Predictive analytics and industry disruption

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Simon BittlestoneSimon Bittlestone, Managing Director, writes on markets and economics

Anthony Hilton, the respected Financial Editor of the London Evening Standard, quoted a fascinating anecdote in one of his articles this week. It was to the effect that, when asked in 1980 to assess the total US market for mobile phones in the year 2000, analysts at a top firm came up with a figure of 900,000 units. The true figure turned out to be 109 million units.

As this story shows, even the experts find it hard to anticipate disruptive trends, let alone analyse their impact upon a given business. The same article quoted a noted fund manager to the effect that around a third of companies may be destroyed by imminent advances in technology. Whether that is right or wrong, there is no doubt that it is possible, and there are many examples of once-dominant companies that have been overwhelmed by disruptive change, even in just the last decade.

But it cannot be acceptable for business leaders to simply hope that their organisation will not be affected. If it is difficult to foresee major changes in consumer markets, then there is a clear imperative to use something to amplify brainpower alone.

Predictive analytics technology may not yet be able to see unerringly into the future, but it can certainly map developing trends, consumer attitudes and markets in a much more comprehensive fashion than any conventional analysis technique. Integrating economic and competitor data, analysing the relationships between these factors, and adding probability calculations can give a much more accurate assessment of possible changes than any conventional analysis.

What’s more, a market situation modelled in this manner can be recalculated on a monthly, or even weekly basis. Unlike costly long-term consulting engagements, there is no marginal cost to the analysis itself, so there is no chance that it will anchor an organisation to false assumptions after the fundamentals have changed.

While analysis like this may not have spotted the mobile technology boom before it started, it would certainly have been able to identify it once it was under way. For business leaders tempted to dismiss a breakthrough technology as a fad or niche interest, an objective analysis can be invaluable in confirming if this is the case or not. Analysis of this type will only become more valuable as technology disrupts more and more industries in the years to come

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