Thursday, April 24, 2008

Three-Dimensional Business Analytics: How Deep is the Ocean?

Business data, like our universe, is three-dimensional. Nevertheless, business analytics tends to be flat or two-dimensional like an Excel table or chart. The difference between a two-dimensional analysis and a three-dimensional analysis is depth. Depth perception allows an individual to accurately determine the distance to an object. It is a characteristic mostly seen in higher species.

In analytics, depth is referred to as dimensional analysis. Dimensional analysis is used in engineering, physics, and chemistry to understand the characteristics of multi-dimensional data. It is used to formulate hypotheses about the data, which are later tested in more detail. In business analytics we can create a three-dimensional variable that allows the end-user to “see the depth” of the data. This variable is called a three-dimensional vector analysis. This variable, when combined with cluster analysis and a visualization tool, answers the proverbial business question: how deep can I go into my data and see patterns in which sound business decisions can be made?

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