INTRODUCTION TO
DECISION ANALYTICS
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Chapter 1: An Overview of Business
Intelligence, Analytics, and Data Science.
Chapter 6: Prescriptive Analytics:
Optimization and Simulation.
Chapter 1: Introduction
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Operations Research (OR)
• Operations Research = research on operations.
• A discipline that deals with the application of advanced
analytical methods to help make better decisions.
• Sub-field of applied mathematics.
• Synonyms: management science, decision science, decision
analytics.
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Operations Research (OR) (cont…)
• Research on how to conduct and coordinate an organization’s
activities.
• In a business organization, as the complexity and specialization
increase, it becomes difficult to allocate the available resources
to the various activities in a way that is most effective for the
organization as a whole.
• These kinds of problems which need proper solutions provided
the environment for the emergence of OR.
• OR provides positive, understandable conclusions to the
decision maker using scientific approach.
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Operations Research (OR) (cont…)
• The term Operations Research was first used in the military
during World War II – to manage the allocation of scarce
resources.
• Early 1950s - OR was introduced into business, industry, and
government.
• Generally, at least two major factors are influencing the rapid
growth of OR as follows:
Factors influencing
the growth of OR
• Simplex method.
• Dynamic
programming.
Improved
• Queuing theory.
techniques
• Inventory theory.
Computer
revolution
• Advancement of
hardware and
software.
• Fast solutions for
complex problems.
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Operations Research (OR) (cont…)
• A typical OR process
Carefully observe and formulate the problem
Gather data
Construct a mathematical model
Test whether the model represents the actual situation
Modify the model as appropriate and validate again
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Operations Research (OR) (cont…)
• OR considers what is best for organization as a whole.
• Attempts to identify best possible course of action.
• An OR team consists of individuals with diverse backgrounds
and skills.
• The team is necessary for considering ramifications of problem
throughout organization.
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Analytics Overview
The process of developing actionable
decisions or recommendations for
actions based on insights generated
from historical data.
According to Institute for Operations
Research and Management Science
(INFORMS):
Analytics represents the combination
of computer technology, management
science techniques, and statistics to
solve real problems.
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Analytics Overview (cont…)
• Introduced in 2006 by Thomas H.
Davenport
• Similar in concept to operations
research.
• Transforms data into insight to
make better decisions.
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Business Analytics
• FIGURE 1.11 Three Types of Analytics
Sharda R., Delen, D., Turban E., King D., Business Intelligence: A Managerial Approach (Global Edition), 4th Edition, Pearson, 2017
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Business Analytics (cont…)
• Descriptive and predictive leads to prescriptive.
• OR focuses on predictive and prescriptive analytics.
• 2012 U.S. presidential campaign
 The Obama team used data to target voters and donors
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Business Analytics (cont…)
• Applications that shows the wide applicability of OR as shown in Table 1.1
(Hillier, F. S., Lieberman, G. J., Introduction to Operations Research, 10th
Edition, McGraw Hill, 2015)
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Business Analytics (cont…)
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