What Is Predictive Analytics?


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Predictive analytics is the use of past data to extrapolate possible future scenarios and is made possible by big data. The larger and more varied the dataset, the more accurate the prediction will be; hence the necessity for massive computing power.

Before human analysis, the data is usually processed using AI and/or machine learning techniques to spot patterns, trends, and markers that may imply certain events or trajectories. These results are then packaged into a format designed for human consumption for further analysis—ideally yielding actionable insights.

Why is predictive analytics important?

Predictive analytics is becoming essential for a wide range of industries to stay competitive because its statistical algorithms and machine-learning techniques can help businesses make data-driven decisions. By analyzing historical data and making predictions about future outcomes, patterns and trends can be discovered to identify potential risks and opportunities, anticipate market trends and customer needs, optimize operations, and improve customer experiences.

The difference between predictive analytics and machine learning

Predictive analytics is a process that uses historical data to make predictions about future events or trends, while machine learning is a type of artificial intelligence (AI) that involves training algorithms to learn from data and make predictions or decisions based on that learning. Both predictive analytics and machine learning involve making predictions, but they differ in approach and level of automation. Another difference is that predictive analytics tends to be more manual and relies on human expertise to identify and analyze relevant data, where machine learning is more automated and can handle larger volumes of data with greater accuracy. These two processes offer options to businesses seeking the right approach for their specific needs and goals.

What are the types of predictive analytics models?

Decision trees

A decision tree is a type of flowchart, consisting of decision nodes, chance nodes, and end nodes, which displays the decision-making process visually with a tree like model of decisions along with their possible outcomes. This visual representation is used in machine learning and AI as a predictive model to classify and analyze data. Decision trees make decision-making more easily understandable by providing an image that maps out the reasoning behind a decision.

Neural networks

A neural network is a type of machine learning that teaches computers to process data in a way that resembles the human brain. Interconnected nodes, or neurons, work together to recognize patterns and make predictions based on large amounts of data and patterns that can be too complex for humans to identify. Neural networks are becoming more vital in areas like AI, robotics, and data science, and can be useful in a number of applications, including image and speech recognition, natural language processing, and predictive analytics.


The regression predictive analytic model is used to analyze the correlation between variables to forecast future trends and make informed decisions. Regression uses historical data to identify patterns and relationships between variables and applies this knowledge to predict future outcomes. Regression models can vary from simple to complex and can be used to analyze both linear and nonlinear relationships depending on the number of variables involved.

What are the benefits of predictive analytics?

Reduces risk

Predictive analytics can be a powerful tool for businesses to reduce risk by providing insights into future outcomes based on past data. This can help businesses make more informed decisions, while also letting them take advantage of opportunities to mitigate risk. By analyzing patterns and trends in data, predictive analytics can also help to identify and prevent fraudulent activities

Increases efficiency in operations

By analyzing historical data and using machine learning algorithms, predictive analytics can help businesses predict future outcomes and make data-driven decisions to improve efficiency. Business supply chains can be optimized by forecasting product demand and adjusting inventory levels accordingly. Predictive analytics can also help reduce downtime and improve maintenance schedules by predicting equipment failures before they occur, giving businesses a competitive edge and improving their bottom line.

Improves decision-making

The use of statistical algorithms and machine learning techniques in predictive analytics can flag the likelihood of future outcomes based on historical data. By analyzing past trends and patterns, predictive analytics can help organizations make more informed decisions, zero in on potential risks, forecast future trends, and optimize operations. Leveraging predictive analytics helps decision-makers to make better choices, reduce uncertainty, and avoid taking unnecessary risks. Predictive analytics gives businesses a competitive edge by empowering them to make more accurate, efficient, and effective data-driven decisions.

What predictive analytics means in practice

Manufacturers, for example, can use predictive analytics to prevent machine faults from occurring. They would do so by collecting real-time streams of machine health data—a combination of heat detectors, vibration detectors, ultrasound, acoustic sensors and so on. This data can be analyzed for changes to normal operation.

The frequency emitted by a fast-rotating part may have changed, for example. This is then cross-referenced against past data and/or industry benchmarks for that machine to see what the change might mean. Previous instances of this frequency change may have previously preceded rotating part x corroding beyond repair, for example. By catching this early sign, technicians can extrapolate what would happen in the future if the part was left as is, including how long they have to replace it before it becomes a more serious problem.

Five examples of predictive analytics in use

Field service

Field service teams are empowered by predictive analytics to address issues proactively and minimize downtime, reduce costs, and improve customer satisfaction. Predictive analytics can be a powerful tool in field service by analyzing data from sensors or other sources so that algorithms can identify patterns and irregularities that flag potential problems before they occur. Field service technicians can also use predictive analytics to optimize scheduling and routing to ensure that they are dispatched in the most efficient and effective manner.


