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It’s easy to be put off by the jargon. Predictive? Are you really telling me you can predict the future? You’d be right in a way, as predictive analytics doesn’t tell you what will happen in the future. What it does do is to forecast what might happen in the future with an acceptable level of reliability and can include things like what-if scenarios and risk assessments.
This is massively valuable if your business decision making and business problem resolution is still based too much on guesswork and too many blank canvases. Predictive analytics or PA, gives you a best assessment of what will happen in future.
PA has moved from the domain of mathematicians to business analysts and line of business chiefs because of growing volumes of data, faster, cheaper computing, easier to use software and tougher economic conditions generally. It’s everywhere and it’s mainstream because the sort of business challenges it tackles are wide ranging:
Fraud detection – PA can improve pattern detection and prevent criminal behaviour. And to improve cybersecurity, high-performance behavioural analytics can examine all actions on a network in real time to spot abnormalities that may indicate fraud and advanced persistent threats. Commonwealth Bank uses analytics to predict the likelihood of fraud activity for any given transaction before it is authorized – within 40 milliseconds of the transaction initiation!
Marketing campaign optimisation – Predictive models help businesses attract, retain and grow their most profitable customers with:
Operations and business process improvement – Predictive analytics enables organizations to function more efficiently:
Risk reduction – Credit scores generated by a predictive model are used to assess a buyer’s likelihood of default for purchases, incorporating all data relevant to a person’s creditworthiness. Other risk-related uses include insurance claims and collections. In software development, PA helps teams leverage appropriate technologies that will give businesses the capability to better hedge investments or price products more appropriately. In addition, it can also help leverage appropriate technology to predict profitability more accurately and deploy resources proactively, thereby improving risk management.
To realise the value of PA for your business, it’s not a case of simply clicking the ‘predictive analytics button’ on your dashboard. Integrating into your business decision making means going through an analytical life cycle such as the following:
So it will require a team approach to bring predictive analytics effectively into the business. But you can be sure we’ve only just scratched the surface, both in the ways different industries could integrate PA and the depths to which PA tools and techniques will redefine how we do business in concert with the evolution of AI. And as we inch closer to truly mapping an artificial brain, the possibilities are endless!
By: Stephen Masters
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