205290 crystal ball predictive analytics

Embed Predictive Analytics in

your tools and processes with

Oracle Crystal Ball

A case study of the USGS

Notice to Audience

This presentation was prepared by an organization outside of the United States Government. Neither

the United States Government or any agency thereof, or any of their employees, make any warranty,

expressed or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or

usefulness of any information, apparatus, product, or process disclosed in this report, or represents that

its use would not infringe privately owned rights. Reference therein to any specific commercial product,

process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily

constitute or imply its endorsement, recommendation, or favoring by the United States Government or

any agency thereof. Any views and opinions of authors expressed herein do not necessarily state or

reflect those of the United States Government or any agency thereof.

Objectives

» Show how Crystal Ball can be used to develop powerful

analytics apps

» Demonstrate a real-world example how Crystal Ball can be

customized to business needs

» Accelerate and improve decisions through standardized

models.

A little about us

Technology Partnerz Ltd. provides strategy, business analysis,

solution selection and organizational change management support

for the rapid adoption of predictive analytics tools and practices in a

variety of business functions, sectors and industries.

WHAT WE DO?

We support our clients in improving decisions and business outcomes by

providing:

Success in analytics is more than just software and geeks…

WHO WE DO IT FOR…

About the USGS

The USGS is a science organization that provides impartial

information on the health of our ecosystems and environment,

the natural hazards that threaten us, the natural resources we

rely on, the impacts of climate and land-use change, and the

core science systems that help us provide timely, relevant, and

useable information.

Today‟s presenters

Eric Torkia, M.A.Sc

Eric Torkia MASc is a senior

management consultant/trainer and

business analyst. He has collaborated

with some of the worlds most recognized

organizations to ensure the optimal

design and delivery of enterprise

systems, analytics as well as new

forecasting and decision making

processes.

Dr. Michael Friedel

Dr. Friedel has international experience

leading and participating on teams that

characterize, monitor, and model the

climatic, ecological, geophysical, and

water-resource response to natural and

anthropogenic stresses through the

development and application of

computational methods to better quantify

prediction uncertainty.

Why Analytics?

Plans are nothing; planning is

everything.

Dwight D. Eisenhower

4 truths about analytics

4 truths about analytics

» Test ideas, business models and

designs early and cheaply

Improved Performance

» Analytics drive discussions around

the real issues impacting your

objectives better solutions

» The costs of not doing analytics will

almost always outweigh the

investment. Insight and peace of

mind.

» Only way to account for increasingly

complex and uncertain models/data.

1 Reality

Averages can conceal risk

Averages DO conceal risk

Range estimates address hidden risk

Analytics fit nicely in the planning lifecycle

Craft Decisions &

Strategy

KNOWLEDGE WORKERS / USERS

SENIOR MANAGEMENT

BUSINESS ANALYSTS

Generate Data

through normal

operations

Analyze data for insight

and opportunities

Use Analytics to

Make It Happen

Get Results

Design Implementation

Strategy

Planning

Lifecycle

Analytics - What?

It is better to be vaguely right

than exactly wrong.

Carveth Read

Crystal Ball

Busin

ess Im

pact

Sophistication

Forecasting“What’s next?”

• Use historical data to auto-generate forecast

• Easy to use

• Uses advanced Time Series methodology

• Caters for „explained peaks‟

• Use as the forecast or to „sense-check‟ expert

forecast

BI Reporting“What Happened?”

• Statistical Analysis

• Data Mining

• Dashboards

• Reports

• OLAP Cubes

Optimisation“What’s best?”

Automatically determine the best scenarios to

maximise your goals within your constraints : e.g.

maximise sales within the costs of stock and staff

Simulation“What If?”

• Replace unknown numbers with ranges, e.g.

instead of estimating 4, the range is

between 1 and 5

• Calculate probability of each outcome by

running thousands of simulations

• Determine which of the outcomes are most

likely

How Can risk analysis translate into ROI?

Averages vs. Range Estimates

Challenges and opportunities that risk analysis and simulation address?

How to make better decisions with risk information

The conventional way of ignoring risk

Market Demand

Worst Most Likely Best

Volume 50,000 75,000 100,000

Price $11.00 $10.00 $8.50

Variable Costs / Unit $7.50 $6.50 $5.50

Case Analysis


Total Revenue $550,000.00 $750,000.00 $850,000.00

Total Variable Cost $375,000.00 $487,500.00 $550,000.00

Fixed Costs $120,000.00 $120,000.00 $120,000.00

Profit Case 1 $55,000.00 $142,500.00 $180,000.00

The old school vs. the new school

• Only 3 possible outcomes

• Limited view of risk

• What are most important risk

factors?

