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What’s the difference between business intelligence and business analytics?

So . .. are you a BI guy?

I get that often and the answer is yes, yes I am. In actuality the answer is, “well . . . sort of. Not really. It’s more machine learning.” If I get into it there is a variety of questions that start with: “What’s the difference between …”

What’s the difference between business intelligence and machine learning? Even if you google these terms it’s hard to find a good definition. For sure you will find definitions, but not meaning and context for a never ending list of terms in a jargon rich field.

Quoting a Google employee, “Everything at the company is driven by machine learning.” What does that mean exactly? Is that big data? What about data mining? How does that fit in? Is this all just fancy jargon for old school econometrics and statistics?

In the next 3 min i am going to take on the job of getting you up to speed on what all these terms mean in relation to each other. It isn’t enough to have a list of definitions, you need to understand context. That is what I will give you here. Context.

What Business intelligence is . . . and isn’t.

When you think about Business Intelligence you might confuse it for Business Analytics. Business Intelligence runs the business. Business Analytics changes the business. Intelligence directs process. Analytics directs strategy. Intelligence focuses understanding for today. Analytics focuses planning for tomorrow.

BI is real time access to data. Reporting. BI identifies current problems, solutions, and enables informed decision making. Business Analytics explores data: statistical analysis, quantitative analysis, data mining, predictive modelling among other technologies and techniques to identify trends and make predictions. But the two areas are merging as evidenced by these headlines:

  • 5 Ways Machine Learning Can Make Your BI Better
  • Machine Learning: The Real Business Intelligence
  • Machine Learning: The Future of Business Intelligence.
  • Big Data & BI Trends 2017: Machine Learning, data lakes, and Hadoop Vs Spark

How Does  Machine Learning Relate to Business Analytics? What is it?

I’ve heard machine learning described as the brains behind AI. Machine learning is the subfield of computer science that gives "computers the ability to learn without being explicitly programmed." I think of Machine Learning as a collection of pre-built algorithms for building models to predict future outcomes. Business analytics is about using those models on the execution side, putting insight into context and making things happen. In my last post I talked about the difference between data science and data savvy. Business analytics requires data savvy while machine learning is a component of data science.

What
is
Data Science?​

Data Science deals with structured and unstructured data. In principle, everything that relates to data cleaning, preparation and analysis lies within the scope of Data Science. Data science is interdisciplinary requiring training in statistics, computer science, and industry. Solo practitioners with specialization in all three areas are rare so it is common to have data science teams: a data savvy manager, an econometrician, & a developer trained in machine learning.

Traditional Research. If you know anything about analytics (or statistics) you are probably familiar with regression: “ordinary least squares”. If not I highly recommend reading the book, Freakonomics. Regression is a mathematical way of drawing a straight line that most closely fits a scatterplot of data.

Regression is the basis for econometrics which is squarely found in the arena of traditional research. As you can see on the venn diagram traditional research blends classical statistics with industry knowledge. The emphasis of traditional econometrics is to use statistical tools to determine causal relationships in data. An econometrician wants to be able to tell why something is happening in the data. They want to tell a story about why you see correlations. And they do that using different variations of the regression technique.

Software development. We all have apps that make our lives easier & more entertaining. A relative few are lucky enough to earn a living developing and/or supporting software, SaaS (Software as a Service). Traditional software development makes processes more efficient. Most of development exists around this. This field requires both Computer Science (coders) as well as industry knowledge. This space is marked by partnerships between clients and their SaaS providers. 

Developers will spend a lot of time and resources understanding their client's existing process to build solutions around industry best practices.

Machine Learning. Which brings us back to machine learning, which is probably not as familiar as software development or traditional research. When a developer uses machine learning, what does that look like? It starts with a dataset. As is the case with traditional research the first step is to prepare the data for analysis. Data prep, munging or data wrangling, as it is called is the most time intensive step. The second step is to separate the data into two parts. Two thirds to 70% of the data is used for training the model. 

One third to 30% is saved for testing the model. A machine learning modeler has a variety of tools at their disposal to build a model of relationships based on the training data. The modeler will then make predictions about the test data based on this model. The more accurate the predictions, the better the model.

Summary

At this point you should have a clear idea of what data science is: a blending of machine learning, traditional research, and software development to create predictive models. To contrast BI focuses on dashboards and reporting for the here and now. BI focuses on process. DS focuses on strategy. Data science requires a variety of advanced skill sets which makes data science teams quite common (and full stack data scientists quite rare). Business analytics on the other hand requires data savvy: a survey level understanding of data science topics with the purpose of putting these models to good use by executing on business goals.​

Among these topics a data savvy professional should be familiar with is an understanding of machine learning and the strengths and limitations of the more common algorithms used in machine learning. If you are interested in learning more, make sure to subscribe to my email list for data savvy professionals and get a copy of “Bull Doze Thru Bull.” In my next post we are going to explore these topics and get under the hood with machine learning.​

Why Your Salary Will Always Be Below Average

By Rho Lall

Have you been on glassdoor lately? Maybe you’ve tried the Payscale salary calculator? Is your take home pay below average? Chances are it is. Use the calculator below and find out.

It’s ok . . . i’ll wait.

Did you check it out? Is that surprising? Before you start planning how to bring this up with your boss you might want to take a second look at that number. I'll explain.

Income follows a power law distribution.

There are two issues with this number. First you will run into trouble if you look for averages where there aren't any. Income follows a power law distribution.

What’s that?

If you have heard of Pareto’s 80/20 rule, that is a power distribution. For income, 80% of the income is earned by 20% of people. Don’t take that literally. 

If we plot out income (see image above) you would see a small number of people (in green) earn a disproportionately larger amount of money relative to everyone else (in yellow). 

If you try to take the average of a set of incomes (any power distribution) your average will wildly misrepresent the truth. It's going to underestimate a small number of people, and overestimate the majority. The average (in blue) makes it seem seem like higher incomes are more common than they are in actuality. Case and point:

Bill Gates walks into a bar and everyone inside becomes a millionaire . . .
 . . . on average.

Accurate, real-time salaries for thousands of careers.

So when you or someone else pulls up a report on glassdoor and circles the average salary, it is likely not telling the whole story.

But. You might ask, what if Bill Gates doesn’t walk into the bar? What if in this bar we only have locals who all work the same job. I like where your head's at. You might be onto something. But no, you’re not.

Income follows a power distribution even on a localized scale, it's just less noticeable. Let's look at SaaS Implementation Consultants in Provo, UT (see right). The average is $50,800. But look at the range. The low is $39K and the high is $78K. There are a few highly paid individuals driving the average up but most consultants probably earn less than 50K. In full disclosure I don’t know. But the point is neither do you.


The average is not representative of this sample. Let alone the salaries that were not reported.

Implementation consultant earn $50,800  in Provo, UT are on average.

Average is not the same as usual and customary.

Here is the second issue. What do you think of when I say average? When we talk averages, most people assume it's a mean. Most people would agree that average and mean are synonymous. That is not the case. An average doesn't have to be a mean. You can google the definition: a number expressing the central or typical value in a set of data, in particular:

the mode, median, or mean

When you read about an average, you could be reading about one of three different measurements. It's easy to be mislead. The government reports median income. Median is the middle number: 50% earn above median, 50% below. But what if I want to know what salary is usual and customary? What do most people make? This is the mode. If you want to get a sense of where the long tail on the power law distribution falls, the mode would work best. It will tell you what the most common salary is. That could be useful.


The lesson:

Don’t hang your hat on average salary. First, averages don’t fit the data very well. You can take the average, that doesn’t mean you should. Second, when you see an average take steps to learn what kind of average it is. Personally, I find the bookends, the high and low values of a range, to be more useful.

Do you want to learn more? If you a SaaS professional that struggles with aligning your team & getting to the truth then you have come to the right place. Find out how to use averages, bookends, and other KIPs to make better use of your data so you can . . .

Confront The Deluge of Information.

Perfect for people that want to become leaders! You don’t have to be an expert math person to be data literate - Download the FREE report.

Why would you want to learn to “Bull Doze Through Bull Sh*t”?​

  • Would you benefit from a deeper knowledge from your data? Probably.
  • Do statistics and data analysis intimidate you? It intimidates most people.
  • Do you want to be able to make use of all the data you have access to, so that you can make better business decisions? Of course you do!

Stop letting your fear of “number crunching” keep you from learning what is actually true. Sign up for my newsletter, and download my FREE Report on making sense of data without becoming a math expert!

Confront The Deluge of Information.

Bulldoze_thru_bullshit

Perfect for people that want to become leaders! You don’t have to be an expert math person to be data literate - Download the FREE report.

Why would you want to learn to “Bull Doze Through Bull Sh*t”?

Would you benefit from deeper knowledge from your data?
Probably.

Do statistics and data analysis intimidate you?
It intimidates most people.

Do you want to be able to make use of all the data you have access to, so that you can make better business decisions?
Of course you do!
Stop letting your fear of “number crunching” keep you from learning what is actually true. Sign up for my newsletter, and download my FREE Report on making sense of data without becoming a math expert! Powered by ConvertKit
1

#1 Best Tip to Improve Your KPI Dashboard

#1 Best Tip to Improve Your KPI Dashboard

By Rho Lall

Key Performance Indicators PDF

I Hate Averages. And You Should Too!

 

Hate is a strong word. But I do hate seeing averages used as KPIs. The problem is they are so prevalent. The only practice more prevalent is reporting on raw totals: We did this much in sales, we worked this many hours, etc. etc. (See my Key Performance Indicators PDF for a set of great examples.) Averages are terrible:

One. There are better KPIs that communicate more meaningful information.

Two. You can be taken advantage of when you rely on averages.

Did I Tell You About The Time I Almost Dated A Model?

I asked a girl for her number. She was clearly out of my league and she let me know it. I responded that she was acting like a ten when she was clearly a seven. She agreed! Then she started in on herself about how she needed a nose job. Her error? Only comparing herself to other models (not all women). She blew her nose out of proportion (double pun intended). I got her number (And didn't use it). The lesson. Don't be taken advantage of.

There are better options.

Why Averages Perform Below Average In Your KPIs.

 

Out of a group of two-hundred KPIs, I have researched the seven top KPIs for Professional Service firms. None of the seven are from taking averages. Six of them are ratios (and the seventh can be). Isn't that interesting. So what is so great about ratios?

Ratios reveal trends and makes large numbers easier to digest.

Ratios provide indicators of organizational performance.

Ratios allow me to compare apples to oranges.

 

Three Keys To Understand And Use Ratios.

 

First, ratios can be confusing because we were never taught to use ratios in a professional setting. We learned basic fractions. A half or a quarter is an intuitive number. I know what that looks like. I can imagine a pie which gives a fraction meaning. But if a ratio comes out to be 1.09, that is not intuitive. Is it 109%? 92%? Or something else all together?

Comment below on which you think is right?

 

Second, not every ratio is great. But the great ones compare two opposing metrics. Let's look at one of my top seven Professional Services KPIs. Revenue Per Employee. If you are in business then revenue is a positive. More revenue is better. More people isn't necessarily better. This ratio reflects the sensitivity between these two metrics. More revenue will drive the ratio up. More employees will drive it down. More employees will only drive the ratio up if synergies increase revenue at a greater rate. This ratio simplifies the relationship between revenue and employees down to a number. It also lets me compare two companies that are drastically different in terms of size and revenue.

 

Third. When I first started learning KPIs I spent a lot of time memorizing definitions. I tried to wrap my head around them. It was hard. I re-learned grade school fractions on Khan Academy because I thought it would help. It didn't. The memorization didn't either. For every new KPI I had to memorize a new definition. Don't waste time memorizing definitions!

There is a better way.

 

Next time . . . 

In my next blog I am going to teach you a very simple visual aid that has helped me break down ratios so I don't have to memorize definitions. Subscribe to my blog so you do not miss it! You might as well pick up my Key Performance Indicators PDF as well. It's free!

I'm shooting to have it out in about a week.

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