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Predictive analytics for “Quantitative” ROI-driven decision making Sai Devulapalli Director, Technology Strategy Ericsson North America

Predictive analytics for ROI driven decision making

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Page 1: Predictive analytics for ROI driven decision making

Predictive analytics for“Quantitative” ROI-driven decision making

Sai DevulapalliDirector, Technology Strategy Ericsson North America

Page 2: Predictive analytics for ROI driven decision making

Machines vs. Management

Score = 0.65

Training

Scoring

Machines Management

Gut Feeling !

Page 3: Predictive analytics for ROI driven decision making

“Crossing the Chasm” in Predictive analytics

• Align business intuition with predictions

• Is it the data or is it the inference ?

• Quantitative ROI metrics

Trust takes time, i.e. Business CyclesTrust takes time, i.e. Business Cycles

Page 4: Predictive analytics for ROI driven decision making

Machines and ManagementScore= 0.65

Score= 0.75

Training

Scoring

Training

Scoring

Prediction vs. Intuition vs. Reality

Score= 0.85

Training

Scoring

Prediction vs. Intuition vs. Reality

BusinessCycle 1

BusinessCycle 2

BusinessCycle n

Machines Management

Page 5: Predictive analytics for ROI driven decision making

Micro Decisions:Few decisions → Millions of instances

Observed AttributesObserved Attributes

Predicted OutcomePredicted Outcome

BusinessDecisionBusinessDecision

Outcomes afterBusiness Decision

Outcomes afterBusiness Decision

CustomersEquipmentDevicesNetwork nodes Products

InstancesInstances

UpgradeReplacePromoteMarket

DecisionsDecisions

Nex

t bus

ines

s cy

cle

For each instance

Page 6: Predictive analytics for ROI driven decision making

Observed AttributesObserved Attributes

PredictedOutcomePredictedOutcome

Score Outcome

Score Outcome

Observed AttributesObserved Attributes

Real Outcome on control group

Real Outcome on control group

Learn Outcome

Learn Outcome Business Decision bd1Business Decision bd1

Real Outcome after bd1Real Outcome after bd1

Learn impact of Business Decision bd1Learn impact of Business Decision bd1

bd1

bd2

bdt

Experimental Groups (EG)

EG1

EG2

EGt

***

***

Two Stage Prediction

Page 7: Predictive analytics for ROI driven decision making

ROI(ia→bdb) : ROI in applying business decision bdb to instance ia

ROI(ia1→bdb1) ROI(ia2→bdb2)ROI(ia3→bdb3)ROI(ia3→bdb3) * * *

Business DecisionsBudget

Decreasing orderof ROI

Business Milestone. Ex.•Out of budget•ROI target reached

Instance skipped

“Quantitative” ROI-driven decision making

Page 8: Predictive analytics for ROI driven decision making

Determining ROI for a micro-business decision

ROI in applying business decision bdb on instance ia : CΔ(ia → bdb)

ROI in applying business decision bdb on instance ia : CΔ(ia → bdb)

Expected cost savings from change in outcome

Expected cost savings from change in outcome - Cost of business decision bdb on

instance CBD(bdb)Cost of business decision bdb on

instance CBD(bdb)

Expected cost of outcome prior to business decision

Expected cost of outcome prior to business decision

Expected cost of outcome after business decision

Expected cost of outcome after business decision

Cost of outcome yk on instance ia

CY(ia,yk)

Cost of outcome yk on instance ia

CY(ia,yk)X

Probability of outcome yk

for instance ia prior to bdb : P(ia,yk,,bdΦ)

Probability of outcome yk

for instance ia prior to bdb : P(ia,yk,,bdΦ)

Σ Over possible outcomes yk

-Cost of outcome yk on instance ia

CY(ia,yk)

Cost of outcome yk on instance ia

CY(ia,yk)X

Probability of outcome yk

for instance ia after bdb : P(ia,yk,, bdb)

Probability of outcome yk

for instance ia after bdb : P(ia,yk,, bdb)

Σ Over possible outcomes yk

Page 9: Predictive analytics for ROI driven decision making

Maturing predictions over business cycles

Num

. of I

nsta

nces

Business Cycles and Prediction maturity

ExperimentationExperimentation Business IntuitionBusiness Intuition Predictive Optimization

Predictive Optimization

Control Group

Experimental Group 1

Experimental Group 2

Experimental Group 3

Today

1. Pre-paid subscribers Churn analytics2. Marketing Campaign management1. Pre-paid subscribers Churn analytics2. Marketing Campaign management

Page 10: Predictive analytics for ROI driven decision making

Whitepaper: http://goo.gl/Xw4XFL