automated decision making with predictive applications – big data frankfurt
Post on 15-Jul-2015
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— Holger Kisker, Forrester Research
“Even after more than 20 years of using BI, they still base nearly 45% of business decisions on qualitative decision factors instead of quantitative, fact-based evidence. “
— –Libby Rittenberg
“Economic profits in a system of perfectly competitive markets will, in the long run, be driven to zero in all industries.”
Collection
Storage
Analysis
Prediction
Decision
Physiological
Safety
Love/Belonging
Esteem
Self-Actualization
How Data-Driven Decisions should work
Computer Collects
Computer Stores
Human Analyzes
Human Predicts
Human Decides
How Data-Driven Decisions REALLY work
Computer Collects
Computer Stores
Human Analyzes
C O M M U N I C AT I O N B R E A K D O W N
Human Decides
— Led Zeppelin
Communication Breakdown, It's always the same, I'm having a nervous breakdown, Drive me insane!
• Drill-down analysis … misunderstood or distorted
• Metrics dashboards … contradictory and confusing
• Monthly reports … ignored after two iterations
• In-house analyst teams … overworked and powerless
How Data-Driven Decisions REALLY work
C O M M U N I C AT I O N
B R E A K D O W N
How Decisions REALLY should work
Computer Collects
Computer Stores
Computer Analyzes
Computer Predicts
C O M P U T E R D E C I D E S
— Robin Sharma
“Making no decision is a decision. To do nothing. And nothing always brings you nowhere..”
Business Rules for Beginners
Not doing anything is the simplest business rule in the world – and also the most popular
Advanced Business Rules
Computers are machines following rules. This means business rules are programs.
• Business rules are like programs – written by non-programmers
• Business rules can be contradictory, incomplete, and complex beyond comprehension
• Business rules have no built-in feedback mechanism: “It is the rule, because it is the rule”
Business rules are Programs, just not very good ones.
— Mark Twain
“It ain’t what we don’t know that causes trouble, it’s what we know for sure that just ain’t so”
— Steven Pinker, describing Moravec’s Paradox
“The hard problems are easy and the easy problems are hard.”
How we are making decisions (Like the big apes we are)
Anchoring effectIKEA effect
Confirmation bias
Bandwagon effect
Substitution
Availability heuristic Texas Sharpshooter Fallacy
Rhyme as reason effect
Over-justification effect
Zero-risk bias
Framing effect
Illusory correlationSunk cost fallacy
Overconfidence
Outcome bias
Inattentional Blindness
Benjamin Franklin effect
Hindsight bias
Gambler’s fallacy
Anecdotal evidenceNegativity bias
Loss aversion
Backfire effect
K-Means Clustering
Naive BayesSupport Vector Machines
Affinity Propagation
Least Angle Regression
Nearest Neighbors
Decision Trees
Markov Chain Monte Carlo
Spectral clustering
Restricted Bolzmann Machines
Logistic Regression
Computers making decisions (cold, fast, cheap, rational)
• A machine learning algorithm is a system that derives a set of rules based on a set of data
• It is based on systematic observation, double-checking and cross-validation
• There is no magic, just data – and without data there is no magic either
Machine Learning means Programs that write Programs
How Predictive Applications Work
Collect & Store Analyze Correlations
Build Decision Model
Decide & Test Optimize
— Warren Buffett
“I checked the actuarial tables, and the lowest death rate is among six-year-olds, so I decided to eat like a six-year-old.”
Building Predictive Applications
Machine Learning ModelPredictive Application
Enterprise Integration
Great. But how much do we need to order
each day?
Let’s reduce the risk of running out of
stock to 20%
Sales Forecasts for FridaySa
les P
roba
bilit
y
0
0,01
0,02
0,03
0,04
0 4 8 12 16
Friday Sales Amount
Sales Forecasts for SaturdaySa
les P
roba
bilit
y
0
0,01
0,02
0,03
0,04
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Saturday Sales Amount
Great. But how much do we need to order
each day?
Let’s reduce the risk of running out
of stock to 20%
So it’s 3 on Friday and 5,5 on Saturday.
Sales Forecasts for Both DaysSa
les P
roba
bilit
y
0
0,01
0,02
0,03
0,04
0 4 8 12 16
Friday Sales Amount Saturday Sales Amount
Bad news…
We need to skip the Saturday delivery.
How big should we make the Friday delivery
instead?
If you need 3 on Friday and 5,5 on Saturday to fulfill 80% of the demand, how much do you need to fulfill 80% of the combined demand?
Combined Sales ForecastsSa
les P
roba
bilit
y
0
0,01
0,02
0,03
0,04
0 4 8 12 16
Combined Sales Amount
Predictive Apps in a NutshellBatch and streaming data ingestion, batch
and streaming delivery (with real-time option)
Reduce risk and cost » increase revenue and profit
Trend Estimation Classification Event Prediction
Optimize Returns
Collect Data Predict Results Drive Decisions
One Common Platform for Predictive Applications
Your own and third-party data, easily integrated via API
Link
Build Machine Learning and
application code
Build
Automatically run and scale ML models
and applications
Run
Monitor and inspect resource usage and
model quality
View
Your data stored in high-performance
database as a service
Store
— Kevin Kelly
“The business plans of the next 10,000 startups are easy to forecast: Take X and add AI”
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