From the October 2011 issue of Treasury & Risk magazine

Where Did Things Go Wrong?

Predictive analytics tools let companies crunch the data to come up with trends and probabilities.

As the world of business speeds up, executives need more insightful analyses to guide their decisions and they need them quickly. With that sense of urgency comes a greater interest in predictive analytics, software that sorts through a range of information to come up with future probabilities. Robert Kugel, a senior vice president at Ventana Research, distinguishes predictive analytics from traditional forecasting. “The real value of predictive analytics is comparing actuals to predicted results, disaggregating why things are different sooner, and then being able—once you’ve spotted the discrepancy—to more accurately forecast how things will turn out next,” Kugel says. “It isn’t so much creating a forecast, which is almost certainly going to be wrong, but using why it’s wrong and how wrong it is to make better decisions on what to do next.”

He cites the example of a retailer finding a certain product isn’t moving as fast as expected and using that information to promote the product more aggressively or mark it down.

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