Overview of data analysis

Completed 100 XP

6 minutes

Before data can be used to tell a story, it must be run through a process that makes it usable in the
story. Data analysis is the process of identifying, cleaning, transforming, and modeling data to
discover meaningful and useful information. The data is then crafted into a story through reports
for analysis to support the critical decision-making process.

As the world becomes more data-driven, storytelling through data analysis is becoming a vital
component and aspect of large and small businesses. It is the reason that organizations continue to
hire data analysts.

Data-driven businesses make decisions based on the story that their data tells, and in today's data-
driven world, data is not being used to its full potential, a challenge that most businesses face. Data
analysis is, and should be, a critical aspect of all organizations to help determine the impact to their
business, including evaluating customer sentiment, performing market and product research, and
identifying trends or other data insights.

While the process of data analysis focuses on the tasks of cleaning, modeling, and visualizing data,
the concept of data analysis and its importance to business should not be understated. To analyze
data, core components of analytics are divided into the following categories:

Descriptive
Diagnostic
Predictive
Prescriptive
Cognitive

Descriptive analytics
Descriptive analytics help answer questions about what has happened based on historical data.
Descriptive analytics techniques summarize large datasets to describe outcomes to stakeholders.

By developing key performance indicators (KPIs), these strategies can help track the success or
failure of key objectives. Metrics such as return on investment (ROI) are used in many industries,
and specialized metrics are developed to track performance in specific industries.

An example of descriptive analytics is generating reports to provide a view of an organization's

Diagnostic analytics
Diagnostic analytics help answer questions about why events happened. Diagnostic analytics
techniques supplement basic descriptive analytics, and they use the findings from descriptive
analytics to discover the cause of these events. Then, performance indicators are further
investigated to discover why these events improved or became worse. Generally, this process
occurs in three steps:

1. Identify anomalies in the data. These anomalies might be unexpected changes in a

2. Collect data that's related to these anomalies.

3. Use statistical techniques to discover relationships and trends that explain these
anomalies.

Predictive analytics
Predictive analytics help answer questions about what will happen in the future. Predictive
analytics techniques use historical data to identify trends and determine if they're likely to recur.
Predictive analytical tools provide valuable insight into what might happen in the future.
Techniques include a variety of statistical and machine learning techniques such as neural
networks, decision trees, and regression.

Prescriptive analytics
Prescriptive analytics help answer questions about which actions should be taken to achieve a goal
or target. By using insights from prescriptive analytics, organizations can make data-driven
decisions. This technique allows businesses to make informed decisions in the face of uncertainty.
Prescriptive analytics techniques rely on machine learning as one of the strategies to find patterns
in large datasets. By analyzing past decisions and events, organizations can estimate the likelihood
of different outcomes.

Cognitive analytics
Cognitive analytics attempt to draw inferences from existing data and patterns, derive conclusions
based on existing knowledge bases, and then add these findings back into the knowledge base for
future inferences, a self-learning feedback loop. Cognitive analytics help you learn what might
happen if circumstances change and determine how you might handle these situations.

Inferences aren't structured queries based on a rules database; rather, they're unstructured
hypotheses that are gathered from several sources and expressed with varying degrees of
confidence. Effective cognitive analytics depend on machine learning algorithms, and will use
several natural language processing concepts to make sense of previously untapped data sources,
such as call center conversation logs and product reviews.

Example
By enabling reporting and data visualizations, a retail business uses descriptive analytics to look at
patterns of purchases from previous years to determine what products might be popular next year.
The company might also look at supporting data to understand why a particular product was
popular and if that trend is continuing, which will help them determine whether to continue
stocking that product.

A business might determine that a certain product was popular over a specific timeframe. Then,
they can use this analysis to determine whether certain marketing efforts or online social activities
contributed to the sales increase.

An underlying facet of data analysis is that a business needs to trust its data. As a practice, the data
analysis process will capture data from trusted sources and shape it into something that is
consumable, meaningful, and easily understood to help with the decision-making process. Data
analysis enables businesses to fully understand their data through data-driven processes and
decisions, allowing them to be confident in their decisions.

As the amount of data grows, so does the need for data analysts. A data analyst knows how to
organize information and distill it into something relevant and comprehensible. A data analyst
knows how to gather the right data and what to do with it, in other words, making sense of the data
in your data overload.