Using historical measures to gauge business and process performance has become a thing of the past. Organizations now need to develop capabilities that can deliver a highly personalized experience for each customer based on their unique practices and preferences. This requires an increased emphasis on “leading indicators” rather than just historical metrics or “lagging indicators.”
Companies have begun to get the message. Recent research has shown an increased usage of predictive analytics – the practice of identifying and leveraging patterns in transactional data to develop insights and better anticipate potential business scenarios.
Using predictive analytics can help your organization achieve substantial profitability increases by getting the most out of your data assets. It can increase your employees’ awareness of transient opportunities, resulting in greater agility. For instance, it could provide an employee with additional data that will allow them to present an offer of complimentary products to a customer at the time of purchase, thereby satisfying the customer’s need and increasing sales. It takes the concept of “a customer who bought this may also buy that” to a whole new level.
Predictive analytics can also be applied in an aggregate manner to better manage business risks. Using this approach, organizations can develop early warning metrics to mitigate or even prevent the impact of disruptive events on profitability. Examples range from changes in customer preferences for products and services to internal operational issues related to quality and efficiency.
Most organizations are aware of the key performance indicators that would be most impactful to their businesses, but many do not have the ability to monitor and analyze these events in a timely manner. They still rely on historical measures rather than trying to leverage their data to predict future trends. Developing predictive capabilities can enable your organization to get a leg up on your competition and anticipate change in a proactive, rather than a reactive manner.