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What is meant by Predictive Analytics?
It is the sub-branch of Advanced Analytics, the key area of Data Science that uses Statistical concepts to output an event's maximum likelihood. Mathematics and Statistics are the building blocks of Predictive Analytics. It looks into the historical data and finds the trends & patterns from it by using the statistics and build the strategy to apply on new data to compute and predict the best possible outcomes.
It is based not only on statistical terms but also on data mining that provides Knowledge Discovery and Data-Driven features related to the prediction. You may also learn more about Cognitive Analytics in this insight
Determine what will happen—how well a product will sell, who is likely to buy it, which marketing to use for the greatest impact. Source - The Future Of Data Analytics
Different Predictive Analysis Techniques?
Predictive analysis uses various techniques and also takes the help of data mining, machine learning, and artificial intelligence. It finds the pattern from the dataset and predicts what will happen. Machine learning models like time series analysis, neural networks, and classification models make such predictions.
It is a prediction technique that entails calculating the probability of an item in a specific category. The problem of two specific categories is known as binary classification. For example, churn analysis is an example of binary classification where two specific categories are churned or not. This is known as a multi-class classification model if categories are more than two. The classification model continuously generates values expressed by the probability of different classes, known as a confidence value.
The human brain inspires this concept. Most of the cases use mathematical equations to activate the neural network. The web of input nodes and output nodes creates a neural network. And between input and output nodes, many hidden layers of nodes can be present. And hidden layers make networks more intelligent. A few examples of neural networks are - the Hopfield network, the Boltzmann network, the multilayer perceptron, and the Kohonen network.
Time Series Analysis
The time series analysis predicts the future based on the previously observed data. It is the sequence of data points that occur over some time. A few examples are household income or the price of shares over time.
Decision Tree Analysis
It is another method of prediction. It is a supervised algorithm. The decision tree assigns inputs to two or more categories. A regression tree is used to predict continuous data. The goal of the decision tree model is to predict the categorical input data based on some rules inferred from the past pattern of the dataset.
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Are you confused with Predictive and Prescriptive Analytics?
Prescriptive Analytics is the next step to Predictive analytics. Prescriptive analytics is the branch of Data Analytics that uses Predictive Modelling to suggest the actions to be taken for getting the optimal outcome. It relies on Optimization and Rule-based Techniques for Decision-Making. E.g., Forecasting the load on the energy grid over the next 24 hours is predictive analytics, while how to operate the power-plant based on the forecast of energy load is Prescriptive Analytics.
How does it works?
It incorporates and performs the Knowledge Data Discovery steps and forecasts the maximum likelihood outcome as the prediction. It combines Data mining, Machine Learning to result in qualitative and quantitative predictions for the future. Each one of these is as important as others for estimating the outcome.
These are four necessary steps to be taken for reaching Prediction -
- Access and Explore Data- The necessary and relevant data acquisition is made from various data sources like sensors, databases, data lakes, etc.
- Pre-processing and Aggregating Data- Here, the data results in the removal of messy data and transformed into the required format, along with the selected features extracted.
- Predictive Models Development- Statistical and Computational approaches are used to create the models and their experiments to optimize parameters used while training and monitoring the performance.
- Integration with Real-Time Systems- Now, the integration of Predictive and Prescriptive analytics comes into the picture to generalize the Intelligent system that functionally works on the Predictive Building and behaves in the way as prescriptive implements.
Predictive Modeling helps to improve the claim process and detect fraud and provider payment abuse. Source: Insurance Analytics, Fraud Detection
What are the best techniques?It combines various data analysis techniques; likewise, data mining, machine learning, and many more. Listed below are the methods involved in analytics:
Decision TreesA decision tree is an analytics technique based on Machine Learning, uses algorithms from data mining to predict the possible risks and rewards of pursuing several different actions. It is a visual chart that resembles an upside-down tree, which illustrates a decision's potential outcome. It can solve all types of classification problems and answer the tricky questions when deployed for analytics.
Text AnalyticsText Analytics comes into use when an organization willing to predict a numerical value. It is based on Statistical, Machine Learning, and linguistics techniques. It helps to predict the topics of a document, and also it examines words used in the given form.
What are the benefits of enabling it?
Tools are more reliable. Predictive analysis tools increase the efficiency of prediction. Instead of performing predictive analysis manually, predictive analysis tools are made more accessible. A few benefits of predictive analysis tools are following:
Performing predictive analysis manually is time-consuming. Whereas tools will take less time. Just need to perform a few actions, and accordingly, the model will predict the result.
