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How Can Predictive Analytics Improve Performance?

By Muhammad Hanzla Ijaz

Posted on: August 4, 2022 8:45 AM

BUSINESS MANAGEMENT > (IOT)

Wouldn’t it be great if organizations could harness, restructure and use their data to predict the purchasing patterns of their most loyal customers and how to encourage those customers to renew their subscriptions? It is possible to accomplish these tasks thanks to predictive analytics. Companies require business analysts who can convert data into accessible information.

Table of Contents

What is Predictive Analytics?

Predictive analytics is a form of advanced analytics that predicts future results by using current and historical data. Companies used combined data mining techniques and machine learning algorithms to identify activity, behavior, trends, or business opportunities.

In short, predictive analytics is used to identify risks, determine how these can be minimized, identify opportunities for taking advantage of and converting them to optimum results, and improve operational efficiency. According to the research, the market for Predictive Analytics is expected to grow from $10.5 billion in 2021 to $28.1 billion by 2026 as more companies utilize advanced analytics for their business management and to boost competitive advantage. ^[1]

While in manufacturing, predictive analytics models can boost efficiency and revenues. Predictive analytics can anticipate production delays by identifying the location and frequency of machine failures. By projecting upcoming demands, manufacturers can order supplies accurately, reducing raw material waste.

How does Predictive Analytics work?

A business uses different techniques according to the type of purpose and response set that works best for it.

For example, streaming platform companies like Netflix & Amazon use predictive analytics to determine consumer behavior and personalize user experience.

Following are the basic steps predictive analytics software typically tracks:

Data Collection: The most common obstacle encountered by organizations trying to enforce predictive analytics is a lack of reliable data. Using spreadsheets and databases to import data ensures that the data sets are customized according to the goal’s requirements.
Data cleaning & Combination: Identify any missing data, and determine if there are any irregularities or other factors that might cause the data to be incorrect. In that case, merge relevant data sources that would need to be compiled depending on the desired outcome.
Develop the model: Establish the concept and build the model based on the data collected through statistical techniques. Assume all variables and factors, then test the model using historical data to determine which would bring the most accurate result and check if it would prove the concept.
Integration of analytics with systems: Using analytics to predict the load can be integrated into your production system, making it available to various applications, including web apps, servers, or mobile devices.

What are the benefits of Predictive analytics?

Following are the benefits of using predictive analytics,

Improve your competitive edge
Find new product/service opportunities
Optimize product and performance
Get a better understanding of customers
Help detect fraud
Cost & risk optimization
Address problems before they occur
Meet consumer expectations
Improved collaboration

What are types of Predictive Analytical models?

Picking the right predictive model is vital in generating the most accurate forecast. Going for the wrong one can lead to inaccuracy and irregularity in your operation.

Following are the most common types of predictive analytical models used,

Decision Tree: It’s one of the most popular methods of predictive analytics.

As the name suggests, it looks like a tree-shaped diagram with each branch representing a choice between several alternatives and each leaf representing a decision.

Regression: This model helps users predict asset values and understand the relationship between dependent and independent variables. These techniques are often used in banking, investing, and other finance models since they’re used to predict a number as they find crucial patterns in large data sets.

Neural Networks: An innovative method of predictive analytics is neural networks. This model is designed to determine the relationship between data & mimics the way the human brain functions. It can deal with complex data relationships using artificial intelligence.

What is an example of predictive analytics?

Different industries go for predictive analytics to support their efficient operation and decision-making.

Following are the industries that use predictive analytics,

Manufacturing – Predictive analytics help manufacturers monitor equipment and machine performance and identify product quality & production through predictive maintenance. This can help predict failures before they occur and prevent their impact on production.
Healthcare – It can offer more effective treatment and improve healthcare operations. It can also assist in diagnosing by utilizing A.I can predict the reaction’s severity and alert the individual and caregivers.
Supply chain management – Enables businesses to address supply chain challenges, identify the most inefficient areas in operation, and reduce costs by helping avoid supply chain disturbance.
Transportation Management – Transportation agencies can monitor traffic load, spot accidents or vehicle breakdowns, and suggest proper assistance.

Conclusion

Ultimately, we know how much predictive analytics tools are capable of. Yet, companies are at a slow pace of totally relying on or utilizing such technology. More the less, as we are advancing towards the new world of the digital frontier, this tool will end up being a game changer for businesses. You may wonder how so. Well, at first, it’s not something out of the blue that is a way to forecast outcomes. But what sets it apart is that data analytics predict results from users’ past collected data. Still, when it comes to predictive analytics, it provides companies with both past & future insights.

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