Your Company Can See The Future With Predictive Analytics
If hindsight is 20/20 for businesses, what is the value of laser-focused foresight? For companies like Amazon, it could mean beginning to ship customers’ packages before they even order them, giving the retailer an unparalleled advantage in shipping speed. Today, the value of predicting the future of markets and consumers is on the rise, but the trend isn’t based on anything as mystical as tea leaves or palm reading: Simply put, it’s all about the data.
How important is predictive analytics today? According to a recent Accenture survey of 600 business executives, the use of forward-looking data analysis has tripled since 2009. The company attributes such growth in what its report calls this “advanced application of analytics” to increased “sophistication in analytics capabilities that anticipate tomorrow rather than explain yesterday.”
What Is Predictive Analytics?
Data that can predict the future may seem like it must come from a newfound trough of metrics, but the data is closer than you think. According to Dr. Michael Wu, chief scientist at social customer experience management firm Lithium Technologies, it’s not about finding new raw data, but about using data differently. With large amounts of data, organizations can identify patterns and build new models to predict future actions rather than simply analyzing the past through the old standard of descriptive analytics.
Wu told InformationWeek that predictive analytics utilizes “a variety of statistical, modeling, data mining, and machine learning techniques to study recent and historical data, thereby allowing analysts to make predictions about the future.”
A Forward-Looking Advantage
Although Accenture has seen the use of predictive analytics triple, the organization’s report reveals that only a third of surveyed businesses have gotten in on the game, giving them–and anyone about to jump in–a notable advantage over their competition.
This edge can look very different depending on the company and the industry. For online retailers, Practical Ecommerce explains, predictive analytics can be used to automatically vary pricing over time based on purchasing trends, produce optimal search results, and pair the right promotion with the right consumer to close a sale.
Predictive analytics can be used not only to reveal what people will buy, but also how effective they will be in a job. Information Management revealed how Abbot Analytics used predictive data to help the U.S. Special Forces assess new candidates based on information such as the qualities of people who had done the job effectively in the past, as well as “acceptable trade-offs” for those qualities.