Better practice prediction using neural networks: an application to the smartphone industry

Purpose – The purpose of this paper is to develop an artificial neural network (ANN) based prediction model via integration with data envelopment analysis (DEA) to provide the means of predicting incremental performance goals. The findings confirm the usefulness of the herein developed prediction approach, based on the results of analyses of time series data from the smartphone industry. Design/methodology/approach – A two-stage hybrid model was developed, incorporating sequential measurement and prediction capability. In the first stage, a Chames, Cooper, and Rhodes DEA model is the preprocessor, generating efficiency scores (ES) of decision-making units (DMUs). In the second or follow-on stage, the ANN prediction module utilizes knowledge variables and ES to predict the change in performance needed for a desired level of improvement. Findings – This combined approach effectively captured the information contained in the industry’s turbulent characteristics, and subsequently demonstrated an adaptive prediction capability. The back propagating neural network successfully predicted the incremental performance targets of DMUs, which translated the desired improvement levels into actionable performance goals, e.g., revenue and operating income. Originality/value – This paper presents an incremental prediction approach that supports better practice benchmarking. This study differentiates itself from previous research by introducing an adaptive prediction method which generates relevant quantity outputs based upon desired improvement levels. The proposed modeling approach integrates performance measurement with a prediction framework and advances benchmarking practices to enable better performance prediction.