ACHARYA INSTITUTE OF TECHNOLOGY

Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.

Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

MODULE 1
Chapter 1: An Overview of Business Intelligence, Analytics, Data
Science, and AI

Changing Business Environments and Evolving Needs for Decision Support

and Analytics

Introduction

Organizations operate in a complex, rapidly changing environment that creates both

opportunities and threats. The changing business environment forces organizations to
respond quickly and effectively to survive and thrive. Decision makers must be aware of
environmental factors, assess their potential impact, and react in a timely manner.
Computerized decision support has become essential to help managers cope with this complexity
and speed of change.

Decision-Making Process

Definition

Decision making is a process of choosing among two or more alternative courses of action
for the purpose of attaining a goal or goals. It is an essential managerial activity at all levels of
an organization.

Steps in the Decision-Making Process

1. Define the Problem

o Understand the difference between the actual state and the desired state.
o Poorly defined problems can lead to ineffective solutions.
2. Identify Alternatives
o List possible courses of action that could solve the problem.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

3. Determine the Criteria

o Establish measures to evaluate the alternatives.
4. Evaluate the Alternatives
o Assess each option using the established criteria.
5. Choose the Best Alternative
o Select the course of action that best meets the decision criteria.
6. Implement the Decision
o Put the chosen solution into effect.
7. Monitor and Evaluate the Results
o Compare actual outcomes with expected results and make adjustments if needed.

Factors Affecting Decision-Making Today

 Time pressure due to fast-changing conditions.

 Large amounts of data that must be processed quickly.
 Complexity of global operations and multiple variables.
 Uncertainty about the future and incomplete information.

Technologies for Data Analysis and Decision Support

Modern organizations rely on advanced technologies to support decision-making at all levels.

1. Data Warehousing

 Integrates data from multiple internal and external sources into a central repository.
 Enables consistent, accurate, and timely reporting.

2. Online Analytical Processing (OLAP)

 Allows users to analyze data in multiple dimensions.

 Supports drill-down (detailed view) and roll-up (summary view) operations.

3. Business Analytics

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

 Encompasses descriptive, predictive, and prescriptive analysis.

 Uses statistical and machine learning models to gain insights.

4. Big Data Technologies

 Handle large, diverse, and rapidly growing datasets.

 Examples: Hadoop, Apache Spark.

5. Artificial Intelligence (AI) and Machine Learning (ML)

 AI systems can learn from historical data to improve predictions and automate decisions.

6. Data Visualization Tools

 Present data using charts, graphs, dashboards to make insights more understandable.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Decision-Making Processes and Computerized Decision Support Framework

Introduction

Decision making is at the core of managerial activities. It involves choosing among alternative
courses of action to achieve desired outcomes.
Given the complexity of modern organizations, computerized decision support is now essential
to assist managers in processing large amounts of data, modeling complex scenarios, and
selecting optimal actions.

Simon’s Process: Intelligence, Design, and Choice

Overview

Herbert A. Simon, Nobel laureate in Economics, proposed a three-phase model for decision
making:

1. Intelligence Phase – identifying problems or opportunities.

2. Design Phase – developing possible solutions.
3. Choice Phase – selecting the most appropriate solution.

Later, researchers added the Implementation Phase as a fourth step.

The Intelligence Phase: Problem (or Opportunity) Identification

Purpose

To scan the environment, detect conditions that require decisions, and diagnose the problem.

Activities in This Phase

 Problem detection: Recognizing gaps between actual and desired performance.

 Data collection: Gathering relevant internal and external data.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

 Problem classification: Determining whether the problem is structured, semi-structured,

or unstructured.
 Problem ownership: Deciding who is responsible for resolving the issue.

Example

A retail chain detecting declining customer satisfaction scores via feedback surveys.

Analytics in Action 1.1: Making Elevators Go Faster!

Case Summary

 Problem: Tenants in a high-rise building complained elevators were too slow.

 Initial thinking: Install faster elevators — costly and complex.
 Analytical approach: Redefine the problem — dissatisfaction was due to perceived wait
time.
 Solution: Install mirrors near elevators so people are distracted while waiting.
 Lesson: Proper problem definition in the Intelligence Phase can lead to innovative,
cost-effective solutions.

The Design Phase

Purpose

To develop and analyze possible courses of action to address the identified problem or
opportunity.

Activities

 Formulating models of the decision problem (mathematical, simulation, descriptive).

 Generating alternatives for consideration.
 Predicting the consequences of each alternative.
 Conducting what-if and sensitivity analyses.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Example

A logistics company simulating different delivery routes to minimize costs and delivery times.

The Choice Phase

Purpose

To select the best course of action from the alternatives generated in the design phase.

Activities

 Evaluating each alternative against established criteria.

 Applying optimization or decision analysis tools (e.g., decision trees, cost-benefit
analysis).
 Making the final selection.

Example

Choosing the most profitable product mix given limited production resources.

The Implementation Phase

Purpose

To put the chosen solution into action and ensure that it is producing the desired results.

Activities

 Allocating resources and assigning responsibilities.

 Managing change and overcoming resistance from stakeholders.
 Monitoring outcomes and making adjustments as needed.

Example

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Rolling out a new customer relationship management (CRM) system after careful planning and
training.

Diagram Explanation

The figure for this section illustrates Simon’s decision-making phases in a linear but iterative
process, showing feedback loops between phases to allow for reassessment when necessary.

Evolution of Computerized Decision Support to Analytics/Data Science

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Introduction

Computerized decision support has evolved significantly over the past five decades.
Initially, systems were developed to produce routine reports for managers, but over time they
have become interactive, analytical, and data-driven platforms supporting complex, real-time
decision making.
The evolution reflects advancements in technology, data storage, processing power, and
analytical techniques.

Stages of Evolution

1. Management Information Systems (MIS) – 1960s to early 1970s

 Focused on producing structured, periodic reports based on internal data.

 Provided historical summaries but limited analytical capabilities.
 Limitations: Static, inflexible, and mainly for operational control.
 Example: Weekly sales summary reports generated from transaction systems.

2. Decision Support Systems (DSS) – late 1970s to 1980s

 Designed to assist in semi-structured and unstructured decision making.

 Integrated analytical models with data to support “what-if” and sensitivity analysis.
 More interactive than MIS, allowing managers to explore data and test scenarios.
 Example: A DSS for selecting the best plant location based on cost, logistics, and labor
availability.

3. Executive Information Systems (EIS) and OLAP – 1980s to mid-1990s

 EIS provided top executives with easy access to summarized, high-level information.
 OLAP introduced multidimensional data analysis, enabling slicing, dicing, drill-down,
and roll-up operations.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

 Data Warehousing became common, integrating multiple sources for consistent

reporting.
 Example: An OLAP cube to analyze sales by product, region, and time.

4. Business Intelligence (BI) – late 1990s to 2000s

 BI integrated data warehousing, reporting tools, dashboards, and key performance

indicators (KPIs).
 Moved from descriptive reporting to performance management.
 Emphasis on providing insights to a wide range of users, not just top executives.
 Example: A BI dashboard tracking real-time supply chain performance.

5. Analytics and Data Science Era – 2010s to Present

 Fueled by big data technologies, cloud computing, and advances in AI/ML.

 Uses descriptive, predictive, and prescriptive analytics for deeper insights.
 Capable of processing real-time streaming data from IoT, social media, and sensors.
 Data science blends statistics, machine learning, and domain expertise to extract
actionable insights.
 Example: Real-time fraud detection in banking using AI models trained on massive
transaction datasets.

Key Trends Driving the Evolution

 Explosion of data from internal and external sources.

 Advances in hardware and software enabling large-scale processing.
 Demand for faster, better-informed decisions in competitive environments.
 Shift from historical reporting to predictive and prescriptive insights.

Figure Explanation

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

The figure in this section presents a timeline showing the progression from:
MIS → DSS → EIS/OLAP → BI → Analytics/Data Science,
highlighting increased scope, interactivity, and analytical sophistication at each stage.

A Framework for Business Intelligence (BI)

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Introduction

Business Intelligence (BI) refers to a set of processes, architectures, and technologies that
convert raw data into meaningful information for business purposes.
A BI framework provides the structure for understanding and implementing BI initiatives in
organizations, ensuring alignment with strategic goals.

Definitions of BI

 BI is an umbrella term combining architectures, tools, databases, analytical tools,

applications, and methodologies.
 It enables interactive access to data, manipulation of data, and the transformation of data
into useful information.
 BI supports decision making by providing timely, relevant, and accurate information.
 Key characteristics: user-centered, data-driven, and often includes predictive and
prescriptive components.

A Brief History of BI

 The concept of BI dates back to the 1970s with the development of Decision Support
Systems (DSS).
 The 1980s saw Executive Information Systems (EIS) for top-level managers.
 The 1990s marked the rise of data warehousing and OLAP.
 Early 2000s introduced dashboards, scorecards, and performance management.
 Today’s BI integrates big data analytics, AI, and machine learning for advanced
decision support.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

The Architecture of BI

A typical BI architecture includes:

1. Data Sources – internal (transaction systems, ERP) and external (market data, social
media).
2. Data Integration Layer – ETL (Extract, Transform, Load) processes.
3. Data Warehousing – centralized data repository.
4. Business Analytics – OLAP, data mining, predictive modeling.
5. Presentation Layer – dashboards, reports, scorecards.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Diagram Explanation: The architecture is often depicted as layered — data sources at the
bottom, processing in the middle, and presentation tools at the top, enabling flow from raw data
to actionable insights.

The Origins and Drivers of BI

 Originated from the need to make better, faster decisions in increasingly complex
environments.
 Key drivers:
o Global competition
o Need for customer-centric strategies
o Explosion of data volumes and sources
o Technological advances enabling large-scale analytics

A Multimedia Exercise in Business Intelligence

 This section uses a multimedia example to demonstrate how BI tools can be applied in
real-world decision-making scenarios.
 Shows the interactive and visual capabilities of BI systems.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Transaction Processing versus Analytic Processing

 Transaction Processing (OLTP): Handles day-to-day operational data (e.g., sales

transactions, banking withdrawals). Focuses on efficiency and accuracy.
 Analytic Processing (OLAP): Focuses on analysis of data to support decision making.
Enables multidimensional views of data.

