With the increased awareness of statistics, many organisations are looking to deploy statistical models to optimize their business processes . Some examples of this are pricing models, cross sell models, forecasting models etc. But are all business problems 'modelable' ? Are their scenarios when a process cannot be optimized by statistical techniques. In this context 2 very important questions must be posed
a) Is the problem 'modelable' ?
b) Is the past a reliable indicator of future ?
For example can a statistical model succesfully be trained to predict stock market behavior ?
Given the plethora of factors which influence shareholder sentiments is it even worth attempting to do this.
Even if it is worth modeling the problem, is the past a reliable indicator of the future ?
For example if a model was trained on historical data before the economic crisis kicked in, its ability to forecast future behavior is tremendously affected
Given the fact that there are constraints in statistically modeling every business problem it is prudent to ask the 2 most important questions before starting the exercise
1. IS THE BUSINESS PROBLEM STATISTICALLY MODELABLE ?
2. EVEN IF IT IS MODELABLE IT THE PAST A RELIABLE INDICATOR OF THE FUTURE ?
Tuesday, June 16, 2009
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