What is Predictive Analytics and its roles in Business Intelligence

What is Predictive Analytics and its roles in Business Intelligence

Table of Contents

A company’s most precious asset, after its people, is information. Predictive Analytics and Business Intelligence (BI) have proven invaluable in minimizing risks and boosting financial performance.

What Is Predictive Analytics?

Predictive Analytics is a subset of advanced analytics that uses previous data to create predictions about future events using statistical modeling, data mining techniques, and machine learning. Companies use predictive analytics to identify risks and opportunities by finding trends in data. Big data and data science are frequently related to Data Predictive Analytics.

Companies nowadays are swamped with data, ranging from log files to photos and video, and all of this data is stored in separate data repositories throughout an organization. Data scientists employ deep learning and machine learning algorithms to detect patterns and anticipate future events in order to obtain insights from this data. Logistic and linear regression models, neural networks, and decision trees are examples of statistical approaches. Some of these modeling strategies build on previous Predictive Data Analysis learnings to generate new predicted insights.

Types of predictive modeling

Predictive Analytics models are intended to analyze past data, identify patterns, monitor trends, and use that information to forecast future trends. Classification, clustering, and time series models are examples of popular Prediction Analytics models.

What is Predictive Analytics and its roles in Business Intelligence

Classification models

Classification models are a subset of supervised machine learning models. These models classify data using historical data and describe relationships within a specific dataset.

This model, for example, can be used to divide consumers or prospects into groups for segmentation. It can also be used to answer binary questions, such as yes or no or true or false; prominent applications include fraud detection and credit risk assessment. Logistic regression, decision trees, random forests, neural networks, and Nave Bayes are examples of categorization models.

Clustering models

Clustering models are examples of unsupervised learning. They categorize data based on similarities.

For example, an e-commerce site can use the model to divide clients into similar groups based on shared characteristics and build marketing strategies for each group. k-means clustering, mean-shift clustering, Density-based Spatial Clustering Of Applications With Noise (DBSCAN), Expectation-maximization (EM) clustering using Gaussian Mixture Models (GMM), and hierarchical clustering are all common clustering algorithms.

Time series models

Time series models incorporate a variety of data inputs at different time intervals, such as daily, weekly, monthly, and so on. The dependent variable is commonly plotted across time to examine the data for seasonality, trends, and cyclical behavior, which may indicate the necessity for specific transformations and model types. Time series models that are commonly employed include Autoregressive (AR), Moving Average (MA), ARMA, and ARIMA.

For example, a call center can use a time series model to anticipate how many calls it will receive per hour at various times of day.

How Does Predictive Analytics Work?

What is Predictive Analytics and its roles in Business Intelligence

AI-based Predictive Analytics optimizes forecasts by utilizing a collection of machine learning algorithms. The algorithm chooses a model that is specifically fit for the business metric you’re expecting. The procedure is divided into several steps:

  • Determine the Analytic Prediction purpose.
  • Determine the Predictive Analytics items.
  • Select a Predictive Analytics model type.
  • Collect and analyze the data required for the model.
  • Make your Analytic Prediction.
  • Analyze, validate, and implement the findings.

Predictive Analytics is critical for firms, regardless of their company style, because it provides some insurance for future business outcomes. It not only detects and mitigates potential hazards in advance, but it also assists organizations in making educated decisions and setting budgets and corporate goals. AI helps businesses oversee all these aspects with increased accuracy in the Predictive Business Analytics process.

Benefits of predictive modeling

Think of all the data you have access to but aren’t making the most of. Not just data generated by standard customer transactions, but data is acquired via atypical sources such as social media, the web, audio files, and image documents. Today, you can use all of this data—structured and unstructured alike— to achieve a competitive advantage. Analytics—particularly Predictive Analytics, is one key to gaining these insights.

What is Predictive Analytics and its roles in Business Intelligence

Predictive Analytics is an advanced analytics technique. Advanced analytics methods differ from traditional ones in that they assist firms in looking forward rather than backward. Instead of asking what happened? You ask, what is likely to happen?

For example, will this elevator need to be repaired after another 50 hours of operation? Or, as your analytics experience and expertise grow, what are we going to do about it? Or, more excitingly, when you gain proficiency in sophisticated analytics, you just trust the system: study the data and do what is best for your firm.


Every modern firm must be worried about data security. Security is improved by combining automation and Predictive Analytics. Specific security measures can be triggered by specific patterns associated with suspicious and anomalous end-user activity.

Risk reduction

Most firms are attempting to decrease their risk profiles in addition to keeping data secure. For example, a credit provider can utilize data analytics to determine whether a customer is at a higher-than-average risk of default. Other businesses may use Predictive Analytics to determine whether their insurance coverage is appropriate.

Operational efficiency

Improved profit margins result from more efficient workflows with Predictive Analytics. Understanding when a delivery vehicle in a fleet needs maintenance before it breaks down on the side of the road, for example, means deliveries are delivered on time, without the additional costs of having the vehicle removed and bringing in another employee to complete the delivery.

Improved decision making

Making calculated decisions is an important part of running a business. Any expansion or addition to a product line, or any other type of growth, necessitates weighing the inherent risk against the potential outcome. Predictive Analytics can provide knowledge to help inform decision-making and create a competitive advantage.

Predictive analytics industry use cases

Predictive Analytics can be used in a variety of industries to solve various business difficulties. The following industry use cases demonstrate how Analytics Predictive can help guide decision-making in real-world settings.


