July 14, 2022

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3-Minute Nutshell: What Is Predictive Analytics?

Predictive analytics finds patterns in complex data that can be used to predict future outcomes.

Welcome to our new 3-Minute Nutshell series, where we’ll answer FAQs about predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… in just a few minutes of your time! Get up to speed on key ideas you need to know to start your business’s journey toward AI success.

Predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… is the process of identifying meaningful patterns in historical data that can be used to mathematically predict what’s likely to happen in the future.

Of course, regular “data analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business…,” aka “business analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business…,” also looks for patterns in historical data. You might look at data on customer transactions to find out which products were most popular in a certain season last year. You could also determine what level of customer activity correlated with churn in the past.

Those are definitely meaningful patterns in data. But while finding patterns that existed in the past might be helpful in some ways, those same patterns might not hold true for the future. These simple connections in customer behavior in 2021 may not hold true for brand-new customers in 2022.

Moreover, those patterns connect just a couple of variables (product popularity + season, customer activity level + churn). Human brains and basic analytical tools are adequate for spotting those simple patterns. But the minute things get more complex or future-looking, AI-powered predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… show their power.

Predictive analytics finds patterns in complex data that can be used to predict future outcomes.

The most important distinction about predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… is its ability to look into the future. But how does it do that?

To feel confident about your predictions and the decisions you’ll make with them, you need a deeper level of analysis that can grasp all the relevant variables. Additionally, maybe there are 10, 20 or more variables that actually determine the outcome you want to predict.

Beyond detecting patterns with these additional variables, you also want to be able to see how each of those variables contribute to what will happen in the future. Confidence only increases when predictions aren’t coming out of a black box.

To glimpse what’s most likely to happen in the future, predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… techniques take your historical data and dig deeper. They seek more complex patterns and relationships among all the important variables. Predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… platforms build mathematical models that show how these variables relate to each other. They then use those models to generate predictions about what’s likely to happen in the future.

These models are based on the state-of-the-art methods developed by thousands of researchers and practitioners who refine artificial intelligence and machine learning techniques. (We’ll talk more about the role of AI and ML in analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… in an upcoming post!)

And in the case of Pecan, modeling methods are refined with the results of thousands of models built for customers, using business goals as the key measure of success.

animated graphic showing data analytics, business analytics, descriptive analytics, predictive analytics, and prescriptive analytics in rotating text with Pecan logo

You might have also heard two other terms paired with analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business…, other than “predictive”: “descriptive” and “prescriptive.” Descriptive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… refers to the kind of analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… we described first in this article. It’s an effort to summarize and explore your data about what happened in the past. It’s also the foundation on which more advanced analytical methods are built.

The name of “prescriptive analytics” is pretty revealing. It’s a method to determine the right next action to take based on your data. For example, a recommendation system on an ecommerce site that suggests more products is “prescribing” next options for you to pursue, based on your browsing history.

All of these analytic methods — descriptive, predictive, and prescriptive — have their place in a business’s data strategy. However, many businesses’ data efforts have stalled at descriptive analytics. Spreadsheets and BI dashboards dominate their toolkits and offer only windows into the past.

Considering jump-starting your data engine and adopting a future-driven perspective? Stay tuned for more of this blog series. We’ll share more about predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business…, how it works, and how it can benefit your business. You can also grab our guides to the basics of predictive analytics and to choosing a strategy for building your team’s predictive capabilities.

Ready to start exploring what predictive analyticsAnalytics is a business practice that uses descriptive and visualization techniques to gain insight into data; those insights can then be used to guide business… can do for your business? We’d love to help you launch your journey into AI. Augment your team’s capabilities by making machine learning available to your data and BI analysts through our accessible, accurate and powerful platform.

We can assess your predictive readiness with a quick, easy use-case consultation. We’ll help you find the best way to get future-ready.

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