## Level 5 – Prescriptive Data

I didn’t want to say it…but using the last levels Predictive Data analysis, we were able to predict you’d want to read this one too.  Obviously that’s a joke, but prediction is pretty powerful when its correct.

So you can now predict the future with your data because you’ve followed the Data Hierarchy steps.  Congratulations, you’re still not the coolest kid on the block.

Predictions are more accurate “what if” type of scenarios.  You as a person have to make the decision on how to get there.  This is actually the difference between levels 6 and 7 which we will get to in a second.

Prescriptive Data is the “what should we do about it” phase.  (for example) Your Predictive model spit out 5 highly likely outcomes.  Your team all agree they would be great if you could make them a reality.  Prescriptive Data takes the same data set and looks for adjustments and/or variables to help achieve those outcomes.  Prescriptive Data gives you the actionable items that increase the likelihood of your predictions even more.

Anybody who’s ever hit a golf ball knows there are dozens of split seconds in a golf swing that equate to hitting the ball correctly.  Get them all right, and you’ll beat Tiger Woods. He’s good, but he’s not perfect. Get 2 or 3 of those moments wrong, and you’ll probably end up in the woods at the worst possible time.

In business your “golf swing” is how you execute decisions.  Lets say your biggest competitor is the Tiger Woods of your industry.  They get 15 out of 20 of the little things right almost all the time. Pretty good, can’t compete with them right?  Wrong! They’re still missing 20% of the things that make them good.

Prescriptive Data looks at your swing.  Because you’ve used the previous steps you know you are doing 13 out of the 20 things right.  Prescriptive Data runs hypothetical “tweaks” to your swing at every point with every variable until it can get 17 out of 20.  (for example)

Your data will tell you at any given point in your “swing” if you do X then Y will happen more often.  And its proven by the historic data you have on 1000’s of swings before. Tiger Woods won the 2019 Masters by 1 stroke…1 stroke.  Xander Schauffele, the guy who LOST by 1 stroke, wasn’t beaten by a vastly superior golfer…he was beaten by a detail (or more) being wrong in 2 swings.  A foot that was ¼ inch out of place, a shoulder that dipped ⅛ of an inch too low, and worst of all…he probably hit those shots and could feel it wasn’t perfect.

Hundreds of people leave cable companies every year. For what? A myriad of reasons. Better price, free HBO, wireless boxes, faster internet, Game of Thrones is finally over, and more. The ironic thing is that most people leave a cable company to get a feature the current company could have sold them if they

(1) Knew they were going to leave (predictive analytics)

(2) knew what they were leaving for most likely (descriptive analytics)

(3) knew what to sell them to keep them–free HBO on a phone call to see how they liked their cable (prescriptive data).

It’s only with Prescriptive Analytics that the whole hierarchy starts to make sense (and pay off).

**Next weeks post will be on July 3rd to accommodate the holiday**

Quickly jump back to the previous segments using the buttons below.

## Level 4 – Predictive Data

If you’ve enjoyed learning about what your data can do for you looking backward, you might want to sit down for this one.  You probably are already, so lets just say you were standing then.

Level 4 is Predictive Data.  Predictive Data takes the information learned in the previous steps and applies a “what if?” thought process.  If Levels 1-3 were reactive, Levels 4-7 are Proactive. Proactive is knowing what’s going to happen before it happens and it takes a completely new way of thinking to apply it to business. If you’ve ever played with a magic 8 ball as a child, this isn’t that kind of prediction

Prediction is looking at the variables that produce an outcome.  If X then Y then Z kind of relationships. The difference is prediction runs through the entire alphabet and double letters for every variable If A then Y then Z?  If B then Y then R? Then runs through it again in near infinite combinations of if AB then Y then Z? What about if both A and T both happen, then Z? The human equivalent of “throwing it at the wall and seeing what sticks” but thousands of times over and over.

Lets Review:

Your Reporting is giving the machine the raw data.

Business Intelligence is setting a baseline of “known outcomes”.

