Randy Rosseel

Intro to Business Analytics

Course Notes
 Managing expectations of different stakeholder groups

Different stakeholder groups

and their expectations
The CEO and the Board of Directors are collectively
Owners
 Maximize future profits
best qualified to set objective non-conflicting
expectations for the company
Employees
 I nc o m e
 Growth oppor tunities Internal stakeholders C EO Board of directors
Daily operations Strategy & Vision
External stakeholders
Suppliers
 B e p a i d so o n
 Earn more business
Objective Expectations
Customers
 Best product
 Cheap price
We will focus on Objective Expectations
Authorities
 Job creation
 Tax collection

2
Long Range Plan (LRP) and Annual Business Plan (ABP)

L o ng Rang e P lan ( L RP) Annual Business Plan (ABP)

 A prediction of how the  Same methods of preparation as long-range plan
business would evolve in the but much more detail
next 3-5 years  Then track and see how you are progressing
against expectations
 Compare actuals vs budget and allow for
corrective actions on time

Today 1 y ear 3 y ear 5 y ear

(ABP) How businesses capture stakeholder expectations

3
 Analysis vs. Analytics
Analysis: Analytics:
The investigation of When we prepare the Long Range Plan and the
“Why something happened in the past?” Annual Business Plan, we need to predict what will
happen in the future. Consider from an end-to-
end process perspective to determine ” What will
happen?”

Actuals Bu d g et Past Data Expectations

4
 Stakeholders Mapping Exercise

In general, these are the main

stakeholder groups for most companies. Remember!
 Neglecting the expectations of even
Shareholders one stakeholder group can have a
Market Environment massive impact on profitability.

 The easiest and most effective way

Human Suppliers to understand the expectations of
Resources different stakeholder groups is by
asking questions.
Community
Public • Ask “who”, “what”, “when”,
administration Partners “where”, “why” and “how”
questions.
Customers
and consumers
 The knowledge you will get from
these interviews is the backbone on
which you will proceed and start
Our goal is to study the
building the firm’s business
expectations of stakeholder groups
intelligence.

5
 Business Intelligence
The idea of BI is to:
 Gain an accurate and deep understanding of a company’s business
 Predict and prescribe the firm’s performance.
ENTERPRISE PERFORMANCE
QUALITATIVE ANALYSIS QUANTITATIVE ANALYSIS MANAGEMENT

 Considers a firm’s risks  Estimates the additional  highlights the underlying

and opportunities investments required and effectiveness and
the impact of these efficiency of your
 Represents a diagnostic investments on future operations
and descriptive analysis sales (quantitative
representation  helps build business plan,
strategy

 highlights risks and

opportunities 6
 End-to-end Process Mapping

Metrics
Business Business
knowledge process
 help us track our performance under
different aspects
 would enable us to evaluate whether the
execution of a particular process or sub-
process needs to be improved

Detailed objectives
Stakeholder and targets
dependencies It is important to introduce metrics that are
standard for the industry
Targets of
execution process
Benchmarking – the comparison of one
company’s performance against other firms
Metrics operating in the same field

7 .1
 End-to-end Process Mapping

S ales Receivables
Purchase management Deliver y
Q u o te

Receivables Dispute Returns

Deliver y collection management policy

Payment Returns
Treasur y Accounting Repor ting policy
management

 Certain activities that are

part of the same process sit
with different departments
 Very often a single process
S ta r t End-to-end perspective Finish consists of several sub-
processes
 We do not consider functional roles, but we consider processes from beginning to end

7 .2
 Global process owners - Introduction

Companies are organised around the

Process leaders following processes

 Are responsible for an end-to- Hire-to-Retire (H2R)

 This flow takes care of all the organizational aspects from the time a
end process person is recruited in an organization until the employee retires

 Act independently from any Order-to-Cash (O2C)

A set of business processes that involve receiving and fulfilling
depar tment

customer orders

 Are placed to align the objectives Record-to-Repor t (R2R)

Provide strategic, financial and operational information about
of the different functional leads

how a business is performing

Source-to-Pay (S2P)
 A Global Process lead is responsible  Obtain and manage the raw materials needed for
for an end-to-end process spanning manufacturing a product or providing a ser vice
across different parts of the
organisation.

