There are many aspects to understanding data analytics, so where does one even get started?
Some may dive right into the programming languages used for analysis, others may look at how analytics are used to solve business problems.
For a simpler starting point, we’ll first explain the types of data being analyzed. Then, we’ll look at the process of data analysis, identify sources where data is collected, break down the different types of analytics, and finish with some trends.
But before we can get into any of the above topics, we first need to define data analytics.
Data analytics is the use of processes and technology, typically some sort of analytics software, to extract valuable insight out of datasets. This insight is then applied in a number of ways depending on the business, its industry, and other unique requirements.
This is important because it helps businesses become data-driven, meaning decisions are supported through the use of data. Data analytics is also helping businesses to predict problems before they occur and map out possible solutions.
While more businesses turn to data analytics to identify gaps, there are still plenty of people who could use some clarification. That’s why we’re starting with the root of data analysis: discerning qualitative data from quantitative data.
Data analytics is comprised of both qualitative and quantitative data. The makeup of these data types is important, considering it’s how it will be analyzed later on. Let’s start with qualitative data.
Qualitative data asks “why,” and consists of characteristics, attributes, labels, and other identifiers. Some examples of how qualitative data is generated include:
Qualitative data is descriptive and non-statistical, as opposed to quantitative data.
Quantitative data asks “how much” or “how many,” and consists of numbers and values. Some examples of how quantitative data is generated include:
Quantitative data is statistical, conclusive, and measurable, making it a more optimal candidate for data analysis.
With a grasp on the two types of data, it’s now time to see why data structures make such a difference as well.
Next, onto structured and unstructured data. How data is structured will determine how it is collected and processed, and which methods will need to be used to extract insight. Let’s start with structured data.
Structured data is most often categorized as quantitative data. It is, as you may have guessed by its name, highly-structured and organized so it can be easily searched in relational databases. Think of spreadsheets and tables.
Some examples of structured data include:
Structured data is generally preferred for data analysis since it’s much easier for machines to digest, as opposed to unstructured data.
Unstructured data actually accounts for more than 80 percent of all data generated today. The downside to this is that unstructured data cannot be collected and processed using conventional tools and methods.
Some examples of unstructured data include:
Making sense of unstructured data isn’t an easy task, but for more predictive and proactive insights, more businesses are looking at ways to deconstruct it.
Now that we know the anatomy of data, it’s time to see the steps businesses have to take to analyze it. This is known as the data analysis process.
The first step in this process is defining a need for analysis. Are sales dwindling? Are production costs soaring? Are customers satisfied with your product? These are questions that will need to be considered.Additionally, it's important to have a data management plan set in place. This will ensure that all the data coming in and out of your system is organized and accounted for. Many businesses rely on a data management platform (DMP) to store all data in one centralized hub.
A business will typically gather structured data from its internal sources, such as CRM software, ERP systems, marketing automation tools, and more. There are also many open data sources to gather external information. For example, accessing finance and economic datasets to locate any patterns or trends.
After you have all the right data, it’s time to sort through and clean any duplicates, anomalous data, and other inconsistencies that could skew the analysis.
Now for the analysis, and there are a number of ways to do so. For example, business intelligence software could generate charts and reports that are easily understood by decision-makers. One could also perform a variety of data mining techniques for deeper analysis. This step depends on the business’ requirements and resources.
The final step is putting analysis into action. How one interprets the results of the analysis is crucial for resolving the business problem brought up in step one. Your results should paint a clear picture of how to move forward. If not, this is the right time to re-evaluate your data analysis method and see where there could be gaps in your process.
Not all analyses are created equal. Each has its level of complexity and depth of insight they reveal. Below are the four types of data analytics you’ll commonly hear about.
Descriptive analytics is introductory, retrospective, and is the first step of identifying “what happened” regarding a business query. For example, this type of analysis may point toward declining website traffic or an uptick in social media engagement. Descriptive analytics is the most common type of business analytics today.
Diagnostic analytics is retrospective as well, although, it identifies “why” something may have occurred. It is a more in-depth, drilled down analytical approach and may apply data mining techniques to provide context to a business query.
Predictive analytics attempts to forecast what is likely to happen next based on historical data. This is a type of advanced analytics, utilizing data mining, machine learning, and predictive modeling.
The usefulness of predictive analytics software transcends many industries. Banks are using it for clearer fraud detection, manufacturers are using it for predictive maintenance, and retailers are using it to identify up-sell opportunities.
Prescriptive analytics is an analysis of extreme complexity, often requiring data scientists with prior knowledge of prescriptive models. Utilizing both historical data and external information, prescriptive analytics could provide calculated next steps a business should take to solve its query.
While every business would love to tap prescriptive analytics, the amount of resources needed is just not feasible for many. Although, there are some analytics trends we can expect to take shape soon.
As data science becomes more commonplace in business, analytics will surely shift from being retrospective to more proactive and predictive. To validate this, we asked 10 industry experts who work with data for their opinions.
Here are some noteworthy highlights:
So, what can you take away from this overview of data analytics?
We know that data can be descriptive and sentimental, or it can be conclusive and numerical. The way data is structured also plays a key role in how it’s analyzed.
When it comes to analysis, there is a general five-step process of defining the need, collecting data, cleaning it, analyzing it, then interpreting it. Depending on the business’ requirements, interpretation can vary immensely.
Then there are four types of data analytics. Some are retrospective, and others are predictive and proactive. The latter will become more commonplace with advances in artificial intelligence, machine learning, statistical modeling, and other data science disciplines.
Ready to tackle the world of big data? Check out our resource that covers how businesses go about deconstructing mountains of data, and why it’s necessary for future innovation.
Devin is a former Content Marketing Specialist at G2, who wrote about data, analytics, and digital marketing. Prior to G2, he helped scale early-stage startups out of Chicago's booming tech scene. Outside of work, he enjoys watching his beloved Cubs, playing baseball, and gaming. (he/him/his)
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