Descriptive Data is helping set the framework of what kinds of trends you should expect, and  Predictive Data is taking what is already known and testing “what if” beyond what you could imagine

Back to the teddy bears for a second…because who doesn’t like this analogy?  So you know there is a spike around Christmas and February for teddy bears. Great, now you also know there is an initial rush followed by lesser activity until the panic buyers kick in.  You’ve proven this with your data and have 4 years of historic data to support it

Using Predictive Data you begin to look at other variables connected to the data.  Is there a higher number of men vs women buying the bears, and is it tied to one or the other holidays?  Is there an age group that is more likely to buy a bear? Why did we pick teddy bears for this example? Does the color of the bear make any difference? Does it even have to be a bear?

The machine looks at the data, takes into account all of the Descriptive Data, and begins to tie that data to trends and patterns that are happening currently. This gives you the ability to predict the sales volume and inventory requirements for next week (for staffing), next quarter (for sales quota setting), and next year (for inventory forecasting). So your Descriptive Data provides your Predictive Data meaningful information for the example below.   (totally fictitious numbers

Men between the ages of 20-35 are 75% more likely to buy blue bears in December.

Having 10% more blue bears in November than the rest of the year will cover demand.

Women between the ages of 35-45 are 45% more likely to buy a red bear in February.

Having 5% more blue bears in January than the rest of the year will cover this demand.

Now we know how many to order, when, and how many people are needed to staff selling them.

With Descriptive Data you were able to make market adjustments for when to market and to whom. With Predictive Data you can laser focus your marketing to exactly who you want to sell your goods to and know how many you are going to sell. When you’re that accurate you have a higher return on investment (ROI) than you would if you just “guessed” with your marketing efforts

Quickly jump back to the previous segments using the buttons below.

## Level 3 – Descriptive Data

How would you describe your data?  That is a phrase you’ll never hear outside of a Data Scientist cocktail party.  But it’s an important question.

Descriptive Data, or “Why did that happen?” is where the past 2 levels really starts to sing.  Now that your reporting supports business intelligence you can start to dig even deeper

Digging deeper with data sounds intimidating but it doesn’t have to be.  Your BI level information works well for short term understanding and is almost a real time indicator of your business.  Learning WHY it happened factors in variables that would never cross your mind.

So we used the teddy bear example of business intelligence.  You can correlate data points to see beyond the obvious. Descriptive Data takes that even further by looking at the data correlations you might miss and brings them to your attention

For example:  Using our Teddy Bear company, your reporting and BI indicate there is a spike in sales around February and then again around December.  It shouldn’t come as a shock that these are connected to the holidays. If that is a shock, you might want to get out of the teddy bear business.

Descriptive Data looks deeper into the data and notices things that seem obvious but aren’t always clear.  In this case it tells you that dads and husbands buy the bears in February and that mothers buy bears in December.

Not the most groundbreaking discovery either, that is pretty common sense for those holidays.  However, it also tells you that its dads under 40 but over 27 who are buying the bears. Its moms 20-35 who are buying the bears later in the year.  This insight translates to better accuracy with sales and marketing efforts.

Machines don’t find this kind of work tedious or boring, like most of us would qualify it.  Because its a machine you can run these kinds of reports all day every day. To do this by hand would take weeks or months.  A machine can do it in minutes.

Quickly jump back to the previous segments using the buttons below.

## Level 2 – Business Intelligence

“Business Intelligence” as a term always has some interesting visuals in people’s minds.  If you instantly flashed to James Bond or Maxwell Smart…you’re our kind of people. *high five*

Business Intelligence is looking at your viable data and deciphering “what is happening right now?”.  Knowing what is happening helps you repeat success and avoid failure in the future

A great analogy for Business Intelligence (BI for the cool kids) is the car.  Your business is your car, its constantly generating data. The miles per gallon calculation, the miles to your next oil change, tire pressure and so on.  The BI part of your car is the dashboard. You get real time feedback from the car on things like RPM and your speed. You also get neat little lights when you’ve broken something.  Tire gets low? There’s a light. Oil needs a change? There’s a light. Engine detonated at 7000 RPM? There’s a lot of smoke, maybe some fire, and then a light.

