How do most businesses project likely future scenarios? I suspect that most currently use conventional techniques like brainstorming, maybe predictive analytics, and limited numbers of external sources like thought leaders, and market research. In fact the latest IBM C-Suite study (which surveyed 5,000+ business leaders from around the globe) indicates that that's exactly what they do. Far fewer it seems (at least according to IBM) draw on more advanced and potentially complimentary techniques like simulation, crowdsourcing, insights from adjacent markets or even their own customers.
I'm not a data expert but when thinking about the analytics side of this there is an interesting framework I like, and one that you might call a maturity model (of sorts) for how businesses approach analytics:
- Descriptive analytics:- which still accounts for the majority of contemporary business analytics and management reporting, is focused on looking at historical data and past performance to identify reasons for success and failure
- Predictive analytics:- sets out to combine historical data with algorithms, rules and perhaps other sources of external data in order to identify probable future outcomes
- Prescriptive analytics:- turns predicted outcomes into recommended actions and illustrates likely results from specific decision scenarios. So it goes beyond predictive analytics in understanding not only what will happen and when, but why, and gives you decision options for how best to capitalise on opportunity or mitigate risk.
I like this because it aligns nicely with another favourite data model (the DIKW model) which is about deriving actionable insight (or wisdom) from knowledge (meaning, understanding), information (structured data), and data (raw numbers or observations). Whilst prescriptive analytics may be beyond the reach of where most companies are right now, it's not hard to see that as data analytics becomes more sophisticated, this is the likely path that many companies will want to take.
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