Every business runs on analytics. Even the smallest businesses that keep their information in QuickBooks and Excel learn how to figure out which activities make money and which do not, or they won't be in business very long. Modern enterprise analytics have taken one huge step and are in the middle of a second. When this second step is complete, it will change the way businesses are managed.
From Descriptive To Predictive
The first major step in analytics was from descriptive analytics (what has happened) to predictive analytics (what should happen, based on what has happened and trend lines).
This was very important because it allowed management to have a high degree of confidence in the outlook for their business; they could make plans based on something better than a "best guess" basis. Step two builds on predictive analytics to make the IT system a partner in business management.
Prescriptive Analytics Is Coming
If a computer system can predict what is likely to happen, and has been given information on what business management wants to happen, the next step is to provide the analytics system with the ability to tell management how to tweak inputs to turn the predicted future to the desired future. This next step is called prescriptive analytics and it's a step that is coming very, very quickly.
Analysts like those at Gartner see this next step of prescriptive analytics taking three forms. The first involves the analytics system acting as an advisor to management. This is the traditional role of the IT system, but in the high-speed world of modern business, it might not be fast enough to react to changing circumstances. So Gartner sees the prescribed actions of the analytics system becoming the default instructions of management, to be overridden only in the most extreme circumstances. And that leads to the third form.
Taking Humans (partially) Out Of The Picture
When management understands that the decisions reached by the prescriptive analytics system are more reliably correct than the decisions of human managers, then the only rational course is to cut out the slow, unreliable part of the system and allow the prescriptive analytics system to feed commands straight into the ERP and process control systems. At that point, humans can concentrate on creative matters and decide what the corporate goals should be.
This third form is technologically feasible today. Major enterprise software companies are already demonstrating the integration of analytics and ERP required to take human managers out of the loop. While it sounds frightening to many, this merely brings to manufacturing and other types of enterprise the sort of automated business activity that financial services have already embraced in their trading operations. Prescriptive analytics will become a competitive advantage for the companies that embrace it; the real question is how quickly IT departments can be ready.