Introduction to

Data Analytics
Introduction to Data Analytics

Table of Contents
Introduction P3

Fundamentals of Data Analytics

P5

Using AI for Data Analysis P8

Managing Data for Analytics P11

Types of Data Analysis P16

Popular Data Analysis Methods P26

Best Practices in Data Analytics P41

Data Visualization and P47

Data Analytics

Closing P50

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Introduction to Data Analytics

Introduction
What is data analytics, and why
is it important?
Data is much more than a collection of numbers.
But if you don’t do anything with it, it’s just
that—a nice collection taking up space on your
hard drive. Instead of filing your data away,
never to be seen again, put it to good use and
analyze your data to help tell the story of your
company’s growth.

Data analytics is a science. It’s the process

of turning raw data into meaningful metrics
companies can use to help make informed
decisions. Think of it this way: the raw data is
trying to tell a story, but it’s jumbled and needs
to be deciphered. That’s what data analytics
does. Data analytics uses tools, algorithms, and
artificial intelligence to identify patterns and
trends over a specific data set.

The goal of data analytics is to answer questions

about possible outcomes. However, identifying
possible outcomes is one of many reasons
companies invest so much time in data analytics.
Depending on your analysis, the data can tell
you things like valuable market insights or if your
company uses its resources efficiently.

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Introduction to Data Analytics

There are many reasons why you should seek to analyze and understand your data.
For one, having a firm grasp of your company’s metrics can help you optimize your
processes and procedures. With optimal strategies, you’re more likely to see a more
significant return on investments and be more efficient.

A second reason? Businesses that succeed are known for taking risks– but they
don’t usually take a chance without having an idea of the outcome. Data analytics
helps lower the dangers of high-stakes decisions by allowing you to review carefully
calculated outcomes.

The results of data analysis can also help with customer retention. Analyzing your
customers’ trends, patterns, and behaviors can help your team better market to those
individuals. When you understand what your customers want according to the data, you
can provide them with precisely what they need.

So, with data analytics, you can uncover your company’s patterns and trends and then
make better, more accurate assumptions, predictions, and conclusions for your team.

Ready to learn how to analyze your data? Let’s take a look at the fundamentals of
data analytics.

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Introduction to Data Analytics

Fundamentals of Data Analytics

Data analytics is a science. Simply put, it is the collection and processing of data to
gain insights and draw conclusions. Data analysis is vital to any business, no matter the
industry, as the insights gained can help support you and your team when making crucial
business decisions.

It’s essential to understand precisely what data is. Most likely, numbers and figures
come to mind when you hear “data.” But it’s so much more than that. Text snippets,
images, and videos are also classified as data. This is important because it means you
have options regarding the type of data you can collect. For example, you can run a text
or sentiment analysis on social media comments to gain insight into your customers’
thoughts and feelings regarding your product or service. In other words, you can count it
as data if it’s trackable.

Numbers, like dollars earned or lost, are essential to understanding how well your
business is doing. However, metrics like customer satisfaction are also valuable to help
you understand what your business is doing right and how you can improve.

Before we continue with how to implement data analytics in your business, we need to
define some useful terms. Use this section as a reference guide.

• Data collection: This is the process of collecting data from various

sources, including but not limited to spreadsheets, social media,
and data sensors.

• Data cleansing: Data cleansing is reviewing raw data to ensure

critical information is not missing. If an essential variable is
missing, that data piece should be removed from the data set.
During the data cleansing process, you’ll also complete data
normalization and data transformation. This means you’re
putting your collected data into usable form for analysis.

• Data storage of Data silos: This refers to the places where your
data is stored. Think hard drives or warehouses.

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Introduction to Data Analytics

• Data ethics: Did you receive prior consent from participants in your data sets?
Do your data collection methods align with government policies like GDPR
and CPPA? It’s essential you can answer “yes” to both these questions before
continuing with your analysis. Otherwise, you could end up in serious legal trouble.

• Sampling: This term refers to a technique and a data set. As a technique,

sampling is done when there is a large data set. You’ll choose a small sample set,
or a sampling, of data for analysis.

• Classification: This is done when you set parameters for your data. You likely
see classification happening throughout your workday. If you have spam filters
turned on for your email inbox, this is classification. Spam filters are great at
detecting spam and separating it from essential emails.

• Clustering: This is the process of grouping data sets together. We’ll talk about
this later.

• Bias and variance: Bias is a term that refers to system errors, while variance
refers to errors that randomly occur. To get the best result from your data
analysis, bias and variance are best balanced.

• Correlation and causation: Describes the events or variables that caused a

specific outcome.

• Overlifting and underfitting: Overlifting occurs when the results of your analysis
match the data sets too closely. While this might not seem bad at first, it is.
It means somehow your training and testing sets combined and created an
error. You’ll need cross-validation to solve this, ensuring your testing data and
training data are separate sets.

Underlifting describes the phenomenon of oversimplifying the data.

This is bad for your analysis because it will only represent part of the picture.

• Machine learning: Machine learning uses algorithms and, now, artificial

intelligence to learn your data, classify it, build models, and make predictions.
Machine learning can automate data analysis, saving your analysts time during
the workday.

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Introduction to Data Analytics

• Deep learning: A subset of machine learning that uses neural networks to

function like the human brain.

• Noise: Corrupt or meaningless data.

As a business, you likely collect data

daily (probably more like every minute!).
The data you collect tells a hidden story
of your company’s performance. But
you’ll never get the full story without
critically examining your data and
understanding what it means.

Data analytics can be a manual process,

and typically, this means a data analyst
spends hours manually crunching data
sets. While there is nothing wrong with
this approach, let’s be honest: we are
human and sometimes make mistakes.
Manual data analysis leaves room for
error, which could change the outcome of
what the data shows.

However, with the rise of new and faster

technology, better algorithms, and the
introduction of AI, data analysis can also
be an automated process. Automated
analysis reduces the chance of human
error and saves your analysts time,
leaving them with more time to do what
they do best— make predictions and
assumptions for your company.

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Introduction to Data Analytics

Using AI for Data Analysis

Any data analyst will tell you that algorithms are essential to their work. Most analysts
will also tell you that using an algorithm to crunch numbers manually takes a significant
amount of time. So, it is no surprise to anyone that artificial intelligence would make its
way into data analytics.

Artificial intelligence, or AI, is more than a trend– a rapidly evolving technology that’s
here to stay. AI is a computer science powered by a machine whose goal is to mimic
human intelligence. This human-like thinking allows the computer to detect patterns,
make predictions, and problem-solve. When introduced to data analytics, AI can help
data analysts quickly and efficiently run analyses on any given dataset.

As more and more businesses attempt to establish themselves as a data-driven

company, it’s a good idea to consider implementing AI into business practices. Although
AI is an intelligent technology, it should not replace your data analysts. Instead, AI is a
valuable tool to help data analysts compile a comprehensive overview of your company's
processes and metrics. Think of AI as a secret weapon. It can help your business stand
out amongst the competition and help you and your team better understand the markets
and your customers.

Applications of AI techniques in data analysis

There are several reasons to use AI in your business practices, particularly for data
analytics. Data analytics uses your business’s data to tell your company’s story. AI,
though, helps tell the complete data-driven story, allowing you and your team to
understand better what happened, why it happened, what’s happening, what’s likely to
happen, and what could happen.

AI can be applied to help:

• Provide and explore insights • Forecast demand

• Create datasets for training • Make informed decisions
purposes • Improve production
• Create dashboards and reports and efficiency
• Predict market outcomes • Monitor business performance
• Understand markets and
customer behaviors

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Introduction to Data Analytics

Artificial intelligence lends an extremely helping hand when attempting to make

predictions with your data. We’ll talk more about this type of analysis later, but predictive
analysis and the above list aren’t an exhaustive list of the uses of AI. Artificial intelligence
can help you and your team with data analytics in hundreds of different ways. Before
you jump into implementing AI into your process, let's look at some of the benefits and
challenges of AI.

Benefits and challenges of incorporating AI in data analytics

You might think AI is not for you or your company. And you might be right. However, it
makes your data analyst’s job easier, primarily if your company collects large amounts of
data, and it’s worth considering this technology.

One of the reasons a company chooses to implement data analytics into its processes
is to help them make decisions. Without AI, this responsibility lies solely on the analyst
to look at the data, compute the numbers, and present the options. With large datasets,
this can be challenging and time-consuming. There’s always the chance that a formula is
miscalculated or an essential piece of data is missing.

AI helps alleviate those problems. Artificial intelligence can quickly parse immense
volumes of data. This dramatically improves the accuracy and efficiency of data review,
leaving your analysts with more time to review results and consider what the data says.
AI can help with decision-making, too, as it can easily predict outcomes depending on
the analysis and model you choose. Those are just some of the benefits for your analysts.
Let’s not forget about your customers. AI technologies can help learn customer data and
predict products and services your customers will like based on past purchases.

AI can be a fantastic tool for your business operations. However, there are a few
drawbacks. AI and its algorithms are only as good as your datasets, meaning insufficient
data will lead to inaccurate results. You and your team will need to ensure your data is
ready for your applications, which could take significant time. AI is also not great at
detecting bias in a dataset, so you must ensure your data accurately represents
your customers.

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Introduction to Data Analytics

Because AI is an ever-changing technology, you’ll need to ensure your teams continually

keep up with trends, understand the complex algorithms, and are trained for the
technology. AI will also require your company to work across departments, as you’ll need
to team up with your analytics team, your IT team, your infrastructure team, and any
others who play an integral role in data collection and storage. AI can be costly, but its
benefits greatly outweigh its cons.

With the help of AI, data analytics is a smart investment for any company, big or small.
But before you decide to run any kind of analysis, you should consider several important
factors, like which kind of analysis to run on your data. There are various types of data
analysis to help you discover the big picture of your company.

Let’s take a look at them.

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Introduction to Data Analytics

Managing Data for Analytics

Before you can begin analyzing data, you must collect it. Because data can come from
anywhere, your business is likely generating data every minute of the day. However,
data collection becomes a problem if you do not have the proper management tools
and systems. That’s why you need to implement data management into your business
operations. Data management is a critical part of data analytics.

Data management is data collection, organization, processing, and storage. Normally,

data is managed by a data management team that consists of IT professionals, data
scientists, and data administrators. It’s important to create a team of professionals
responsible for data management. The role of this team is to ensure the data collection
methods comply with governing policies, like GDPR (or General Data Protection
Regulations). They also determine how your data is defined and stored, and they help
monitor the integrity of data and conduct any necessary security updates, data recovery,
backups, and software installations.

You’ll likely need to assign a member of each department as a data manager, too, but
they’ll work to maintain data on a smaller scale. This person can access the necessary
data relevant to their department. They’ll also be able to work closely with the data
management to become their department’s point of contact for anything data-related.

Let’s take a moment to look at the necessary components of data management to

ensure your data quality is top-notch and ready for analysis.

Sources of data collection

It’s helpful to think of data as a life cycle. The first step of the cycle is data generation.
Data is generated from various sources, and each source may have relevance to your
business operations. There are three main types of data sources: first-party sources,
second-party sources, and third-party sources.

First-party sources are sources of information that your company generates itself. These
are sources of data where the data relates directly to your business operations. Social
media interactions, transactions and receipts, observations, cookies, and customer
survey results are considered first-party sources. Each source relates directly to your
business and how your customers interact with your websites, products, and services.

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Introduction to Data Analytics

Second-party sources are necessary

data, too. Although this is not data your
company generates, it’s likely data other
businesses in your field generate that
can be useful. Secondary sources include
published interviews, online databases,
and government or institutional
records. This data is likely in the public
domain, and you can use it to train your
algorithms before you test your data.

The last source of important data is

called third-party data. Third-party data
is collected from sources outside of your
organization and, sometimes, industry.
Normally, this data is bought, sold, or
rented. Be wary of the validity of this
data, though, because it may not have
been collected according to government
and industry standards. You’ll need to
ensure the data is trustworthy before you
use it for any reason.

Reprocessing and data quality assurance

Once your data has been identified and collected, you or your data scientist should
spend some time preprocessing it. Raw data, or the data you’ve collected directly from
your sources, is not usually in a usable or readable form. It must be translated into a
language your data storage system can understand. Plus, raw data likely contains errors
or missing information. Data cleansing is an important part of data quality assurance.
It’s okay to throw out data that is missing or incomplete. Leaving flawed data in the
dataset can cause significant issues and skewed results later.

Be sure to keep a watchful eye on the data pipeline, too. If you notice a large number
of insignificant data, it could be that something in the data pipeline is broken, causing
data points to be left out or corrupted before reaching their destination. If something is
broken, you should fix it as soon as possible to ensure the quality of your data.

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Introduction to Data Analytics

Data quality assurance also includes validation. This means you should
continually be aware of collection methods to ensure they always comply with
data policies and rules. If not, unethical or illegal collection methods can land
your business in hot water with the federal government.

After the data has been assured for quality, preprocessed, and translated,
the next step is to input the data into the data management system. How
you store and organize your data is a key determining factor of what you
can do with it later on. So, if you haven’t already built or implemented a data
management system, pay particular attention to the next section. In the next
section, we’ll cover the different types of data storage and how your storage
methods can determine your analysis methods.

Data storage and organization

When thinking about data storage and organization, it’s helpful to imagine
a building. To construct the building, you first need software and a
database. The database is the foundation of your building that allows for
the construction of rooms. Inside each of these rooms, there is a place to
store your data. Some rooms may be standard columns for numerical data,
others may be components of graphs, and some rooms might be pools of
unorganized raw data, like text, images, or sounds. When it’s time to analyze
something, you will just go to the particular room, extract the data, and send
it for analysis. This is a simplified version of data storage. However, it provides
a decent visual of your data infrastructure and how it functions.

There are two main types of databases we need to discuss. Those are SQL
and NoSQL databases. An SQL database is a structured, relational database
that requires data to be translated into a readable language. This means the
data is stored and organized in a table or connected tables. This database
allows for easy analysis and modeling because the data is likely already
translated to a language an algorithm can read.

SQL databases are popular amongst data scientists because they follow the
ACID criteria well. Each acronym letter describes four criteria components
necessary for data integrity about how data moves throughout the system.
Let’s define ACID before we continue:

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Introduction to Data Analytics

1) Atomicity: 3) Isolation:
This term describes data transactions. Data scientists can quickly encounter
It means that each transaction of a problems if multiple data transactions
dataset is counted as its transaction. If, coincide. Isolation ensures
for some reason, the transaction fails, it transactions do not interfere with one
is not applied to the data. Instead, the another.
data is reverted to its original state.

2) Consistency: 4) Durability:
This property ensures that transactions Durability refers to the security of
remain consistent across the database. a transaction. In other words, once
It also maintains data integrity and changes are made to a database
ensures the absence of data corruption. during a transaction, those changes
are permanent and stored in the
database.

Data stored in SQL databases is normally stored in a data warehouse. Data

warehouses organize data into neat boxes, making queries easy. These boxes also
determine the type of analysis you can run because it mostly collects historical data.

NoSQL databases are slightly different from SQL databases and have different
purposes.. For some datasets, a structured database is not the best choice of storage
and can’t be immediately organized. That’s where NoSQL databases come into play.
NoSQL databases lack defined boundaries, models, and schemas. This means that
data can be stored in large pools on the framework. These large pools are called data
lakes. If you plan to run predictive analytics using AI technologies, particularly machine
learning or deep learning, data lakes are imperative because they can manage a
continuous data stream.

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Introduction to Data Analytics

Let’s say, though, that the data you

collect can be stored in both a data
warehouse and a lake. Instead of building
two separate data management systems,
you can combine your storage options
and use what is known as a data lake
house. Data lake houses are flexible, rigid
when needed, can be easily queried, and
allow for scalability.

The type of data storage system you

implement directly determines the types
of data analytics you can perform.
Static datasets, or data in a data
warehouse, are perfect for exploratory
and descriptive data analytics, while data
stored in a lake is necessary for predictive
analytics.

Let’s look at each type of analysis to

understand better what each one can tell
you about datasets.

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Introduction to Data Analytics

Types of Data Analysis

The term “data analytics” is broadly used to describe the process of data collection and
analysis. Analyzing data can help you look at the “here and now,” but it is also helpful to
understand why your business is where it is today, how it got there, and where it’s going.

The answers to “what happened?”, “Why did it happen?”, “What will happen?” and “What
should we do?” are not all answered by the same type of analysis, though. That’s why
there are various types of data analysis, and it’s essential to choose the correct type of
analysis before you begin answering any of your questions or making predictions.

Let’s first look at exploratory data analysis.

Exploratory data analysis

Let’s pretend you have a complete data set and have no idea where to start with data
analytics. Before you do anything else with your data, like putting it in an algorithm for
forecasting or projections, you need to make sense of it. That’s where exploratory data
analysis comes in. Simply put, exploratory data analysis means looking at the data to
search for patterns and trends.

Exploratory data analysis was developed in 1977 by mathematician John Tukey to

identify dominant characteristics in a data set. If you think of data analytics as a series
of steps, exploratory data analysis is always the first step, no matter which type of
analysis you plan to complete next.

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Introduction to Data Analytics

There are two main parts of exploratory data

analysis: collecting data and visualizing it. During
the data collection phase, you’ll need to gather
your data, review it, and clean it to ensure it’s
usable. Data cleansing might mean you must throw
out some pieces of data entirely because they are
incomplete. Doing so will help ensure you have
good data. Good, clean data will give you the most
accurate analysis results.

Once your data is in a usable format, it’s time to

sort and visualize it. Data visualization refers to
organizing your data in a way that makes it easy
to see and understand. Think of bar graphs and pie
charts. These are easy ways to understand what
the data says quickly.

Let’s use an example, though, of how to visualize

data and what you can gain from exploratory data
analysis. Let’s pretend you have the ages of your
customers and you want to create a customer
persona. Before creating customer personas, you’ll
need information about your current customers to
create an “average customer.” This is why collecting
customer data is essential— to help better market
to your client base in the future.

Let’s say you’ve collected the ages of twenty of

your customers. To get a quick view of the ages of
your clients, you’ll first want to organize the ages
from oldest to youngest. Then, draw a graph or use
the Excel or Google Sheets software to create a bar
graph or scatter plot. These graphs will give you a
better idea of your customers’ ages than looking at
a list of out-of-order numbers.

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Introduction to Data Analytics

Data visualization can help you determine other essential information, too, like the
mean, median, mode, and range of your data set. The mean of a data set refers to the
average of your data. So, to find the mean, you’ll add the data set together and divide
the number by the total number of data points. The value you calculate represents the
average of your data set, or for the example of customers’ ages, the average age of
customers who purchase your products.

You can determine the median of the data set by putting your variables in order from
least to greatest. The median is the value directly in the middle of the data set.

The mode simply refers to the value that is the most common. Continuing with the
customers’ age example, if twelve of twenty customers are 26 years old and the other
eight vary in age, then 26 is the mode because it is the most common value.

Mean, median, and mode all describe the middle of the data set, but in different ways.
The range, however, represents the span between the lowest and highest values. You can
easily find the range of a data set by subtracting the lowest value from the highest.

Understanding the mean, median, mode, and range of your data set is helpful, as it will
provide the basis for what your company can and should expect. However, this is not the
only information you can gather through exploratory data analysis. You’ll want to look
at the outliers or data points that don’t necessarily align with the rest and calculate the
standard deviation to determine how much your data points differ from the average. This
is helpful because it will give you a solid understanding of your client base in the case of
the age example.
Beauty Products Sales Order Analysis

4.95k

3.96k
No. of Orders

2.97k

1.98k

989

Powder Lipstick Foundation Mascara Rouge

Image Source

18
Introduction to Data Analytics

Smarphones
15.19%

Accessories Smart Watches

37.97% 8.86%
Unit Sold
by product
category
Headsets
12.66%

Laptops
LCD
7.59%
17.72%

United States ($1.20M)

Canada ($750k)

UK ($500k)

Budget Australia ($240k)

Consumption

Image Source

Looking at and graphing your data set for exploratory data analysis can also help
understand correlation and causation. Studying the correlation and causation of your
data set can help you understand which variables need to be in place for something else
to occur. For example, if you are looking at data related to new customer subscriptions,
you might notice more signups due to a one-day sale.

If exploratory data analysis is completed correctly, you’ll likely have more questions than
answers. Use the results of your exploratory data analysis to help form hypotheses for
further analysis of your data.

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Introduction to Data Analytics

Descriptive data analysis

If exploratory data analysis is the first step of data analytics, descriptive data analysis
is the second. If you’ve been in business for any length of time, you’ve seen the results of
descriptive analytics in actions. Year-over-year increases and month-to-month revenue
changes are examples of descriptive analysis results.

Descriptive analysis aims to answer the question, “What happened?” This kind of
analysis is helpful because it uncovers patterns and trends hidden in historical data. It’s
important to note that results from this kind of analysis should not be used to predict
future outcomes (predictions and forecasts are made in a different type of analysis that
we’ll cover later). Instead, descriptive analysis is designed to help make sense of past
operations so we can understand current business operation models.

When conducting descriptive analysis, it is necessary to complete all of the same steps
that you would do for exploratory data analysis. (Do you see why exploratory data
analysis is the first step? It’s the foundation of data analytics!) You’ll need to take the
necessary steps to gather your data from internal or external sources and clean it to
ensure it is usable. However, before you visualize your data, take a moment to explore it.

Data exploration is a vital step of descriptive analysis. This is part of the process where
you will plug your data into a spreadsheet (if it’s not already in one), run statistical
equations, or review it for its apparent characteristics, like trends or patterns. It’s helpful
to use tools, like artificial intelligence or built-in software for your spreadsheet, to help
you analyze your data. Then, when you have a solid understanding of the data, you can
visualize it, summarize it, and present your findings to your team. Hopefully, with your
team members’ input, you can begin to interpret what the data is telling you.

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Introduction to Data Analytics

Relationship between library visits and movie theater visits

25

20
Library visits

15

10

5 10 15 20

Movie theater visits

Image Source

With the various tools available, descriptive data analysis is a simple process. If you’ve
taken the time to ensure your data is good, your analysis’s results should accurately
describe your business’s past metrics. Descriptive data analysis is helpful, too, because
you can keep track of key performance indicators or KPIs.

The downside to descriptive data analytics is that it does not answer “why?” It just
describes what has happened. However, you can use the results to understand what and
what is not working for your company. Many stakeholders use the results of descriptive
data analytics to help determine what to do with their investments in your company, as
this kind of analysis is known to reveal red or green flags. This could be problematic if you
have slightly less-than-perfect numbers and skittish stakeholders.

Don’t let the stakeholder’s interest dissuade you from conducting descriptive data
analysis– this analysis is necessary for any business. It is helpful to know and understand
metrics like year-on-year growth, sales revenue and income reporting, shipping logistics,
and sales trends. You’ve likely seen descriptive analytics in action, too, in other ways.
Think social media engagement reporting and web traffic analysis. These are all data
points you can gather from descriptive analytics to help you understand what variables
were in place for your current business operations to exist.

If you want to use data analytics to get an idea of potential data projections and
forecasts, you’ll want to implement predictive data analysis. Let’s take a look at it now.

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Introduction to Data Analytics

Predictive data analysis

Predictive data analysis is an advanced technology that uses data, algorithms, machine
learning, and deep learning to study a data set and predict future events or outcomes
based on historical data. Weather forecasters use predictive analytics regularly to help
forecast storms and their projected paths. If you’ve ever wondered if you can use the
same technology for your company, the answer is a resounding yes.

Before we get into how to use predictive analytics and its benefits, let’s take a minute to
review machine learning and deep learning. Machine learning is an artificial intelligence
technology that uses algorithms and models to make predictions based on the collected
data. Depending on the type of machine learning you use, you may need to program
certain algorithms for your specific data set. Some machine learning technologies do not
need to be programmed and can run as is.

Deep learning is a machine learning type that processes data similarly to how a human
brain processes information. This type of learning uses neural networks, or connected
neurons that resemble the brain, to recognize complicated patterns and trends that
might have been missed during descriptive data analysis. Deep learning can review text,
pictures, video, or sounds to make predictions and provide valuable insight.

Think of predictive data analysis as a crystal ball. It combines machine learning and
deep learning to analyze patterns and trends in a data set, allowing you and your team
to gain insight into potential outcomes if you change or manipulate variables.

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Introduction to Data Analytics

Image Source

It’s important to understand that you shouldn’t feed data directly into the algorithm
without cleaning it. Missing information can have a significant outcome on the
accuracy of your predictions. You wouldn’t want to use predictions made on misleading
information as it could negatively impact your business, defeating the whole purpose of
using predictive analytics in the first place.

Data fed into algorithms for predictive analysis must also be separated into two
groups: a testing group and a training group. The testing group should contain as much
information about your data set as possible.

For example, let’s say you own a restaurant and notice a slight uptick in soup sales
Gabby
on cloudy or Gomez,
rainy days. Because this is purely anecdotal, you want to be sure of your
Inbound
findings Success
and decide to use predictive data analytics to estimate future sales. To do this,
Coach,provide
you should HubSpotthe algorithm with the number of bowls of soup sold and the weather
conditions for a set time, including sunny and cloudy or rainy days. Because you already
know how many bowls of soup were sold on cloudy days, you should be able to run the
analysis on the training set and compare results with your true historical data.

23
Introduction to Data Analytics

Once the algorithm is trained on your data, you can feed new data into the algorithm,
like the following week’s weather forecast, and get an idea of how many bowls of soup
you might sell in the next week. This lowers the risk of making extra soup that doesn’t sell
because now you have a fairly accurate prediction of projected sales based on your
past numbers.

Lowering and mitigating risks is just one example of how predictive data analysis can
help your business. Predictive data analysis can do much more than just project potential
sales; it works best with real-time data. Many companies use this kind of analysis for
customer retention. Predictive data analysis can help pinpoint potential churn when
run with real-time data. With the analysis results, you and your team can take the
appropriate measures to stop churn before customers reach that point.

If you are an ecommerce business, predictive analytics can help you recommend
new products or services to your customers. Simply provide the algorithm with your
customers’ past behaviors and purchases. The algorithm will match your clients to
products or services based on what other customers with similar behaviors bought in
the past. It can also help prevent fraud by detecting suspicious user activity in your
operation systems, thus keeping your data secure.

While predictive data analysis is suitable for forecasting, using the results to change your
business operations is always a risk because there is a chance variables could change, or
an unexpected hiccup could occur. Prescriptive data analytics considers all the likelihood
of variables changing and can help make the best recommendations based on your data.

Prescriptive data analysis

If you’ve ever wanted someone to help you make a business decision, you need to
consider using prescriptive data analysis. Unlike predictive analytics, which answers the
question “what could happen?” prescriptive data analytics helps you understand what
you should do and the outcomes you would face if you followed its recommendation.
Prescriptive data analytics is the most advanced stage of data analytics, helping you
take the guesswork out of your decisions.

Prescriptive data analytics is complex. First, you’ll need to define the question you want
to understand. Then, you’ll need to link the AI-powered algorithm with your data storage
system. This kind of analysis requires continuous historical, real-time, and internal and
external data to give you the most accurate outcomes.

24
Introduction to Data Analytics

And unless you are comfortable building

your own models, you’ll likely need an
analyst or a technician with AI and
algorithm experience to get your models up
and running. This person can also nail down
any necessary tweaks before deploying
any models.

Could a human sift through the data and

help you decide what to do? Theoretically,
sure. But with large, never-ending data sets,
your analyst will waste time sifting through
data, potentially miss something important,
and give biased recommendations.

Prescriptive analytics removes human bias

and the temptation to make decisions
based on human intuition. The results of
prescriptive data analysis take all potential
scenarios based on all relevant variables
into consideration and offer the best
recommendations and potential outcomes,
even the worst-case scenarios. This is
helpful because it gives you ample time
to create a contingency plan to combat
adverse outcomes.

Decision support and decision automation

are two of the most significant benefits
of prescriptive data analysis. While the
results of prescriptive analytics are backed
by research and data, you should always
have a human review of the results before
implementing any of the recommendations.
As brilliant as artificial intelligence is, it
does not outweigh the opinions of those
running the business.

25
Introduction to Data Analytics

Popular Data Analysis Methods

No matter which type of analysis you choose for your data, you must analyze the
results to understand them. There are four popular data analysis methods to help you
understand and make sense of your analysis results.

Regression analysis

Regression analysis is a statistical model that depicts the relationship between two
variables, an independent variable, and a dependent variable. Regression analysis
models are often considered the “go-to method” for data analytics because they explain
the relationship between the dependent and independent variables. Plus, we can use it to
predict future sales based on our historical data.

Regression analysis models give you an idea of what’s happening to reduce the likelihood
of assumption. It’s essential that you choose independent variables that matter;
otherwise, your models will be filled with insignificant data points. So, be as specific as
possible when determining your independent variables.

The mathematical equation that best represents regression analysis is

Let’s define what each of those symbols means:

Y: the dependent variable that you want to predict
X: the independent variable, or the known variable
Β₀: the intercept value, or the value of Y when X is 0
Β₁: the coefficient of the X variable
ε: The error term, or how much error you should expect in your data

This looks like a lot of math and if math isn’t your strong suit, don’t worry. That’s why
you’ve hired data analysts and used statistical programs. It’s helpful to understand these
terms, though, as it will give you a better understanding of model predictions. Let’s look at
a real-world example to understand better the equation and how to graph the data.

26
Introduction to Data Analytics

Let’s look at the soup sales again. Except this time, as a business owner, you want to
explore if the time of day impacts the number of soup sales. You love to have a bowl of
soup at lunch, and you want to assume that your customers do, too. However, you paid
attention in stats class and know you should never assume without looking at the
data first.

So, you first collect several weeks’ worth of data and track the number of soup sales
throughout the day. For example, one particular day, you might find that you do not sell
any soup the first hour your restaurant is open. But, in the fifth hour, you sell two bowls
of soup. Track this data across several weeks before running a regression analysis model.
As always, the most accurate data will produce the best results. Bad data will lead to an
inaccurate analysis.

In this example, the number of soup sales is the dependent variable (or Y). It’s called the
dependent variable because it depends on the value of the independent variable (or X),
which is the time of day.

25

20

15
Y

10

0
2 4 6 8 10

-5 X

Image Source

27
Introduction to Data Analytics

Armed with weeks worth of historical data, including soup sales and the time of day, you
should plot those points on a graph. The graph’s x-axis, or the horizontal axis, represents
the number of soup sales, and the y-axis represents the time of day.

Now that you have a visual representation of your sales look to see if there is a linear
pattern in your data. This graph shows a positive relationship between the time of
day and soup sales. Your data analyst or the program you’re using can determine the
regression line. The regression line shows the line of best fit for your data. It’s important
to remember that there may be a small chance of error in the regression line. The error
term mentioned above acts as an extra layer of insurance for estimating sales. The
smaller the error term, the more you can rely on the accuracy of the estimation.

Linear regression models, like the one pictured above, are among the most common
regression analysis models. But if a linear regression model doesn’t seem to represent
your data fully, there are other types of models to run. Those are:

Nonlinear regression Polynomial

models: regression models:
These models do not depict a clear This model represents the relationship
relationship between independent between independent and dependent
and dependent variables. variables that are not necessarily
linear. Instead, other equations,
like the quadratic formula or
Multiple regression models: cubic equation, best fit the line of
These models are just like linear regression.
regression models; instead of focusing
on one independent variable, multiple
independent variables are added to
Logistic regression models:
the graph. This makes it easier to see If your dependent variables are binary,
the impact of independent variables on meaning other “yes or no” or “0 or
your dependent variable. 1”, a logistic regression model is the
best model to fit your data. It helps
explain the probability of something
occurring based on certain factors, or
independent variables.

28
Introduction to Data Analytics

There are a few important things we must consider when it comes to regression analysis
models. The first is that correlation does not always mean causation. In the example of
the soup sales, the time of day does not always determine the number of soup sales.
Although the time of day definitely influences when customers are most likely to have
soup, you also have to consider the hunger levels of customers and the type of soup you
are offering that day.

The second thing to remember is that you should be as specific as possible when
choosing your independent variables. Too broad of an independent variable will result
in inconsistent or useless results. The more accurate the data is, the better chance of an
accurate regression analysis.

Cluster analysis
The cluster analysis method, or clustering, involves grouping data points based on
similarities. This means that your data set might not have any target values, but with the
help of algorithms, you can sort your data into groups that make sense.

It’s helpful to think of a

box of used crayons to 1
understand how clustering 0.9
works. Each crayon is a
different color; some may 0.8
be broken, others half-used,
or some brand new. The 0.7
point is no two crayons are 0.6
the same. To group these
crayons, you might decide 0.5
to sort them by colors,
meaning every shade of 0.4
green, including forest 0.3
green, lime green, and
yellow-green, go into the 0.2
same pile. Or, you could sort
them based on their use, so 0.1
you’ll have a cluster of new
0
crayons, used and
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
broken crayons.
Image Source

29
 Introduction to Data Analytics

The same concept can be applied to your data sets. However, instead of manually sorting
your data to look for often hidden similarities, following various cluster models and using
the accompanying algorithm is helpful.

There are six different methods of clustering. Let’s take a look at each of them and
their algorithm.

Connectivity-based clustering
Connectivity-based clustering, also known as hierarchical clustering, centers around the
idea that each piece of data is connected to its neighbor based on its relationship, or
proximal distance, to its neighbor. If you use an algorithm to compute a connectivity-
based cluster, your results will be shown in a dendrogram.

