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1 Bana 103 Predictive Analytics Larry+Fronda+Jr Module
1 Bana 103 Predictive Analytics Larry+Fronda+Jr Module
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VISION MISSION
A center of human development committed to the pursuit of wisdom, truth, Establish and maintain an academic environment promoting the pursuit of
justice, pride, dignity, and local/global competitiveness via a quality but excellence and the total development of its students as human beings,
affordable education for all qualified clients. with fear of God and love of country and fellowmen.
GOALS
Kolehiyo ng Lungsod ng Lipa aims to:
1. foster the spiritual, intellectual, social, moral, and creative life of its client via affordable but quality tertiary education;
2. provide the clients with reach and substantial, relevant, wide range of academic disciplines, expose them to varied curricular and co-curricular
experiences which nurture and enhance their personal dedications and commitments to social, moral, cultural, and economic transformations.
3. work with the government and the community and the pursuit of achieving national developmental goals; and
4. develop deserving and qualified clients with different skills of life existence and prepare them for local and global competitiveness
MODULE
FIRST Semester, AY 2022-2023
A. INTRODUCTION TO PREDICTIVE
ANALYTICS
a. Predictive Analytics
b. Predictive Analytics vs. Descriptive September 19 – October 21, 2022
Analytics
IV. ENGAGEMENT
DIRECTIONS: Read and analyze the discussions.
Predictive Analytics
The term predictive analytics refers to the use of statistics and modeling techniques to make
predictions about future outcomes and performance. Predictive analytics looks at current and historical data
Predictive analytics uses statistics and modeling techniques to determine future performance.
Industries and disciplines, such as insurance and marketing, use predictive techniques to make
important decisions.
Predictive models help make weather forecasts, develop video games, translate voice-to-text
messages, customer service decisions, and develop investment portfolios.
People often confuse predictive analytics with machine learning even though the two are different
disciplines.
Types of predictive models include decision trees, regression, and neural networks.
Predictive analytics is a form of technology that makes predictions about certain unknowns in the
future. It draws on a series of techniques to make these determinations, including artificial intelligence
(AI), data mining, machine learning, modeling, and statistics. 3 For instance, data mining involves the
analysis of large sets of data to detect patterns from it. Text analysis does the same, except for large blocks
of text.
Weather forecasts
Creating video games
Translating voice to text for mobile phone messaging
Customer service
Investment portfolio development
All of these applications use descriptive statistical models of existing data to make predictions about
future data.
They're also useful for businesses to help them manage inventory, develop marketing strategies,
and forecast sales. It also helps businesses survive, especially those in highly competitive industries, such
as health care and retail. Investors and financial professionals can draw on this technology to help craft
investment portfolios and reduce the potential for risk.
These models determine relationships, patterns, and structures in data that can be used to draw
conclusions about how changes in the underlying processes that generate the data will change the results.
Predictive models build on these descriptive models and look at past data to determine the likelihood of
certain future outcomes, given current conditions or a set of expected future conditions.
Forecasting
Predictive modeling is often used to clean and optimize the quality of data used for such forecasts.
Modeling ensures that more data can be ingested by the system, including from customer-facing operations,
to ensure a more accurate forecast.
Credit
Credit scoring makes extensive use of predictive analytics. When a consumer or business applies
for credit, data on the applicant's credit history and the credit record of borrowers with similar characteristics
are used to predict the risk that the applicant might fail to perform on any credit extended.
Underwriting
Data and predictive analytics play an important role in underwriting. Insurance companies examine
policy applicants to determine the likelihood of having to pay out for a future claim based on the current risk
pool of similar policyholders, as well as past events that have resulted in payouts. Predictive models that
consider characteristics in comparison to data about past policyholders and claims are routinely used
by actuaries.
Marketing
Individuals who work in this field look at how consumers have reacted to the overall economy when
planning on a new campaign. They can use these shifts in demographics to determine if the current mix of
products will entice consumers to make a purchase.
Active traders, meanwhile, look at a variety of metrics based on past events when deciding whether
to buy or sell a security. Moving averages, bands, and breakpoints are based on historical data and are
used to forecast future price movements.
A common misconception is that predictive analytics and machine learning are the same things.