8
 Hire-to-Retire (H2R)
Induction and Salaries and Employee
Hire Employee info on-the-job bonuses retirement
training

Basic Agree on Voluntary

Hire approval Induction Resignation Retirement
employee info compensation retirement

Job posting Pay employee Exit

Job ad on social Update Deployment
taxes interview
media employee info

Receive Compensation Set objectives Timely

and goals Payroll
applications info handover

Check
Select Performance Employee Audit
outstanding
applications info training compliance
vacation

Interview Holiday Transfers and Manage final

rounds info relocations settlement

Rewards and
Hire
promotion

9
 Source-to-Pay (S2P)
Order Order
Vendor sourcing Procurement management settlement

Demand Production
Production Sign a contract Receive invoice
planning personnel

Supplier Verify delivery

Requisition Set up ERP alerts
negotiations (match invoice to PO)

Select & approve Performance Payment

Track inventory (match payment
suppliers management to invoice)

Create 3-way-match
Address issues 3-way-
purchase order
reconciliation
Accept
(Purchase order)

Send
(Purchase order)

Delivery
10
Record-to-Report (R2R)
Actuals from
sub-ledgers AP,
AR, Inventory

General
Ledger

Prepare P&L, Balance

sheet data, P&L per ac-
count, scorecards, etc.

Create flexible
dashboards

11
 Order-to-Cash (O2C)

Sales Monitor Product

Order fulfilment orders inventory delivery

Communicate Product
Production with manufacturing
production

Receivables Invoice Monitor Close

customers payments invoices

12
 Value Driver Tree
Selling price
 A value driver tells  After having tested
us what impacts predictability,
company Change in volatility, materiality
performance. Revenue
inventor y and risk, an
organization will be
able to select the
Sales quantity
key drivers that
have an impact on
Q u a n ti ty its business.
Profit
produced

Quantity produced
pe r h ou r

Q u a n ti ty Planned
produced ho ur s
Operating
Cos t ho ur s
Unplanned
Cost per unit ho u r s
(downtime) 13
 What are metrics?
One of the key ingredients for Enterprise Per formance Management is defining relevant metrics.

Well-designed metrics Types of metrics

Metrics centered around Labor
 They are linked to a strategic objective  % of labor cost versus total cost, or % of Research & Development
spend versus total revenue

Quality Metrics
 They help a company translate execution into
quantifiable terms  Based on a specific activity we want to track

Efficiency Metrics
 They provide a quick insight into trends and are helpful for
management to monitor per formance and enact changes  Show us how productive is our organisation

 They help businesses measure the progress that has Cycle Time
been made towards set goals.  Indicates how much time does it take to run a process.

 Metrics can be set to track General Metrics

companywide performance or can be
designed to track the performance of a  Engagement score, attrition rate, and customer satisfaction score.
single department within the company.

14
 Metrics vs. KPIs

K P Is K B Is K R Is
 primarily non-financial  primarily financial  early sings of potential risks
 Analyse the past and the  monitor, predict, understand  could be oriented towards
present and extract BI and improve a company’s internal and external risks
insights financial performance

In addition REMEMBER!
We can have certain Not all metrics are KPIs
compliance metrics, which
are set by external par ties
(such as auditors) or All KPIs are metrics
government regulator
agencies

15
 Define Your Metrics
A metric needs to be:

Concise Can the measure be easily and clearly explained?

Calculated Can the measure be quantified?

Capable Is the metric attainable?

Connected Can the key per formance indicator be aligned to an objective?

Controllable Can the results be controlled or significantly influenced?

Credible Is the measure resistant to manipulation?

Cascaded Can the KPI be cascaded throughout the organisation to drive behaviour?

Consistent Is the KPI measured consistently throughout the organization?

