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Prescriptive analytics
Prescriptive analytics is the third and final phase of business analytics, which also includes descriptive and predictive
analytics.[1][2]

Referred to as the "final frontier of analytic capabilities,"[3] prescriptive analytics entails the application of mathematical
and computational sciences and suggests decision options to take advantage of the results of descriptive and predictive
analytics. The first stage of business analytics is descriptive analytics, which still accounts for the majority of all business
analytics today.[4] Descriptive analytics looks at past performance and understands that performance by mining historical
data to look for the reasons behind past success or failure. Most management reporting – such as sales, marketing,
operations, and finance – uses this type of post-mortem analysis.

The next phase is predictive analytics. Predictive

analytics answers the question what is likely to happen.
This is when historical data is combined with rules,
algorithms, and occasionally external data to determine
the probable future outcome of an event or the likelihood
of a situation occurring. The final phase is prescriptive
analytics,[5] which goes beyond predicting future
outcomes by also suggesting actions to benefit from the
predictions and showing the implications of each
decision option.[6]
Prescriptive Analytics extends beyond predictive analytics
Prescriptive analytics not only anticipates what will
by specifying both the actions necessary to achieve
happen and when it will happen, but also why it will
predicted outcomes, and the interrelated effects of each
decision happen. Further, prescriptive analytics suggests decision
options on how to take advantage of a future opportunity
or mitigate a future risk and shows the implication of
each decision option. Prescriptive analytics can continually take in new data to re-predict and re-prescribe, thus
automatically improving prediction accuracy and prescribing better decision options. Prescriptive analytics ingests hybrid
data, a combination of structured (numbers, categories) and unstructured data (videos, images, sounds, texts), and
business rules to predict what lies ahead and to prescribe how to take advantage of this predicted future without
compromising other priorities.[7]

All three phases of analytics can be performed through professional services or technology or a combination. In order to
scale, prescriptive analytics technologies need to be adaptive to take into account the growing volume, velocity, and variety
of data that most mission critical processes and their environments may produce.

One criticism of prescriptive analytics is that its distinction from predictive analytics is ill-defined and therefore ill-
conceived.[8]

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The scientific disciplines that comprise Prescriptive Analytics

Contents
History
Applications in Oil and Gas
Unconventional Resource Development
Oilfield Equipment Maintenance
Pricing
Applications in healthcare
See also
References
Further reading
External links

History
Prescriptive analytics incorporates both structured and unstructured data, and uses a combination of advanced analytic
techniques and disciplines to predict, prescribe, and adapt. While the term prescriptive analytics was first coined by IBM[2]
and later trademarked by Ayata,[9] the underlying concepts have been around for hundreds of years. The technology
behind prescriptive analytics synergistically combines hybrid data, business rules with mathematical models and
computational models. The data inputs to prescriptive analytics may come from multiple sources: internal, such as inside
a corporation; and external, also known as environmental data. The data may be structured, which includes numbers and
categories, as well as unstructured data, such as texts, images, sounds, and videos. Unstructured data differs from
structured data in that its format varies widely and cannot be stored in traditional relational databases without significant
effort at data transformation.[10] More than 80% of the world's data today is unstructured, according to IBM.

In addition to this variety of data types and growing data volume, incoming data can also evolve with respect to velocity,
that is, more data being generated at a faster or a variable pace. Business rules define the business process and include
objectives constraints, preferences, policies, best practices, and boundaries. Mathematical models and computational

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models are techniques derived from mathematical sciences, computer science and related disciplines such as applied
statistics, machine learning, operations research, natural language processing, computer vision, pattern recognition,
image processing, speech recognition, and signal processing. The correct application of all these methods and the
verification of their results implies the need for resources on a massive scale including human, computational and
temporal for every Prescriptive Analytic project. In order to spare the expense of dozens of people, high performance
machines and weeks of work one must consider the reduction of resources and therefore a reduction in the accuracy or
reliability of the outcome. The preferable route is a reduction that produces a probabilistic result within acceptable limits.

