Prescriptive analytics is a form of

business analytics Business analytics (BA) refers to the skills, technologies, and practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing ne ...

which suggests decision options for how to take advantage of a future opportunity or mitigate a future risk, and shows the implication of each decision option. It enables an enterprise to consider "the best course of action to take" in the light of information derived from descriptive and

predictive analytics Predictive analytics encompasses a variety of statistical techniques from data mining, predictive modeling, and machine learning that analyze current and historical facts to make predictions about future or otherwise unknown events. In busine ...

.Basu, Atanu
''Five pillars of prescriptive analytics success''
''Analytics'', March / April 2013, accessed 3 December 2022

Overview

Prescriptive analytics is the third and final phase of business analytics, which also includes descriptive and predictive analytics.http://www.analytics-magazine.org/november-december-2010/54-the-analytics-journey Referred to as the "final frontier of analytic capabilities", prescriptive analytics entails the application of

mathematical Mathematics is an area of knowledge that includes the topics of numbers, formulas and related structures, shapes and the spaces in which they are contained, and quantities and their changes. These topics are represented in modern mathematics ...

and

computational science Computational science, also known as scientific computing or scientific computation (SC), is a field in mathematics that uses advanced computing capabilities to understand and solve complex problems. It is an area of science that spans many disc ...

s and suggests decision options for how to take advantage of the results of descriptive and predictive phases. The first stage of business analytics is descriptive analytics, which still accounts for the majority of all business analytics today. Descriptive analytics looks at past performance and understands that performance by mining historical data to look for the reasons behind past success or failure. Most management reporting – such as

sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in r ...

marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emph ...

, operations, and

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of f ...

– uses this type of post-mortem analysis. Three Phases of Analytics

The next phase is predictive analytics. Predictive analytics answers the question of what is likely to happen. This is where historical data is combined with rules,

algorithms In mathematics and computer science, an algorithm () is a finite sequence of rigorous instructions, typically used to solve a class of specific problems or to perform a computation. Algorithms are used as specifications for performing ...

, and occasionally external data to determine the probable future outcome of an event or the likelihood of a situation occurring. The final phase is prescriptive analytics, which goes beyond predicting future outcomes by also suggesting actions to benefit from the predictions and showing the implications of each decision option. Prescriptive analytics not only anticipates what will happen and when it will happen, but also why it will happen. Further, prescriptive analytics suggests decision options on how to take advantage of a future opportunity or mitigate a future risk and shows the implication of each decision option. Prescriptive analytics incorporates both

structured Structuring, also known as smurfing in banking jargon, is the practice of executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file reports required by law ...

and

unstructured data Unstructured data (or unstructured information) is information that either does not have a pre-defined data model or is not organized in a pre-defined manner. Unstructured information is typically text-heavy, but may contain data such as dates, num ...

, and uses a combination of advanced analytic techniques and disciplines to predict, prescribe, and adapt. It can continually take in new data to re-predict and re-prescribe, thus automatically improving prediction accuracy and prescribing better decision options. Effective prescriptive analytics utilises hybrid data, a combination of structured (numbers, categories) and unstructured data (videos, images, sounds, texts), and business rules to predict what lies ahead and to prescribe how to take advantage of this predicted future without compromising other priorities. Basu suggests that without hybrid data input, the benefits of prescriptive analytics are limited. In addition to this variety of data types and growing data volume, incoming data can also evolve with respect to velocity, that is, more data being generated at a faster or a variable pace. Business rules define the

business process A business process, business method or business function is a collection of related, structured activities or tasks by people or equipment in which a specific sequence produces a service or product (serves a particular business goal) for a parti ...

and include objectives constraints, preferences, policies, best practices, and boundaries. Mathematical models and computational models are techniques derived from mathematical sciences, computer science and related disciplines such as applied statistics, machine learning,

operations research Operations research ( en-GB, operational research) (U.S. Air Force Specialty Code: Operations Analysis), often shortened to the initialism OR, is a discipline that deals with the development and application of analytical methods to improve decis ...

natural language processing Natural language processing (NLP) is an interdisciplinary subfield of linguistics, computer science, and artificial intelligence concerned with the interactions between computers and human language, in particular how to program computers to proc ...

computer vision Computer vision is an interdisciplinary scientific field that deals with how computers can gain high-level understanding from digital images or videos. From the perspective of engineering, it seeks to understand and automate tasks that the human ...

, pattern recognition, image processing,

speech recognition Speech recognition is an interdisciplinary subfield of computer science and computational linguistics that develops methodologies and technologies that enable the recognition and translation of spoken language into text by computers with the ...

