Complementary Investments Pay Off with Predictive Analytics


In 2022, the predictive analytics business is expected to be worth more than $273 billion. Despite the excitement around big data and the predictive capabilities of technologies like statistical modeling and machine learning, not all businesses who invest in them enjoy the advantages, leading a study team to investigate why.

Significant and complementary expenditures in IT resources, an educated staff, and high-efficiency manufacturing processes were determined to be “indispensable” for getting the most out of predictive tools that assist organizations maximize their performance.

Companies using predictive analytics increased sales by $500,000 to $1 million on average among the 30,000 manufacturers assessed in a 2015 research. Companies who didn’t make at least one of these mutually reinforcing investments, on the other hand, experienced little to no return.


Kristina McElheran, an assistant professor of strategic management at the University of Toronto Scarborough and the Rotman School of Management, notes, “These complements give the organizational infrastructure to gather, evaluate, and respond to forecasts based on objective data.”

“Investments in data gathering and computer gear that can transmit, store, and analyze data, for example, are included in IT capital. Workers who have been educated are acknowledged to be an important component of that system. Due to the techniques used in particular production contexts, data is richer.”

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Prof. McElheran and her co-authors collaborated with the United States Census Bureau to develop a survey that was completed by a highly representative sample of U.S. manufacturing firms in both 2010 and 2015. The poll inquired about the use of predictive analytics by manufacturers, management practices, data availability and usage in decision-making, and the design of their manufacturing processes.

The findings were cross-referenced with other information, such as corporate production inputs and outputs. Manufacturers were chosen because they are known for being early adopters of new technology.

Researchers discovered that by 2010, more over three-quarters of responding plants had implemented some type of predictive analytics, however most enterprises only employed the technologies annually or monthly. Higher levels of usage were linked to higher productivity increases.

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