Predictive analytics help us understand possible future occurrences by analyzing the past. At its core,
predictive analytics includes a series of statistical techniques (including machine learning, predictive
Machine learning, on the other hand, is a subfield of computer science that, as per the 1959 definition
by Arthur Samuel (an American pioneer in the field of computer gaming and artificial intelligence) means
"the programming of a digital computer to behave in a way which, if done by human beings or animals,
would be described as involving the process of learning."
The most common predictive models include decision trees, regressions (linear and logistic), and neural
networks, which is the emerging field of deep learning methods and technologies.
There are three common techniques used in predictive analytics: Decision trees, neural networks,
and regression. Read more about each of these below.
Decision Trees
If you want to understand what leads to someone's decisions, then you may find decision trees
useful. This type of model places data into different sections based on certain variables, such as price
or market capitalization. Just as the name implies, it looks like a tree with individual branches and leaves.
Branches indicate the choices available while individual leaves represent a particular decision.
Decision trees are the simplest models because they're easy to understand and dissect. They're
also very useful when you need to make a decision in a short period of time.
Regression
This is the model that is used the most in statistical analysis. Use it when you want to determine
patterns in large sets of data and when there's a linear relationship between the inputs. This method works
by figuring out a formula, which represents the relationship between all the inputs found in the dataset. For
example, you can use regression to figure out how price and other key factors can shape the performance
of a security.
Neural Networks
Neural networks were developed as a form of predictive analytics by imitating the way the human
brain works. This model can deal with complex data relationships using artificial intelligence and pattern
recognition. Use it if you have several hurdles that you need to overcome like when you have too much data
on hand, when you don't have the formula you need to help you find a relationship between the inputs and
outputs in your dataset, or when you need to make predictions rather than come up with explanations.
If you've already used decision trees and regression as models, you can confirm your findings with neural
networks.
As noted above, predictive analysis can be used in a number of different applications. Businesses
can capitalize on models to help advance their interests and improve their operations. Predictive models
are frequently used by businesses to help improve their customer service and outreach.
Executives and business owners can take advantage of this kind of statistical analysis to determine
customer behavior. For instance, the owner of a business can use predictive techniques to identify and
target regular customers who could defect and go to a competitor.
Predictive analytics plays a key role in advertising and marketing. Companies can use models to
determine which customers are likely to respond positively to marketing and sales campaigns. Business
owners can save money by targeting customers who will respond positively rather than doing blanket
campaigns.
There are numerous benefits to using predictive analysis. As mentioned above, using this type of
analysis can help entities when you need to make predictions about outcomes when there are no other (and
obvious) answers available.
Investors, financial professionals, and business leaders are able to use models to help reduce risk.
For instance, an investor and their advisor can use certain models to help craft an investment portfolio with
minimal risk to the investor by taking certain factors into consideration, such as age, capital, and goals.
There is a significant impact to cost reduction when models are used. Businesses can determine the
likelihood of success or failure of a product before it launches. Or they can set aside capital for production
improvements by using predictive techniques before the manufacturing process begins.
The use of predictive analytics has been criticized and, in some cases, legally restricted due to
perceived inequities in its outcomes. Most commonly, this involves predictive models that result in statistical
discrimination against racial or ethnic groups in areas such as credit scoring, home lending, employment,
or risk of criminal behavior.
A famous example of this is the (now illegal) practice of redlining in home lending by banks.
Regardless of whether the predictions drawn from the use of such analytics are accurate, their use is
generally frowned upon, and data that explicitly include information such as a person's race are now often
excluded from predictive analytics.
Data collection is very important to a company like Netflix. It collects data from its customers based
on their behavior and past viewing patterns. It uses information and makes predictions based to make
recommendations based on their preferences. This is the basis behind the "Because you watched..." lists
you'll find on your subscription.
There are three pillars to data analytics. They are the needs of the entity that is using the models,
the data and the technology used to study it, and the actions and insights that come as a result of the use
of this kind of analysis.
Asking the right question What will happen? What should be done? What happened and why?
Tools and methodologies Statistical modeling and Heuristics and optimization Data aggregation and
simulation models mining
Application Make informed decisions Making complex time - Summarizing business
about future sensitive decisions results
Businesses don’t have to just rely on gut feeling or intuition but can take data-driven decisions for
getting more insights into their customers, market conditions and more. It is used in a diverse range of
Predictive Analytics is more interested in getting the events of the future rather than of the past or
the present. The accuracy of the Predictive Analytics greatly depends on the accuracy and usability of the
data and also on the level of analysis and the quality of assumptions.