, and signal processing. The correct application of all these methods and the verification of their results implies the need for resources on a massive scale including human, computational and temporal for every Prescriptive Analytic project. In order to spare the expense of dozens of people, high performance machines and weeks of work one must consider the reduction of resources and therefore a reduction in the accuracy or reliability of the outcome. The preferable route is a reduction that produces a probabilistic result within acceptable limits. All three phases of analytics can be performed through professional services or technology or a combination. In order to scale, prescriptive analytics technologies need to be adaptive to take into account the growing volume, velocity, and variety of data that most mission critical processes and their environments may produce. One criticism of prescriptive analytics is that its distinction from predictive analytics is ill-defined and therefore ill-conceived. Components of Prescriptive Analytics

History

While the term prescriptive analytics was first coined by IBM, and was later

trademark A trademark (also written trade mark or trade-mark) is a type of intellectual property consisting of a recognizable sign, design, or expression that identifies products or services from a particular source and distinguishes them from ot ...

ed by Texas-based company Ayata, the underlying concepts have been around for hundreds of years. The technology behind prescriptive analytics synergistically combines hybrid

data In the pursuit of knowledge, data (; ) is a collection of discrete values that convey information, describing quantity, quality, fact, statistics, other basic units of meaning, or simply sequences of symbols that may be further interpret ...

, business rules with

mathematical model A mathematical model is a description of a system using mathematical concepts and language. The process of developing a mathematical model is termed mathematical modeling. Mathematical models are used in the natural sciences (such as physics, ...

s and

computational model A computational model uses computer programs to simulate and study complex systems using an algorithmic or mechanistic approach and is widely used in a diverse range of fields spanning from physics, chemistry and biology to economics, psychology, ...

s. The data inputs to prescriptive analytics may come from multiple sources: internal, such as inside a corporation; and external, also known as environmental data. The data may be structured, which includes numbers and categories, as well as

, such as texts, images, sounds, and videos. Unstructured data differs from

structured data A data model is an abstract model that organizes elements of data and standardizes how they relate to one another and to the properties of real-world entities. For instance, a data model may specify that the data element representing a car be c ...

in that its format varies widely and cannot be stored in traditional relational databases without significant effort at data transformation. More than 80% of the world's data today is unstructured, according to IBM. Ayata's trade mark was cancelled in 2018.

Applications in Oil and Gas

Key Questions Prescriptive Analytics software answers for oil and gas producers

Energy is the largest industry in the world ($6 trillion in size). The processes and decisions related to oil and natural gas exploration, development and production generate large amounts of data. Many types of captured data are used to create models and images of the Earth’s structure and layers 5,000 - 35,000 feet below the surface and to describe activities around the wells themselves, such as depositional characteristics, machinery performance, oil flow rates, reservoir temperatures and pressures. Prescriptive analytics software can help with both locating and producing hydrocarbons by taking in seismic data, well log data, production data, and other related data sets to prescribe specific recipes for how and where to drill, complete, and produce wells in order to optimize recovery, minimize cost, and reduce environmental footprint.

Unconventional Resource Development

With the value of the end product determined by global commodity economics, the basis of competition for operators in upstream E&P is the ability to effectively deploy capital to locate and extract resources more efficiently, effectively, predictably, and safely than their peers. In unconventional resource plays, operational efficiency and effectiveness is diminished by reservoir inconsistencies, and decision-making impaired by high degrees of uncertainty. These challenges manifest themselves in the form of low recovery factors and wide performance variations. Prescriptive Analytics software can accurately predict production and prescribe optimal configurations of controllable drilling, completion, and production variables by modeling numerous internal and external variables simultaneously, regardless of source, structure, size, or format. Prescriptive analytics software can also provide decision options and show the impact of each decision option so the operations managers can proactively take appropriate actions, on time, to guarantee future exploration and production performance, and maximize the economic value of assets at every point over the course of their serviceable lifetimes.

Oilfield Equipment Maintenance

In the realm of oilfield equipment maintenance, Prescriptive Analytics can optimize configuration, anticipate and prevent unplanned downtime, optimize field scheduling, and improve maintenance planning. According to

General Electric General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable ene ...

, there are more than 130,000 electric submersible pumps (ESP's) installed globally, accounting for 60% of the world's oil production. Prescriptive Analytics has been deployed to predict when and why an ESP will fail, and recommend the necessary actions to prevent the failure. In the area of health, safety and environment, prescriptive analytics can predict and preempt incidents that can lead to reputational and financial loss for oil and gas companies.

Pricing

Pricing is another area of focus.

Natural gas prices Natural gas prices, as with other commodity prices, are mainly driven by supply and demand fundamentals. However, natural gas prices may also be linked to the price of crude oil and petroleum products, especially in continental Europe. ...

fluctuate dramatically depending upon supply, demand,

econometrics Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics," '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. ...

geopolitics Geopolitics (from Greek γῆ ''gê'' "earth, land" and πολιτική ''politikḗ'' "politics") is the study of the effects of Earth's geography (human and physical) on politics and international relations. While geopolitics usually refers to ...

