSpace (42,000 x
8000 pixels).[4]

Methodologies[edit]
The methodologies which fall under the umbrella of cultural analytics includes the data mining of
large sets of culturally-relevant data (such as studies of library catalogs, image collections, and
social networking databases.) Image processing of still and moving video, with feature recognition as
well as image data extraction is used to support research into cultural and historical change. Cultural
analytical methodologies are deployed to study and interpret videogames and other software forms,
both at the phenomonological level (human-computer interface, feature extraction) or at the object
level (the analysis of source code.)
Cultural analytics relies heavily on software-based tools, and the field is related to the nascent
discipline of software studies. While the objects of a cultural analytical approach are often digitized
representations of the work, rather than the work in its original material form, the objects of study
need not be digital works in themselves.

Related methodologies[edit]
Related methodologies include:

 Culturomics
 Information visualization
 Visual analytics
 Data visualization
 Data mining
 New media art
 Software studies

References[edit]
1. Jump up^ "Four to Five Years: Visual Data Analysis". 2010 Horizon Report. The New Media
Consortium. Archived from the original on 2011-08-10.
2. Jump up^ Napoleon's March on Moscow
3. Jump up^ Moretti, Franco (2005). Graphs, maps, trees: abstract models for a literary history. Verso.
p. 119. ISBN 1-84467-026-0.
4. Jump up^ HIPerSpace

External links[edit]
 Cultural Analytics research at Software Studies Initiative
 James Willford. Graphing Culture. Humanities (a publication of National Endowment of
Humanities.) March/April 22, number 2, 2011.

[show]

Culture

PRACTICAL STEPS TO BUILDING AN

ANALYTICS CULTURE
JANUARY 18, 2016 GARYANGEL

Building an analytics culture in the enterprise is incredibly important. It’s far more important
than any single capability, technology or technique. But building culture isn’t easy. You can’t
buy it. You can’t proclaim it. You can’t implement it.
There is, of course, a vast literature on building culture in the enterprise. But if the clumsy,
heavy-handed, thoroughly useless attempts to “build culture” that I’ve witnessed over the course
of my working life are any evidence, that body of literature is nearly useless.

Here’s one thing I know for sure: you don’t build culture by talk. I don’t care whether it’s getting
teenagers to practice safe-sex or getting managers to use analytics, preaching virtue doesn’t
work, has never worked and will never work. Telling people to be data-driven, proclaiming your
commitment to analytics, touting your analytics capabilities: none of this builds analytics culture.

If there’s one thing that every young employee has learned in this era, it’s that fancy talk is cheap
and meaningless. People are incredibly sophisticated about language these days. We can sit in
front of the TV and recognize in a second whether we’re seeing a commercial or a program.
Most of us can tell the difference between a TV show and movie almost at a glance. We can tune
out advertising on a Website as effortlessly as we put on our pants. A bunch of glib words aren’t
going to fool anyone. You want to know what the reaction is to your carefully crafted, strategic
consultancy driven mission statement or that five year “vision” you spent millions on and just
rolled out with a cool video at your Sales Conference? Complete indifference.

That’s if you’re lucky…if you didn’t do it really well, you got the eye-roll.

But it isn’t just that people are incredibly sensitive – probably too sensitive – to BS. It’s that even
true, sincere, beautifully reasoned words will not build culture. Reading moral philosophy does
not create moral students. Not because the words aren’t right or true, but because behaviors are,
for the most part, not driven by those types of reasons.

That’s the whole thing about culture.

Culture is lived, not read or spoken. To create it, you have to ingrain it in people’s thinking. If
you want a data-driven organization, you have to create good analytic habits. You have to make
the organization (and you too) work right.

How do you do that?

You do it by creating certain kinds of process and behaviors that embed analytic thinking. Do
enough of that, and you’ll have an analytic culture. I guarantee it. The whole thrust of this recent
series of posts is that by changing the way you integrate analytics, voice-of-customer, journey-
mapping and experimentation into the enterprise, you can drive better digital decision making.
That’s building culture. It’s my big answer to the question of how you build analytics culture.
But I have some small answers as well. Here, in no particular order, are practical ways you can
create importantly good analytics habits in the enterprise.

Analytic Reporting
What it is: Changing your enterprise reporting strategy by moving from reports to tools.
Analytic models and forecasting allow you to build tools that integrate historical reporting with
forecasting and what-if capabilities. Static reporting is replaced by a set of interactive tools that
allow users to see how different business strategies actually play-out.
Why it build analytics culture: With analytics reporting, you democratize knowledge not data.
It makes all the difference in the world. The analytic models capture your best insight into how a
key business works and what levers drive performance. Building this into tools not only
operationalizes the knowledge, it creates positive feedback loops to analytics. When the forecast
isn’t right, everyone know it and the business is incented to improve its understanding and
predictive capabilities. This makes for better culture in analytics consumers and analytics
producers.