Applications in Oil and Gas

Energy is the largest industry in the
world ($6 trillion in size). The
processes and decisions related to oil
and natural gas exploration,
development and production generate
large amounts of data. Many types of
captured data are used to create models
and images of the Earth’s structure and
layers 5,000 - 35,000 feet below the
surface and to describe activities
around the wells themselves, such as
depositional characteristics, machinery
performance, oil flow rates, reservoir
temperatures and pressures.[11] Key Questions Prescriptive Analytics software answers for oil and gas
Prescriptive analytics software can help producers
with both locating and producing
hydrocarbons[12]

by taking in seismic data, well log data, production data, and other related data sets to prescribe specific recipes for how
and where to drill, complete, and produce wells in order to optimize recovery, minimize cost, and reduce environmental
footprint.[13]

Unconventional Resource Development

With the value of the end product determined by global commodity economics, the basis of competition for operators in
upstream E&P is the ability to effectively deploy capital to locate and extract resources more efficiently, effectively,
predictably, and safely than their peers. In unconventional resource plays, operational efficiency and effectiveness is
diminished by reservoir inconsistencies, and decision-making impaired by high degrees of uncertainty. These challenges
manifest themselves in the form of low recovery factors and wide performance variations.

Prescriptive Analytics software can accurately predict production and prescribe optimal configurations of controllable
drilling, completion, and production variables by modeling numerous internal and external variables simultaneously,
regardless of source, structure, size, or format.[14] Prescriptive analytics software can also provide decision options and
show the impact of each decision option so the operations managers can proactively take appropriate actions, on time, to
guarantee future exploration and production performance, and maximize the economic value of assets at every point over
the course of their serviceable lifetimes.[15]

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Oilfield Equipment
Maintenance
In the realm of oilfield equipment
maintenance, Prescriptive Analytics can
optimize configuration, anticipate and
prevent unplanned downtime, optimize
field scheduling, and improve
maintenance planning.[16] According to
General Electric, there are more than
130,000 electric submersible pumps
(ESP's) installed globally, accounting
for 60% of the world's oil Examples of structured and unstructured data sets generated and by the oil
production.[17] Prescriptive Analytics and gas companies and their ecosystem of service providers that can be
has been deployed to predict when and analyzed together using Prescriptive Analytics software
why an ESP will fail, and recommend
the necessary actions to prevent the
failure.[18]

In the area of Health, Safety, and Environment, prescriptive analytics can predict and preempt incidents that can lead to
reputational and financial loss for oil and gas companies.

Pricing
Pricing is another area of focus. Natural gas prices fluctuate dramatically depending upon supply, demand, econometrics,
geopolitics, and weather conditions. Gas producers, pipeline transmission companies and utility firms have a keen interest
in more accurately predicting gas prices so that they can lock in favorable terms while hedging downside risk. Prescriptive
analytics software can accurately predict prices by modeling internal and external variables simultaneously and also
provide decision options and show the impact of each decision option.[19]

Applications in healthcare
Multiple factors are driving healthcare providers to dramatically improve business processes and operations as the United
States healthcare industry embarks on the necessary migration from a largely fee-for service, volume-based system to a
fee-for-performance, value-based system. Prescriptive analytics is playing a key role to help improve the performance in a
number of areas involving various stakeholders: payers, providers and pharmaceutical companies.

Prescriptive analytics can help providers improve effectiveness of their clinical care delivery to the population they
manage and in the process achieve better patient satisfaction and retention. Providers can do better population health
management by identifying appropriate intervention models for risk stratified population combining data from the in-
facility care episodes and home based telehealth.

Prescriptive analytics can also benefit healthcare providers in their capacity planning by using analytics to leverage
operational and usage data combined with data of external factors such as economic data, population demographic trends
and population health trends, to more accurately plan for future capital investments such as new facilities and equipment
utilization as well as understand the trade-offs between adding additional beds and expanding an existing facility versus
building a new one.[20]

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Prescriptive analytics can help pharmaceutical companies to expedite their drug development by identifying patient
cohorts that are most suitable for the clinical trials worldwide - patients who are expected to be compliant and will not
drop out of the trial due to complications. Analytics can tell companies how much time and money they can save if they
choose one patient cohort in a specific country vs. another.

In provider-payer negotiations, providers can improve their negotiating position with health insurers by developing a
robust understanding of future service utilization. By accurately predicting utilization, providers can also better allocate
personnel.