, and weather conditions. Gas producers, pipeline transmission companies and

utility companies A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and ...

have a keen interest in more accurately predicting gas prices so that they can lock in favorable terms while hedging downside risk. Prescriptive analytics software can accurately predict prices by modeling internal and external variables simultaneously and also provide decision options and show the impact of each decision option.

Applications in maritime industry

Common Structural Rules for Bulk Carriers and Oil Tankers
managed by IACS organisation
) intensively utilizes the term "prescriptive requirements" as one of two main classes of checkable calculations by dedicated numerical tools and algorithms for verifying safety of ship hull construction.

Applications in healthcare

Multiple factors are driving

healthcare Health care or healthcare is the improvement of health via the prevention, diagnosis, treatment, amelioration or cure of disease, illness, injury, and other physical and mental impairments in people. Health care is delivered by health pro ...

providers to dramatically improve business processes and operations as the United States healthcare industry embarks on the necessary migration from a largely fee-for service, volume-based system to a fee-for-performance, value-based system. Prescriptive analytics is playing a key role to help improve the performance in a number of areas involving various stakeholders: payers, providers and pharmaceutical companies. Prescriptive analytics can help providers improve effectiveness of their clinical care delivery to the population they manage and in the process achieve better patient satisfaction and retention. Providers can do better population health management by identifying appropriate intervention models for risk stratified population combining data from the in-facility care episodes and home based telehealth. Prescriptive analytics can also benefit healthcare providers in their capacity planning by using analytics to leverage operational and usage data combined with data of external factors such as economic data, population demographic trends and population health trends, to more accurately plan for future capital investments such as new facilities and equipment utilization as well as understand the trade-offs between adding additional beds and expanding an existing facility versus building a new one. Prescriptive analytics can help pharmaceutical companies to expedite their drug development by identifying patient cohorts that are most suitable for the clinical trials worldwide - patients who are expected to be compliant and will not drop out of the trial due to complications. Analytics can tell companies how much time and money they can save if they choose one patient cohort in a specific country vs. another. In provider-payer negotiations,

providers Providers is a Danish hip hop, R&B and pop song production team made up of Jeppe Federspiel and Rasmus Stabell.Analytics Analytics is the systematic computational analysis of data or statistics. It is used for the discovery, interpretation, and communication of meaningful patterns in data. It also entails applying data patterns toward effective decision-making. It ...

Applied Statistics Statistics (from German: ''Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, industr ...

Big Data Though used sometimes loosely partly because of a lack of formal definition, the interpretation that seems to best describe Big data is the one associated with large body of information that we could not comprehend when used only in smaller am ...

Business analytics Business analytics (BA) refers to the skills, technologies, and practices for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing ne ...

Business Intelligence Business intelligence (BI) comprises the strategies and technologies used by enterprises for the data analysis and management of business information. Common functions of business intelligence technologies include reporting, online analytical ...

* Data mining *

Decision Management Decision management, also known as enterprise decision management (EDM) or business decision management (BDM) entails all aspects of designing, building and managing the automated decision-making systems that an organization uses to manage its inte ...

Decision Engineering Decision intelligence is an engineering discipline that augments data science with theory from social science, decision theory, and managerial science. Its application provides a framework for best practices in organizational decision-making an ...

Forecasting Forecasting is the process of making predictions based on past and present data. Later these can be compared (resolved) against what happens. For example, a company might estimate their revenue in the next year, then compare it against the actual ...

Hadoop Apache Hadoop () is a collection of open-source software utilities that facilitates using a network of many computers to solve problems involving massive amounts of data and computation. It provides a software framework for distributed storage an ...

MapReduce MapReduce is a programming model and an associated implementation for processing and generating big data sets with a parallel, distributed algorithm on a cluster. A MapReduce program is composed of a ''map'' procedure, which performs filtering ...

OLTP In online transaction processing (OLTP), information systems typically facilitate and manage transaction-oriented applications. This is contrasted with online analytical processing. The term "transaction" can have two different meanings, both of w ...

Operations Research Operations research ( en-GB, operational research) (U.S. Air Force Specialty Code: Operations Analysis), often shortened to the initialism OR, is a discipline that deals with the development and application of analytical methods to improve decis ...

Statistics Statistics (from German: '' Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, indust ...

Notes

References

External links

INFORMS' bi-monthly, digital magazine on the analytics profession
* Menon, Ja
"Why Data Matters: Moving Beyond Prediction"
IBM Types of analytics

analytics Analytics is the systematic computational analysis of data or statistics. It is used for the discovery, interpretation, and communication of meaningful patterns in data. It also entails applying data patterns toward effective decision-making. It ...

Business intelligence Business terms Formal sciences Health care