Ok, so you understand what BI is on a broad spectrum.  That should be easy to spot with your reporting right?  …not so fast. Somethings are easy to spot in data and others are buried deep in the bowels of your data set.

For example:  If you’re a toy company selling teddy bears you would understand why you see spikes in your data around Valentines Day and Christmas.  People buy more teddy bears around that time of year. Mystery solved. Business Intelligence takes that a step further and shows you the real time data.  Its being broken down and put into a format you can make decisions with. Because you can see your business running to plan there are no “lights” on your dash.  If something is out of the ordinary then your BI solution would let you know instantly you need to fix something.

So now you know you’ve got a correlation in your data that wasn’t what you thought.  Thank you BI for proving I don’t understand my business right? Wrong. Using BI you can now formulate marketing efforts to lengthen that time frame for purchase, hold off on pricing reductions until after your busy time to keep your margin’s high, increase your inventory a week earlier to prevent early outages, and more

You can now see deeper into your business than ever before because you know what just happened.  The more accurate the data you input into your reporting now, the more impressive the results will be as you get further down the line in Data Hierarchy

Quickly jump back to the previous segments using the buttons below.

## Level 1 – Reporting

Reporting is the first step on this journey with Data Hierarchy for several reasons.  Reporting is the “what happened?” part of looking at your business.

If a company doesn’t track and understand “what happened” then how would they implement Artificial Intelligence to give them suggestions on data?  Better yet…how do you file your taxes without some kind of basic reporting? If you’re going to start making data driven decisions, you need to have data…good data.

Reporting takes on all kinds of forms.  The key is to have it in a format that is viable.  Notice the word “viable”? That was intentional, the definition of Viable is as follows:

Viable:  vi·a·ble /ˈvīəb(ə)l / adjective “capable of working successfully; feasible.”

If your reporting is a color coded spreadsheet in excel with abbreviations for fields that only make sense to you and the other person who uses it…you barely have reporting.  Arguably color coding is as effective as a wall covered in handwritten post it notes.  (please don’t be “that guy”)

Remember, the long term goal is to have your data work for you, not you work for your data.  So your reporting data needs to be in a format that is easily understood by others and computers alike.

There is no shortage of software to make reporting work.  The number one problem people run into is cross platform reporting.  Which can be easier to fix than you think.

If you’ve got one platform for sales, another for orders, and yet another for payments…oh and the one for accounting.  You may have given up trying to find a single system that does it all.  Don’t worry, you’re not alone.

You’re actually in the majority with that problem.  So much so other companies saw a need to fix that, and they did!  These platforms take some skill to connect them but that’s part of the setup process.

Once you have connected all your data inputs into a Viable data set you can do amazing things.

Also is your data accurate?  Do you have a system that requires a data field to be entered every single time?  Do you have a (lazy) sales person who is putting “asjkdjkldfshjkfadsjkhasdfjklhsdf” in a vital field out of frustration and lack of understanding?

Educating your team(s) that data, good information or bad information, being accurate is vital to being able to fix problems for everyone.  If your data is all smoke and mirrors you’ll never be able to do anything of value with it.

Going forward you’ll be able to quickly jump back to the previous segments by following the hyperlinks below.

## Data Hierarchy

Machine Learning, Business Intelligence, and Artificial Intelligence are buzz words that are being thrown around at planning sessions a lot these last few years. They have real meanings that most people don’t understand. They are using them to mean “more sophisticated at using data to make decisions”. And while that is right, there is a right way and a very wrong way to lead your company down the path of using data to make data-driven decisions. After 10+ years of helping companies understand what that path is, we wanted to help you the reader understand the order and the real definitions of the buzz words. This way, you can not be educated, but you can give your company the direction it needs to go up the Data Hierarchy.