Essay to use
All users may not be familiar with the different techniques' models and algorithms. Such users can also use the tools to know about the business's future and make changes in the business.
Reduce error chances
Predictive analysis manually increases the chance of error at the analysis time, whereas everything is predefined in the tools that decrease the error chances.
One can only be aware of some techniques, but as all predictive analysis techniques are predefined with tools, the use of tools is easier for the user.
Predictive maintenance is critical in diverse application areas, such as manufacturing industry, information, and technology. Source: Predictive Maintenance Services.
Why it Matters?
Role of Analytics in Data Science is leveraging various new opportunities, mainly -
- Decision-Making and Intelligence
- Fraud Detection
- Optimizing the Market Campaigns
- Optimize operations and results
- Risks Analysis and reduction
Where to use Predictive Analytics?
- Customer Retention
- Dynamic Pricing
- B2B analytics
- Customer Lifetime Values
What are some business use cases?
Advanced Analytics has become such a common word to be used by applying it in many fields and creating some specific domains -
- Supply-Chain Analytics
- Financial Analytics
- Risk Analytics
- Semantic and Sentiment Analytics
- Workforce Analytics
- Healthcare Diagnosis
- Customer Analytics
- Fraud Detection
- Equipment Maintenance
- Virtual Assistants
Enterprises reducing the need of manual decision making, make operational analytics actionable in real-time. Improve cross-department collaboration. Source: Enterprise Operational Analytics Services
What are the best tools for it?
Software Tools have advanced analytical capabilities like Text Analysis, Real-Time Analysis, Statistical Analysis, Data Mining, Machine Learning modeling and Optimization, and many more to add.
Libraries for Statistical Modeling and Analysis
- Stats model
- NLTK (Natural Language Processing Tool Kit)
- Neural Designer
Open-Source Analytical Tools
- SAP Business Objects
- Halo Business Intelligence
- R-Studio(R-Programming used)- most demanding Statistical tools for Machine Learning
- Apache Mahout (easy integration with Hadoop)
- RapidMiner Studio
- Knime AnalyticsStatistica
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Many tools are available in the market for predictive analysis. Some of them are discussed below-
IBM SPSS Statistics
It is one of the most reliable and most used predictive analysis tools. It has been around for a long time and offers a robust list of capabilities, including the Statistical Package for Social Sciences(SPSS) modeler. The cost pricing of IBM SPSS is also easily understandable. For the first-time user, the platform is complicated that’s why the user needs to be experienced. A few key features are data preprocessing, advanced statistics, extract, forecasting, decision tree, neural network, direct marketing, etc.
SAS Advance Analytics
SAS is another useful analytics tool. It offers different incredible predictive analysis tools. These analytics tools could be used according to the purpose. A few key features are descriptive analysis, predictive modeling, code-based model development, dynamic group processing, and many more.
SAP Predictive Analytics
SAP Solution is good for predictive analytics. It is a product of SAP Software. The company provides different options available when it comes to features, like SAS Advanced Analytics tools. It provides advanced machine learning and security features for analytics models. A few key features are python API, data security, compliance features, automated data preprocessing, predictive modeling, native pyspark modeling, and many more. It support datasets with more than 10000 columns
It is one of the best open-source tools. It also provides the data mining feature that puts this tool on the top analytics tools list. Its high performance, affordability, and high flexibility make it a renowned predictive analytics tool for users. H2O is used for expert data science and citizen data scientists. A few key features are automatic feature engineering, machine learning interpretability, natural language processing, automatic scoring pipelines, time series analysis, and many more.
Oracle also entered the market of data analysis. They purchased a renowned startup company known as DataScience and expanded the tool DataScience. The DataScience tool is mainly used for organizations with the Oracle database and cloud service.
This tool is mainly developed to perform analysis in the market research field. The QResearch tool provides all required facilities for better market analysis. It is a highly automated tool and needs less time for performing analysis. This tool can be integrated with R, the Microsoft Office product.
What are the best practices of Predictive Analytics?
The best practices for predictive analytics are listed below:
- Validate the database set
- Clearly define objectives
- Identify high-quality data streams for its interface
- Discover the best visual representation
- Monitor the deployment and Performance
A Holistic Approach
It uses many techniques from Artificial Intelligence, Data mining but analyzes real-time data for future predictions and understanding predictive analytics. You should review each of the following steps for better understanding: