Introduction to Data Science for

Business/Finance
Lecture 2 - Data-Driven Decision Making1

Vinh Vo

Faculty of Data Science for Business

Ho Chi Minh University of Banking

October 20, 2024

1
Materials used: “Data Science for Business Analytics” by V.N. Huynh, JAIST, 2021
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Outline

1 Introduction

2 Big Data and Data Science

3 Data-Driven Decision Making

4 Conclusions

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 Introduction

Outline

1 Introduction

2 Big Data and Data Science

3 Data-Driven Decision Making

4 Conclusions

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 Introduction

“Competing in a Data-driven World”

“Organizations will not only need to

ensure they have sufficient skills in
back-office analytics but also manage
a transition toward the right
managerial talent on the front line
that will be capable of executing
strategy based on the insights
analysts mined from big data.”

©McKinsey Global Institute, May 2011

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 Introduction

©McKinsey Global Institute, May 2011

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 Introduction

IBM Tech Trends Report (2011)

Business Analytics is one of the four major technology trends (other three
are Mobile Computing, Cloud Computing, and Social Business) in the
2010s (based on a survey of over 4,000 information technology (IT)
professionals from 93 countries and 25 industries).

Survey by Bloomberg Businessweek (2011)

“97% of companies with revenues exceeding $100 million were found to
use some form of Business Analytics, up from 90% just two years ago.”

Business Analytics = Business ⋂ Data Science

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 Big Data and Data Science

Outline

1 Introduction

2 Big Data and Data Science

3 Data-Driven Decision Making

4 Conclusions

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 Big Data and Data Science

Big Data as a Natural Resource

Big Data is a ‘new natural resource’. Like other natural resources, big data
needs to be successfully mined, refined and delivered in order to create
value.
Source: @IBM 2013

Dell CEO Michael Dell (2014)

“Data is arguably the most important natural resource of this century. Top
thinkers are no longer the people who can tell you what happened in the
past, but those who can predict the future.”

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 Big Data and Data Science

❖ There is no question that Big Data has hit the business, government
and scientific sectors.
✦ The term ‘big data’ was coined in 1997 by Michael Cox and David
Ellsworth at NASA in their paper published in the Proceedings of the
IEEE 8th Conference on Visualization.

The phrase “big data” means different things to different people. That is
not surprising given the amount of hype that surrounds the term and the
variety of ways in which marketers have deployed it to promote their
products.
Source: The Economist Intelligence Unit, 2013

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 Big Data and Data Science

What is Big Data?

‘Big Data’ is data sets characterized by their volume, velocity of change

and variety of type (the ‘Three Vs’) that, because of their size and
complexity, can not be analyzed through using traditional methods.
Source: The Economist Intelligence Unit, 2013

‘Big data’ refers to datasets whose size is beyond the ability of typical
database software tools to capture, store, manage, and analyze.
Source: The McKinsey Global Institute, 2011

❖ IBM data scientists break big data into four dimensions: volume,
velocity, variety, and veracity.

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 Big Data and Data Science

Characteristics: Four Vs

❶ Volume : The ‘amount of data’ being generated is immense and

every moment new data is created resulting from different kind of
activities. E.g.,
✦ More than 4,000 million email accounts.
✦ 1,440 million Facebook accounts.
✦ 500 million Twitter accounts. @Gabriel Jiménez, IBMblogs, May 2016

❷ Variety : ‘Data in different forms’, and from different sources. These

data types are usually classified into three broad categories:
✦ Structured data (e.g., the numbers in a customer invoice)
✦ Semi-structured data (e.g., web or multimedia data, email files)
✦ Unstructured data (e.g., images, videos, audio)

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 Big Data and Data Science

❸ Velocity : ‘Data in motion’, i.e. the speed by which data is

generated/accumulated and need to be processed.
✦ Every 60 seconds on : 510,000 comments are posted, 293,000
statuses are updated, and 136,000 photos are uploaded. (Source: The Social
Skinny)

✦ Every second, on average, around 6,000 tweets are tweeted on

Twitter, corresponding to over 500 million tweets per day and around
200 billion tweets per year. (Source: @internetlivestats.com)
✦ About 400 hours of video content uploaded to every single
minute. (Source: @http://tubularinsights.com)

❹ Veracity : ‘Data in doubt’, i.e. uncertainty of data due to data

inconsistency, incompleteness, ambiguities, noise, reliability, etc.

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 Big Data and Data Science

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 Big Data and Data Science

Questions for Discussion

✍ What kinds and sources of data does your company/organization

collect and use?

✍ How is your company’s data gathered and managed?

✍ What ‘Four V’ characteristics of big data does your company’s data

have?

The first question is adapted from the Survey developed by The Economist Intelligence Unit (2013)

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 Big Data and Data Science

“Scientists have long known that data

could create new knowledge via the
application of the scientific method, but
now the rest of the world, including
government and management, has
realized that data can create many
types of value: principally financial, but
also environmental and social.”
Sean Patrick Murphy in IBM Big Data & Analytics Heroes

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 Big Data and Data Science

“To get the full business value from big data, companies are focusing less
on the three Vs of big data (volume, velocity, variety) and more on the
four Ms of big data: Make Me More Money! New sources of data, coupled
with advanced analytics, can improve customer engagement, optimize
business processes and point to new monetization opportunities.”
Bill Schmarzo, Chief Technology Officer at EMC Global Services Big Data Practice

“Do not focus on the ‘bigness’ of the data, but on the value creation of
the data.”
Stephen Brobst, Chief Technology Officer of Teradata Corporation

(requoted from [Diego Kuonen, 2015])

➠ The 5th V of big data: “Value”

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 Big Data and Data Science

Extracting business value

from the 4 V’s of big data.
Source: @IBMBigData

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 Big Data and Data Science

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 Big Data and Data Science

But, how to create value from data?

Source: Domo, Inc.

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 Big Data and Data Science

From the Scientific Perspective

“Scientific data are not taken for museum purposes; they are taken as a
basis for doing something. If nothing is to be done with the data, then
there is no use in collecting any. The ultimate purpose of taking data is to
provide a basis for action or a recommendation for action. The step
intermediate between the collection of data and the action is prediction.”
W. Edwards Deming, On a Classification of the Problems of Statistical Inference, June 1942

Journal of the American Statistical Association

“Planning requires prediction. Prediction requires a theory.”

Ron Moen at the 2012 Annual Deming Conference.

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 Big Data and Data Science

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 Big Data and Data Science

Data Science Association - Code of Conduct

“Data Science” means the scientific study of the creation, validation
and transformation of data to create meaning.

“Data Scientist” means a professional who uses scientific methods to

liberate and create meaning from raw data.
Source: http://www.datascienceassn.org/code-of-conduct.html

“Data Science” is a set of fundamental principles that support and guide

the principled extraction of information and knowledge from data.
[F. Provost, T. Fawcett, 2013]

Closely related concepts: data mining and machine learning – the

extraction of knowledge and learning from data.

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 Big Data and Data Science

Big Data Processing Framework

Related Issues and Challenges

● X. Wu et al., Data Mining with Big Data, IEEE Transactions on Knowledge and Data Engineering 26 (2014) 97–107.

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 Big Data and Data Science

Source: McKinsey Global Institute, December 2016

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 Big Data and Data Science

Source: McKinsey Global Institute, December 2016

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 Big Data and Data Science

Source: Chen, Chiang and Storey, MIS Quarterly 36 (2012)

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 Big Data and Data Science

Source: Chen, Chiang and Storey, MIS Quarterly 36 (2012)

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 Big Data and Data Science

Source: Chen, Chiang and Storey, MIS Quarterly 36 (2012)

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 Big Data and Data Science

A Big Data Workflow

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 Data-Driven Decision Making

Outline

1 Introduction

2 Big Data and Data Science

3 Data-Driven Decision Making

4 Conclusions

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 Data-Driven Decision Making

➤ Decision-making is the pervasive

function of managers aimed at
achieving organizational goals.

➤ Therefore, the ability of managers to

make good decisions is vital for the
success of any organization.

M. Myatt, Forbes, March 2012

“The first key in understanding how to make great decisions is learning
how to synthesize the overwhelming amount incoming information leaders
must deal with on a daily basis, while making the best decisions
possible in a timely fashion.”