Data Science is in an integral part of everyday life at this point and you just don’t know it.  As a society, we’re generating more data than ever before. Smart businesses are tapping into that data to do things that were previously unheard of.

Take Facebook for example.  20 years ago Facebook didn’t exist, now people are addicted to it and seemingly can’t live without it.  But even then, people are still weary of the dreaded “Facebook algorithm” that cuts 50% of the posts you might want to see.  That algorithm is data science at work

That’s right, you’ve generated enough data that Facebook wrote some code to cut 50% of your friends out of your life.  You didn’t interact with them enough, they didn’t post enough, there are hundreds of reasons why that system feels like your college roommates buddy from down the hall with the cat doesn’t need to be at the top of your feed.  It also looks at what you read on a regular basis and then tries to predict what you would want to read next.

So to help people truly understand what we do as a company, and to help you hire us.  (let’s be honest) We put together a series on the sophistication of data usage as businesses mature that we call the Business Data Hierarchy.  The goal of this series is to help people and companies understand where they are now, and where they could go with data driven decision making.

We’ve written the series to be informative and insightful, with a splash of humor mixed in to keep you awake through the whole process.  If you like it or if you feel like someone needs to read this…we ask that you share the info or…better yet…get them in touch with us and we’ll bring the show to you!  The pyrotechnic guys tell us we’ll need a 25’ ceiling for the fire and lasers…Hey, it’s a good show.

…this will also be the longest post of the entire series, don’t worry!

When you look at Data, and what it can do for you and your company, there are six different levels of Data Hierarchy.  It’s a hierarchy because each level is codependent on another.

These levels are important to understand because jumping from one to another, without a long term goal, can be cost prohibitive.  This is even more devastating when you finally get your executive level to believe in the power of data, and it breaks the bank in the execution.

There are consultants with lovely summer and winter homes who have paid for them “skipping” to the end and then back billing/building the solutions.

To insulate against catastrophic failure of a data-driven initiative we at Contemporary Analysis (CAN) have created a Data Hierarchy to help companies understand where they are and more importantly, where they are going. This understanding helps drive the strategy and vision needed to be successful.  These levels are

1. Reporting:  Tracking and “What happened?”
2. Business Intelligence:  “What just happened?”
3. Descriptive Data:  “Why did that happen?”
4. Predictive Data:  “What is going to happen next?”
5. Prescriptive Data:  “What should we do to make it happen?”
6. Artificial Intelligence:  “Automated recommendations”
7. Omnipotent AI (Skynet): “Automated Doing of its own recommendations” a.k.a. “Terminator Movies”

Every business is trying to move “forward”.  If you work for a company whose response is anything but “forward” or “more” start polishing up your resume, you’ll need it sooner than later.

Most companies are so focused on today’s business they don’t know what the path to the future looks like.

Imagine you tell a CEO you’re going to walk a mile to get another 1 million in sales.  Most CEO’s would look at the distance and agree that a short distance is worth the time and effort to get the additional revenue.

You and your team(s) work feverishly to get from point A to point B as quickly as possible.  You cross the finish line and there’s your 1 million. The CEO checks the box and there it is, project complete.

Now imagine if you told a CEO you’re going to get 20 million in sales.  After the confused look and possible laughing subsides you tell them how.  Instead of a mile, you have to walk 15 miles. But you’re not going to do them all in 1 year.  Instead you’re going to walk that distance over 5-6 years. You’ll measure success with each mile you pass and each mile will result in ROI for the company.

You also let them know that you can cover the ground when and how you want to.  If one mile is too tough to work in the time and effort this year, you postpone it to the next.  If, as you’re walking, a business need changes and you need to walk a completely different direction you can.  The steps remain the same but the road you use to get there is slightly different.

Understanding the long term goal allows you and your team(s) the ability to work smarter not harder.  You’re building toward the vision at every turn so you have little to no wasted effort. And, because you’re building over time, you can staff accordingly for each mile and access the right talent at the right time

Part of CAN’s role is being that “Data Visionary” that helps you see over the horizon with possibilities.  The hardest part of this whole process is getting the decision makers in an organization to embrace the culture of change.