At a more granular level the Predictive Analytics can be thought as something that is related with
creating predictive scores for an individual organizational element. The domain of Predictive Analytics is
different from forecasting in the sense that the in Predictive Analytics there is learning from the data in order
to predict the future so organizations can make better decisions.
Today’s businesses need to go beyond knowing what has happened to giving the right assessment of what
will happen in the future. Though Predictive Analytics has been there for quite some time now it is only
recently that it has got some serious clout thanks to the following reasons:
Due to these developments that we are seeing it is clear that Predictive Analytics has not just
remained the sole domain of mathematicians and statisticians but has been more wide-spread. Today
business analysts and decision-makers are exploring this field to gain more insight into the mind of the
customer.
Predictive Analytics has been developed in the last 50 years and today we are seeing a huge jump
in the number of companies that are using Predictive Analytics. Today due to the incessant growth of big
data and the need to make data-driven decisions, it is imperative on each and every organization to make
use of Predictive Analytics. Predictive modeling based techniques help to work in a streamlined fashion and
get the results delivered as per the specific framework.
Collecting the data : This is the second step of the process wherein you will be mining for the data from
multiple sources and prepare the Predictive Analytics mode and provide a complete overview of the entire
process.
Analyzing the data : This is the process that includes the various steps of inspection, cleaning, modelling
of the data for discovering the objective and help to reach at a conclusion.
Deploying the statistics : Here you will be working on validating the assumptions and hypothesis and
testing it using the standard statistical models.
Data Modeling : This is the process that provides the ability to create automatic predictive models of the
future. You can also create a set of models and choose the most optimal one.
Model Deployment : This is the step in which you will be deploying the analytical results into your everyday
business operations helping to get results, reports and the output of the automated decisions.
Monitoring the Model : The models are reviewed in order to ensure the performance of it is going in the
right direction.
The Predictive models are the relation between the specific performance of a unit in the sample and
other attributes in the unit. The model is designed in order to understand the possibility of a different sample
that exhibits the same specific performance. It is used in many domains for the purpose of answering a
whole set of questions in various areas like marketing, sales, customer service among other domains.
Predictive Analytics is used for various purposes like business segmentation, decision-making and
other purposes like statistical techniques among other tasks. There is a huge advancement in the speeds
at which computing is done, the availability of modeling techniques to come up with valuable insights.
It is up to every individual organization to find out newer ways to deploy Predictive Analytics and
uncovering of new opportunities in their pursuit of growth and revenues:
Improving operational efficiency – Streamlining the various operations of an organization, managing the
supply chain, inventory management, deploying the right resources, promoting opportunities for cross-
selling, optimizing the various processes.
Risk mitigation – Predictive Analytics deployment for finding out more about the customer’s aversion to
buying a product, the various factors which dissuade a customer from making the purchase decisions and
finding out how to reduce the risks involved.
Fraud detection – Working with the various analytical tools to find out more about the pattern detection of
the fraud transaction in banking and financial domains, preventing the criminal motives, deploying
behavioral analytics to preclude fraud, researching about zero-day vulnerabilities and reducing the risks of
advanced frauds.
Automotive : Today’s automobiles are heavily invested when it comes to deploying the most cutting-edge
gadgets, technologies, sensors for coming up with highly valuable analytical methods for ensuring the
driving experience is simply phenomenal. In the not so distant future, most of the automobiles will be
connected to the internet of things and due to this the role of Predictive Analytics will only grow stronger.
Energy & Utilities : This is another domain wherein the role of Predictive Analytics is again very significant.
It helps to predict the demand and supply of electrical energy through the power grids. There are various
sophisticated models that are used for monitoring the plant availability, impact of changing weather pattern,
learning from historical trends, forecasting the optimal demand and supply balance among other things that
can help the energy domain save huge amounts of money and resources.
Banking and Financial Services : This is one of the biggest domains that is currently deploying Predictive
Analytics at scale. Due to the large amounts of data being generated and the extremely high stakes involved,
banking and financial institutions are increasingly deploying Predictive Analytics for ensuring the customers
get a world-class experience that is customer-friendly, secure and forward-looking. It is possible to tailor-
make products and services depending on the profile built around the customer, opportunities for cross-
selling and up-selling, find patterns of fraud and malpractices among a host of other things.