16
 Define Your Metrics

Dimensions are categorical buckets that can be used to

Lagging metrics  KRIs Leading  KPIs segment, filter, or group metrics. Within each of these
dimensions you have attributes that are descriptive.
Report what has Predict future events and tend to
happened change ahead of that event Username  Attribute
Website’s URL  Descriptive

Set Targets Per Metric

Yearly Targets Target Per Month Target vs Forecast

17
 Define Your Metrics
Metric
Description Calculation method

Metric Organizational Frequency of Business

Stakeholder Type of data
categor y hierarchy deliver y hierarchy

KPI Client Level 1 Daily Division Actual

KRI Top
Finance team Weekly Business unit Historical
management

KBI Production BoD

Production
Monthly Budget
plant

Sales Level 2 Quarterly Client Forecast

Senior
Marketing Yearly Project Target
management

Peer
Staff
benchmark 18
 Define Your Metrics

Lessons learned:

Define the value Have a clear Identify the

of the metric direction right metrics

Communicate Ga t h e r
the value successfully Historical data

19
 Benchmarking
It consists of comparing the company’s per formance to peer organisations.

Benchmarking consists of 4 steps: Types of benchmarking

Internal benchmarking
 study your own company  focuses on processes and functions and there is no problem in terms
of data confidentiality

Functional benchmarking
 have a good idea about industr y leaders and
consists in comparing how efficient the industr y leader is in a cer tain
competitors

aspect of the organisation

Per formance benchmarking

 identify the best peer companies and focus on
enables an organisation to assess its competitive positioning by
learning from them

analysing the products and ser vices it offers

 work in a direction that would allow us to become

better than the selected benchmark

19
 Master Data Governance

Master Data Governance is key to define: Data governance increases the:

1 2
 The level of information to be analysed  Integrity
 The metrics to be used  auditability
 How information reporting will be carried out  accountability
 transparency of a company’s data
And it turns such data into a reliable source for analytics.

Enterprise-wide data governance function Master data governance is a critical

3 is responsible for establishing and 4 ingredient for successful analytics projects
maintaining of data collection criteria

Pre-established criteria help maintain consistent master  consistent

data across the entire organization
 easy to access
 good quality data

20
 Descriptive & Diagnostic
Analytics

Predictive Analytics

Prescriptive Analytics Categories of

analytics
0 1 2 3 4 5
techniques

21
 Descriptive Analytics

Key characteristics Descriptive analytics (examples)

 Easy execution

Historical analysis
 Main goal: Explain variances and look for trends

 Uncover the key drivers of business per formance

Variance Trend Comparative
analysis analysis analysis
 Steppingstone to more sophisticated analytical
techniques

20
 Diagnostic Analytics
A good example of diagnostic analytics is:
SWOT ANALYSIS

STRENGTHS

THREATS S Strengths are aspects that

your organization excels at
and is better than
Threats include anything that can competitors.
negatively affect your business
from the outside, such as supply
chain problems, shifts in market
requirements, or a shortage of
recruits.
T W WEAKNESSES

O
Weaknesses need to be
OPPORTUNITIES addressed because these can be
exploited by competitors
Opportunities are openings or
chances for positive
developments that can become
a source of strength.

21
 Predictive Analytics

Then, we can per form scenario analysis

Answers the question:
What will happen next?
 best-case scenario

The goal is to make

projections about future events  realistic scenario
by using:

 worst-case scenario
 Current data
 Historical data

22
 Prescriptive Analytics
Finding the best action in a given situation

Descriptive analytics  What happened?

Prescriptive analytics allow companies to
track human behaviour and deliver
Predictive analytics  What is going to happen?
relevant content
Prescriptive Analytics  Best solution

Predictions Decisions Effects

 What is going to happen?  Why we need this
When?  What will be the impact?
 predictions?
 Why?

