What is Prescriptive Analytics?

Summary

Prescriptive analytics recommends actions to achieve specific goals by analyzing data from descriptive and predictive analytics. It explores various scenarios and suggests the best course of action based on predefined objectives. Unlike objective analysis, its goal is to match outcomes with business targets like increasing profits, reducing delivery times, or growing enrollment. Using tools like mathematical programming and simulation models, prescriptive analytics determines the optimal strategy for success. This approach goes beyond understanding data and forecasting; it provides actionable insights to guide decisions, helping businesses achieve their desired results.

Takeaways

• 😀 Prescriptive analytics recommends actionable steps to achieve a specific goal, just like a doctor prescribes treatment after a diagnosis.
• 😀 It comes after descriptive and predictive analytics, using their findings to suggest the best course of action.
• 😀 Prescriptive analytics explores multiple scenarios, adjusting variables across each to calculate potential outcomes.
• 😀 The goal is to select the scenario whose outcome most closely matches a predetermined goal, such as increasing profits or reducing delivery times.
• 😀 The recommended course of action is not objectively 'best,' but best in relation to the defined goal set by a company or business.
• 😀 Prescriptive analytics leverages past, present, and future data to recommend strategies that help achieve business objectives.
• 😀 It uses a range of tools and models, including mathematical programming, simulation, probabilistic models, and evolutionary computation.
• 😀 For example, in the case of doubling profits, prescriptive analytics predicts scenarios with varying actions, like price changes or marketing spend.
• 😀 The tool selects the scenario with the highest return, such as choosing a strategy that results in a 40% profit increase over 20%.
• 😀 The success of prescriptive analytics relies on understanding both the variables and their impact on business goals.
• 😀 Companies use prescriptive analytics to optimize decision-making processes, improving efficiency and helping meet defined business objectives.

Q & A

What is prescriptive analytics?

Prescriptive analytics is a type of data analytics that recommends the best course of action to achieve a desired outcome or goal. It follows descriptive and predictive analytics by using their data results to explore and propose actionable solutions.

How does prescriptive analytics work in relation to descriptive and predictive analytics?

Prescriptive analytics builds upon descriptive and predictive analytics. Descriptive analytics provides insights into past data, predictive analytics forecasts future outcomes, and prescriptive analytics uses this information to recommend the most effective actions to reach a specific goal.

Can prescriptive analytics provide the absolute best course of action?

No, prescriptive analytics does not necessarily recommend the absolute best solution in an objective sense. It identifies the best solution relative to a defined goal, which may vary depending on the specific context and objectives.

What types of actions does prescriptive analytics consider when making recommendations?

Prescriptive analytics considers multiple variables, such as cost changes, marketing strategies, or price adjustments. These variables are manipulated across different scenarios to predict and recommend the best course of action.

What kinds of tools and models does prescriptive analytics use?

Prescriptive analytics uses various tools and models, including mathematical programming, evolutionary computation, probabilistic models, simulation logic-based models, and more, to map out scenarios and identify optimal solutions.

How are goals defined in prescriptive analytics?

Goals in prescriptive analytics are typically defined by the business or company and could include objectives such as increasing profits, shortening product delivery times, or growing customer numbers. The recommended actions are based on how well the outcomes align with these predetermined goals.

What is an example of how prescriptive analytics could be used in business?

For example, if a company wants to double its profits, prescriptive analytics would simulate various scenarios involving actions like lowering supply costs or increasing marketing spend. It would then recommend the scenario with the highest predicted profit increase, such as a 40% increase over a 5-year period.

What does prescriptive analytics prioritize when selecting a course of action?

Prescriptive analytics prioritizes selecting the course of action that most closely matches the defined goal, rather than focusing on what might be objectively considered the 'best' solution.

Why is prescriptive analytics important for decision-making?

Prescriptive analytics is valuable because it provides actionable recommendations based on data, helping businesses make informed decisions that are aligned with their specific goals and objectives.

How do different variables in prescriptive analytics scenarios impact the final recommendation?

Different variables, such as pricing strategies, resource allocation, or marketing investments, are adjusted and tested across multiple scenarios. The combination of these variables that produces the most favorable outcome, aligned with the business goal, is recommended by prescriptive analytics.