“We’ve done it this way for __X__ years and it works just fine.”  Is becoming the leading indicator of a dying business. If you’re 40 years old the technology available today wasn’t even conceptualized when you were in grade school.  “We’ve done it this way for 50 years…” means you’re already behind the curve.

The posts that will follow will walk you through each level of the Business Data Hierarchy concept.  We’ll be sure to include examples that are relatable. The subject matter can be a bit dry, so we’ll also make sure we include some humor along the way to keep things lively.  We’re a Data Science Consulting firm..not monsters after all.

At any point, feel free to reach out and let us know how we can help you through these steps:

Reporting

Descriptive Analytics

Predictive Analtyics

Prescriptive Analtyics

Machine Learning

Artificial Intelligence

## Omaha Data Science Academy Video

Nate Watson, president of Contemporary Analysis (CAN), talks about the Omaha Data Science Academy (ODSA). The ODSA is Omaha’s first accredited school specific to skills related to Data Science. It was started because we saw a need to help individuals at companies who already had a degree, but needed a few new skill sets to accomplish the tasks given to them by their companies. The ODSA teaches data science programming, database, data visualization, and modeling. Taught by practicing data scientists, a student is going to get real-world knowledge about how to build and implement real, functional, and useable models and visualizations into their companies.

In the real world, the answer isn’t in the back of the book. We will take the time to walk you through the process we know will work, and that we have used hundreds of times to solve some of the hardest problems for some of the largest companies. This includes real-world examples, real-world problems, and real data sets from real projects. This exposure means you get to learn in an actual environment where the answer is rarely perfect. We will also teach you what “good enough” means in data science and why you have to be okay with moving forward with models that could be better. (Good enough is the opposite of perfect. Trying to chase perfection in a model kills more data science in the real world than anything else). Lastly, we will look at how to present and sell data science to the organization. After all, if the organization doesn’t use it, regardless of the potential ROI, your actual ROI will be zero.

In our latest video, we will discuss why having access to the ODSA is important to the community, why skill training from practicing data scientists is important to implementing data science into companies, and the challenges companies face with implementing Data Science.

Click the button below.

## InfoTec 2019 Slide Deck

As some of you know, last week Nate presented at InfoTec. The subject was “How to hire and manage Data Scientists”. Since then we’ve had multiple requests for copies of his presentation.

Don’t forget we run the Omaha Data Science Academy and can help train Data Scientists! We’re an advocate for the Data Science community and love to be a resource for so many great people.

## Using Data To Make Better Business Decisions

Joe Sova, President of Ideal Payroll Service, hosts a podcast that helps businesses make more informed decisions.

Recently Joe interviewed our own Nate Watson about making data driven decisions. Listen to the full podcast through the link below:

Get more great content from Joe from their site. www.joesova.biz/

## CAN at InfoTec 2019

Contemporary Analysis had not one, but two of our guys speaking at InfoTec 2019!

Nate Watson, President of Contemporary Analysis, gave a talk about how to hire and retain Data Scientists. Data Scientists are some of the hardest people to find on the planet currently. Video of Nate talking to “Spaceman Tom” below:

Gordon Summers, our Chief Data Scientist, spoke about his book “Leading a Data Driven Organization: A Practical Guide to Transforming Yourself and Your Organization to Win the Data Science Revolution“. Gordon does a great job framing the importance of data driven decision making in today’s business setting.

The book is available on Amazon in both paperback and digital versions below:

CAN realized this years ago and that’s why we built the Omaha Data Science Academy. (ODSA) The Academy allows up and coming talent access to not only our cadre of instructors but a growing community of Data Scientists.

We had a great time meeting new people and reconnecting with old friends. AIM continues to put on great events to support the tech community in Omaha. We’re honored to be a part of it and looking forward to next year!