“Only one in four jokes ever work, and I still can't predict what people will laugh at,” said long-time American comedian Steven Wright.
While prediction may not work in an industry like comedy, there are plenty of other industries where being able to predict outcomes and next steps are essential to short and long term successes.
Of course, these predictions aren’t off-the-cuff. Instead, they’re backed by data, translated into models, and interpreted by skilled professionals. This is commonly referred to as predictive analytics.
In this roundup article, we’ll provide a brief recap of predictive analytics and look into how it’s used across 8 prominent industries today.
By leveraging advanced technologies and methodologies like machine learning, data mining, statistics, modeling, and others, a company may be able to predict what is likely to happen next. This insight is commonly applied to solve a business problem, unveil new opportunities, or to forecast the future.
A few years ago, predictive analytics may have been looked at as niche and accessible for a select few, but now, more and more companies are using it in their day-to-day.
To put its influence in perspective, we’re going to start off our roundup with perhaps the most significant user of predictive analytics today – the retail industry.
1. Predicting buying behavior in retail
With the retail industry seeing nearly $4 trillion in sales annually, it’s no wonder why enterprises like Amazon and Walmart regularly use predictive analytics to learn all they can about their customers.
For example, in 2004, Walmart mined transaction data in its stores to understand buying habits at certain points in time. They found that right before hurricanes hit, strawberry Pop-Tart sales rose by seven times along with beer. Of course, Walmart used this as an opportunity to stock its shelves. We discuss the technique they used in our intro guide on data mining.
Amazon has already used predictive analytics in the past to create personalized product recommendations based on buying patterns.
Most recently, Amazon is looking to use predictive analytics for anticipatory shipping. In other words, shipping products to customers before they even buy them based on their behavior on Amazon’s platform. This could lead to creepily-fast shipping times.
What if I’m not an enterprise?
Predictive analytics isn’t reserved for the big players. Many of today’s retail POS software is great at gathering customer data and integrating with other systems like CRM, supply chain, and inventory management to be used for predictive analysis.
Successful retailers are able to collect and combine data from all touch points, like e-commerce sites, mobile apps, store locations, social media platforms, and more. Analyzing this data will help you understand your customers on a deeper level and predict their behaviors in a more personalized way.
2. Detecting sickness in healthcare
There are more than 36 million patients in U.S. hospitals alone; you can only imagine how much health data this amounts to.
But the healthcare industry isn’t so much focused on the consumer journey as much as it’s focused on analyzing data to improve diagnoses and predict outcomes based on certain health factors. Interestingly, Jeff Howell, Director of Growth at AlayaCare, provided us with a real-world example of how they used predictive analytics to examine negative health events in seniors.
“We worked with Element AI to produce an algorithm that successfully predicted negative health events in seniors (in their homes). Seniors would take a series of vitals every day (for example, a blue tooth scale for weight). The algorithm digested the vitals and combined that with the clients’ ICD-10 diagnosis, age, and gender. We successfully reduced hospitalizations and ER visits by 73% and 64% amongst a chronically ill patient set.”
These visits are extremely expensive for any health care system. This remote patient monitoring software is tied into the patients’ operating software for their home health agency, so when the health risk score gets too high, the home health agency can intervene with a visit to get the client’s health back on track.”
This two-year study is just one of many ways predictive analytics and AI is used in healthcare for more personalized, proactive patient care.
Check out AlayaCare’s G2 profile to learn more about its home care product, and read some real-user reviews while you’re at it!
3. Curating content in entertainment
The entertainment industry, more specifically digital entertainment, benefits greatly from the use of predictive analytics. Let’s look at some of the ways today’s digital media and entertainment giants harness big data to shape viewer experiences.
We know there are more than 100 million active Netflix accounts today, amounting to billions of hours streaming digital content. All of this data helps Netflix build predictive models for keeping their consumers satisfied and exposing them to relevant shows.
So, what are some types of data Netflix uses for their models and algorithms? Some of the user data includes:
The preferred genre of content.
Search keywords when looking for content.
The preferred device to watch content.
Dates watched, and in some cases, re-watched.
Time spent watching content previews.
When content is paused and at what point.
