Prescriptive Analytics - the future?

Prescriptive analytics is the third and final phase of business analytics.

The first 2 stages of business analytics include:

Descriptive Analytics: Analytics that quantitatively describe or summarize features within a data set. The data set could be the combination of data sets for example house sale prices combined with ONS statistics on employment rates. We would then be able to describe the areas of the country, where has high house prices Vs employment rate etc. 

Predictive Analytics: Uses a variety of techniques from predictive modelling, machine learning, and data mining to analyse current states and historical facts to make predictions about future or otherwise unknown events. For example, using our descriptive analytics above on house prices and employment rate, we may be able to predict the price a house should be added to the market as a sale price, based on what other houses sold for, the size of the house, income in the area, employment rates etc. 

Often Prescriptive Analytics is sometime referred to as the “final frontier of analytic capabilities”, which entails the application of mathematical and computational sciences and suggests decision options to take advantage of the results of descriptive and predictive analytics. 

Prescriptive Analytics goes beyond the prescriptive analytics by showing potential actions to benefit from the predictions and showing the implications of the decision options. Often prescriptive analytics will go one step further will not just predict what will happen or when it will happen but also why it will happen. 

An example of where prescriptive analytics is utilised is in energy pricing. When predicting prices it depends on supply, demand, economy, geopolitics, weather conditions etc. As an energy company being able to use prescriptive analytics to take in the external data sets next to their own data sets to predict prices by modelling the internal and external variables at the same time and provide decision options and show the consequences of each decision.