Machine learning and quantitative technologies are used in financial services to predict credit risk and detect fraud. BondIT, for example, is a firm that specializes in fixed-income asset management. In addition to static market limits, predictive analytics enables them to accommodate dynamic market changes in real time. This use of technology enables it to customize personal services for clients while also minimizing risk.


In health care, Predictive Analytics is used to detect and manage the care of chronically unwell patients, as well as to track specific illnesses like sepsis.

Geisinger Health mined health information using Predictive Analytics to learn more about how sepsis is recognized and managed. Geisinger developed a predictive model based on the health records of over 10,000 patients who had previously been diagnosed with sepsis. The model performed admirably, correctly predicting patients with a high rate of survival.

Human resources (HR)

To match prospective job applicants, reduce employee turnover, and boost employee engagement, HR teams use Predictive Analytics and employee survey measures. This combination of quantitative and qualitative data enables firms to cut recruiting expenses while increasing employee happiness, which is especially valuable in fluctuating labor markets.

Marketing and sales

While marketing and sales teams are well-versed in using business intelligence reports to assess historical sales performance, Predictive Analytics allows businesses to be more proactive in how they connect with their customers across the customer lifecycle.

For example, churn projections can help sales teams detect unsatisfied customers sooner, allowing them to launch retention dialogues. Marketing teams can use Predictive Data Analytics to develop cross-sell strategies, which typically take the form of a recommendation engine on a brand’s website.

Supply chain

Predictive Analytics is often used by businesses to manage product inventory and determine price strategies. This form of predictive research assists businesses in meeting client demand while not overstocking warehouses. It also allows businesses to calculate the cost and return on their items over time. If one component of a certain product becomes more expensive to import, businesses can forecast the long-term impact on revenue if they pass on higher costs to their client base or not.

For a more in-depth look at a case study, learn about how FleetPride employed data analytics to inform their decision-making on their inventory of excavators and tractor-trailer parts. Previous shipping orders allowed them to plan more accurately in order to create adequate supply criteria.

Predictive Analytics’ significance in business intelligence

What is Predictive Analytics and its roles in Business Intelligence

Predictive Analytics is critical for businesses. Companies are more competitive than ever before as a result of digital revolutions and increased competition. Using Analytic Prediction is analogous to having a strategic vision of the future, outlining possibilities and dangers. As a result, businesses should seek prediction models for:

Service delivery is improved with Predictive Analytics

One of the most common applications of Predictive Analytics in business intelligence is to improve service delivery. Businesses can improve the customer experience by researching prior behaviors and preferences and tailoring their service offerings to the specific demands of each consumer.

eCommerce companies such as Amazon and eBay recommend products to users based on their previous purchases and current searching behavior. Netflix employs a similar strategy when recommending new movies and TV episodes to customers based on their watchlist.

So, Predictive Data may help firms improve their customer experience.

It aids in the detection of fraudulent operations

Fraud has existed alongside businesses for as long as they have been. Many firms around the world have suffered enormous financial losses as a result of this. According to a recent report, fraud cost the global economy more than $5 trillion in 2019—a figure that is anticipated to rise as digital interactions increase.

However, not all businesses are equally affected by business fraud; certain industries are fundamentally more vulnerable than others. For example, the insurance business loses $80 billion every year, while banks in the United Kingdom lost $620 million due to fraud in 2019.

Businesses want a strong anti-fraud solution, and business intelligence combined with Predictive Analytics could be that solution.

In contrast to traditional fraud prevention methods, which rely on reactive measures to limit the damage caused by fraudulent practices, Predictive Data Analysis in business intelligence assists businesses in identifying potential fraud and proactively policing their service delivery channels to prevent these transactions.

Predictive Analytics in BI aids in the optimization of marketing initiatives

Businesses now have a wealth of data about their clients’ purchasing habits and preferences. With this information, Predictive Analytics can calculate the possibility of a customer purchasing a product, which can help firms focus their marketing efforts on customers who are more likely to buy their items.

Consider YouTube advertisements. If a user’s watch history reveals that they are interested in learning about digital security, they will see at least one advertisement that offers VPN services the next time they are on YouTube. Predictive analytics algorithms identify the user as a possible consumer of VPN services, allowing this to happen.

Predictive Analytics can also assist firms in keeping the news cycle rolling during the off-season.

For example, Smartphone makers predict months when phone sales may fall owing to a lack of news and issue small refreshes, new colors, or software updates to existing models to keep the headlines focused on their products. Consider Apple providing new colors for their latest iPhone model halfway through its lifecycle.

Use Predictive Analytics in BI to grow your company

Businesses today have access to a vast amount of data. However, data is useless to a corporation unless it is used to gather insights and make informed decisions to improve corporate operations. To keep ahead of the competition in today’s competitive business world, organizations must be on their toes. You can always keep one step ahead of your competitors using business intelligence tools powered by Predictive Analytics.

Sales forecasting may add substantial value to firms when combined with Predictive Analytics. Accurate sales estimates influence many other business decisions. However, sales forecasting remains a time-consuming process for sales professionals, who frequently rely on Excel spreadsheets and other technologies that lack the analytics and insights needed to produce accurate sales forecasts. Sales professionals can use advanced Analytic Predictions to automate rolling projections, gain more transparency, and make better decisions.

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