The data analytics process has some key components that are needed for any initiative. By combining these components, a successful data analytics initiative will provide a clear picture of where you are, where you have been and where you should go.
- Generally, this process begins with descriptive analytics. This is the process of describing historical trends in data. Descriptive analytics aims to answer the question “what happened?” This often involves measuring traditional indicators such as return on investment (ROI). The indicators used will be different for each industry. Descriptive analytics does not make predictions or directly inform decisions. It focuses on summarizing data in a meaningful and descriptive way.
- The next essential part of data analytics is advanced analytics. This part of data science takes advantage of advanced tools to extract data, make predictions and discover trends. These tools include classical statistics as well as machine learning. Machine learning technologies such as neural networks, natural language processing, sentiment analysis and more enable advanced analytics. This information provides new insight from data. Advanced analytics addresses “what if?” questions.
- The availability of machine learning techniques, massive data sets, and cheap computing power has enabled the use of these techniques in many industries. The collection of big data sets is instrumental in enabling these techniques. Big data analytics enables businesses to draw meaningful conclusions from complex and varied data sources, which has made possible by advances in parallel processing and cheap computational power.
Types of Data Analytics
Data analytics is a broad field. There are four primary types of data analytics: descriptive, diagnostic, predictive and prescriptive analytics. Each type has a different goal and a different place in the data analysis process. These are also the primary data analytics applications in business.
- Descriptive analytics helps answer questions about what happened. These techniques summarize large datasets to describe outcomes to stakeholders. By developing key performance indicators (KPIs,) these strategies can help track successes or failures. Metrics such as return on investment (ROI) are used in many industries. Specialized metrics are developed to track performance in specific industries. This process requires the collection of relevant data, processing of the data, data analysis and data visualization. This process provides essential insight into past performance.
- Diagnostic analytics helps answer questions about why things happened. These techniques supplement more basic descriptive analytics. They take the findings from descriptive analytics and dig deeper to find the cause. The performance indicators are further investigated to discover why they got better or worse. This generally occurs in three steps:
- Identify anomalies in the data. These may be unexpected changes in a metric or a particular market.
- Data that is related to these anomalies is collected.
- Statistical techniques are used to find relationships and trends that explain these anomalies.
- Predictive analytics helps answer questions about what will happen in the future. These techniques use historical data to identify trends and determine if they are likely to recur. Predictive analytical tools provide valuable insight into what may happen in the future and its techniques include a variety of statistical and machine learning techniques, such as: neural networks, decision trees, and regression.
- Prescriptive analytics helps answer questions about what should be done. By using insights from predictive analytics, data-driven decisions can be made. This allows businesses to make informed decisions in the face of uncertainty. Prescriptive analytics techniques rely on machine learning strategies that can find patterns in large datasets. By analyzing past decisions and events, the likelihood of different outcomes can be estimated.
These types of data analytics provide the insight that businesses need to make effective and efficient decisions. Used in combination they provide a well-rounded understanding of a companies needs and opportunities.
What is the Role of Data Analytics?
Data analysts exist at the intersection of information technology, statistics and business. They combine these fields in order to help businesses and organizations succeed. The primary goal of a data analyst is to increase efficiency and improve performance by discovering patterns in data.
What Is Data Analytics?
Data analytics is the science of analyzing raw data in order to make conclusions about that information. Many of the techniques and processes of data analytics have been automated into mechanical processes and algorithms that work over raw data for human consumption.
Data analytics techniques can reveal trends and metrics that would otherwise be lost in the mass of information. This information can then be used to optimize processes to increase the overall efficiency of a business or system.
Understanding Data Analytics
Data analytics is a broad term that encompasses many diverse types of data analysis. Any type of information can be subjected to data analytics techniques to get insight that can be used to improve things.
For example, manufacturing companies often record the runtime, downtime, and work queue for various machines and then analyze the data to better plan the workloads so the machines operate closer to peak capacity.
Data analytics can do much more than point out bottlenecks in production. Gaming companies use data analytics to set reward schedules for players that keep the majority of players active in the game. Content companies use many of the same data analytics to keep you clicking, watching, or re-organizing content to get another view or another click.
The process involved in data analysis involves several different steps:
- The first step is to determine the data requirements or how the data is grouped. Data may be separated by age, demographic, income, or gender. Data values may be numerical or be divided by category.
- The second step in data analytics is the process of collecting it. This can be done through a variety of sources such as computers, online sources, cameras, environmental sources, or through personnel.
- Once the data is collected, it must be organized so it can be analyzed. Organization may take place on a spreadsheet or other form of software that can take statistical data.
- The data is then cleaned up before analysis. This means it is scrubbed and checked to ensure there is no duplication or error, and that it is not incomplete. This step helps correct any errors before it goes on to a data analyst to be analyzed.
[Important: Data analytics focuses on coming to conclusions based on what the analyst already knows.]
- Data analytics is the science of analyzing raw data in order to make conclusions about that information.
- The techniques and processes of data analytics have been automated into mechanical processes and algorithms that work over raw data for human consumption.
- Data analytics help a business optimize its performance.
Why Data Analytics Matters
Data analytics is important because it helps businesses optimize their performances. Implementing it into the business model means companies can help reduce costs by identifying more efficient ways of doing business and by storing large amounts of data.
A company can also use data analytics to make better business decisions and help analyze customer trends and satisfaction, which can lead to new—and better—products and services.
Types of Data Analytics
Data analytics is broken down into four basic types.
- Descriptive analytics describes what has happened over a given period of time. Have the number of views gone up? Are sales stronger this month than last?
- Diagnostic analytics focuses more on why something happened. This involves more diverse data inputs and a bit of hypothesizing. Did the weather affect beer sales? Did that latest marketing campaign impact sales?
- Predictive analytics moves to what is likely going to happen in the near term. What happened to sales the last time we had a hot summer? How many weather models predict a hot summer this year?
- Prescriptive analytics suggests a course of action. If the likelihood of a hot summer is measured as an average of these five weather models is above 58%, we should add an evening shift to the brewery and rent an additional tank to increase output.
Data analytics underpins many quality control systems in the financial world, including the ever-popular Six Sigma program. If you aren’t properly measuring something—whether it’s your weight or the number of defects per million in a production line—it is nearly impossible to optimize it.
Special Considerations: Who’s Using Data Analytics?
Some of the sectors that have adopted the use of data analytics include the travel and hospitality industry, where turnarounds can be quick. This industry can collect customer data and figure out where the problems, if any, lie and how to fix them.
Healthcare combines the use of high volumes of structured and unstructured data and uses data analytics to make quick decisions. Similarly, the retail industry uses copious amounts of data to meet the ever-changing demands of shoppers. The information retailers collect and analyze can help them identify trends, recommend products, and increase profits.