See also
Analytics Decision Engineering
Applied Statistics Forecasting
Big Data Hadoop
Business analytics MapReduce
Business Intelligence OLTP
Data mining Operations Research
Decision Management Statistics

References
1. Evans,James R. & Lindner, Carl H. (March 2012). "Business Analytics: The Next Frontier for Decision Sciences".
Decision Line. 43 (2).
2. http://www.analytics-magazine.org/november-december-2010/54-the-analytics-journeyLustig,Irv, Dietrich, Brenda,
Johnson, Christer, and Dziekan, Christopher (Nov–Dec 2010). "The Analytics Journey". Analytics.
3. https://www.globys.com/2013/06/gartner-terms-prescriptive-analytics-%E2%80%9Cfinal-frontier%E2%80%9D-
analytic-capabilities
4. Davenport,Tom (November 2012). "The three '..tives' of business analytics; predictive, prescriptive and descriptive".
CIO Enterprise Forum.
5. Haas, Peter J., Maglio, Paul P., Selinger, Patricia G., and Tan, Wang-Chie (2011). "Data is Dead…Without What-If
Models". Proceedings of the VLDB Endowment. 4 (12).
6. Stewart, Thomas. R. & McMillan, Claude, Jr. (1987). "Descriptive and Prescriptive Models for Judgment and Decision
Making: Implications for Knowledge Engineering". NATO AS1 Senes, Expert Judgment and Expert Systems. F35:
314–318.
7. Riabacke, Mona, Danielson, Mats, and Ekenber, Love (2012). "State-of-the-Art Prescriptive Criteria Weight
Elicitation". Advances in Decision Sciences.
8. Bill Vorhies (November 2014). "Prescriptive versus Predictive Analytics – A Distinction without a Difference?" (http://w
ww.predictiveanalyticsworld.com/patimes/prescriptive-versus-predictive-analytics-distinction-without-difference/).
Predictive Analytics Times.
9. http://trademarks.justia.com/852/06/prescriptive-analytics-85206495.html
10. Inmon, Bill; Nesavich, Anthony (2007). Tapping Into Unstructured Data. Prentice-Hall. ISBN 978-0-13-236029-6.
11. Basu, Atanu (November 2012). "How Prescriptive Analytics Can Reshape Fracking in Oil and Gas Fields". Data-
Informed.
12. Basu, Atanu (December 2013). "How Data Analytics Can Help Frackers Find Oil". Datanami.
13. Mohan, Daniel (August 2014). "Machines Prescribing Recipes from 'Things,' Earth, and People". Oil & Gas Investor.
14. Basu, Mohan, Marshall, & McColpin (December 23, 2014). "The Journey to Designer Wells". Oil & Gas Investor.

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15. Mohan, Daniel (September 2014). "Your Data Already Know What You Don't". E&P Magazine.
16. Presley, Jennifer (July 1, 2013). "ESP for ESPs". Exploration & Production.
17. {http://www.ge-energy.com/products_and_services/products/electric_submersible_pumping_systems/}
18. Wheatley, Malcolm (May 29, 2013). "Underground Analytics". DataInformed.
19. Watson, Michael (November 2012). "Advanced Analytics in Supply Chain - What is it, and is it Better than Non-
Advanced Analytics?". Supply Chain Digest.
20. Foster, Roger (May 2012). "Big data and public health, part 2: Reducing Unwarranted Services". Government Health
IT.

