Publish date November 15, 2017
If predictive analytics is placed at the heart of an automated decision-making process, then it must be approached in a controlled and systematic way. Building a decision-making infrastructure based on predictive analytics is just like any other sort of project, like setting up an IT data center, refitting a factory or restructuring an organization.
Let us understand the different types of analytics used in many organizations today.
Descriptive Analytics uses data aggregation and mining for providing insights into the past and answers: “What has happened?” These are the most common reports that organizations generate. These reports show patterns of what happened in the past and allow the analyst to make their predictions.
Predictive Analytics makes use of statistical models and forecasting techniques to understand the future and answers: “What could happen?”
Prescriptive Analytics makes use of optimization and simulation algorithms to advice on possible outcomes and answers: “What should we do?”
Predictive analytics not only about what’s happening, but it can also predict what WILL happen in the future, which is precious stuff. Rather than just explaining the who, what, where, when predictive analytics PREDICT the best course of action that will generate the most optimal return based on an algorithm, such as a regression equation.
Predictive analytics prime objective is to analyze data and manipulating variables to extract forecasting capabilities from existing data. Predictive analytics techniques rely on variables that can be measured, manipulating metrics to predict future behavior or outcomes given various quantifiable approaches. Predictive analytics models combine multiple predictors, or quantifiable variables, into a predictive model. This approach allows for the collection of data and subsequent formulation of a statistical model, to which additional data can be added as it becomes available.
The prediction process involves the following steps:
Organizations involved in the Predictive Process:
Predictive analytics allows organizations to become proactive, forward-looking, anticipating outcomes and behaviors based on data and not on any assumptions. You need to plan what you are going to do, undertake feasibility work, understand the costs and benefits and risks and issues, and have someone overseeing the whole show to ensure that it delivers what was promised on time and to budget.
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John Doraswamy Bonam- BI Lead SAP @YASH Technologies