Predictive Analytics

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F IRST QUARTER 2007

T DWI BEST PRACTICES REPORT

PREDICTIVE ANALYTICS
Extending the Value of Your
Data Warehousing Investment
By Wayne W. Eckerson

Sponsored by

FIRST QUARTER 2007

TDWI BEST PRACTICES REPORT

PREDICTIVE ANALYTICS
Extending the Value of Your
Data Warehousing Investment
By Wayne W. Eckerson

Table of Contents
Research Methodology and Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 What Is Predictive Analytics? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Business Value of Predictive Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Measuring Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 How Do You Deliver Predictive Analytics? . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The Process of Predictive Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1. Defining the Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2. Exploring the Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3. Preparing the Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4. Building Predictive Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 5. Deploying Analytical Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 6. Managing Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Trends in Predictive Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Analytics Bottleneck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Advances in Predictive Analytics Software . . . . . . . . . . . . . . . . . . . . . . . . . 20 Database-Embedded Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 BI-Enabled Analytics and Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Industry Standards for Interoperability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

1. Hire business-savvy analysts to create models. . . . . . . . . . . . . . . . . . . . . 27 2. Nurture a rewarding environment to retain analytic modelers . . . . . . . . 28 3. Fold predictive analytics onto the information management team . . . . . 29 4. Leverage the data warehouse to prepare and score the data . . . . . . . . . 30 5. Build awareness and confidence in the technology . . . . . . . . . . . . . . . . . 31 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

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PREDIC T I V E A N ALY T IC S

About the Author
WAYNE W. ECKERSON is director of research and services for The Data Warehousing Institute (TDWI), a worldwide association of business intelligence and data warehousing professionals that provides education, training, research, and certification. Eckerson has 17 years of industry experience and has covered data warehousing and business intelligence since 1995. Eckerson is the author of many in-depth reports, a columnist for several business and technology magazines, and a noted speaker and consultant. He authored the book Performance Dashboards: Measuring, Monitoring, and Managing Your Business, published by John Wiley & Sons in October 2005. He can be reached at weckerson@tdwi.org.

About TDWI
TDWI, a division of 1105 Media, Inc., is the premier provider of in-depth, high-quality education and research in the business intelligence and data warehousing industry. Starting in...
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