Type of Analytics: Part 2 -Diagnostic and Prescriptive Analytics
In the first part we discussed about the Descriptive and Predictive analytics. To understand the data in a better way it is important to understand the reason behind why did the event occur or why was the outcome in a particular way. Diagnostic analytics helps to get the answer to this question. To increase the utility of predictive analytics, we need to convert the forecast into a concrete action. Application of Prescriptive analytics will help us achieve this goal.
Diagnostics analytics provide us valuable insights to understand why a particular event occurred. The answer to this question will help the corporations take better corrective action or help refine the decision before it is implemented. It not only focuses to find the reason behind the rise in cost or reduction in profits but also helps in enhancing positive outcomes. Companies often thinks of rationalizing its cost and cut down the fab wherever possible. Another way to increase the profitability would be to understand the reason behind high sale of a particular product / service. Can the strategy be replicated on the poor performing (low selling) products. Diagnostics analytics will help in improving both the cost aspect and revenue aspect of the company by finding the reason for outperformance / underperformance. It can also help the companies to understand the behavior of the customer towards a particular brand. These behavior patterns can be analyzed to understand buying characteristic of the customer. This information can be leverage to improve the sales of the company.
Predictive analytics helps us to forecast what can be potential outcome of the particular operations in the company. Taking a step ahead, Prescriptive analytics converts the forecast in to a tangible plan. It assists companies to chalk down proper plan of action. The implementation of Prescriptive analytics depends on what part of the business the organization plans to improve the efficiency. If the company plans to implement prescriptive analytics in the operations, than ‘Optimization’ can play a key role by identifying best outcome for the different level of inputs and constraints. Its utility can be further enhanced by calculating the impact of various forecasts. On the other hand, when designing systems / models / tools, Prescriptive analytics can be of help by checking impact of different iterations using various simulations techniques. It can also suggest measure to mitigate potential future risk, suggest market positioning to take advantage of future opportunity and provide the user with likely implications of the every decision. In practical application prescriptive analytics can have high level of utilization on the real time basis for processing new data, improve forecasting capabilities and hence help make better decision at the given point in time.
Diagnostics and Prescriptive analytics along with Descriptive and Predictive analytics if implemented properly in the organization can have huge positive impact. It will not only assist companies to take proper strategic decisions but also assist in placing company in tactically best position.
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