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 Data-Driven Decision Making

Source: https://www.domo.com/learn/ebook/biguide/

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 Data-Driven Decision Making

Intuition-based Decision Making

Source: McAfee and Brynjolfsson, Havard Business Review, 2012

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 Data-Driven Decision Making

Intuition-based Decision Making

“What I have seen across numerous industry sectors, and even government
and academia, is that most decisions are made by opinions that are
polluted with personal biases and low information.”
Sean Patrick Murphy in IBM Big Data & Analytics Heroes

According to a survey conducted by , 58% of respondents say their

companies base at least half of their regular business decisions on gut feel
or experience rather than being driven by data and information. On
average, organizations only use 50% of all available information for
decision-making.
Source: https://bi-survey.com/data-driven-decision-making-business

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 Data-Driven Decision Making

Data-Driven Decision Making

✦ Decision making based

on data and business
analytics.

✦ The practice of basing

decisions on the analysis
of data rather than
purely on intuition. [Provost
and Fawcett, 2013]

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 Data-Driven Decision Making

Data science in the context of

closely related processes in
the organization.

Source: Provost and Fawcett, “Data Science for Business”, O’Reilly Media, 2013

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 Data-Driven Decision Making

Why DDD is Your Path To Business Success

[Mona Lebied, The datapine Blog, Jul 2017]

The benefits of DDD have been demonstrated conclusively.

Also according to the above-mentioned survey conducted by ,

significantly fewer best-in-class companies than laggards base the majority
of their business decisions on gut feel or experience (40% vs. 70%). This
highlights a link between using information for decision-making and being
able to benefit from information and achieve a strategic advantage over
rivals.
Source: https://bi-survey.com/data-driven-decision-making-business

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 Data-Driven Decision Making

Source: McAfee and Brynjolfsson, “Big Data: The Management Revolution”, Havard Business Review, 2012

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 Data-Driven Decision Making

Source: McAfee and Brynjolfsson, “Big Data: The Management Revolution”, Havard Business Review, 2012

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 Data-Driven Decision Making

Example: Hurricane Frances

“What Wal-Mart Knows About Customers’ Habits”, The New York Times
(Hays, 2004)

HURRICANE FRANCES was on its way, barreling across the Caribbean,

threatening a direct hit on Florida’s Atlantic coast. Residents made for higher
ground, but far away, in Bentonville, Ark., executives at Wal-Mart Stores decided
that the situation offered a great opportunity for one of their newest data-driven
weapons, something that the company calls predictive technology.
A week ahead of the storm’s landfall, Linda M. Dillman, Wal-Mart’s chief
information officer, pressed her staff to come up with forecasts based on what
had happened when Hurricane Charley struck several weeks earlier. Backed by the
trillions of bytes’ worth of shopper history that is stored in Wal-Mart’s computer
network, she felt that the company could “start predicting what’s going to
happen, instead of waiting for it to happen,” as she put it.

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 Data-Driven Decision Making

Example: Hurricane Frances

“What Wal-Mart Knows About Customers’ Habits”, The New York Times
(Hays, 2004)

The experts mined the data and found that the stores would indeed need certain
products – and not just the usual flashlights. “We didn’t know in the past that
strawberry Pop-Tarts increase in sales, like seven times their normal sales rate,
ahead of a hurricane,” Ms. Dillman said in a recent interview. “And the
pre-hurricane top-selling item was beer.”

Thanks to those insights, trucks filled with toaster pastries and six-packs were
soon speeding down Interstate 95 toward Wal-Marts in the path of Frances. Most
of the products that were stocked for the storm sold quickly, the company said.

Such knowledge, Wal-Mart has learned, is not only power. It is profit, too.

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 Data-Driven Decision Making

Example: Hurricane Frances

✍ Why might data-driven prediction be useful?

✍ It would be more valuable to discover sales patterns due to the

hurricane that were not obvious.

✍ Analysts might examine the huge volume of data from prior, similar
situations (such as Hurricane Charley) to identify unusual local
demand for products

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 Data-Driven Decision Making

Analytics at Google HR Department

Great Example of Data-Driven Decision-Making [Bernard Marr, 2012]

“In Google the aim is that all decisions are based on data, analytics and
scientific experimentation.”

❖ Fact-based Decision-Making:
➢ Within their global HR function, Google has created a People Analytics
Department that supports the organisation with making HR decisions
with data. One question Google wanted to have an answer to was:
Do managers actually matter?

