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
So, what 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.
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!