Putting predictive analytics to work

Contrary to popular opinion, you don't need a huge budget to get started.

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Initially, BHI focused on diabetes patients at highest risk for hospitalization -- a patient group expected to cost the healthcare industry $500 billion by 2020. "The first round [of analytics projects] was not successful because the business stakeholders weren't involved. It became an IT exercise," Abbot says, and because the reports didn't say why a given patient was at high risk, clinical professionals ignored them.

So Abbot made sure that they understood the underlying "risk drivers" in the model, explaining not just who was at high risk but why, and what interventions would be mostly likely to improve the outcome.

"Provide transparency," she advises, "and serve up the information in the right way, so it's not disruptive to workflows."

Iterate first, scale later

At Intuit, every project starts small and goes through continuous cycles of improvement, says George Roumeliotis, data science team leader. "That's our process: Iterative and driven by small scale before going big." The financial services business started using predictive analytics to optimize its marketing and upsell efforts, and now focuses on optimizing the customer experience with its products.

Intuit developed predictive task algorithms to anticipate how customers will categorize financial transactions in products such as Mint and QuickBooks, and makes suggestions as they enter new transactions. It also proactively offers content and advice as customers use its products in an effort to anticipate questions before the user has to ask.

"Start with a clearly articulated business outcome, formulate a hypothesis about how the process will contribute to that outcome, and then create an experiment," he says. Through A/B testing, analysts can gain the confidence of business leaders by creating parallel business processes and demonstrating a measurable improvement in outcomes.

Just be sure to start by choosing an existing business process that can be optimized with minimal risk to the business, he advises. Customer support, retention and user experience are great places to get started.

While predictive analytics projects can require a substantial investment up front, return-on-investment studies show that it does make an impact, as Cisco's experience shows. Ultimately, even small-scale projects can have an enormous impact on the bottom line. "Predictive analytics is about projecting forward and transforming the company," says Peri.

The risks are high, but so are the rewards, says Informs' Robinson. "Take it to the end," she says. "Be successful. And act on what you learn."

Next: Robert L. Mitchell: Who owns your analytics group?

Robert L. Mitchell is a national correspondent for Computerworld. Follow him on Twitter at twitter.com/rmitch, or email him at rmitchell@computerworld.com.

Copyright © 2012 IDG Communications, Inc.

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