Are you psychic or is that just the analytics talking?

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Just the other day, my wife said to me, “Did you know they have an app that can tell you when it would be a good time to take a bathroom break when you are at the movies?” She went on to explain that this app would also inform you if there were outtakes at the end of the movie so that you would not leave and miss out. I told her that I was not surprised an app could do that. I said to her, “You know what is doing that? It’s analytics.” I began to explain how companies collect data patterns on how people behave with regard to certain scenarios and they can then predict how a group of people might behave in a particular situation. I told her that analytics is a pretty interesting concept. Having said that, I thought I should blog about it so that I could learn more about this thing called predictive analytics.

What is predictive analytics?

I’ll try to use an example to help define the term. You have probably wondered how your mom or dad knows your habits or can usually tell when you’re going to do something before you even do it. Sometimes, when my son is telling me something about his day or he is thinking about doing something, I can tell him what the outcome is going to be. He doesn’t believe me all the time, but then at a later point in the day or week he comes back and asks how I knew this. I simply tell him, “I was once 16 and you have my DNA.”

Predictive analytics is a process of taking lots of data for a particular event, which often involves studying past historical data to research potential trends, to analyze the effects of certain decisions or events or to evaluate the performance of a given tool or scenario. The goal of predictive analytics is to improve the business by gaining knowledge that can be used to make improvements or changes.

To give your organization that edge, you can leverage the cloud for your predictive analytics solution.

So, in my example, because my son has some of my makeup (DNA), I can sometimes evaluate some of the things he is attempting to do and potentially offer a better way to go about the task he is trying to complete. We could say I am predicting what my son is going to do based on what he is telling me and the fact that he has my DNA and I have probably done these same things. Having said that, predictive analytics is concerned with the prediction of future probabilities and trends.

The central element of predictive analytics is the predictor, a variable that can be measured for an individual or other entity to predict future behavior. For example, an insurance company is likely to take into account potential driving safety predictors such as age, gender and driving record when issuing car insurance policies. Credit Scoring is used throughout the financial services world and is another example of using predictive analytics. Scoring models process a customer’s credit history, loan application and customer data in order to rank individuals by their likelihood of making future credit payments on time. A well-known example is the FICO score.

So the next time you wonder how a person knew you liked that color dress, always has your favorite chips on Tuesdays at the grocery store or knows when you are ready for your next pair of shoes, they may not be psychic (although they could be). They just might be relying on predictive analytics to figure you out.

What are your thoughts on predictive analytics?

Staff Software Engineer IBM Commerce

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