Publications

A Conceptual Foundation for the Formulation
of Business Predictive Analytics Projects
by Thomas A. "Tony" Rathburn, Senior Consultant, The Modeling Agency

PREFACE
The author approaches building models using Predictive Analytics as a strategy for playing a 'game�. The game is defined by the business unit. All rules, strategies, constraints, and score keeping are defined by those playing the game. There is no 'right� answer. There are only decisions and impacts.

Predictive Analytics is an approach for developing quantitative models, based on historical data, for the purpose of making 'better� decisions in a business environment.

As we are dealing with human behavior, there is no perfect model to be developed. Instead, we are challenged to define groups of people who have a probabilistic expectation of displaying/not-displaying a behavior.

This article explores the development of the major approaches to these types of problems as a foundation for conceptualizing Predictive Analytics problems effectively.

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Predictive analytics is an extension of traditional statistics. Our work lies in the belief that not all members of our group display their behavior of interest at the same rate. Our belief is in the existence of definable sub-groups who display the behavior of interest at a rate different from the group as a whole. And our work is focused on identifying the description of those sub-groups and assigning individuals appropriately.

In our efforts to achieve a higher score in the game we are playing, we typically look for those sub-groups who have the greatest impact on our performance. This performance impact may be either positive, or negative. Once successfully identified, these sub-groups will receive different treatment than is administered to the group in general.

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