Tuesday, March 1, 2011

Descriptive, Predictive, & Prescriptive analytics

The Institute for Operations Research and Management Science (INFORMS) has recently gone through a process of rethinking what "Business Intelligence" or "Business Analytics" means.  They have settled on what seems to be a couple of frame works (here is the first, here is the second).  But, first their definition of analytics:
Analytics facilitates realization of business objectives through reporting of data to analyze trends, creating predictive models for forecasting and optimizing business processes for enhanced performance.
Next, they identified three main categories of analytics:

1. Descriptive - the use of data to find out what happened in the past (I would add:  what is happening now)
    - data modeling, trend reporting, regression analysis
2. Predictive - the use of date to find out what could happen in the future
     - data mining, predictive modeling
3. Prescriptive - the use of data to prescribe the best course of action for the future
     - optimization, simulation
Here is a short clip from IBM (hat tip The Vantage Point) discussing the three categories:



The second framework similarly identifies three different uses or users of business intelligence as described in their venn diagram:


I think neither framework is bad, but I worry that there seems to be some level of hierarchy among the three elements, that one is vastly superior to the others.  

Here is another interesting post on the subject.

1 comment:

  1. A brief educational video on Prescriptive Analytics can be found on the Ayata website at https://www.ayata.com/company/about. Ayata pioneered the technology behind Prescriptive Analytics through eight years of scientific research and development and holds the registered trademark for Prescriptive Analytics.

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