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Demystifying “Advanced Analytics”

Demystifying “Advanced Analytics”

By Anip Satsangi
July 8, 2015

We hear a lot of hype surrounding Analytics, especially, with analytics and big data as a much sought after capability by corporate houses. Technology leaders like IBM, Google, Amazon and HP are putting in serious investments in building capabilities across the value chain of advanced analytics. The market is dotted with start-ups, and these numbers are only increasing with easy access to private equity and venture capital.

Analytics is the watchword of this era – All have heard about it, most of us have a vague idea of what it means; some have a clear idea of what it really is, and, a few have an understanding of what it can really do for the business.

Oxford dictionary defines “Analytics” as – “The systematic computational analysis of data or statistics

Source: http://www.oxforddictionaries.com/definition/english/analytics

Advanced analytics is a future oriented analysis that can help drive improvements in business practices. It comprises of the following four parts:

Descriptive Analytics – It gives an insight into what has happened in the past by getting a context relevant view of the business area in question; using a blend of exploration and discovery through visualization, often used in the form of dashboard or standard reports. E.g. Insight – My company shares have declined for a particular brand in India.

Diagnostic Analytics – Once we know what has happened using descriptive analytics, determination of the root cause is usually achieved via diagnostic analytics. E.g. Insight – My company had launched a new brand in the market at a higher price tier, but, with the price discounts for the launching activity, it is directly competing with my best selling brand in the next lower price tier, thereby cannibalizing it.

Predictive Analytics – With a slew of sophisticated statistical models, or, even artificial neural network, the outcome of an event can be forecasted even before it happens. E.g. Insight – If I run a price discount on the newly launched brand, it will cannibalize my best selling brand in the next lower price tier.

image 1

Prescriptive Analytics – This is basically a decision support system; decision/ recommendation will still require human involvement. In its most advanced form, prescriptive analytics transcends to decision automation (technology aided recommendation system).

Here is an example of decision automation in today’s world.

Prescriptive analytics applied – Why does airline ticket rate change every hour?

We know from basic economics that prices are directly proportional to demand. Using this logic, a customer can book the cheapest tickets for her next vacation simply by knowing the least desirable flying days/ times. However, airline companies have an edge against customers when it comes to getting hold of this information. Airlines use prescriptive analytics to analyze millions of flight itineraries in real time and set an optimal price point based on supply and demand, instantaneously. This maximizes their profits by squeezing the last possible rupee off passenger’s wallets. Analytics helps the airline industry ensure that the pricing structures are optimized at all times, which directly contributes to the bottom line.

Source: http://www.analytics.northwestern.edu/program-overview/analytics-examples.html#airline-price

The journey of advanced analytics is strikingly similar to human evolution – man becoming more upright and more intelligent as time passes.

So, how does the future of analytics industry look like? image 2

The BFSI, ecommerce, telecom industries are clearly driving the analytics adoption in India. They fall into the Innovators/ Early Adopters segment; join when it’s new, or, when they perceive a benefit. Sectors like manufacturing, retail, media and advertizing are typical examples of Early Majority; i.e. they join when they see a productivity gain. Healthcare and education sectors are yet to make a mark in analytics deployment, and, could be part of the Late Majority (join when there is plenty of health and support), or, Laggards (join only when they have to).

From Ola trying to capture the demand skewed cab industry, to, Flipkart looking to capture the biggest chunk of customers against Amazon, to, your bank trying to cross sell financial products, to Airtel offering MyPlan, analytics is at the heart of all these companies. Analytics is rapidly changing the face of competitive dynamics by moving away from traditional tactics into an “Analytics Centered World”. Analytics is here to change the way we experience and interact with the world.

 

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