+

Chapter 5:Technologies
Enabling Insights and
Decisions
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Introduction

 Data mining

 Business analytics

 Goal, design, techniques & implementation of data mining

 Decision trees or rule induction, as a knowledge-modeling tool

 Predictive techniques

 Real time decision support

+
Technologies to Create Insights: Using
Data Mining to Create New Explicit
Knowledge
 Business analytics

 Knowledge discovery in databases (KDD), or more commonly, data mining

(DM)

 Analytics comes with hypothesis testing

 Data mining is more the act of discovery that lacks a hypothesis

 DM applications have made noteworthy contributions to scientific discovery,

for example, in breast cancer diagnosis
+ Technologies to Create Insights: Using Data
Mining to Create New Explicit Knowledge

 Some of the factors driving BI are:

 Exploding data volumes
 Increasing decision complexity
 Need for quick reflexes
 Technological progress
+ BI Intelligence in Practice: Data Mining
Applications for e-Commerce

 One successful e-tailer implementation is the case of eBags, a web based

storefront of handbags, suitcases, wallets, and other similar products.

 Web pages garnering maximum purchases

 Utilization of customer information for customizing and maximizing profits

 Proflowers, an online resource that describes itself as ‘connecting consumers

with fresh-from-the-field flowers’

 Timely delivery of the product to maximizing customer satisfaction

 Improved the management

+
Other Successful DM Applications

 Banking

 Target Marketing

 Insurance

 Telecommunications

 Operations Management

 Retail Sales Forecasting

 Systems Diagnosis
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The Business Analytics Process

 Business analytics

 Two significant ways to get new insights from the existing information:
 Discovery by using existing information
 Discovery by finding useful patterns in observations

 Cross-Industry Standard Process for Data Mining (CRISP-DM)

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CRISP-DM Process Methodology
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Steps for the Data Preparation

 Selection

 Construction and transformation of variables

 Data Integration

 Formatting
+
The Business Analytics Process

 DM process comprises the:

 Model building and validation
 Model evaluation and interpretation
 Deployment

 Customer Profile Exchange (CPEX)

 Data Mining Group (DMG)

+
The Data Mining Model:
Describing What Happened

 Describe what happened or to predict what will happen

 Descriptive techniques are used to look for patterns

 Descriptive techniques can be of two types:

 Affinity or association
 Clustering

 Market basket or association analysis can include the use of two techniques:
 Apriori association rule algorithm
 Generalized rule induction (GRI)
+
Association Techniques
+ BI in Practice: Harrah’s Customer Clusters
Lead to Higher Firm Profitability

 Use of technology for the improvement of customer satisfaction

 Company leadership embarked in the implementation of a customer loyalty

program

 Motivated by the economic slowdown caused by the dot bust of the late
1990s

 Innovative rewards program for improving sales, customer service and

marketing

 Included an enterprise-wide data warehouse that integrated customer data

 Invested in an award-wining CRM system used to analyze the customer

information for new patterns and insights
+
The Data Mining Model-Predicting
What Will Happen

 DM techniques used to predict what will happen are classified into three
categories:
 Statistical Data Mining methods
 Connectionist methods: Neural Networks
 Symbolic Data Mining methods :Rule induction
+
Statistical Data Mining Methods

 Find the correlations between the variables

 Curve fitting

 There are a number of curve fitting methods

 Least squares method
 Nonlinear correlation method
 Multivariate correlation techniques
 Inferential statistical techniques
+
Applicability of Statistical Techniques
+
Connectionist Methods: Neural
Networks
 Use of artificial neural networks (ANN) techniques

 A predictive technique (backward propagation network) or as a clustering

technique (Kohonen network)

 Most important feature of ANN is that they can ‘learn’

 Most popular neural network algorithm is the multilayered feed forward

neural network with the back propagation learning

 The process is continuously iterative

 Memory-based reasoning
+
Connectionist Methods: Neural
Networks

Inputs Outputs

Two-layer Neural Network

+
Applicability of Non-Inferential
Predictive Technique
+
Symbolic Data Mining Methods:
Rule Induction

 Decision Tree and Rule Induction Methods, also known as symbolic

techniques

 Used to infer the ‘rules’ that classify or partition the dataset

 Rule induction methods provide automated techniques

 The Classification and Regression Tree (CART) algorithm

 Chi-squared Automatic Interaction Detector (CHAID) and C5.0

 Root node-parent node-child node

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Symbolic Data Mining Methods:
Rule Induction

 Classification Rule

 Traditional statistical prediction methods

 Decision Tree

 Variables

 Advantage-the results may be directly inspected to understand the variables

that can be effectively used to classify the data
+
Simple Decision Tree-(Source:
[SPSS, 2000])
+
Simple Decision Tree-(Source:
[SPSS, 2000])

 Depicts the outcome decision tree for a targeting marketing initiative

 Identifies ‘Age in Years’ as the most significant predictor for customer

purchases

 Node was further exploited using the ‘Income’ variable

 The decision points of the trees can intuitively be translated into software
conditional statements
+
Applicability of Decision Tree
Techniques
+
The Data Mining Model:
Understanding What Happened

 Evaluate the cost of the errors

 Shaded quadrant represents patients that were correctly predicted as being

healthy

 Shaded quadrant - 96 patients were diagnosed with presence of disease

 70.6% of the patients were correctly classified with the prediction algorithm
+
Classification Table Results [SPSS,
2000]
+ Case Study-Can knowledge discovery uncover the
factors that help predict the competitiveness of
nations?

 A nation’s competitiveness

 Productivity

 Competitiveness

 Country risk

 Competitiveness can be defined in one of the following ways:

 Cost-competitiveness
 Price-competitiveness
 Non-price competitiveness
+ Case Study-Can knowledge discovery uncover the
factors that help predict the competitiveness of
nations?

 WCY provides a competitiveness score for each country based on eight

major factors:
 Domestic economy
 Internationalization
 Government
 Finance
 Infrastructure
 Management
 Science and technology
 People

 Mathematical programming modeling

+ Predictors for Country Competitiveness According
to Different Data Mining Algorithms
+ Case Study-Can knowledge discovery uncover the
factors that help predict the competitiveness of
nations?

 The figure described country competitiveness using each of the four

methods:
 Stepwise regression (SWR)
 Weighted non-linear programming (WNLP)
 Neural networks (NN)
 Classification and regression trees (CART)
+
Effective Implementation of
Business Analytics
 Storage Law

 Data tombs or data stores

 Eight common mistakes that organizations seeking the deployment of DM

technologies must avoid:
 User expectations are too high
 Putting the right tools in the wrong hands
 Dishing up data that users need to figure out how to use
 Training users only at the beginning of the project
 Going for a quick win rather than planning for the long-haul
 The organization goes for the big bang
 Data roles and governance are not adequately addressed.
 The organization fails to demonstrate values.
+
Real-Time Decision Support:
Integrating Results With Action
 Real time decision support

 “interactive” as well as “invisible”

 Making analytics invisible requires the following challenges be addressed:

 Scaling analysis to large databases
 Scaling to high-dimensional data and models
 Automating the search
 Finding patterns and models understandable and interesting to user

 Vertically integrated decision support solutions

 Metadata

 Integration of existing environments