❖ Project Oxygen:
➢ Within the People Analytics Department, a group of social scientists,
called the Information Lab, took on the project of answering the
question: “Do managers matter” – codenamed ‘Project Oxygen’ – to
define clearly the objectives and information needs.
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 Data-Driven Decision Making

Analytics at Google HR Department

Great Example of Data-Driven Decision-Making [Bernard Marr, 2012]

❖ What Data to Use?

➢ The team first looked at the data sources that already existed:
performance reviews (top down review of managers) & employee survey
(bottom up review of managers). The team plotted the information on
a graph and determined that managers were generally perceived as
good. The team further split the data into the top and bottom quartile.

❖ Analytics
➢ Using a regression analysis to show a big difference between these two
groups in terms of team productivity, employee happiness, and
employee turnover. In summary, the teams with the better managers
were performing better and employees were happier and more likely to
stay. While this has confirmed that good managers do actually make a
difference, it wouldn’t allow Google to act on the data.

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 Data-Driven Decision Making

Analytics at Google HR Department

Great Example of Data-Driven Decision-Making [Bernard Marr, 2012]

❖ Analytics
➢ The next question they needed an answer to was:
What makes a good manager at Google?
Answering this question would provide much more usable insights.

❖ Two New Data Collections:

➢ The first was a ‘Great Managers Award’ through which employees
could nominate managers they feel were particularly good. As part of
the nomination employees had to provide examples of behaviours that
they felt showed that the managers were good managers.
➢ The second data came from interviews with the managers in each of
the two quartiles (bottom and top) to understand what they were
doing (the managers didn’t know which quartile they were in).

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 Data-Driven Decision Making

Analytics at Google HR Department

Great Example of Data-Driven Decision-Making [Bernard Marr, 2012]

The data from the interviews and

from the Great Manager Award
nominations was then coded using
text analysis. Based on this the
analytics team was able to extract
the top 8 behaviours of a high
scoring manager as well as the top 3
causes why managers are struggling
in their role.

Source: https://www.smartdatacollective.com/analytics-google-great-example-data-driven-decision-making/

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 Data-Driven Decision Making

Analytics at Google HR Department

Great Example of Data-Driven Decision-Making [Bernard Marr, 2012]

Source: https://www.smartdatacollective.com/analytics-google-great-example-data-driven-decision-making/

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 Data-Driven Decision Making

Questions for Discussion

Adapted from the Survey developed by The Economist Intelligence Unit (2013)

✍ How would you rate your organization’s ability to use available data
to drive decision making?

✍ Does your organization plan to increase its use of (or plan to use) big
data in decision making?

✍ What are the main obstacles to successful data-driven

decision-making in your organization?

✍ What are the main obstacles to big data usage in your organization?

✍ In your organization, whether and which functional groups rely most

heavily on big data?

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 Conclusions

Outline

1 Introduction

2 Big Data and Data Science

3 Data-Driven Decision Making

4 Conclusions

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 Conclusions

Conclusions

The biggest business trend by 2020 will be the creation of new businesses
based on collecting, analyzing, and delivering data....
By 2020, all businesses will be digital businesses. As ones and zeros
consume the world, data will become the new product and business
intelligence – finding the needle in a haystack – will be the new process of
innovation.
Source: at https://www.domo.com/learn/ebook/biguide/

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 Conclusions

Conclusions

❖ “Big data is here to stay and will continue to have a growing influence
in terms of its impact to business decision making across a number of
sectors.” [Mireille De Cré, the CEO and founder of MDCPartners, May 2017]

Without data we are flying blind, and we can’t do evidence-based policy

decisions – or any decision at all.
Johannes Jütting, Manager of the Partnership in Statistics for Development in the 21st Century, quoted in Data ‘crucial’ to

eradicating poverty by Sarah Shearman in the Guardian, 28/09/2015

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 Conclusions

Conclusions

❖ Decision making that was once based on intuition should be driven by

data.

As more data comes online and our understanding of how to use data
improves, HiPPOs (Highest Paid Person’s Opinion) will become extinct as
a means of decision making; those organizations that can’t let go of this
archaic practice will simply be overtaken by those that can or are too
young to have allowed such a culture to arise.
Sean Patrick Murphy, Senior Scientist, Johns Hopkins University Applied Physics Laboratory

in IBM Big Data & Analytics Heroes

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 Conclusions

B B B B B

B B B B B

B B
Q&A B B

B B B B B

B B B B B

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