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J Bill Schmarzo on
Business Analytics: Moving
Understanding Type I and Type II
Errors

From Descriptive To Predictive J Tony on Understanding Type I

and Type II Errors

Analytics J Bill Schmarzo on Embracing

Conflict to Fuel Digital Innovation
By Bill Schmarzo
CTO, Dell EMC Services (aka “Dean of Big Data”)
J Alysen Northern on Embracing
Conflict to Fuel Digital Innovation
January 9, 2014
J Bill Schmarzo on Using
I recently met with two organizations that had very impressive business Machine Learning to Stop Fake
News
intelligence (BI) implementations. However, they struggled to understand
how predictive analytics could augment their existing BI capabilities. The
141 purpose of this blog is to clarify the differences between business
Recent Posts
SHARES intelligence (a.k.a. descriptive analytics) and predictive analytics (a subset
of data science) and highlight their complementary natures. In particular, fThe Focus is on you – so tell us
you will learn that predictive analytics: what you think
718
SHARES
1. Can provide more insightful and actionable answers to the fAutonomous to Smart:
organization’s most common questions, (“Who are my most valuable Importance of Artificial
SEND TO customers?” “What are my most important products?” “What are my Intelligence
most successful campaigns?”) than those generated by business
fSolve Big Data Evolution
FRIEND
intelligence alone.[1]
Challenges with Blockchain-ified
2. Can provide more future-looking answers and recommendations to
Data
questions that cannot be addressed at all by business intelligence.
fUsing Machine Learning to Stop
Fake News
Business Intelligence (Descriptive Analytics)
fEnabling Intelligent Routing and
Versus Predictive Analytics Support Swarming (and then
some): Follow the Problem
Figure 1 is a pretty common way to view the worlds of business
intelligence and predictive analytics. Business intelligence is the world of
descriptive analytics: retrospective analysis that provides a rearview mirror
Featured
view on the business—reporting on what happened and what is currently
happening. Predictive analytics is forward-looking analysis: providing
future-looking insights on the business—predicting what is likely to happen
(usually associated with a probability) and why it’s likely to happen.
 Don’t Let Hadoop
Become Hadoops!

LAUNCH

Figure 1: Business Intelligence versus Predictive Analytics

Management Challenge:
P-hacking or “The
Business intelligence looks for trends at the macro or aggregated levels of Danger of Alternative
the business, and then drills up, down, or across the data to identify areas
Facts”
of under- and over-performance. Areas may include: geography, time,
products, customers, stores, partners, campaigns, or other business
LAUNCH
dimensions.

Business Intelligence is about descriptive analytics (or looking at

what happened), slicing-and-dicing across dimensional models
with massive dissemination to all business users.

Predictive analytics, on the other hand, builds analytic models at the lowest
levels of the business—at the individual customer, product, campaign,
store, and device levels—and looks for predictable behaviors, propensities,
and business rules (as can be expressed by an analytic or mathematical
formula) that can be used to predict the likelihood of certain behaviors and Second Derivative: The
actions[2]. Accelerating Rate of
Change
Predictive analytics is about finding and quantifying hidden
patterns in the data using complex mathematical models that LAUNCH
can be used to predict future outcomes.

What’s Different About BI and Predictive

Analytics? The Answers…
Maybe the easiest way to understand the differences between business
intelligence and predictive analytics is to look at the answers they can
generate. For example, business intelligence allows you to answer
questions about the demographics or characteristics of your customers, Solve Big Data Evolution
products, stores, etc., and answer questions about the performance of your Challenges with
business across a number of different dimensions (see Figure 2). Blockchain-ified Data

LAUNCH
 The Focus is on you - so
tell us what you think

LAUNCH

Meet our Authors

Figure 2: Descriptive Analytics (Business Intelligence)

On the other hand, predictive analytics allow organizations to go beyond

the answers generated by BI by providing more predictive answers and
recommendations to many of the same questions (see Figure 3). ‹ ›

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Sample BI versus Predictive Analytics Answers experience? Learn how:…
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Below is a more detailed list of the types of answers that predictive 3h ago
analytics can answer that not only enriches the answers provided by
1 RETWEET
business intelligence, but also provides answers to questions that
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business intelligence could not previously address.

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Summary
Predictive analytics takes the questions that business intelligence is
answering to the next level, moving from a retrospective set of answers to
a set of answers focused on predicting performance and prescribing
specific actions or recommendations.

For example, if we change the three key business questions that we asked
earlier (most valuable customers, most important products, most
successful campaigns) to a future tense, then you can see that we need a
predictive analytics approach that is completely different from the
conventional BI approach (see table below).
No matter what, you still need business intelligence to know what really
happened in the past, but you also need predictive analytics to optimize
your resources as you look to make decisions and take actions for the
future.

[1] These three questions can be answered with more granularity,

relevance, and actionability through the integration of currently non-
accessible detailed transactional “dark” data (now available in much larger
volume and detail) and new sources of internal (consumer comments,
work orders, technician notes) and external (social media, blogs,
newsfeeds) unstructured data.
[2] Per Dr. Pedro Desouza, the concepts of Big Data and Predictive
Analytics get used interchangeably. They shouldn’t. “Big Data” provides
data at a very low level of granularity with enough points that can still be
statistically meaningful. Before the era of Big Data, business analysts
needed to aggregate data in order to have enough points to predict with
reasonable confidence. Now we can develop predictions at the individual
customer level, without the need to aggregate the data, for example, to the
store level.

TAGS:

Analytics Business Intelligence

Business Intelligence / Data Warehousing

Data Science data science descriptive analytics

predictive analytics

RELATED POSTS:
1. Autonomous to Smart: Importance of Artificial Intelligence
2. Solve Big Data Evolution Challenges with Blockchain-ified Data
3. Using Machine Learning to Stop Fake News
4. Embracing Conflict to Fuel Digital Innovation

About Bill Schmarzo

CTO, Dell EMC Services (aka “Dean of Big Data”)

Bill Schmarzo, author of “Big Data: Understanding How Data Powers

Big Business” and “Big Data MBA: Driving Business Strategies with
Data Science”, is responsible for setting strategy and defining the Big
Data service offerings for Dell EMC’s Big Data Practice. As a CTO
within Dell EMC’s 2,000+ person consulting organization, he works
with organizations to identify where and how to start their big data
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12 thoughts on “Business Analytics: Moving From Descriptive

To Predictive Analytics”

Mike Foley says:

January 9, 2014 at 12:27 pm

Bill, I think this is a great framework for looking at BI and Predictive Analytics. I think that
you make an important point that it’s not a matter of moving from one to the other but
employing both really well for competitive advantage.

Reply

Bill Schmarzo says:

January 9, 2014 at 12:48 pm

MIke, totally agree! It’s not an either/or discussion and I didn’t mean to position it as such.
It’s a matter of using both at the appropriate times to achieve, as you say so well,
competitive advantage. Thanks for reading the blogs!!

Reply
 Allen Bernard says:
January 15, 2014 at 3:58 pm

Where does “prescriptive” analytics fall on this continuum?

Reply

David Dietrich says:

January 16, 2014 at 9:01 am

As stated above, as more organizations strive to implement advanced analytical

techniques, the need for solid Business Intelligence remains. Adding to the discussion
here, the first graphic in the blog post above is a modified version of content developed
and released as part of EMC’s Data Science & Big Data Analytics curriculum, first
introduced in late 2011. The original graphic displays the topmost group of techniques as
Data Science, rather than Predictive Analytics, which the blog here points out can differ
from Data Science. It is included in the introductory module of the five-day course that
EMC offers for people who would like to become Data Scientists
https://education.emc.com/guest/campaign/data_science.aspx, for those who may be
interested in additional materials.

In addition, the original version of this graphic is also part of the free, 90-minute overview
module developed by EMC Education Services, for those who want to learn what Big Data
is, and how to begin taking advantage of it at their companies. The free module may be
viewed here: https://education.emc.com/bigdata

The topmost graphic above shows a way to distinguish Business Intelligence and Data
Science. As the post mentions, Predictive Analytics and Data Science are not necessarily
the same thing, as Data Science is generally broader and encompasses a larger group of
techniques spanning multiple disciplines. Earlier iterations of this graphic, which correctly
portray this distinction, may be seen as part of this presentation, if people wish to see this
point as part of a larger context: http://www.slideshare.net/emcacademics/iccdba-
conference-8-feb-2013-david-dietrich .

Reply

Bill Schmarzo says:

January 17, 2014 at 4:51 pm

Allen, prescriptive analytics (that is, analytics that tell the user specifically what to do, like
a recommendation engine) fall within the Predictive Analytics category. If you can
imagine a continuum of analytics, I’d have descriptive analytics on the far left, predictive
analytics in the middle, and prescriptive analytics to the far right. Part of the power of
analytics is to get to the point where we can make specific, actionable recommendations
to our users … and that’s prescriptive analytics.

Thanks for asking and for reading the blog!

Reply

Patrick Taylor says:

January 31, 2014 at 11:28 am

To take the analytics discussion one step further, BI provides descriptive insight into what
happened in the past. Predictive analytics predicts trends and behaviors in the future. I
would argue that in order to deliver true and immediate value to most businesses,
analytics must be “prescriptive.” Prescriptive analytics involve delivering information to
frontline business decision-makers in a way that is insightful and actionable and enables
them to improve decisions being made, by making them more informed. While this may
seem obvious, many analytics solutions today do not embrace this important capability.
For example, they might present refined data reports, but still place a significant burden
of analysis on the recipient.

Prescriptive analytics deliver digestible information in a timely manner, making it

absolutely clear to the decision-maker that some particular action needs to be taken. An
example would be the difference between delivering:
– A list of all purchases made over the corporate maximum (BI)
– A list of employees who are likely, based on past behavior, to exhibit out-of-policy
purchase behavior (Predictive)
– Actionable information about a specific employee whose spending behavior the last
two weeks of employment was out-of-character – though not out-of-policy – when
compared with a history of spending (Prescriptive)

Each of these deliverables has value to the business, but for everyday business decision
makers on the front lines, prescriptive analytics allows them to be smarter and drive
immediate value from analytics on a day-to-day basis.

Reply

Bill Schmarzo says:

February 1, 2014 at 1:44 pm

Patrick, spot on about how the world needs to migrate to prescriptive analytics. It’ll
dramatically change the way we deliver information and insights to our users – both
internal users and external customers. And I love the example!

Thanks for sharing!

Reply

Chris Surdak says:

March 23, 2014 at 10:57 am

Bill,

Great article! One other element of the descriptive vs. predictive discussion worth noting
is what we discussed last week; the value of context. Descriptive analytic are very
focused upon questions of “what” rather that of why. Answers to “what” are readily found
in structured data, and that’s what most organizations are comfortable with.

However, richness and context are found mostly in unstructured data. This context helps
to answer questions of “why” which leads directly to predictive analysis. If I understand
“why” I have real power. Hence, a huge step in moving from descriptive analytics and
towards predictive is to start analyzing unstructured data in conjunction with structured,
and to start asking “why” things happened.

Reply

Jai Shankar says:

June 19, 2014 at 12:20 am

Great Insight into the Differences Bill. Thanks for your Inputs

Reply

Fleming Lure says:

September 2, 2014 at 4:43 pm
 Very interesting. Do you have any published journal or conference papers on this big data
on hospital readmission? Or do you have contact info for one of authors: Dr. Pedro
Desouza that I can inquire some information?

Reply

MVD Prasad says:

December 26, 2014 at 5:51 am

Dear Sir/Madam,

It was very informative & helpful for me.

Thanks and regards,

Reply

Pat Hennel says:

February 24, 2015 at 1:50 pm

The way I see it, BI tells you how things ARE while predictive analytics tells you how
things WILL BE. BI shows you past trends while predictive analytics takes those trends
and shows how that will effect you in the future.

Reply

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