Cadence of Communications
What it is: Setting up regular briefings between analytics and your senior team and decision-
makers. This can include review of dashboards but should primarily focus on answers to
previous business questions and discussion of new problems.
Why it builds analytics culture: This is actually one of the most important things you can do. It
exposes decision-makers to analytics. It makes it easy for decision-makers to ask for new
research and exposes them to the relevant techniques. Perhaps even more important, it lets
decision-makers drive the analytics agenda, exposes analysts to real business problems, and
forces analysts to develop better communication skills.

C-Suite Advisor
What it is: Create an Analytics Minister-without-portfolio whose sole job is to advise senior
decision-makers on how to use, understand and evaluate the analytics, the data and the decisions
they get.
Why it builds analytics culture: Most senior executives are fairly ignorant of the pitfalls in data
interpretation and the ins-and-outs of KPIs and experimentation. You can’t send them back to get
a modern MBA, but you can give them a trusted advisor with no axe to grind. This not only
raises their analytics intelligence, it forces everyone feeding them information to up their game
as well. This tactic is also critical because of the next strategy…

Walking the Walk

What it is: Senior Leaders can talk tell they are blue in the face about data-driven decision-
making. Nobody will care. But let a Senior Leader even once use data or demand data around a
decision they are making and the whole organization will take notice.
Why it builds analytics culture: Senior leaders CAN and DO have a profound impact on
culture but they do so by their behavior not their words. When the leaders at the top use and
demand data for decisions, so will everyone else.

Tagging Standards
What it is: A clearly defined set of data collection specifications that ensure that every piece of
content on every platform is appropriately tagged to collect a rich set of customer, content, and
behavioral data.
Why it builds analytics culture: This ends the debate over whether tags and measurement are
optional. They aren’t. This also, interestingly, makes measurement easier. Sometimes, people
just need to be told what to do. This is like choosing which side of the road to drive on – it’s far
more important that you have a standard that which side of the road you pick. Standards are
necessary when an organization needs direction and coordination. Tagging is a perfect example.

CMS and Campaign Meta-Data

What it is: The definition of and governance around the creation of campaign and content meta-
data. Every piece of content and every campaign element should have detailed, rich meta-data
around the audience, tone, approach, contents, and every other element that can be tuned and
analyzed.
Why it builds analytics culture: Not only is meta-data the key to digital analytics – providing
the meaning that makes content consumption understandable, but rich meta-data definition
guides useful thought. These are the categories people will think about when they analyze
content and campaign performance. That’s as it should be and by providing these pre-built,
populated categorizations, you’ll greatly facilitate good analytics thinking.

Rapid VoC
What it is: The technical and organizational capability to rapidly create, deploy and analyze
surveys and other voice-of-customer research instruments.
Why it builds analytics culture: This is the best capability I know for training senior decision-
makers to use research. It’s so cheap, so easy, so flexible and so understandable that decision-
makers will quickly get spoiled. They’ll use it over and over and over. Well – that’s the point.
Nothing builds analytics muscle like use and getting this type of capability deeply embedded in
the way your senior team thinks and works will truly change the decision-making culture of the
enterprise.

SPEED and Formal Continuous Improvement Cycles

What it is: The use of a formal methodology for digital improvement. SPEED provides a way to
identify the best opportunities for digital improvement, the ways to tackle those opportunities,
and the ability to measure the impact of any changes. It’s the equivalent of Six Sigma for digital.
Why it builds analytics culture: Formal methods make it vastly easier for everyone in the
organization to understand how to get better. Methods also help define a set of processes that
organizations can build their organization around. This makes it easier to grow and scale. For
large enterprises, in particular, it’s no surprise that formal methodologies like Six Sigma have
been so successful. They make key cultural precepts manifest and attach processes to them so
that the organizational inertia is guided in positive directions.
Does this seem like an absurdly long list? In truth I’m only about half-way through. But this post
is getting LONG. So I’m going to save the rest of my list for next week. Till then, here’s some
final thoughts on creating an analytics culture.

The secret to building culture is this: everything you do builds culture. Some things build the
wrong kind of culture. Some things the right kind. But you are never not building culture. So if
you want to build the right culture to be good at digital and decision-making, there’s no magic
elixir, no secret sauce. There is only the discipline of doing things right. Over and over.

