Chapter 1: Data and Business Decisions PDF

Chapter  1:  Data  and  Business   Decisions Statistics,  Data  Analysis,  and  Decision   Modeling,  Fifth  Edition James  R.  Evans Copyright   ©2013  P...

Chapter  1:  Data  and  Business   Decisions Statistics,  Data  Analysis,  and  Decision   Modeling,  Fifth  Edition James  R.  Evans Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­1  Data,  Information,  and   Analysis n Data  are  numerical  facts  and  figures  collected   through  some  type  of  measurement  process. n Information derives  from  the  analysis  of  data n Modern  organizations  need  good  data  to   evaluate  daily  performance  and  to  make   critical  strategic  and  operational  decisions.     Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­2  Uses  of  Data n Annual  reports n Audits n Financial  analysis n Market  research n Operations  management n Human  resource  management n Economic  analysis n Regulatory  compliance n Budget  allocation Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­3  Decision  Models n A  decision  model  is  a  logical  or  mathematical   representation  of  a  problem  or  business   situation  that  can  be  developed  from  theory   or  observation. n Data  provide  key  inputs  to  decision  models. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­4  Statistics n Statistics – the  science  of  uncertainty  and  the   technology  of  extracting  information  from   data. n Statistics  involves  collecting,  organizing,   analyzing,  interpreting,  and  presenting  data. n A  statistic is  a  summary  measure  of  data. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­5  Data  and  Organizational   Measurement n Malcolm  Baldrige  Criteria  Measurement   Categories: n Product  and  process  outcomes n Customer-­focused  outcomes n Workforce-­focused  outcomes n Leadership  outcomes n Financial  and  market  outcomes n Understanding  relationships  among  such   measures  can  lead  to  better  decisions. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­6  Sources  of  Data n Internal – obtained  from  company  records,   databases,  etc. n External – obtained  from  published  sources,   external  databases,  the  internet n Generated – obtained  from  surveys,  focus   groups,  etc. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­7  Metrics  and  Measurement n A  metric is  a  unit  of  measurement  that  provides   a  way  to  objectively  quantify  performance. n Measurement is  the  act  of  obtaining  data   associated  with  a  metric.   n Measures are  numerical  values  associated  with   a  metric. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­8  Discrete  and  Continuous   Metrics n Discrete  Metrics  – derived  from  counts n E.g.,  number  of  defects  per  unit  of  production,   percentage  of  on-­time  flight  arrivals,  number  of   complaints  per  customer,  percentage  of  “top  box” responses  in  a  satisfaction  survey n Continuous  Metrics  –based  on  a  continuous  scale  of   measurement n E.g.,  delivery  time,  number  of  ounces  in  a  bottle  of   beer,  monthly  revenues,  diameter  of  a  drilled  hole,   balance  in  your  checking  account,  time  spent  on   homework Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­9  Data  Classification n Type  of  Data n Cross-­Sectional – data  collected  over  one   time  period n Time  series – data  collected  over  time n Number  of  Variables n Univariate– data  consisting  of  a  single   variable n Multivariate– data  consisting  of  two  or   more  (often  related)  variables Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­10  Cross-­Sectional,  Univariate Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­11  Cross-­Sectional,  Multivariate Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­12  Time  Series,  Univariate Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­13  Time  Series,  Multivariate Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­14  Data  Classification n Categorical  (nominal) – data  sorted  into  mutually   exclusive  (an  observation  cannot  belong  to  more   than  one  category)  categories n Geographical  region,  type  of  employee,  gender,   state  of  birth,  type  of  automobile  owned n Properties n No  quantitative  relationships  among  categories n Statistics  such  as  averages  a re  usually   meaningless Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­15  Data  Classification n Ordinal  data – data  ordered  or  ranked  according  to   some  relationship  to  one  another n Ranking  of  colas  in  taste  tests,  employee   performance  appraisals,  satisfaction  survey  scales n Properties n Categories  can  be  compared  with  one  another n Statistics  usually  meaningless  because  of  no  fixed   units  of  measurement;;  i.e.,  differences  are   meaningless Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­16  Data  Classification n Interval  data – data  that  are  ordered  and   characterized  by  a  specified  measure  of  distance   between  observations,  but  with  no  natural  zero. n Temperature  scales,  time,  survey  scales  that  are   assumed  to  be  interval n Properties n Ratios  are  meaningless  (50  degrees  is  not  twice   as  hot  as  25  degrees) n Differences  a re  meaningful,  so  statistics  such  as   averages  may  be  compared Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­17  Data  Classification n Ratio  data – data  that  have  a  natural  zero n Sales  dollars,  length,  weight,  time  from  start  of  a   process,  most  business  and  economic  data n Properties   n Strongest  form  of  measurement;;  both  ratios  and   differences  are  meaningful Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­18  Statistical  Thinking n A  philosophy  of  learning  and  action  for   improvement  based  on  three  principles: n All  work  occurs  in  a  system  of  interconnected   processes n Variation  exists  in  all  processes – systematic   ways  of  doing  things  that  achieve  desired   results n Better  performance  results  from   understanding  and  reducing  variation Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­19  Variation n Common  causes  of  variation – complex  interactions  of   variation  in  materials,  tools,  machines,  operators,  and   the  environment n Individual  sources  are  not  easily  understood  and   cannot  be  controlled n Special  causes  of  variation – variation  arising  from   external  sources  not  inherent  in  a  process n Can  be  identified  and  controlled  or  explained n Many  managers  do  not  properly  distinguish  between   these  two  causes,  confuse  them,  and  as  a  result,  often   make  poor  decisions   Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­20  Six  Sigma  and  Statistical   Thinking n Six  Sigma -­ a  business  process  improvement   approach  that  seeks  to  find  and  eliminate  causes   of  defects  and  errors,  reduce  cycle  times  and   cost  of  operations,  improve  productivity,  better   meet  customer  expectations,  and  achieve  higher   asset  utilization  and  returns  on  investment  in   manufacturing  and  service  processes.     