I have talked in the past about Big Data; the need for CFO’s to be integral in the process of collecting and analyzing data. Smart CFO’s then create analytics out of analysis.
Analytics can include several different types. See this article in InformationWeek for a more detailed description of three: Descriptive, Predictive, and Prescriptive. See the comments at the end for other models of analytics.
Briefly, many businesses use descriptive analytics. They are the run of the mill historical analyses that take massive amounts of data and boil it down to bite size pieces of information. They tell you where you’ve been.
Predictive analytics is the next step up the ladder of data analysis sophistication. Predictive analytics take historical data and recent data to help forecast what might happen in the future. Thereby taking the results of what happened in the past and creating a prediction of the future.
Prescriptive analytics extend predictive analytics by recommending courses of action and then showing the results from the actions. Prescriptive analytics truly move Predictive analytics into the strategy scenario environment.
As enterprises create more and more data and wrap themselves in the wonders of Big Data, management, and particularly CFO’s, must embrace moving the sophistication of analytics from reviews of what happened, to modeling strategies and measuring the outcomes.