Appropriate Planning and Alignment with the Business Strategy

 BI projects must be aligned with the organization’s strategic objectives.

 Requires thorough planning involving business and IT stakeholders.
 Misalignment leads to poor ROI and underutilization of BI tools.

Real-Time, On-Demand BI Is Attainable

 Advances in hardware, in-memory analytics, and data streaming make real-time BI

possible.
 Benefits include instant access to insights, faster reaction to market changes, and
improved operational agility.

Developing or Acquiring BI Systems

 Organizations must decide whether to build in-house or purchase BI solutions.

 Considerations:
o Cost
o Time to deploy
o Scalability
o Vendor support

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Justification and Cost–Benefit Analysis

 BI investments should be evaluated using:

o Quantitative benefits (cost savings, increased revenue)
o Qualitative benefits (improved customer satisfaction, better decision making)
 A proper cost–benefit analysis helps secure executive buy-in.

Security and Protection of Privacy

 BI systems must ensure data confidentiality, integrity, and availability.

 Compliance with data protection laws (e.g., GDPR, HIPAA) is critical.
 Techniques include encryption, access control, and auditing.

Integration of Systems and Applications

 BI tools often need to integrate with:

o ERP systems
o CRM applications
o Supply chain systems
 Seamless integration improves data consistency and eliminates silos.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Analytics Overview

Introduction

Analytics refers to the scientific process of transforming data into insight for making better
decisions.
It is a key component of Business Intelligence (BI) and includes descriptive, predictive, and
prescriptive methods.
Analytics can be applied across industries for operational, tactical, and strategic decision-
making.

Descriptive Analytics

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Definition

 Descriptive analytics answers the question: “What happened?”

 Uses historical data to understand trends and patterns.

Techniques

 Standard reporting
 Dashboards and scorecards
 OLAP for multidimensional data exploration

Example

Analyzing last quarter’s sales to identify top-performing products.

Predictive Analytics

Definition

 Predictive analytics answers: “What is likely to happen?”

 Uses historical data along with statistical, data mining, and machine learning models.

Techniques

 Regression analysis
 Classification models
 Time-series forecasting

Example

Forecasting customer churn based on behavioral and demographic data.

Analytics in Action 1.2: Silvaris Increases Business with Visual Analysis and Real-Time
Reporting Capabilities

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Case Summary

 Company: Silvaris, a wholesale distributor of building materials.

 Problem: Needed faster, more visual access to business data.
 Solution: Adopted BI tools for real-time dashboards and visual analytics.
 Results: Improved sales tracking, enhanced decision-making, and increased operational
efficiency.

Prescriptive Analytics

Definition

 Prescriptive analytics answers: “What should we do?”

 Recommends actions based on optimization and simulation models.

Techniques

 Optimization algorithms
 Decision analysis
 Simulation

Example

Recommending optimal pricing strategies to maximize profit given market demand forecasts.

Analytics in Action 1.3: How Big Will Be the Beef? Understanding Animals’ Eating
Behavior and Their Final Weight

Case Summary

 Objective: Predict final weight of cattle to improve supply chain efficiency.

 Approach: Used sensor data to track feeding behavior and integrated it with predictive
models.
 Results: Improved accuracy in predicting market readiness, reducing waste and costs.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

The Modeling Process and Results

Steps

1. Define the problem and objectives.

2. Collect and prepare data.
3. Develop and test models.
4. Deploy models and monitor results.

Key Point

Modeling is iterative — models are refined as new data and feedback become available.

Analytics in Action 1.4: A Specialty Steel Bar Company Uses Analytics to Determine
Available-to-Promise Dates

Case Summary

 Problem: Needed to provide accurate delivery dates for custom steel orders.
 Solution: Implemented analytics-based scheduling and production planning.
 Results: Increased customer satisfaction and improved production efficiency.

Analytics/Data Science/Machine Learning/AI?

Relationship

 Analytics: Broader process of deriving insights from data.

 Data Science: Combines statistics, programming, and domain knowledge to solve data-
driven problems.
 Machine Learning: A subset of AI focusing on algorithms that learn from data.
 AI: Broader field enabling machines to mimic human intelligence.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555
 ACHARYA INSTITUTE OF TECHNOLOGY
Affiliated to Visvesvaraya Technological University, Belagavi, Govt. of Karnataka.
Approved by AICTE, New Delhi and Accredited by NBA (AE, BT, CSE, ECE, ME and MTE)
Department of Artificial Intelligence & Machine Learning
and
Computer Science & Engineering (Data Science)

Integration

Modern BI systems integrate all four areas to provide comprehensive decision support.

Acharya Dr. Sarvepalli Radhakrishnan Road, Soladevanahalli, ACHIT Nagar P. O., Bangalore-560 107
[Link] Ph.: 080 22555555