Retail : The retail industry is working with predictive analytical tools and technologies to get inside the mind
of the customers. It includes the process of stocking the right products, promoting the right products to the
right customers, providing the most optimal discounts to persuade sales, having the right strategy for
marketing and advertising among a whole host of other aspects.
Oil & Gas : The industry of oil and gas is a big user of the domain of Predictive Analytics. it helps to save
millions of dollars through better predicting equipment failure, need for future resources, ensuring safety
and reliability measures are met, and so on. There are a lot of sensor data that needs to be monitored in
order to take the right data-driven decision in the oil and gas industry.
Governments : Since the data in a government department is humungous thanks to the all-encompassing
nature of this domain, there is a huge untapped opportunity which can be aptly exploited using the right
Predictive Analytics tools and technologies. It could be deployed for providing the right services to the
citizens, monitoring the various welfare schemes are reaching the right audience, checking corruption and
malpractices and so on.
Manufacturing : Even in today’s world of services-oriented economy the domain of manufacturing is still
extremely important. The manufacturing industry can make use of Predictive Analytics in order to streamline
the various processes, improve the quality of service, supply chain management, optimizing distribution and
such other tasks for enhancing the overall business revenue and achieve bigger goals.
Working with Predictive Analytics starts with a business goal. It is all about asking the right questions,
what are processes that need streamlining, optimization, how to leverage data to come up with better
decisions and such other aspects. It is about making a prediction that is represented by a probability of the
target variable as per the significance of the input variable.
The goal of Predictive Analytics is being deployed by the mathematical and computational methods
for predicting the outcome of an event or process. The process of the predictive modeling is based on the
forecast of a certain future state that is based on the changes that happen to the model input. It uses an
iterative process for developing the model using a training data set and then testing and validating it for
determining the accuracy of the predictions to be made. There are a various set of machine learning
methodologies also involved for finding the most effective model.
The difference between Predictive Analytics and prescriptive analytics is that Predictive Analytics
lets you know what will happen next with a certain degree of accuracy while prescriptive analytics lets you
react to the predicted situation in a certain manner for the optimal results.
Organizations are increasingly working on directing, optimizing and automating the decisions for
improving the business processes. Here are some of the advantages of Predictive Analytics framework:
Deploying analytics for analyzing past, present and projected future outcome
Choosing the right step to drive the action in the most optimal manner
Predictive Analytics includes both decision optimization and advanced analytics
Supporting action and recommended actions are sent to the decision-makers
It helps to take proactive risk management measures
Testing iterative actions for the intended and unintended consequences
Process improvement, cost reduction and revenue generation are all possible
Conclusion
Predictive Analytics is set to grow at a huge pace thanks to the need for making data-driven decisions
on an ongoing basis in organizations regardless of the industry vertical. So the domain of Predictive
Analytics will see a huge interest and this opens the door for professionals who are trained in Predictive
Analytics to take up jobs for hefty salaries in some of the best organizations around the world.
Most applications typically talk about what happened in the past. But end users are looking for new
ways to leverage their business data. They want to know what is most likely to happen in the future and,
even more importantly, identify actions they can take to make good things happen and prevent bad things
from happening.
Healthcare
Manufacturing
Finance
Insurance
SaaS
Healthcare
Problem: Data growth affects every industry today—and healthcare data is primed to grow faster than
nearly any other market, according to a recent report from the International Data Corporation (IDC). As
healthcare data explodes in volume, the popularity of machine learning and predictive analytics grows.
There are three key areas in which machine learning can help healthcare organizations: improving patient
outcomes, improving healthcare operations, and detecting fraud.
In this case, say we have 1,000 patients who need to be screened for diabetes. Is there a way to prioritize
high-risk patients for screenings first, and de-prioritize low-risk patients to be screened later?
Data to Analyze: The predictive analytics model should consider data from many sources, including patient
demographics, patient vitals, past medication history, visits to the hospital, lab test results, and any claims
data.
Actions to Take: Patients found to be at a higher risk of the condition will be notified to come in for a
screening sooner rather than later.
