Exploring 4 Business Benefits of Predictive Analytics
Today’s businesses are swimming in data. For better or worse, modern organizations have access to millions of data points about products, processes, customers, and competitors. On the surface, this sounds like businesses have a major competitive advantage that’s historically been unavailable. But without a plan for how to leverage this data, it quickly becomes a paralyzing force.
photo Gerd Altmann via pixabay
What is Predictive Analytics?
Data is everywhere. Every application, software program, online tool, and web page collects raw data and presents it to the user. And with each new data source, businesses are finding themselves increasingly overwhelmed with how to proceed. But this is where predictive analytics comes into play.
“Big data collects, processes and spits out information that may or may not be helpful or useful. Predictive analytics takes that big data—say, insight into past buying patterns or responses to emails or likelihood of defaulting on payments—and uses that historical data to predict future behavior,” Mike Michalowicz writes for American Express.
This stands in stark contrast to the manual analytics that most businesses have grown accustomed to. Whether it’s in a spreadsheet or internally-developed solution, these dated analytics tools are slow, inefficient, and highly-prone to human error.
“These manual analytics are descriptive, only revealing intelligence about where the supply chain has been in the past,” writes Richard Lebovitz, founder of LeanDNA. “Historical results are important, but the emerging AI technology is focused on identifying ways to improve the future.”
In essence, predictive analytics tells businesses what data is relevant to the specific problems they’re solving and/or questions they’re asking. It’s a game-changer in the best possible sense.
4 Benefits for Businesses
Every business has unique needs, demands, pain points, challenges, and opportunities. But the versatility of predictive analytics means every organization can extract some value from this new form of AI analysis. Here are some of the specific ways businesses can benefit:
- Improved Operational Efficiency
Predictive analytics can be especially insightful when it comes to logistics and supply chain management. From understanding how to source products, when to ship to meet fluctuating demand, and how to forecast inventory properly, there’s enormous value on the operational efficiency side of things.
Predictive analytics is especially important for businesses that have multiple locations and/or suppliers spread out across different facilities. It not only enhances visibility, but it also ensures greater consistency among fragmented portions of the business.
- Lower Costs
With greater demand forecasting, smoother logistics, and greater operational efficiency, come less wasted time and resources. This ultimately results in lower costs and higher profit margins.
Take, for example, a solution that offers predictive asset maintenance for technical equipment. By predicting issues and breakdowns before they occur, businesses can avoid unnecessary downtime and more costly repairs.
Predictive analytics solutions cost money to implement, but used appropriately, they’ll almost always deliver a net savings that puts companies in the black. It’s not just an even trade-off – it’s a positive investment.
- More Strategic Marketing
When it comes to predictive analytics, most people don’t think about marketing. However, there’s actually a strong correlation between insightful predictive analytics and marketing productivity.
Predictive analytics can empower marketers by providing them with the information they need to identify audiences who are most likely to respond to specific marketing campaigns. In doing so, businesses can reduce wasted marketing spend and generate higher ROI.
- Better Security
Safety and security is something businesses have to be focused on in multiple areas. In particular, many businesses are significantly constrained by safety and compliance issues. With predictive analytics, it becomes easier to identify things like fraud, high-risk scenarios, and even cyber security problems. This results in better regulatory compliance and lower risk of fraud – which could have serious and long-lasting consequences.
Ushering in the New Age of Business
The ability to collect data is one thing. But for data collection efforts to produce a high return on investment, there must be a way to interpret the findings and extract meaningful value from the information found inside. Predictive analytics fills this void.
The business world is undergoing rapid evolution and positive change. Organizations that properly leverage predictive analytics will discover a powerful competitive advantage that sets them apart for years to come. Will you?
Author: Anna Johansson