• What are the odds I‟ll miss the

target?

• Which outcome is most likely?

• Full range of outcomes

• 60% risk of being below profit expectation

• 10% chance you are below your worst case

• 20% chance of profits exceeding the best

case

• Price is the biggest driver on profit

THE OLD WAYGuesswork

THE NEW WAYQuantify risk and uncertainty

3 possibilities…

No probabilities…

All possibilities…

Clear probability…

What if you have to pick a winner?CASE 1 Worst Most Likely Best

Volume 50,000 75,000 100,000

Price $11.00 $10.00 $8.50


Case Analysis


Total Revenue $550,000.00 $750,000.00 $850,000.00


Fixed Costs $120,000.00 $120,000.00 $120,000.00

Profit Case 1 $55,000.00 $142,500.00 $180,000.00

CASE 2 Worst Most Likely Best

Volume 20,000 27,000 42,000

Price $12.50 $13.75 $15.00


Case Analysis


Total Revenue $250,000.00 $371,250.00 $630,000.00


Fixed Costs $120,000.00 $120,000.00 $120,000.00

Profit Case 2 $10,000.00 $116,250.00 $384,000.00

-20 345 47 335

Single-Point Estimate

More information, Better decisions

142.5K

Ranges show the full spectrum of possibilities

116.25K

Range informationProbability of occurrence

Or this one?Would you pick this project?

What do Simulation ANALYTICS Do?

» Quantify the effects of variation in your current “as-

is” scenario

» Predict a scenario‟s probability of occurrence

» Identify critical input variables that drive uncertainty

or variability in your project plan

» Determine an optimum and robust solution for your

new “to-be” planning scenarios

X3

2

1

Analytics - Where?

The greatest good is like water.

Water benefits all things, yet

conflicts with none; it dwells in

places scorned by most. – Lao Tzu

Crystal Ball Applications and Industries

Financial Forecasting • Pro forma analysis of land deals

• Driver based revenue forecasting

• Cash flow at risk analysis

• Assessment of credit risk

• Outlicensing and inlicensing

valuations and deal structuring

• Valuation of new product

opportunities

• Sales forecasting

• Forecasting Marketing ROI


Financial Forecasting

Portfolio Optimization

• Oil and Gas – Which fields to

develop to maximize revenue

• Pharma – which drug R&D projects

to fund to optimize risk-adjusted

value of pipeline

• IT – which projects to undertake,

given limited resources

• Marketing – optimize investment in

marketing programs and

understand key drivers

• Financial Services – investment

decisions




Capacity Planning

• Plan investment to meet

uncertain future demand

• Capacity modeling for finished

goods warehouse

• Network capacity planning

• Location of distribution facilities

• Determine staffing needs based

on the product pipeline forecast

• Supply chain management:

determine safety stock levels at

international distribution centers

• Production forecasts




Capacity Planning

Capex Decisions

• Which country and projects to

invest in

• Acquisition evaluations

• IT – acquisition/upgrade of

equipment or software

• Manufacturing – upgrade an

existing production line or build

new

Analytics - How?

vidi vici veni

I Came, I Saw, I Conquered

Julius Caesar

Crystal Ball‟s monte-carlo approachCrystal Ball is an Excel-based tool that facilitates simulation, sensitivity, statistical analysis, and optimization of business and engineering uncertainty and variation.

Crystal Ball

applied to Excel

models

Inputs Outputs

DATA

UNCERTAIN

ASSUMPTIONS

Building a custom application

LIVE DEMO of the USGS

PROSPECTOR TOOL

Business Case Overview

NEED: A distributable reserves modeling tool.

SOLUTION: Updated and customized an Excel Add-In for

specialized mineral reserves modeling using Excel & Crystal Ball

VBA. The application was a complete Excel Add-In for Excel

2007/2010 using custom ribbons and the integration of several

other tools including the Data Analysis Toolpack.

We built a custom application in Excel

Custom Excel

Ribbon

Custom Input

Forms

Standardized

Models

Integration of

multiple add-ins

Custom

Distribution

Gallery

Custom

Algorithms

VBA Programming

Standardized Custom Models

Integrated Add-In Ribbon

Scripted Model

BuilderIntegration of MS Data Analysis

Toolkit

Streamlined process around the

model

Custom Forms

Setup Model Special Estimation Forms

Take-Aways

» Streamlined process

» Standardized model

» CB is automated to simplify the user experience

» Integration of multiple add-ins into one special client app.

Questions and Answers