Additional praise for Predictive Business Analytics: Forward-Looking Capabilities to Improve Business Performance “In the words of Harvard Professor MENG Xiao-Li (quoted by Thomas Davenport), ‘you don’t need to become a winemaker to become a wine connoisseur.’ This book constitutes an excellent introduction to any- one wishing to grow into a data connoisseur. Skipping all the technical aspects of predictive analytics, it focusses on how to better appreciate quantitative analysis, allowing readers to become more sophisticated consumers of data. A fi rst-class and extremely enlightening read about fact-based decision making.” —Dr. Olivier Maugain, CEO, AsiaAnalytics (formerly SPSS China) “The authors make a compelling case: to win in tomorrow’s market- place, a company must know—not just guess at—the ways in which non-fi nancial factors will impact fi nancial results. But many managers will fail to adjust to this new decision-making paradigm. Reading this book is your fi rst step in avoiding that fate. The authors use an engag- ing writing style and tons of practical examples to provide a clear pic- ture of the competencies and skills sets you need to succeed.” —Mary Driscoll, Senior Research Fellow, APQC “Simply put, Larry and Gary have nailed the ‘why’ and the ‘how’ of Predictive Business Analytics in this publication. To be an economi- cally viable company in today’s transparent, global and competitive world, business leaders must champion the predictive analytics jour- ney and embed this powerful management practice as an operational core competency. The companies that thrive integrate predictive busi- ness analytics into their DNA to out-smart their competitors in strate- gic and tactical decision making that yields sustainable success.” —Chris D. Fraga, Chief Strategy Offi cer and President, Acorn International Wiley & SAS Business Series The Wiley & SAS Business Series presents books that help senior-level managers with their critical management decisions. Titles in the Wiley and SAS Business Series include: Activity-Based Management for Financial Institutions: Driving Bottom- Line Results by Brent Bahnub Big Data Analytics: Turning Big Data into Big Money by Frank Ohlhorst Branded! How Retailers Engage Consumers with Social Media and Mobility by Bernie Brennan and Lori Schafer Bricks Matter: The Role of Supply Chains in Building Market-Driven Differentiation by Lora M. Cecere and Charles W. Chase Business Analytics for Customer Intelligence by Gert Laursen Business Analytics for Managers: Taking Business Intelligence beyond Reporting by Gert Laursen and Jesper Thorlund The Business Forecasting Deal: Exposing Bad Practices and Providing Practical Solutions by Michael Gilliland Business Intelligence Applied: Implementing an Effective Information and Communications Technology Infrastructure by Michael S. Gendron Business Intelligence Success Factors: Tools for Aligning Your Business in the Global Economy by Olivia Parr Rud CIO Best Practices: Enabling Strategic Value with Information Technology, Second Edition by Joe Stenzel Connecting Organizational Silos: Taking Knowledge Flow Management to the Next Level with Social Media by Frank Leistner Credit Risk Assessment: The New Lending System for Borrowers, Lenders, and Investors by Clark Abrahams and Mingyuan Zhang Credit Risk Scorecards: Developing and Implementing Intelligent Credit Scoring by Naeem Siddiqi The Data Asset: How Smart Companies Govern Their Data for Business Success by Tony Fisher Delivering Business Analytics: Practical Guidelines for Best Practice by Evan Stubbs Demand-Driven Forecasting: A Structured Approach to Forecasting, Second Edition by Charles Chase Demand-Driven Inventory Optimization and Replenishment: Creating a More Effi cient Supply Chain by Robert A. Davis The Executive’s Guide to Enterprise Social Media Strategy: How Social Networks Are Radically Transforming Your Business by David Thomas and Mike Barlow Executive’s Guide to Solvency II by David Buckham, Jason Wahl, and Stuart Rose Fair Lending Compliance: Intelligence and Implications for Credit Risk Management by Clark R. Abrahams and Mingyuan Zhang Foreign Currency Financial Reporting from Euros to Yen to Yuan: A Guide to Fundamental Concepts and Practical Applications by Robert Rowan Health Analytics: Gaining the Insights to Transform Health Care by Jason Burke Human Capital Analytics: How to Harness the Potential of Your Organization’s Greatest Asset by Gene Pease, Boyce Byerly, and Jac Fitz-enz Information Revolution: Using the Information Evolution Model to Grow Your Business by Jim Davis, Gloria J. Miller, and Allan Russell Killer Analytics: Top 20 Metrics Missing from Your Balance Sheet by Mark G. Brown Manufacturing Best Practices: Optimizing Productivity and Product Quality by Bobby Hull Marketing Automation: Practical Steps to More Effective Direct Marketing by Jeff LeSueur Mastering Organizational Knowledge Flow: How to Make Knowledge Sharing Work by Frank Leistner The New Know: Innovation Powered by Analytics by Thornton May Performance Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics by Gary Cokins Retail Analytics: The Secret Weapon by Emmett Cox Social Network Analysis in Telecommunications by Carlos Andre Reis Pinheiro Statistical Thinking: Improving Business Performance, Second Edition by Roger W. Hoerl and Ronald D. Snee Taming the Big Data Tidal Wave: Finding Opportunities in Huge Data Streams with Advanced Analytics by Bill Franks Too Big to Ignore: The Business Case for Big Data by Phil Simon The Value of Business Analytics: Identifying the Path to Profi tability by Evan Stubbs Visual Six Sigma: Making Data Analysis Lean by Ian Cox, Marie A. Gaudard, Philip J. Ramsey, Mia L. Stephens, and Leo Wright Win with Advanced Business Analytics: Creating Business Value from Your Data by Jean Paul Isson and Jesse Harriott For more information on any of the above titles, please visit www.wiley.com. Predictive Business Analytics Forward-Looking Capabilities to Improve Business Performance Lawrence S. Maisel Gary Cokins Cover image: © iStockphoto.com/peepo Cover design: Michael Rutkowski Copyright © 2014 by Lawrence S. Maisel and Gary Cokins. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley publishes in a variety of print and electronic formats and by print-on- demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. ISBN 978-1-118-17556-9 (Hardcover) ISBN 978-1-118-22711-4 (ePDF) ISBN 978-1-118-24015-1 (ePub) Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 I would like to dedicate this book to my wife, Claudia, whose patience and intelligence have always been a source of inspiration. I also want to acknowledge my parents and brother, who provided gentle guidance, and my children, Nicole, Dana, and Jonathan, who always bring out the best in me. Lawrence S. Maisel I express my thanks in remembrance to Bob Bonsack, my true mentor at Deloitte and EDS, for educating and training me in business methods and bringing value to people. I also thank my wife, Pam Tower, for her endless patience when I am distracted with projects such as writing this book. Gary Cokins