Analytics…What are they? Why
they are important?
The important thing is, this has six different
examples of very important areas of
applications of analytics and how success and
failures had huge impact on the organizations,
economy, and governments
Key: Analytics … What is It? Why is It
Important?
Brief Introduction to Predictive
Analytics Applications
Examples of Marketing-Socio-Economic-Political
Dynamics
Sam-Nethra Sambamoorthi, PhD
Analytics … What is It? Why is It
Important?
•
•
A distinctive capability or product or service is the reason why organizations exist, and
organization with distinctive capabilities exist making profit and delivering value to its
stakeholders.
What is analytics?
– To ‘analyze’ means, to separate out into constituent parts or elements and determine the essential
elements or features of –Dictionary.com
•
What is business intelligence?
– Analytics that provides full picture of the interactions of business operations and the levers that
help manage the businesses. Steady state of the processes are inherently assumed in these
situations.
•
What is predictive Analytics?
– Predictive analytics covers the broad spectrum of dynamics of consumers (note: Patients are also
consumers, in this broad sense), so that the outcomes of any interaction or intervention or
exposure is predictable and best optimized decisions can be managed resulting in less loss and
better output.
•
Why Analytics matters?
– Analytics, as intelligence, is a guiding light, to manage processes and dynamics where known
efficiencies have been achieved, and yet try to uncover for us those areas of inefficiencies and
unmet market opportunities from the point of view of business operations, or fraud detection or
risk management other things remain equal. Analytics is equally applicable for non-profit
organizations and governmental departments
•
Yet, it can be a challenging or a dangerous job that can land into jail because
prediction was not done correctly or for over-stepping into privacy and ethical areas.
Ex1: 2009 Italy’s L’Aquila Earthquake
On 6th April, 2009, the
Abruzzo region, in central Italy
had a deadly 5.8 RS earth
quake
308 People died , 1,600 people injured, and 65,000
people became homeless with a property loss of $16
Billion
Ex1: The Judge sentenced six scientists and a government
official of National Commission for the Forecast and
Prevention of Major Risks, to jail terms
http://www.nytimes.com/2012/10/27/opinion/a-failed-earthquake-prediction-acrime.html?_r=0 – Is failure to predict a crime? Oct 12, 2014
Scientists acquitted: http://www.thehindu.com/opinion/editorial/laquila-italy-earthquake-legalmanslaughter-case-bizarre-verdict-reversed/article6605371.ece#comments – Nov 11, 2014
Ex2: The Baseball Team Oakland A’s, the lowest ranked
team, surprised the sports world winning 20 Consecutive
games to reach the top in 2002 garnering four division
titles with one tenth of the budget of the top team
• The true story is captured in the movie Moneyball, on
what to measure, how to analyze, how to implement
insights from analytics, and what challenges are
faced by the new breed of analytically competitive
management
• It captured the imagination of ordinary people on the
importance of analytics and predictive methods
Moneyball and Labor Market Inefficiency
Ex3. Subprime Lending and
Everything With That … Still
The Tremors are Around
• Banks Started acting like investment companies under
the repeal of Glass-Steagall act. The trigger for the
repeal started 20 years back, but corporations took
advantage of it post 9/11/2001 , an horrendous event.
• The $12 Trillion dollars mortgage industry was open for
unprotected investments
• 1% shift in the highly predictive 90 day default
delinquency scoring (FICO Score) opened for more credit
easing
• Mortgages that were failing under FHA requirements
were sold under ‘credit default swap’ insurance product
from AIG
Ex4: Netflix Lost $13 Billion Dollars of its
Market Value (80% ) in Six Months in 2011
• Netflix Lost $13 billion dollars in market value, because
they did not predict well the consumer behavior using
predictive price elasticities, when they were coming out
with new pricing plans for three types of consumers (On
demand net streamers, DVD only, mixed product users)
• Latest news. It is back on tract after one and half year of
challenges, because of the strength of the visionary
mode of delivery and consolidated content management.
It is a market leader and technology is on its side
Ex5: Prediction Influenced By Behavioral
Obama Dynamics of Independent Voters
Likelihood
Romney
Likelihood
Trajectory of vacillation for independent
Ex5: Prediction Influenced By Behavioral
Obama Dynamics of Independent Voters
Likelihood
Romney
Likelihood
Nate Silver Analysis - Trajectory of vacillation for independent voter is
basically random fluctuations and/or based on unscientific survey research
but in a different place he says he has used Bayesian updating process to
update the winning probabilities
Predicting Next Behavior/Exposure/Event Is
Important for Organizations and Government
•
Predictive analytics: The power to predict who will click, buy, lie, or die – By Eric Segal
•
Homeland security is interested in evaluating what type of alert is likely to pop up this
month, next month, following, …
•
Insurance companies know who is likely to retire at what age which influences the offer
differentials
•
Insurance companies and health organizations predict death of an individual, to better
manage the costs or cash outlay from the balance sheets.
•
You are more predictable than your closest people could ever do because of precious data –
The company, Target was able to predict pregnancy using the associations of products
people buy while family members did not know.
•
Companies know when you are likely to quit your job, when you will have your first child,
and how long you will postpone for the next child, where you will make your home, will you
be a home owner or a renter and what type of neighborhood you will live, what car you will
buy and when … and so on.
•
Parole boards rely on algorithms to decide who stays in prison and who goes free and what
kind of monitoring is part of the judgment
•
All the above and the recent political discussions of NSA’s snooping gives raise to the
opportunities of privacy protection for ordinary citizens