Chapter 3. Realizing ROI in Analytics

“Fast Learners Win”

Eric Schmidt

In the past decade, the amount of time and money spent on incorporating analytics into business processes has risen to unprecedented levels. Data-driven decisions that used to be a C-suite luxury (costing a small fortune in consulting) are now expected from every operating executive. Gut feelings and anecdotal cases are no longer acceptable. “In God we trust, everyone else bring data” has become the slogan of a generation.

Large organizations have hundreds of processes, strategic initiatives, and channels—all waiting to be optimized—and increasing business complexity has only amplified the demand for analytic solutions. But despite the tremendous demand, supply, and investment, there is one major missing link: value. Do you really know whether your analytics are living up to their lofty expectations?

To unpack this, we first have to dive a little deeper into the different tiers of analytics: descriptive, predictive, and prescriptive. Descriptive analytics summarize historical data—these are reports and dashboards. Predictive analytics projects the most likely outcome given future or unlabeled data points—these are recommendations or classifications. Finally, the highest tier is prescriptive analytics, which combine predictions and feedback—measuring accuracy of predictions over time.

One great example of prescriptive analytics is the Amazon product page and shopping cart. At the bottom of each ...

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