Organizations that aren’t using data to inform their business
strategies are missing out on a huge competitive edge. In the past,
only the biggest corporations with huge budgets could afford to use
big data in their decision-making. Now, companies can’t afford not to.
When we talk about data analytics in business, however, there are
actually several different types of analytics, depending on the
intended purpose of the data. Predictive analytics, which plays a key
role in business strategy, is used in nearly every industry to plan
long-term strategy and minimize risks.
The Core of Predictive Analytics
is predictive analytics, anyway? Basically, the term refers to
the use of historical data to predict future organizational/market
conditions or customer behavior. While predictive analytics can’t say
with one hundred percent certainty that something will or will not
occur, it works using probability to estimate how likely something is
to happen. By using a combination of data mining techniques,
statistical modeling, and machine learning, predictive analytics can
present different theoretical scenarios and help leaders understand
what actions to take—or not to take.
At its core, predictive analytics helps businesses to manage risks
while increasing chances of success. In the past, many organizations
relied on the intuition and experience of organizational leadership
alone to create long-term strategies and to make key business
decisions. Today, that wisdom is supplemented with tools like
Predictive Analytics Benefits
Predictive analytics can help companies to maintain a competitive
edge. In today’s crowded marketplace, it’s important to use every
available tool to stay competitive.
Depending on the organization, there are many
different benefits predictive analytics can offer. A bank can
use predictive analytics to determine who gets a loan and at what rate
to manage their risk, while retailers can use it in product ordering
to predict demand. Predictive analytics can even be used to set prices
and to detect potential fraud, maximizing profits and minimizing losses.
Organizations use predictive analytics because it acts as a strong
starting point for strategy and decision-making. It’s easier to move
forward with confidence if you can see the probability and precedent
for what you’re doing in the data. It also allows organizations to
justify their strategies to shareholders and employees, and to learn
from past mistakes.
How Predictive Analytics Can Help Improve Business Performance
There are so many applications for predictive analytics that it would
be hard to find a business that couldn’t benefit from using this tool.
At the very least, companies can use the technology to predict how
effective their marketing campaigns will be.
Marketing is the backbone of revenue in nearly every business, and
keeping an organization’s return on investment (ROI) high is key for
healthy business performance. Business
analytics can help companies perform better over time, using past
campaign performance to predict future success and failure.
Organizational leaders and marketers can continually improve their
business performance by using predictive analytics consistently and
tweaking their approach according to the models.
Looking to Implement Predictive Analytics? Here’s Where to Start
If your organization hasn’t yet begun to use predictive analytics,
then you might be feeling overwhelmed and unsure of how
to get started. The good news is that the technology is more
accessible than ever and there are lots of predictive analytics
resources out there to help you.
The first step in leveraging your company’s data is to figure out
what your goals for predictive analytics are. You need a clear purpose
in using this tool or it will fall short of your expectations.
Where could your business improve? Are your ads and marketing
campaigns falling short? Are you wasting resources? Are you taking too
many gambles in your strategy? Find a problem you need to solve and
see if predictive analytics could give you the answers.
Once you have your goal, you can start collecting the data you’ll
need. It’s important to be specific in the type of data you’re using
to ensure that the probability will be as accurate as possible. You
should already be collecting data from different sources, but it’s
important to segment the data you’ll need for analysis.
Predictive analytics might require an investment in personnel and/or
software, but it can be well worth it in the end. Remember, it’s not
enough to predict the future—you have to act on it. Adapt your
strategy based on your findings to ensure that your business
performance only improves over time!