How does the K-Means Algorithm Work?

The working of the K-Means algorithm is explained in the below steps:

Step-1: Select the number K to decide the number of clusters.

Step-2: Select random K points or centroids. (It can be other from the input dataset).

Step-3: Assign each data point to their closest centroid, which will form the
predefined K clusters.

Step-4: Calculate the variance and place a new centroid of each cluster.

Step-5: Repeat the third steps, which means reassign each datapoint to the new
closest centroid of each cluster.

Step-6: If any reassignment occurs, then go to step-4 else go to FINISH.

Step-7: The model is ready.

Let's understand the above steps by considering the visual plots:

Suppose we have two variables M1 and M2. The x-y axis scatter plot of these two
variables is given below:
o Let's take number k of clusters, i.e., K=2, to identify the dataset and to put
them into different clusters. It means here we will try to group these datasets
into two different clusters.
o We need to choose some random k points or centroid to form the cluster.
These points can be either the points from the dataset or any other point. So,
here we are selecting the below two points as k points, which are not the part
of our dataset. Consider the below image:

o Now we will assign each data point of the scatter plot to its closest K-point or
centroid. We will compute it by applying some mathematics that we have
studied to calculate the distance between two points. So, we will draw a
 median between both the centroids. Consider the below image:

From the above image, it is clear that points left side of the line is near to the K1 or
blue centroid, and points to the right of the line are close to the yellow centroid. Let's
color them as blue and yellow for clear visualization.
o As we need to find the closest cluster, so we will repeat the process by
choosing a new centroid. To choose the new centroids, we will compute the
center of gravity of these centroids, and will find new centroids as below:

o Next, we will reassign each datapoint to the new centroid. For this, we will
repeat the same process of finding a median line. The median will be like
 below image:

From the above image, we can see, one yellow point is on the left side of the line,
and two blue points are right to the line. So, these three points will be assigned to
new centroids.
As reassignment has taken place, so we will again go to the step-4, which is finding
new centroids or K-points.

o We will repeat the process by finding the center of gravity of centroids, so the
new centroids will be as shown in the below image:
 o As we got the new centroids so again will draw the median line and reassign
the data points. So, the image will be:

o We can see in the above image; there are no dissimilar data points on either
side of the line, which means our model is formed. Consider the below image:

As our model is ready, so we can now remove the assumed centroids, and the two
final clusters will be as shown in the below image:
How to choose the value of "K number of clusters" in
K-means Clustering?
The performance of the K-means clustering algorithm depends upon highly efficient
clusters that it forms. But choosing the optimal number of clusters is a big task. There
are some different ways to find the optimal number of clusters, but here we are
discussing the most appropriate method to find the number of clusters or value of K.
The method is given below:

Elbow Method
The Elbow method is one of the most popular ways to find the optimal number of
clusters. This method uses the concept of WCSS value. WCSS stands for Within
Cluster Sum of Squares, which defines the total variations within a cluster. The
formula to calculate the value of WCSS (for 3 clusters) is given below:

WCSS= ∑Pi in Cluster1 distance(Pi C1)2 +∑Pi in Cluster2distance(Pi C2)2+∑Pi in

CLuster3 distance(Pi C3)2

In the above formula of WCSS,

∑Pi in Cluster1 distance(Pi C1)2: It is the sum of the square of the distances between each
data point and its centroid within a cluster1 and the same for the other two terms.

To measure the distance between data points and centroid, we can use any method
such as Euclidean distance or Manhattan distance.
To find the optimal value of clusters, the elbow method follows the below steps:

o It executes the K-means clustering on a given dataset for different K values

Since the graph shows the sharp bend, which looks like an elbow, hence it is known
as the elbow method. The graph for the elbow method looks like the below image:

***We can choose the number of clusters equal to the given data points. If we choose
the number of clusters equal to the data points, then the value of WCSS becomes zero,
and that will be the endpoint of the plot.