These metrics, and many more, are important to the success of entertainment streaming services. As a matter of fact, Netflix used this data to craft its show House of Cards, claiming they already knew it would be a success based on the results of predictive data analysis.
4. Predicting maintenance in manufacturing
This example is uniquely tied in with the internet of things since the manufacturing industry is moving in a more automated direction. Perhaps the most prominent example of predictive analytics used in manufacturing is with predictive maintenance.
What is predictive maintenance?
The purpose of predictive maintenance is to notify manufacturers of cautious activity regarding industrial equipment. For example, if a conveyor belt in a distribution center breaks down or experiences a malfunction, this could paralyze production and cost the manufacturer money.
By taking it large amounts of data, typically through the use of IoT-embedded sensors on the equipment, manufacturers are able to intervene before a break down occurs.
5. Detecting fraud in cybersecurity
More than 3 billion fraud reports were filed in 2018 with the FTC, resulting in $1.48 billion in total losses. This is up 38 percent in just one year.
What’s one way to tackle the billions of dollars lost to fraud every year? Well, the use of predictive analytics has become a more prominent solution in the cybersecurity industry.
This is done by analyzing typical fraudulent activity, training predictive models to recognize patterns in this behavior, and finding anomalies. Better monitoring of suspicious financial activity should lead to earlier detections of fraud.
6. Predicting employee growth in HR
Is it really possible to predict employee success through the use of analytics? The short answer is yes, although HR is still a relatively new industry tapping the benefits of predictive analytics.
There are a few ways this can be done. One way is through aggregating data to manage workflows and boost productivity. Employee data can show pain points and productivity spikes in their day-to-day, and this data only gets better with time.
Using a performance management system to collect this data can help businesses predict future employee performance. More data can be used to build baselines of where employees should be at which stages in their career.
Predictive analytics can also help during the hiring process. Gathering data on everything from company review sites and social media to job growth rates and evolving skill sets, predictive analytics can help recruiters find the right matches for their job postings faster and more efficiently. This can also reduce turnover rates in the long run.
As a matter of fact, applicant tracking software like Greenhouse is one of a few solutions today that utilize predictive analytics and machine learning for this very purpose.
7. Predicting performance in sports
Professional sports may be fun to watch, but at the end of the day, it’s still an industry where franchises are always looking for ways to gain a competitive edge. The trendiest way to do so now is through predictive analytics.
Baseball has pioneered the use of predictive analytics when it comes to professional sports. It’s most widely used today for predicting the future value of a player, along with his regression, based on a complex series of metrics. This helps teams when it comes time to structure expensive contracts.
It’s no wonder why professional sports teams everywhere are on the prowl for data analysts and scientists with sports acumen.
Read Wharton’s blog to learn more about how small-market baseball teams have been able to maximize their budgets using predictive analytics.
8. Forecasting patterns in weather
Today’s weather forecasts are wildly more accurate than they were 40 years ago. You can thank predictive analytics for this.
By analyzing weather patterns using satellite imagery and historical data, we can see accurate estimates of weather forecasts up to 30 days in advance.
More importantly, this information can also be used to help us understand the impacts of global warming. For example, predictive models paired with data visualization can show us rising sea and carbon dioxide levels – and where these levels may be headed. After results are interpreted, action can be taken to mitigate adverse effects.
What can we learn from these examples?
Of all these examples, there’s one common theme you may have noticed – the sheer volume of data required to derive value from predictive analytics.
Aside from volume, this data also needs to be relevant to the purpose of the model. But collecting and cleaning through this data is much easier said than done, and it’s why the roles of data analysts and scientists are in heavy demand. You can read more about the data analysis process for some visuals on how this is typically done.
Join our network
With this in mind, what are some other industries you believe can benefit from the use of predictive analytics? Energy? Stock-trading? If you have an interesting take, feel free to join our network of contributors to provide insight on future articles!
Devin is a former Content Marketing Specialist at G2, who wrote about data, analytics, and digital marketing. Prior to G2, he helped scale early-stage startups out of Chicago's booming tech scene. Outside of work, he enjoys watching his beloved Cubs, playing baseball, and gaming. (he/him/his)