n The  term  “six  sigma” is  a  measure  signifying  at   most  3.4  errors  or  defects  per  million   opportunities Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­21  Six  Sigma  Problem  Solving n DMAIC (Define,  Measure,  Analyze,  Improve,   and  Control) n Uses  a  wide  variety  of  statistical  and   process  improvement  tools. n Many  companies  report  positive  financial   results  from  Six  Sigma  initiatives Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­22  Populations  and  Samples n Population – all  items  of  interest  for  a  particular   decision  or  investigation n All  married  drivers  in  the  U.S.  over  age  25   n All  individuals  who  do  not  own  a  cell  phone n Sample – a  subset  of  a  population n Nielsen  samples  of  TV  viewers n Accounting  department  samples  of  invoices  for   audits n Samples  are  used n To  reduce  costs  of  data  collection n When  a  full  census  cannot  be  taken Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­23  Statistics n Statistics are  summary  measures  of  population   characteristics  computed  from  samples n Statistics  are  used  used  to  describe  a  characteristic  of  a   population  or  to  draw  inferences  about  the  population. n Descriptive  statistics – collection,  organization,  and   description  of  data n Statistical  inference – drawing  conclusions  about   unknown  characteristics  of  a  population  based  on   samples n Predictive  statistics – inferring  future  values  based  on   historical  data Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­24  Basic  Excel  Skills n Opening,  saving,  and  printing   files n Moving  around  a  spreadsheet n Selecting  ranges n Inserting/deleting  rows  and  columns n Entering  and  editing  text,  data,  and  formulas n Formatting  data  (number,  currency,  decimal) n Working  with  text  strings n Performing  basic  arithmetic  calculations n Formatting  text n Modifying   the  appearance  of  a  spreadsheet n Sorting  data Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­25  Excel  2010  Ribbon Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­26  Copying  Formulas n Select  a  cell.  Click  Copy from  Clipboard group  on  or  press  Ctrl-­C  .    Click  on  cell   to  copy  to.    Click  Paste or  press  Ctrl-­V  .  To  copy  a  formula  from  a  single  cell  or   range  of  cells  down  a  column  or  across  a  row,  first  select  the  cell  or  range,  then   click  and  hold  the  mouse  on  the  “fill  handle”,  and  drag  the  formula  to  the   “target” cells  you  wish  to  copy  to  as  shown  below Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­27  Cell  References n Relative  addressing:    B5,  G13 n Absolute  addressing:  $B$5,  $G13,  K$11 n Change  reference  using  F4  key Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­28  Basic  Excel  Functions n MIN(  range  )—finds  the  smallest  value  in  a  range  of  cells n MAX(  range  )—finds  the  largest  value  in  a  range  of  cells n SUM(   range  )—finds  the  sum  of  values  in  a  range  of  cells n AVERAGE(   range  )—finds  the  average  of  the  values  in  a   range  of  cells n COUNT(  range  )—finds  the  number  of  cells  in  a  range  that   contain  numbers n COUNTIF(   range,  criteria  )—finds  the  number  of  cells   within  a  range  that  meet  specified  criteria Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­29  More  Advanced  Excel   Functions n AND(  condition   1,  condition   2  …)—a  logical  function   that  returns  TRUE  if  all  conditions  are  true,  and  FALSE  if   not n OR(  condition  1,  condition   2  …)—a  logical  function  that   returns  TRUE  if  any  condition  is  true,  and  FALSE  if  not n IF(  condition,   value  if  true,  value  if  false  )—a  logical   function  that  returns  one  value  if  the  condition  is  true   and  another  if  the  condition   is  false n VLOOKUP(  value,  table  range,  column  number  )—looks   up  a  value  in  a  table Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­30  Insert  Function Easiest  way  to  locate a  particular  function and  identify  the   correct  arguments Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­31  Other  Useful  Excel  Tips n Split  screen n Paste  special n Column  and  row  widths n Displaying  formulas n Displaying  grid  lines  and  row/column  headers   for  printing n Filling  a  range  with  a  series  of  numbers Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­32  Excel  Add-­Ins n Analysis  Toolpak   – included  with  Excel n Prentice-­Hall   PHStat2   n Crystal  Ball n TreePlan n Premium  Solver  for  Education n SimQuick Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­33  PHStat Tool:  Stack  and   Unstack  Data n PHStat menu  >  Data  Preparation  >  Stack   Data  (or  Unstack  Data) Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­34  Creating  Charts:  Excel  Insert Tab  and  Chart  Tools  Group Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­35  Column  and  Bar  Charts n Can  be  used  for  any  measurement  scale   (nominal,  ordinal,  interval,  or  ratio) Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­36  Line  Charts n Useful  for  variables  data,  particularly  over   time Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­37  Pie  Charts n Useful  for  attributes  to  show  relative   proportions Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­38  Area  Charts n Combines  features  of  pie  and  line  charts Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­39  Scatter  Diagrams n Shows  relationships  between  two  variables Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­40  Other  Excel  Charts Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­41  Ethics  and  Data  Presentation Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­42  All  rights  reserved.  No  part  of  this  publication  may  be  reproduced,  stored  in  a  retrieval   system,  or  transmitted,  in  any  form  or  by  any  means,  electronic,  mechanical,  photocopying,   recording,  or  otherwise,  without  the  prior  written  permission  of  the  publisher.   Printed  in  the  United  States  of  America. Copyright   ©2013  Pearson  Education,  Inc.  publishing  as  Prentice  Hall   1-­43