23
 Summary
How can we
make it happen?
What will happen?
Prescriptive
Degree of sophistication

Why did it happen? analytics

Predictive
What happened? analytics
Diagnostic
analytics
Descriptive
analytics

Backward looking Forward looking

24
 Trend Analysis

Types of trend analysis

The practice of uncovering patterns in your data
 Per formance Management
 Relies on effective historical analysis
 Project Management
 Focus on the factors that can impact  Trading
t h e b u si n e ss

Per formance Management Project Management Trading

Manage the delivery of projects To study the price and volume
Risky business operations:
on time and on budget movement
 Monitor  Project cost  Stock
 Prevent (Quality control  Commodities
 Remedy mechanism)  Currencies
 Variance Analysis

25
 Comparative Analysis
1 2
Comparative Analysis Type of comparisons

vs
 The comparison of two or more variables
Internal comparison External comparison
 Business units or  Other companies
Price A
departments from the same
Price B
industry

3
Uses of comparative analysis
Transformation projects

 Depoliticize difficult discussions

 Helps setting strategies and tactics back on track

25
 Value-based Analysis
Steps
Value-based Analysis

 outlines the most valuable activities of a firm

1. Successful value-based analysis focuses on an initial,
 Studies the correlations between an activity’s mapping exercise aiming to define the expected
inputs and the factors impacting them outcomes and measures of success

2. Derive causality and sensitivity between measures

Two types of goals 3. Leading metrics vs Lagging metrics

Financial Non-financial Metrics that predict Metrics that measure

 Revenue  Market share growth an outcome an outcome
 Margins  Pace of innovation Outcome realizations

 ROIC  Employee turnover

4. What-if analysis
Identify KPIs

26
 Correlation Analysis

Correlation analysis:

 is a statistical technique aimed at

establishing whether a pair of Correlational coefficient
variables is related
 provides an indication of the strength of the
 establishes a statistical relationship, relationship between two variables
but does not prove causation

 could help us a great deal, provided

that we have the right amount of data Correlation analysis of multiple variables
and that business managers have
 statistical relationship between multiple variables
defined well the variables to be
and a single variable
studied

27
 Time Series Analysis

Characteristics Four modelling methods

Naïve
 The model will provide a range of potential outcomes
 A value is taken from the previous period as a reference

Deterministic
 The outcomes will var y depending on various factors  It is a more complex form of time series analysis, which includes user-
defined confidence inter vals.

Probabilistic (Monte Carlo Simulation)

 Time series analysis is an effective tool allowing us to quantify
 simulates the realization of real-life events with uncer tain outcomes
the impact of management decisions on future outcomes. based on a pre-defined distribution function

Hybrid
 combines probabilistic and deterministic; considers available data and
then steps on it to simulate how uncer tainties can affect the output

28
 Regression Analysis
Linear regression
Regression analysis:

 A model used for quantifying causal

relationships among the different variables
included in your analysis

 A dependent variable is driven by a set of

independent variables

 It’s difficult to understand well the

Logistic regression
relationships between separate data points
in large datasets

29
 Machine Learning Analysis
4 ingredients
Machine Learning Algorithm
 Data

Trial-and-error process
Model
Each consecutive trial is at least as good 

as the previous one

 Objective function

 Optimization algorithm

Types of Machine Learning

1. Super vised learning

2. Unsuper vised learning

 Summary
How can we
make it happen?
What will happen?
Prescriptive
Degree of sophistication

Why did it happen? analytics

Predictive
What happened? analytics
Diagnostic Machine learning
analysis
analytics
Descriptive AI / Natural
Language Analysis
analytics Decision tree
analysis
Regression
analysis
Time series
analysis
Correlation
analysis
Value-based
analysis
Comparative
Trend analysis
Historical Variance analysis
analysis analysis

Backward looking Forward looking

31
 Analytics Project Phases
1. Hypothesis development 2. Situational analysis 3. Current state analysis

A statement that helps Investigate organisational needs How things function currently
communicate an understanding and determine influences
of the question or issue at a
point in time

4. Blueprint and design 5. Build and test 6. Deploy and operationalize

The desired outcome we want to When we implement new Fur ther critical success factors
have and the steps to get there solutions (we build) and we test will be discussed, which must be
these solutions taken into consideration when
working on analytical projects

32
 Hypothesis development

Define the hypothesis

 A statement that helps communicate an  A hypothesis is a proposed explanation of

understanding of the question or issue the a problem derived from limited evidence
organization faces as a star ting point for fur ther analytical
investigation.

