Introduction

Defining the Role of Statistics in Business

A business executive must constantly make decisions under pressure, often with only incomplete and imperfect information available. Naturally, whatever information is available must be utilized to the fullest extent possible. Statistical analysis helps extract information from data and provides an indication of the quality of that information. Data mining combines statistical methods with computer science and optimization in order to help businesses make the best use of the information contained in large data sets. Probability helps you understand risky and random events and provides a way of evaluating the likelihood of various potential outcomes.

Even those who would argue that business decision making should be based on expect intuition and experience must admit that all available relevant information should be considered. Thus, statistical techniques should be viewed as an important part of the decision process, allowing informed strategic decisions to be made that combine executive intuition with a thorough understanding of the facts available. This is a powerful combination.

We will begin with an overview of the competitive advantage provided by knowledge of statistical methods, followed by some basic facts about statistics and probability and their role in business.

Why Statistics

Is knowledge of statistics really necessary to be successful in business? Or is it enough to rely on intuition, experience, and hunches. Let’s put it another way: Do you really want to ignore much of the vast potentially useful information out there that comes in the form of data?

Why Should You Learn Statistics?

By learning statistics, you acquire the competitive advantage of being comfortable and competent around data and uncertainty. A vast amount of information is contained in data, but this information is often not immediately accessible statistics helps you extract and understand this information. A great deal of skill goes into creating strategy from knowledge, experience, and intuition. Statistics helps you deal into creating strategy from knowledge, experience, and intuition. Statistics helps you deal with the knowledge component, especially when this knowledge is in the form of numbers, by answering questions such as; to what extent should you really believe these figures and their implications? And, how should we summarize this mountain of data? By using statistics to acquire knowledge, you will add to the value of your experience and intuition, ultimately resulting in better decision making.

You won’t be able to avoid statistics. These methods are already used routinely throughout the corporate world, and the lower cost of computers is increasing your need to be able to make decisions based on quantitative information.