Analytics has undoubtedly changed the way businesses are operated. It has made clearer than ever that what cannot be measured cannot be managed. However, about 80% of Big Data projects still merely rely on descriptive analytics. While clever visualizations of the business data can be of great aid in the decision making process, there is much more value to be explored through deeper analytical processes. Whenever information about business rules and costs is available, prescriptive analytics can recommend efficient courses of action to optimize costs or revenues. Session presented at Big Data Spain 2015 Conference 16th Oct 2015 Kinépolis Madrid http://www.bigdataspain.org Event promoted by: http://www.paradigmatecnologico.com Abstract: http://www.bigdataspain.org/program/fri/slot-29.html#spch29.2

2. Beyond analytics
Prescriptive analytics for the future of your business
Álvaro Barbero
www.iic.uam.es

3. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Beyond analytics
A note on
Big Data
Hype

4. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Gartner’s Hype Cycle of emerging technologies
2
0
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2

5. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Gartner’s Hype Cycle of emerging technologies
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6. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Gartner’s Hype Cycle of emerging technologies
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7. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Gartner’s Hype Cycle of emerging technologies
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8. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Big data Hypes leves
BigdataHypesleves
2012 2013 2014 2015

9. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Big data Hypes leves
BigdataHypesleves
2012 2013 2014 2015 2016 2017

10. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Big data Hypes leves
BigdataHypesleves
2012 2013 2014 2015 2016 2017

11. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Big data Hypes leves
BigdataHypesleves
2012 2013 2014 2015 2016 2017
GO SELL BIG DATA PROJECTS
NOW

12. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
What´s better to know?
What’s better to know?

13. What is
happening
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
What´s better to know?

14. What will
happen
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
What´s better to know?

15. How do I take advantage
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
What´s better to know?

16. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Levels of analytics
Levels of
analytics
Descriptive analytics
What is happening
Predictive analytics
What will happen
Prescriptive analytics
What is the best strategy

17. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Descriptive analytics
Descriptive
analytics
What is happening
- KPIs
- Dashboards
- Visualizations
Describe the
data to get
useful info

18. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Descriptive analytics
Descriptive
analytics
What is happening

19. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Descriptive analytics
Descriptive
analytics
What is happening

20. Estimate data
we don’t
have
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Predictive analytics
Predictive
analytics
What will happen
ClusteringRegression
Anomaly detectionClassification

21. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Predictive analytics
Predictive
analytics
What will happen
Real Predicción

22. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Predictive analytics
Predictive
analytics
What will happen

23. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Levels of analytics
84%
13%
3%
Descriptive
Predictive
Prescriptive
Levels of
analytics

24. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy

25. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy
START

26. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy
START
?
?
?
?
????
?
?
?
?

27. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy
START
?
?
?
?
????
?
?
?
?
Descriptive
Analytics

28. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy
START
?
?
?
?
????
?
?
?
?
Predictive
Analytics

29. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Prescriptive analytics
Prescriptive
analytics
What is the best
strategy
START

30. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
How it works
How it works

31. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
How it works
How it works
Numerical optimization
Predictive analytics
Prescriptive analytics
Descriptive analytics
=+

32. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Numerical optimization
Numerical
optimization
Simple approach
- Predict expected benefit of each business action, independently of other actions
- Choose the action or actions that maximize benefit, within a budget or other constraints
- Easy to apply on top of standard analytic pipelines
A
B
C
B
C
A
B
C
22
93
78

33. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Numerical optimization
Numerical
optimization
Advanced approach
- Iteratively predict and simulate different future scenarios, considering all possible business actions and
parameters, to obtain the different expected outcomes
- Use outcomes of previous simulations to drive the search toward better solutions
- Expert knowledge in optimization is required
Operations research Genetic algorithms Ant colony optimization

34. Application
examples
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Application examples

35. Customer
service
automation
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Customer service automation

36. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Customer service automation
Level 1
General support
Level 2
Specialized Support

37. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Customer service automation
Level 1
General support
Active Learning
Level 2
Specialized Support

38. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Customer service automation
Experience
with a
national
bank
Over 300
issue classes
%accuracy
% machine classified
Automated
Manual

39. Smart pricing
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es

40. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Smart pricing
Prediction
of future room
demands.
Simulation
of expected sales given
a pricing strategy.
Optimization
of the pricing strategy
to maximize revenue.

41. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Smart pricing
Predictions must
be accurate and
consider all
possible factors
… and if they are
not, we need to
know confidence
bounds or some
way to assess risk
Risk

42. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Smart pricing
Client traits
Marketing actionsHotel features
Environmental conditions
- Demography
- City of origin
- Family, business, …
- Stays at other hotels
- Special offers
- Promotions
- Client interactions
- Hotel placement
- Kind of location
- Competition
- Weather
- Services
- Rooms
- Room rates
% Dto.

43. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Smart pricing
When smart pricing goes wild

44. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Smart pricing
Bussiness rules
and constraints
must be coded
into the model
Prevents wild
decisions

45. Retail logistics
optimization
Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Retail logistics optimization

46. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Retail logistics optimization
Cash demands
forecasting
? ?
Transportation schedule
optimization
? ?
?

47. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Retail logistics optimization
Predicted ATM and
branch withdrawals
Predicted deposits Acceptable stock-out risk
Transportation rates Euribor rates
Transportation and
regulation constraints

48. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Retail logistics optimization
Expected gains
reduction in costs
14%

49. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Take-home message
Take-home message

50. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Don´t ask
Don’t ask
what you
can do for
your data
Sculpture by Alicia Martín

51. Beyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es
Ask
Ask what your
data are going
to do for you
(with prescriptive analytics)

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