? A+
 For organisations, It allows the assessment
of the effectiveness of operations before
the analytics investigation begins. It forms
the basis for allocating resources, time and
Not a Testable Measurable money to the project.
question

33
 Situational Analysis

RACI matrix
 Analyze documentation
Repor ts status of each stakeholder

 Brainstorm about the

affected par ties
Responsible Accountable Consulted Informed

A person A person who A subject matter A person kept

 Build a list of the affected performing a signs-off the expert (SME) up-to-date on
par ties given task deliverable of the consulted for progress
project opinions and
advice

34 . 1
 Situational Analysis
Building a RACI matrix

Stakeholders

1.

2. Fill in each person’s role

3.
Activities

Responsible Accountable Consulted Informed

4.

5.

6.

7.

34 . 2
 Current State Analysis

Useful Four main components

Frames current problems and helps quantify
1. Performance metrics
outstanding issues • Set the baseline and benchmark for each
function by process area identifying the key
Not necessar y performance gaps and opportunities to
improve
If problems have generally been
acknowledged 2. Capability maturity and best practice
assessment
• Assess current processes and systems in place
against best practices and evaluate the
The analytics professional has 2 key roles planned initiatives.

3. Solution targeting and future state assessment

 complete the analysis • Define the design principles, service placement,
organisational structure and reporting lines
 prepare content describing the
current state 4. Benefits case, roadmap and socialisation of
the current state analysis
• Step-by-step plan of execution

35
 Managing expectations of different stakeholder groups

Different stakeholder groups

and their expectations
The CEO and the Board of Directors are collectively
Owners
 Maximize future profits
best qualified to set objective non-conflicting
expectations for the company
Employees
 I nc o m e
 Growth oppor tunities Internal stakeholders C EO Board of directors
Daily operations Strategy & Vision
External stakeholders
Suppliers
 B e p a i d so o n
 Earn more business
Objective Expectations
Customers
 Best product
 Cheap price
We will focus on Objective Expectations
Authorities
 Job creation
 Tax collection

2
 Blueprint And Design
Blueprint Balance between Lessons learned
 Granularity
Refers to a specific way to chart the desired  Get specific: build and validate
future state of an organisation and the  UX the business case as soon as
necessary steps to get there.  Functionality possible

The purpose of the blueprint is to prioritise Know your  Value, value, value: every
initiatives based on their value-add to an problem statement needs to be
organization and short- to long-term  Audience
tied to an implication and every
strategic objectives.  Stakeholders
recommendation to an impact

 Identify points of resistance early

Alignment in Comparable metrics
 Listen to the full stack of
opportunities
 Strong governance model
 Level of detail
for alignment in collecting
 Tracking and  Leverage previous project
collecting data tool EIM data knowledge
 Data definitions Enterprise
Information  Don’t start from scratch
Model

36
 Build And Test
Validate and sign-off the benefits and business case estimates of the project

Priorities:

 Impacted stakeholders  There are sufficient resources (Capabilities to suppor t the newly
are identified implemented solution)

 Scope of the project is

approved
IT Specialist R2R SMEs:

• Change manager
 Establish a clear and • Communication manager (prepare the
frequent communication communication about the change)
with all stakeholders • Internal control (auditing the process)
• Financial controllers

37
 Build And Test
Step-by-step
S te p 1 Readiness Checkpoint

S te p 2 Configure and Build the Technical Solution

S te p 3 Configure and Load the Data Model

S te p 4 Build and Test Business Application Logic

S te p 5 Build and Unit Test Other Application Tasks

S te p 6 Build and Test Repor ts (test how the new tool per forms)
S te p 7 Internal Quality Assurance and Quality Control Checkpoint

S te p 8 Conduct Conference Room Pilot

S te p 9 Update Analytic Solution Based on Feedback

S te p 1 0 Conduct User Acceptance Testing and Remediation

36
 Deploy And Operationalise
Key aspects of actual
development
Critical success factors

 Training must be a top priority for

users and management

 First impression is important

 Communication is essential

 Organise post deployment training

36
Summary
1. Define a hypothesis

2. Investigate organisational needs

3. How things work at the moment

4. Chart the future state of an

organisation

5. Implement and test new

solutions

6. Critical success factors

39
 Randy Rosseel

Email: [email protected]