Further reading
Davenport, Thomas H., Kalakota, Ravi, Taylor, James, Lampa, Mike, Franks, Bill, Jeremy, Shapiro, Cokins, Gary,
Way, Robin, King, Joy, Schafer, Lori, Renfrow, Cyndy and Sittig, Dean, Predictions for Analytics in 2012 (https://web.a
rchive.org/web/20120131154904/http://iianalytics.com/wp-content/uploads/2011/12/2012-IIA-Predictions-Brief-Final.p
df) International Institute for Analytics (December 15, 2011)
Bertolucci, Jeff, Prescriptive Analytics and Data: Next Big Thing? (http://www.informationweek.com/big-data/news/big-
data-analytics/prescriptive-analytics-and-big-data-nex/240152863) InformationWeek. (April 15, 2013).
Basu, Atanu, Five Pillars of Prescriptive Analytics Success (http://www.analytics-magazine.org/march-april-2013/755-
executive-edge-five-pillars-of-prescriptive-analytics-success) Analytics. (March / April 2013).
Laney, Douglas and Kart, Lisa, (March 20, 2012). Emerging Role of the Data Scientist and the Art of Data Science (ht
tp://www.parabal.com/uploads/docs/Greenplum/Emerging%20Role%20of%20the%20Data%20Scientist%20and%20t
he%20Art%20of%20Data%20Science.pdf) Gartner.
McCormick Northwestern Engineering Prescriptive analytics is about enabling smart decisions based on data (http://w
ww.analytics.northwestern.edu/analytics-examples/prescriptive-analytics.html).
Business Analytics Information Event (https://web.archive.org/web/20121202071139/http://business.gwu.edu/decision
sciences/i2sds/pdf/Program%20in%20BA%20presentation.pdf), I2SDS and Department of Decision Sciences, School
of Business, The George Washington University (February 10, 2011).
"The Difference Between Operations Research and Business Analysis" (http://www.or-exchange.com/questions/1344/
difference-between-operations-research-and-business-analysis) OR Exchange / Informs (April 2011).
Farris, Adam, "How Big Data is Changing the Oil & Gas Industry" (http://www.analytics-magazine.org/november-dece
mber-2011/695-how-big-data-is-changing-the-oil-a-gas-industry) Analytics. (November / December 2012).
Venter, Fritz and Stein, Andrew "Images & Videos: Reall Big Data" (http://www.analytics-magazine.org/november-dec
ember-2011/694-images-a-videos-really-big-data) Analytics. (November / December 2012).
Venter, Fritz and Stein, Andrew "The Technology Behind Image Analytics" (http://www.analytics-magazine.org/novem
ber-december-2011/694-images-a-videos-really-big-data) Analytics. (November / December 2012).
Horner, Peter and Basu, Atanu, Analytics and the Future of Healthcare (http://www.analytics-magazine.org/januaryfeb
ruary-2012/503-analytics-a-the-future-of-healthcare) Analytics. (January / February 2012).
Ghosh, Rajib, Basu, Atanu and Bhaduri, Abhijit, From ‘Sick’ Care to ‘Health’ Care (http://www.analytics-magazine.org/
septemberoctober-2011/402-health-care-a-analytics.html) Analytics. (July / August 2011).
Fischer, Eric, Basu, Atanu, Hubele, Joachim and Levine, Eric, TV ads, Wanamaker’s Dilemma & Analytics (http://ww
w.analytics-magazine.org/march-april-2011/278-predictive-analytics-tv-ads-wanamakers-dilemma-a-analytics.html)
Analytics. (March / April 2011)
Basu, Atanu and Worth, Tim, Predictive Analytics Practical ways to Drive Customer Service, Looking Forward (http://
www.analytics-magazine.org/july-august-2010/128-predictive-analytics-game-changer.html) Analytics. (July / August
2010).
Brown, Scott, Basu, Atanu and Worth, Tim, Predictive Analytics in Field Service, Practical Ways to Drive Field
Service, Looking Forward (http://www.analytics-magazine.org/november-december-2010/98-predictive-analytics-in-fie
ld-service) Analytics. (November / December 2010).

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Pease, Andrew Bringing Optimization to the Business (http://support.sas.com/resources/papers/proceedings12/165-2

012.pdf), SAS Global Forum 2012, Paper 165-2012 (2012).
Wheatley, Malcolm "Underground Analytics- The Value of Predicting When an Oil Pump Fails" (http://data-informed.co
m/underground-analytics-the-value-in-predicting-when-an-oil-pump-fails/) DataInformed, May 29, 2013.
Presley, Jennifer "ESP for ESPs (http://www.epmag.com/item/ESP-ESPs_118057) Exploration & Production
Magazine, July 1, 2013
Basu, Atanu "How Prescriptive Analytics Can Reshape Fracking in Oil & Gas" (http://data-informed.com/prescriptive-a
nalytics-can-reshape-fracking-oil-gas-fields/) DataInformed, December 10, 2013.
Basu, Atanu "What The Frack: U.S. Energy Prowess with Shale, Big Data Analytics" (https://www.wired.com/insights/
2014/01/big-data-analytics-can-deliver-u-s-energy-independence/) WIRED Blog. (January 2014).
Logan, Amy "Science Fiction Now a Fact in the E&P World" (http://www.ugcenter.com/Technology/Science-Fiction-A-
Fact-The-EP-World_134336/) Unconventional Oil & Gas Center, June 2, 2014.
Mohan, Daniel "Your Data Already Know What You Don't" (http://www.epmag.com/item/Your-data-know-you-dont_137
311/) Exploration & Production Magazine, September, 2014.
van Rijmenam, Mark "The Future of Big Data? Three Use Cases of Prescriptive Analytics" (https://datafloq.com/read/f
uture-big-data-use-cases-prescriptive-analytics/668) Datafloq, December 29, 2014.

External links
INFORMS' bi-monthly, digital magazine on the analytics profession (http://analyticsmagazine.com/)
Menon, Jai "Why Data Matters: Moving Beyond Prediction" (https://www.youtube.com/watch?v=VtETirgVn9c) IBM

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