The top 3 directions predictive analytics will take in 2015

Digital futurist Chris Riddell looks at how predictive analytics and smart data will provide marketers with the ability to finally tackle the individual

customer, customer engagement, customer data
customer, customer engagement, customer data

Ironic really… I’m a futurist, making a prediction about predictive analytics. So, what does the future hold for big data and the growing field of predictive analytics? More importantly, how can predictive analytics and the insights generated help you and your business to be more agile and responsive in a rapidly changing environment?

Upwards, Downwards and Inside Out

I see three directions predictive analytics will take in 2015, which I’m calling ‘upwards, downwards and inside out’. But rather than different directions, it is more helpful to see these as inter-connected. The real value for business leaders and their businesses comes from being able to access the insights generated from all three.

Before we get to these three directions, however, it’s helpful to take a quick look at what has been called ‘big data’ and its relationship to predictive analytics.

Like digital disruption, big data is a buzzword at present. An IDC Digital Universe research paper estimated worldwide data storage this year would reach 9000 exabytes (an exabyte is a billion Gb). And the size of big data is growing at an exponential rate, driven by the migration of social and economic services to the Internet. Mobile phones already generate a massive amount of digital information and this tidal wave will grow as the Internet of Things rapidly comes online.

Experts define big data on the basis of the Three Vs – volume, variety and velocity – or how much data, what types of data and how quickly it is generated. That’s fine, but the key issue about big data is how it relates the fourth V: Value.

Big data vs smart data

Let’s be blunt: Big Data, by itself, is essentially useless. It’s just numbers, words and pictures - mountains and mountains of information being constantly gathered and stored. It’s a bit like a lazy teenager - you feel it should be ‘doing something productive’, but instead, for many corporations, it just sits around, taking up space and not saying very much at all.

The real value of big data comes when you ask the right questions and big data becomes smart data. And that’s the essence of predictive analytics - asking the right questions.

When you do that, smart data can be a fascinating storyteller, creating real-time narratives about what’s happening inside and outside your business. These stories can generate powerful insights at both a macro and micro level.

And rather than simply telling you what has happened and what is happening, predictive analytics can give you the power to influence what is going to happen in the future. They can give you a say in how the story ends.

How will this work for you and your business? Let’s explore the top three directions predictive analytics will take in 2015.

Direction 1: From the inside out

Good business leaders have always known the value of operational intelligence, and of knowing what is happening inside their business. With the growth of digital technologies, the volume and variety of that data has increased dramatically. The speed of access to this information has also improved with a shift away from printed reports to viewing data in real time and in user-friendly formats on comprehensive dashboards.

What’s new and revolutionary is that this traditional data is now being complemented and supplemented by a growing volume of non-traditional data, which comes from outside the business itself. For example, click-stream data, generated when customers or potential customers interact with your business’s website can tell you:

  • How they got to your site;

  • Which search engine they used and what search term they typed in;

  • How long they spent on the site and what they looked at or didn’t look at as they browsed.

On top of this, there is a veritable treasure-trove of rich data generated by social media, blogs, networking sites, email, Twitter and photos. Combine this data with more data from advertising networks, real estate records, vehicle registration and census results and through the power of predictive analytics this smart data can generate much more powerful insights into the attitudes, needs and desires of target demographics.

This is gold for business leaders seeking to find a competitive edge in a rapidly changing environment, while dealing with the impact of disruptive business models. Shifting your focus from primarily inside the business to a view that includes real-time insights from outside as well can positively impact your marketing, product development and CRM strategies and dramatically reduce your response time to challenges and opportunities. But it doesn’t end there. Predictive analytics will provide insights at the micro level.

Direction 2: Drilling down to the individual

In the past, a major focus of marketing was determining what ‘most customers’ wanted and how to reach the ‘typical’ customer. Well, Mr and Mrs Average are dead. The challenge for marketers now is to identify what individual customers need and want, and create a personalised experience for them. The research shows greater personal relevancy leads to better brand engagement and a more rewarding relationship for both customer and business.

While crunching and analysing smart data can provide valuable insights into the characteristics and behaviours of particular demographics, the real strength of predictive analytics is found at the individual level. Per-person predictions generated by predictive analytics will drive the per-person decisions and actions that businesses will make.