That being said, not every action is equal. Some foods are empty of nutrition but empty, too, of
harm. Others positively destroy your teeth or your waistline. Still others provide the right kind of
fuel. The things I’ve described above are not just a random list of things done right, they are the
small to medium things that, done right, have the biggest impacts I’ve seen on building a great
digital and analytics culture. They are also targeted to places and decisions which, done poorly,
will deeply damage your culture.

I’ll detail some more super-foods for analytics culture in my next post!

Culture Analytics
MARCH 7 - JUNE 10, 2016
 OVERVIEW
 PARTICIPANT LIST
 SEMINAR SERIES
 ACTIVITIES

 OVERVIEW
 PARTICIPANT LIST
 SEMINAR SERIES
 ACTIVITIES

Overview
 The explosion in the widespread use of the Internet and social
media and the ubiquity of low cost computing have increased the possibilities for understanding
cultural behaviors and expressions, while at the same time have facilitated opportunities for making
cultural artifacts both accessible and comprehensible. The rapidly proliferating digital footprints that
people leave as they crisscross these virtual spaces offer a treasure trove of cultural information,
where culture is considered to be expressive of the norms, beliefs and values of a group. This
program encourages the exploration of the unsolved mathematical opportunities that are emerging in
this cultural information space. Many successful approaches to the analysis of cultural content and
activities have been developed, yet there is still a great deal of work to be done. In this program, we
aim to promote a vigorous collaboration across disciplines and devise new approaches and novel
mathematics to address these problems of culture analytics, by bringing together leading scholars in
the social sciences and humanities with those in applied mathematics, engineering, and computer
science.

ORGANIZING COMMITTEE

Tina Eliassi-Rad (Rutgers University, Computer Science)

Mauro Maggioni (Duke University, Mathematics and Computer Science)
Lev Manovich (The Graduate Center, CUNY, Computer Science)
Vwani Roychowdhury (University of California, Los Angeles (UCLA), Electrical Engineering)
Timothy Tangherlini (University of California, Los Angeles (UCLA), Germanic Languages and
Literatures, Scandinavian Section)

Five Myths and Five Ways to Create an Analytics Culture

Monday, March 16th, 2015 - 0:00
BY:
Josh Helms

An organization's culture is often the biggest impediment to embracing analytics and adopting a big data
strategy. This blog entry poses 5 myths that inhibit culture change and the adoption of a big data strategy,
and suggests 5 ways to create a culture that embraces analytics and is open to a big data strategy.
Introduction

This entry is the fifth and final in a series of blog posts discussing issues that the government faces with implementing
big data strategies. The first blog post in this series described why data should be defined as "big" based on
complexity of the data, not volume alone. The second blog post and third blog post explained four challenges that a
big data strategy presents for public sector organizations. The fourth blog post provided examples of areas and
organizations from the public sector that are developing and applying big data strategies.

What are the challenges of changing an organizations culture to embrace analytics and adopt a big data strategy? A
culture that shares data should be part of that big data strategy. Recall the first blog acknowledged that not every
organization will need or necessarily benefit from big data analytic tools. However, it is prudent for leaders to examine
business or mission requirements to determine where they could apply analytics and if they have a need for big data
analytic tools. I uncovered several cultural myths that leaders and analysts have faced, which I will address first. Then
I will discuss some best practices that leaders can apply to change their organizations analytic and big data culture.
Cultural Myths that Challenge the Adoption of a Big Data Strategy

Myth 1: Data is Knowledge and Knowledge is Power

One of the most significant challenges to an organization's cultural approach to big data is that people see data as
knowledge, and according to the age old adage that knowledge is power, so people perceive that restricting the use
of data is one way to wield power. This view has led to the creation of data silos which inhibit people from sharing
data with external organizations and often within organizations.
Myth 2: No One Understands the Data Like Me
Often analysts believe that they are the only ones that understand their data. If the data is dirty and/or it is not well
defined, multiple analyses on the same set of data could result in different conclusions. Different analysts may see a
problem through different lens, resulting in different assumptions and methodologies for cleansing the data.
Presenting a decision maker with different recommendations for the same problem based on the same raw data
results in a lack of trust and confidence from the decision maker and extra work for the analysts.
Myth 3: Big Data Technologies and Sharing Data are a Risk to Job Security
Various reports state that analysts spend anywhere from 60-80% of their time preparing data (e.g. organizing,
cleansing, filtering, documenting). Given that high proportion of time spent in preparing the data, a number of analysts
are concerned that open or shared data will reduce the requirement to prepare data; thus, reducing the number of
jobs for analysts. Furthermore, big data technologies reduce the need to organize and clean data, also raising
concern about reducing the number of jobs for analysts.
Myth 4: Change is Too Hard and Resource Intensive
Change is hard and it will require resources. Inherently, there is a strong desire to maintain status quo. However,
technology, the environment, the competition, and the problem all continue to change. Change is the only path to
process improvement and staying ahead. Changing will take time and money, but the benefits of better data and
automation may be well worth the investment.
Myth 5: The State of my Data Warehouse is Embarrassing
When you have visitors over to your house, there is always at least one room where you stuff all of the junk, and that
room is not on the tour. Similarly, no organization's data warehouse is perfectly organized and governed; there is
always room for improvement. Likely, the worse the state of the data, the greater the need for a big data strategy.
Being embarrassed and hiding the problem will not help solve the problem. Consider one of those TV shows about
hoarders. The only way to fix the problem is to expose the problem and ask for help.
Best Practices in Changing an Organization's Cultural Approach to Analytics and Big Data