Embedding predictive analytics into your existing systems is key here. By putting future insights and
recommended actions in the applications your people already use, you empower them to make more
informed decisions without jumping into another system.
Manufacturing
Predictive Maintenance
Map sensor readings against the actual state of machines. In this approach, you run a simple
clustering algorithm (K-means) to see if sensor values from different machines can logically put those
machines into three different groups, then compare the groupings created by the algorithm with the
actual states of the machines. Ideally, the outcome for the groups generated by the algorithm will
match the reality, and you can apply the model to predict future states with relative accuracy.
Identify correlations between sensors. Predictive analytics models may be able to identify
correlations between sensor readings. For example, if the temperature reading on a machine
correlates to the length of time it runs on high power, those two combined readings may put the
machine at risk of downtime.
Predict future state using sensor values. Since the machine status is a known value, you can run
a classification algorithm (for example, Gradient Boosted Model) to create a predictive model that
predicts the state of the machine based on sensor values. This model can be subsequently used to
predict and flag the state of machines based on the combination of new sensor values.
Actions to Take: Once you have trained your predictive model, you can use it to determine the likelihood
of breakdowns. Plan ahead to shut machines down for preventive maintenance as needed. You can also
Finance
Predicting Late Payments
Problem: Whether you work at a bank or in accounting for a business, any finance professional knows how
much of a disruption missed payments can be. Financial groups with outstanding invoices need to know
who will and who will not pay their bills on time.
Benefits: By predicting which individuals or businesses will likely miss their next payment, financial groups
can better manage cashflow. They can also take steps to mitigate the problem by sending reminders to
potential late payers.
Actions to Take: Once the financial group knows who is likely to pay their bills late, they can send payment
reminders. Predictive analytics can recommend the best date and time to send reminders, as well as the
best mode of contact (for example, text message, email, or phone call). The group may also be able to offer
individuals other payment options, such as a delayed payment plan.
Insurance
Preventing Fraud
Benefits: Insurance companies can use predictive analytics technology to track and monitor potential
scammers, without spending time sorting through every claim.
Data to Analyze: The predictive analytics algorithm can consider the location where the claim originated,
time of day, claimant history, claim amount, and even public data such as the National Fraud Database.
Actions to Take: By applying the model to new claims, insurance companies can quickly detect suspicious
activity. Any claim that appears abnormal is marked as an outlier. Claims that are likely to be fraudulent will
be put on hold and sent back to investigators for further review. Potential alerts can also be cross-referenced
with information in public registers, like the National Fraud Database, to reduce the likelihood of false leads
accompanying legitimate ones.
Investigators can use the analysis to refine their approaches to fraud. And because the patterns may reveal
new types of risk, insurance companies can add new threats to their watch lists as well.
Problem: Customer churn has always been a difficult metric to understand for SaaS (Software as a Service)
companies. Most churn applications tell you how many customers churned last month and how much money
was lost. But they fail to find correlations to tell you what kinds of customers are likely to churn.
Benefits: With predictive analytics, product managers can forecast and mitigate churn with much more
precision than typical analytics tools which can lead to significant revenue. Say your enterprise SaaS
company has an average churn rate of 1 percent per month (12 percent per year). If you’re at $30M ARR,
you are churning close to $4.5M per year. If you reduce churn by just 2 percent a year, you can save close
to half a million dollars.
Actions to Take: Actions may include an automated email showing the customer how they can get more
value from the application, or a trigger to the customer success team to proactively get in touch to
understand what can be done to help the customer.
It’s not only important to identify who will churn, but also who will not churn. Predicting which
customers will not churn means you can find different ways to engage them with new products or strategic
partnerships. Accompanying legitimate ones.
Conclusion
There is no limit to the number of industries or situations in which predictive analytics can help.
Whether you’re looking to keep your customer churn rate low, bolster your company’s fraud detection, or
make your manufacturing process run smoothly, look to predictive analytics.
V. ACTIVITIES
PREDICTIVE ANALYTICS
A. Enumerate the following:
1. __________
2. __________
3. __________
4. __________
5. __________
1. ________
2. ________
3. ________
c. Match Column A to Column B
c. PreventingFraud
3. Finance
5. SaaS
TOTAL = 26 POINTS
VII. REFERENCES:
Prepared by:
Checked by:
Approved by:
Noted by: