• SIMPLIFY. EXPAND. GROW.

    SIMPLIFY. EXPAND. GROW.

    SMB. CORE MIDMARKET. UPPER MIDMARKET. ECOSYSTEM
    LEARN MORE
  • ARTIFICIAL INTELLIGENCE

    ARTIFICIAL INTELLIGENCE

    SMB & Midmarket Analytics & Artificial Intelligence Adoption
    LEARN MORE
  • IT SECURITY TRENDS

    IT SECURITY TRENDS

    SMB & Midmarket Security Adoption Trends
    LATEST RESEARCH
  • CHANNEL PARTNER RESEARCH

    CHANNEL PARTNER RESEARCH

    Channel Partner Trends
    LATEST RESEARCH
  • FEATURED INFOGRAPHIC

    FEATURED INFOGRAPHIC

    2024 Top 10 SMB Business Issues, IT Priorities, IT Challenges
    LEARN MORE
  • CHANNEL INFOGRAPHIC

    CHANNEL INFOGRAPHIC

    2024 Top 10 Partner Business Challenges
    LATEST RESEARCH
  • 2024 TOP 10 PREDICTIONS

    2024 TOP 10 PREDICTIONS

    SMB & Midmarket Predictions
    READ
  • 2024 TOP 10 PREDICTIONS

    2024 TOP 10 PREDICTIONS

    Channel Partner Predictions
    READ
  • CLOUD ADOPTION TRENDS

    CLOUD ADOPTION TRENDS

    SMB & Midmarket Cloud Adoption
    LATEST RESEARCH
  • FUTURE OF PARTNER ECOSYSTEM

    FUTURE OF PARTNER ECOSYSTEM

    Networked, Engaged, Extended, Hybrid
    DOWNLOAD NOW
  • BUYERS JOURNEY

    BUYERS JOURNEY

    Influence map & care-abouts
    LEARN MORE
  • DIGITAL TRANSFORMATION

    DIGITAL TRANSFORMATION

    Connected Business
    LEARN MORE
  • MANAGED SERVICES RESEARCH

    MANAGED SERVICES RESEARCH

    SMB & Midmarket Managed Services Adoption
    LEARN MORE
  • WHITE PAPER

    WHITE PAPER

    SMB Path to Digitalization
    DOWNLOAD

Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.
Font size: +
2 minutes reading time (365 words)

Predictive Analytics – The Predicament

Predictive Analytics (PA) is emerging as an important tool in the area of business decision. Predictive Analytics primarily deals with making a forecast based on several inputs. In this and the blogs that follow I will share my experiences with Predictive Modelling (PM), with a view to contributing to the current knowledge base that exists in the Predictive Analytics World.

Predictive Analytics – The Predicament - Techaisle Blog - Techaisle - Global SMB, Midmarket and Channel Partner Market Research Organization Analysis-blog In the world of business most predictive analytical tools are quantitative where numeric data is used for building an input-output model. The output is the prediction for specific inputs. For example: A 10% increase in advertising in January will result in an increase of 1% sale in May is a typical output from predictive analytics.

Common Mistake of Predictive Modelers: Assumption of linearity

Predictive Models are largely based on statistical techniques. Multiple Linear Regression (MLR) model is what most users will confront when they look at predictive models. This model works in the background whether one is using a multiple time series or multi-level modelling.

Multiple Linear Regression Models are developed based on a crucial assumption: the output is linearly dependent on the inputs. But all experience shows that in most business situations the assumption of linearity is not valid. Hence the statistical models have a poor fit and low predictive capability. In addition, the business world also suffers from Black Swan problems that no modelling can manage with any level of confidence.

The net effect of a linearity assumption, which is ubiquitous in almost all statistical modelling, and the resultant poor fit and low predictive capability has led to frustrated user community. Hence, a business executive looks at models with suspicion and trusts ‘gut’ to make decisions.

Predicament

The predicament of Predictive Modellers’ is: How do we get away from the linearity assumption on which almost all statistical tools are based, but it is known that this assumption is a poor, in fact a very poor, approximation of the real world behaviour?

The story of our approach to modelling starts from this predicament that we have been in, along with all others, and the path that we cut out to get out of it.

Dr. Cooram Ramacharlu Sridhar (Doc)
Managing Director and Advisor, Segmentation & Predictive Modeling

×
Stay Informed

When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.

Demand Supply Gaps exist in Cloud & Mobility Solut...
Whiptail: A friend of big data, foe of storage ven...
 

Research You Can Rely On | Analysis You Can Act Upon

Techaisle - TA