Practice 1: Identify an Appropriate Business Requirement

The first step to any problem is defining and understanding the problem. As I have emphasized many times in this
blog series, you have to identify an appropriate business or mission requirement that will benefit from advanced
analytic tools and/or a big data strategy. TechAmerica Foundation's report on Demystifying Big
Data (http://www.techamerica.org/Docs/fileManager.cfm?f=techamerica-bigdatarep...) laid out four great
recommendations for getting started.
1. Understand the "Art of the Possible" -- Explore the case studies contained in the report linked above, in
the fourth blog entry in this series, and otherwise in the public domain to find inspiration and practical
examples.
2. Identify 2-4 key business or mission requirements that Big Data can address for your agency, and define and
develop underpinning use cases that would create value for both the agency and the public.
3. Take inventory of your "data assets." Explore the data available both within the agency enterprise and across
the government ecosystem within the context of the business requirements and the use cases.
4. Assess your current capabilities and architecture against what is required to support your goals, and select
the deployment entry point that best fits your Big Data challenge - volume, variety or velocity.
Practice 2: Leadership Establishes Clear Expectations
Leadership has the responsibility to establish clear expectations, which will lead to the change of organizational
culture. This responsibility may require some difficult decisions pertaining to personnel actions and resource
allocation. Leaders should emphasize that data is not power and get everyone rowing in the same direction for the
good of the organization instead of personal gain or notoriety. Subject matter experts say that a carrot and stick
approach works well in encouraging change. Rewarding those who share data, practice data governance, use
metadata to document, and use the tools that translate into transparency in the data is effective in changing the
culture and encourages others to adopt those practices. When rewards do not work, leaders need to make the
unpopular decisions consistent with established expectations. Leaders can address the job security risk by
repurposing analysts. Reducing the resources required to prepare the data for analysis allows leaders to reapportion
analysts to spend more time analyzing the data and looking for insights or new ways of using the data.
Practice 3: Start Small and Build Iteratively
There is an old saying that advises to eat an elephant one bite at a time. Experts say that is the same way to embark
on a big data strategy. Change is not too hard and resource intensive with the right approach. Start with a relatively
small, yet appropriate business case. As that application proves successful, grow and build iteratively, which is the
basis of a DevOps type approach discussed in the third entry of this blog series. Although the marginal cost in dollars
might be higher, starting small should require a smaller comprehensive resource investment.
Practice 4: Build a Champion and Celebrate Small Victories
By starting small and growing iteratively, leaders and analysts can build champions along the way who will act as
advocates for the new big data strategy, spreading the good word. As this group of champions grows, the naysayers
will lose grip on the organization's culture, facilitating the path to change. In her interview on Conversations on Big
Data (http://ourpublicservice.org/issues/modernize-management/conversations-on...), Lisa Danzig, Associate Director
for Personnel and Performance, Office of Management and Budget, gives great advice on this topic including the
recommendation to celebrate small victories. These celebrations become contagious, motivate the team, and
encourage others to join the team. Everyone wants to be on a winning team.
Practice 5: Acknowledge that Failure is an Acceptable Way to Learn
An organization with zero tolerance for failure is an organization that is resistant to change. Fresh ideas and new
technologies pose too great of a risk in this type of organization. Inherently, people are going to make mistakes. It is
what people and organizations do in response to those mistakes which determine overall success or failure. An Army
doesn't have to win every battle to win the war. Good leaders want their people to test and try new things; it is the
only way to move forward. It is the leader's responsibility to ensure there are risk mitigation measures to reduce the
impact if the experiment fails.

***The ideas and opinions presented in this paper are those of the author and do not represent an official statement
by IBM, the U.S. Department of Defense, U.S. Army, or other government entity.***
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