beyond analytics: prescriptive analytics for the future of your business by Álvaro barbero at big...

Beyond analyticsPrescriptive analytics for the future of your business

Álvaro Barbero

www.iic.uam.es

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

Beyond analytics

A note on Big Data Hype

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

Gartner’s Hype Cycle of emerging technologies

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

Gartner’s Hype Cycle of emerging technologies

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

Gartner’s Hype Cycle of emerging technologies

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

Gartner’s Hype Cycle of emerging technologies

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

Big data Hypes leves

Big

dat

a H

ypes

leve

s

2012 2013 2014 2015

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

Big data Hypes leves

Big

dat

a H

ypes

leve

s

2012 2013 2014 2015 2016 2017

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

Big data Hypes leves

Big

dat

a H

ypes

leve

s

2012 2013 2014 2015 2016 2017

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

Big data Hypes leves

Big

dat

a H

ypes

leve

s

2012 2013 2014 2015 2016 2017

GO SELL BIG DATA PROJECTS

NOW

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

What´s better to know?

What’s better to know?

What is happening

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

What´s better to know?

What will happen

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

What´s better to know?

How do I take advantage

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

What´s better to know?

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

Levels of analytics

Levels of analytics

Descriptive analyticsWhat is happening

Predictive analyticsWhat will happen

Prescriptive analyticsWhat is the best strategy

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

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

Descriptive analytics

Descriptive analytics

What is happening

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

Descriptive analytics

Descriptive analytics

What is happening

Estimate data we don’t

haveBeyond analytics | Prescriptive analytics for the future of your businesswww.iic.uam.es

Predictive analytics

Predictive analytics

What will happenClusteringRegression

Anomaly detectionClassification

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

Predictive analytics

Predictive analytics

What will happen

Real Predicción

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

Predictive analytics

Predictive analytics

What will happen

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

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

START

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

START

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

START

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Descriptive Analytics

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

START

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?????

?

??

Predictive Analytics

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

Prescriptive analytics

Prescriptive analytics

What is the beststrategy

START

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

How it works

How it works

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

=+

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

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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

Application examples

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

Application examples

Customer service automation

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

Customer service automation

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

Customer service automation

Level 1General support

Level 2Specialized Support

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

Customer service automation

Level 1General support

Active Learning

Level 2Specialized Support

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

% a

ccur

acy

% machine classified

Automated

Manual

Smart pricing

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

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

Smart pricing

Predictionof future room demands.

Simulationof expected sales given a pricing strategy.

Optimizationof the pricing strategy to maximize revenue.

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

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.

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

Smart pricing

When smart pricing goes wild

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

Retail logistics optimization

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

Retail logistics optimization

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

Retail logistics optimization

Cash demands forecasting

? ?

Transportation schedule optimization

? ?

?

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 andregulation constraints

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

Retail logistics optimization

Expected gains

reduction in costs 14%

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

Take-home message

Take-home message

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

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)

C/ Francisco Tomás y Valiente, nº 11EPS, Edificio B, 5ª planta

UAM Cantoblanco. 28049 MadridTel.: (+34) 91 497 2323

www.iic.uam.es blog.iic.uam.es

Elementos gráficos de apoyo obtenidos en

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