One of the most exciting use cases for predictive analytics—and one we can all relate to—is in healthcare. Data-based risk modeling has long been a feature of medicine in one form or another; at least since the discovery that certain conditions run in the family. In more modern times, the screening of genetic markers for breast cancer, and inheritable conditions in fetuses, is commonplace. However, these tend to rely on simplistic “if… then” statements. If this genetic marker is present in your genome, then you have x% risk of developing this condition. Predictive analytics is set to transform the way healthcare is delivered.

By gathering all available health information on an individual—genetics, lab results, questionnaire answers, and data streams from wearable devices such as lifestyle information and real-time vitals—each person can be individually assessed for their risk of developing particular conditions, benchmarked against the rest of the population. It’s the same principle as preventatively servicing industrial equipment. This enables doctors to shift from reactive, episodic medicine—where treatment is given only when symptoms present—to a more preventative, proactive model; giving medication and lifestyle recommendations to intervene before the condition worsens.

On the other side of the coin, the same predictive analytics-enabled preventative maintenance practiced in manufacturing can be applied in medicine. Keeping healthcare machines running will only become more important as the data they produce becomes ever-more essential to the way medicine is delivered.


Trucking companies can benefit from predictive analytics to optimize routes and schedules, reduce fuel consumption, and improve safety. Analyzing data on factors like traffic patterns and weather conditions can also drastically cut down on costly delivery delays. And for the airline industry, predictive analytics can analyze data to predict flight delays or cancellations. Airlines can also use predictive analytics to identify trends and patterns in customer behavior, allowing them to tailor their services to meet specific needs.

Weather forecasting

Meteorologists can benefit from predictive analytics in weather forecasting to provide accurate, timely, and even life-saving information about upcoming weather events. By analyzing historical weather patterns and current weather data, predictive analytics can help forecasters make more informed decisions about potential weather hazards. Severe weather warnings and alerts issued to the public can mean the difference between life and death, not to mention saving millions of dollars in damages to property and infrastructure. Predictive analytics can also improve the accuracy of long-term weather forecasting, helping businesses and individuals make more informed decisions about their daily activities and plans.


Marketers can use predictive analytics to forecast future trends and behaviors of their target audience. Data from various sources, such as customer behavior, purchasing patterns, and social media activity, can be analyzed to predict what customers will want or need in the future, allowing marketers to tailor more effective and efficient marketing strategies, resulting in increased sales and customer loyalty. For instance, marketers can use predictive analytics to identify the most profitable customer segments, create targeted marketing campaigns, and predict the effectiveness of different marketing channels.

The impact of predictive analytics

Relatively speaking, predictive analytics is in its infancy. In the future, its impact will resonate across every sector, massively amplified by the proliferation of the Internet of Things (IoT). As the IoT digitizes and quantifies physical objects, there will be an explosion of data to feed predictive analytics, pivoting industry, policy, and healthcare away from reactive methods, and towards proactive approaches.

On a more prosaic scale, the impact is already on display. Manufacturers are innovating new service models. Where previously they sold machines on a transactional basis, predictive analytics has catalyzed the Product as a Service model. Manufacturers are increasingly charging for outcome-based service contracts rather than equipment, that is, for example, the continued ability to take x-rays, rather than the x-ray scanner itself. With the ability to remotely monitor, troubleshoot, and predict machine health, manufacturers can extend the productive life of a machine, maximize its operational efficiency, and minimize downtime. The end user needn’t concern themselves with the equipment, other than in its use.

This model improves customer experience—with issues often highlighted by the manufacturer before they’ve even presented as a problem to users—while amplifying revenue opportunities for manufacturers. One industrial manufacturer estimates there is $12 of potential service revenue for every $1 of machine sales. According to the IDC, 40% of the top 100 discrete manufacturers globally plan to offer product-as-a-service platforms. Similar effects will be felt in other sectors. Predictive analytics is already transforming banking and finance, city planning, the energy sector, and retail.

As with all technology, it takes time to scale up from initial, simple use cases, to mature, complex uses—both for individual organizations and globally. The key now for organizations is to explore how predictive analytics can fit into their digital strategies, so they can lay the groundwork for the future.

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Tags: Industrial Connectivity Industrial Internet of Things Connected Devices Predictive Analytics

About the Author

Prema Srinivasan, Digital Content Marketing Manager

As a Digital Content Marketing Manager, I bring the latest technology stories to the forefront. I'm passionate about engaging readers and empowering decision makers with relevant, up-to-date content.