Imagine if you could identify an individual customer’s personality and buying preferences and then match these with the most effective channels and touchpoints. Predictive analytics will help you to meet your customer in the right place with the right product at the right time. And that is powerful.

Finding the ‘persuadables’

Predictive analytics gained a lot of attention after it was used as part of President Obama’s 2012 election campaign. Rather than simply predicting the outcome of the election, predictive modelling techniques were used by Team Obama to actually influence the result by driving individual per-person decisions. How did they do this? They began by identifying a group they called the ‘persuadables’.

Using a predictive analytical technique called uplift modelling, analysts focused on identifying those voters who were most persuadable and most likely to shift their preferences towards Obama. Focusing campaign efforts to influence the per-person decisions of these ‘persuadables’, rather than the ‘sure things’, ‘lost causes’ and ‘do not disturbs’ was highly effective and gave a much better ROI. A more significant result was gained by focusing efforts on a smaller group of people.

Needless to say, the business applications for this micro-targeting are game-changing. Predictive analysts are continuing to develop new modelling techniques and even using ‘ensemble modelling’ - combining multiple learning algorithms to give more accurate results than simply using one predictive model. It is a ‘must watch’ area for the coming year.

Related: Why predictive analytics matters

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Direction 3: The view from up above

German politician and diplomat, Prince Metternich, once quipped, “When Paris sneezes, Europe catches cold”. Nowadays the ‘princes’ of some famous super-brands might say, “The stock market sneezes, everyone buys chocolate”. The influences that determine your customers’ attitudes and decisions are many, varied and often very counter-intuitive. As it turns out, in an economic downturn, people cut back on larger items, but their spending on small treats goes up.

In 2015, predictive analysis of smart data is going to help business leaders to better understand how things happening at the macro level - world financial shifts, geopolitics, climate changes - will affect their business on a day-to-day, moment-by-moment basis. Not only that, it will give them the tools to make informed and accurate predictions about possible futures.

The impact of this will be massive in terms of being able to more effectively manage all aspects of a business, from production to inventory, transport logistics, staffing and cashflow. In fact, any aspect of business which benefits from accurate predictions about how customers, staff and management will react in a given circumstance is fair game.

Will these predictions be 100 per cent accurate? Of course not, they will always be ‘best estimates’ based on the available data. But as long as the predictions are more accurate than simply guessing, businesses will be winning.

The challenges of predictive analytics and smart data

The possibilities and opportunities predictive analytics can create for your business in 2015 are incredible. But predictive analytics also raises some challenges for business leaders. Here are three:

  • Turning big data into smart data and getting it to tell its story depends on two key ingredients: Data quality and the ability of the analysts to effectively interpret it. You need analysts who can make the data talk.

  • The field of predictive analytics is new, but growing rapidly. The available talent pool is small and demand is high, driving prices up and potentially lowering the bar in terms of what constitutes expertise in analysis.

  • Making big investments in developing fields can often prove costly due to rapidly obsolete technology. Predictive analytics are definitely here to stay, but the technologies used to collect, manage and analyse big data are going to change dramatically over the next few years.

Polishing the crystal ball

While predictive analytics is not a crystal ball, it will provide increasingly accurate insights into what is happening inside and outside businesses at the micro, macro and meso levels.

Predictive analytics will allow business leaders to go beyond mere forecasting and actually influence the future, by making predictions per-person and then using those predictions to drive the per-person actions and decisions that their business makes. The future is going to be all about creating personal experiences, tightly targeting persuadable customers and maximising marketing bang-for-buck.

So don’t just leave big data sitting around lazily in your business. Turn it into smart data, through the power of predictive analytics and put it to work. Use it to make your business more agile, more responsive and more successful this year.

About the author

Chris is a globally recognised futurist, media commentator, and digital expert with unparalleled insights into emerging trends and behaviours. Chris was recently voted as one of Australia's top 20 most inspirational speakers in 2014.

He has worked with some of the biggest brands in the world including Pedigree, Wrigley, Starburst and Snickers.

You can find him online via Twitter: @chrisriddell , or visit him online at:

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