This month, the subject of prescriptive analytics came up in the Q&A that ends each one of TMA’s free webinars. But just what is “prescriptive” analytics?
Prescriptive analytics is predictive analytics taken to the next logical level. Instead of merely predicting the future it asks how a business might start treating specific issues based on the model. This is a computer-assisted task: one that helps business intelligence analysts choose from perhaps dozens of options. The question now becomes, “out all of these good options, which one will deliver the best results the fastest?”
“The Analytic Journey,” an Analytic Magazine article written by Irv Listig, Brenda Dietrich, Christer Johnson and Christoper Dziekan recently explained prescriptive analytics in greater depth.
Prescriptive analytics, which is part of “advanced analytics,” is based on the concept of optimization, which can be divided into two areas:
- Optimization: How can we achieve the best outcome?
- Stochastic optimization: How can we achieve the best outcome and address uncertainty in the data to make better decisions?
Once the past is understood and predictions can be made about what might happen in the future, it is then time to think about what the best response or action will be, given the limited resources of the enterprise. This is the area of prescriptive analytics. Many problems simply involve too many choices or alternatives for a human decision-maker to effectively consider, weigh and trade off – scheduling or work planning problems, for example. Twenty, 15 or 10 years ago these problems could only be solved using computers running algorithms on a particular data set for hours or even days. It was not useful to embed such problem-solving capability into a decision support system since it could not provide timely results. Now, however, with improvements in the speed and memory size of computers, as well as the significant progress in the performance of the underlying mathematical algorithms, similar computations can be performed in minutes. While this kind of information might have been used in the past to shape policy and offer guidance on action in a class of situations, assessments can now be completed in real time to support decisions to modify actions, assign resources and so on.
Behind all the big words and new terms the idea is simple. Prescriptive analytics is a tool for making choices that will create real benefits for your organization.
Of course, you can never get to this level if you don’t start with the proper training. Why not register for the December 2013 webinar and learn how to properly launch your own analytics projects today?