10
Height

0
Alabama

Louisiana

Georgia

Tennessee
North Carolina
Mississippi

South Carolina

Texas

Illinois

New York
Florida
Arizona
Michigan
Maryland

New Mexico

Alaska
Colorado

California

Nevada
South Dakota

West Virginia
North Dakota

Vermont
Idaho

Montana

Nebraska
Minnesota

Wisonsin
Maine

Iowa

New Hampshire

Virginia
Wyoming

Arkansas

Kentucky
Delaware

Massachusetts

New Jersey

Connecticut

Rhode Island
Missouri

Oregon
Washington

Oklahoma

Indiana

Kansas

Ohio

Pennsylvania
Hawaii

Utah

Image Source

Looking at the above example, you’ll notice that the overall data is split into several
different groups. Each data point within the group is then divided into another similar
subgroup. The x-axis describes the clusters that do not merge, while the y-axis
represents the distance between each cluster.

The rule of thumb for connectivity-based clustering is that if the data is similar to an
established cluster, it is sorted into that group. If dissimilar, it goes elsewhere or farther
away from the established cluster and can form its cluster if needed.

30
Introduction to Data Analytics

There are two main approaches to connectivity-based clustering: divisive and

agglomerative approaches. The divisive approach filters data from the top down. This
means all data is filed into one cluster and sorted into smaller clusters based on specific
termination criteria. Agglomerative approaches, on the other hand, assume each data
point is an individual cluster. Once the data is established as an individual, it is grouped
into a cluster it most closely resembles. In other words, it sorts data from the bottom up.

The algorithm you should use for this kind of clustering is called the BIRCH algorithm, or
Balanced Iterative Reducing and Clustering Using Hierarchies. Running this algorithm
is quick and efficient and works best with large data sets. Unlike other algorithms we’ll
discuss later, this algorithm only makes one pass through the data and needs a few set
parameters to run well. Before running the algorithm, define the CF tree and its threshold.
A CF tree consists of each subgroup or leaf cluster, and each leaf cluster can only get
as big as the threshold allows. A new leaf is formed once the threshold reaches the
maximum number of data points.

Centroid Clustering

The Centroid Clustering method is the easiest of all clustering methods, making it the
most commonly used clustering technique. The most difficult part of this clustering
model is choosing the number of clusters, or k, you want your data set divided into and
assigning those clusters a vector value. Vectr value simply refers to a collection of values
within a group. After those parameters are set, your data is sorted into the given set of
clusters based on how closely it matches the vector value.

Ideal Clustering

-2

-4

-4 -2 0 2 4 6 8 10
Image Source
31
Introduction to Data Analytics

This clustering method relies heavily on the K-means clustering algorithm. This algorithm
sorts data into groups according to the predefined k-cluster. Each time the algorithm is
run, the center value, or the centroid, of k may change. The algorithm is run enough times
so that an optimal k is discovered. Optimal k values should be the average of all of the
centroid points.

Density-based Clustering

Unlike other clustering models, density-based clustering considers density concentration

over the distance between points. These models look noticeably different as they pair
data points into areas of high or low concentration. This model also considers that all
data sets will contain noise and outliers. Instead of throwing the noise and outliers out,
they are plotted in the model and recognized as low-concentration areas. And, unlike
other types of modeling, it does not conform to a certain geometrical shape. The data
determines the shape of the graph.

Outliers are not

included in any cluster

OUTLIER

DBSCAN

Image Source

DBSCAN, or Density-based Spatial Clustering of Applications with Noise, is the most

efficient algorithm to use with this model. This algorithm can find hidden similarities
within data sets. Unlike the BIRCH algorithm, which is a “one and done” kind of
algorithm, this algorithm combs the data set until each piece of data is correctly
classified as a cluster or noise.

32
Introduction to Data Analytics

Distribution-Based Clustering
The distribution-based clustering model takes an entirely different approach to clustering
compared to the previous models we have discussed. This model categorizes data into
groups based on the likelihood of a piece of data belonging to that group. Distribution-
based clustering works if there are predetermined central points. Once those points are
identified, it is put into that cluster if the data looks like it might belong.

100

80
Waiting

60

40

1 2 3 4 5

Duration

Image Source

There are several algorithms that deal with distribution-based clustering, including
K-means clustering and the DBSCAN.

33
Introduction to Data Analytics

Fuzzy Clustering
What do you do if your dataset can be classified into multiple clusters? That’s where
fuzzy clustering comes in. Fuzzy clustering describes a model where data points are
categorized first based on similarities to the central point. On the second test run, data
that has not yet been categorized is grouped based on the probability of belonging.

Random points classified according to known centers

100
series 0
series 1
series 2
8

0
0 2 4 6 8 10
Image Source

The most popular algorithm associated with fuzzy clustering is called the Fuzzy C-Means
algorithm. This algorithm assigns each data point a membership value representing the
standard deviation from the central value of the cluster.

34
Introduction to Data Analytics

Constraint-based Clustering
Algorithms and clustering methods are great for helping your analysts identify hidden
patterns within a data set. However, there are times when your analysts might already
expect how the data should be sorted. In these cases, the constraint-based clustering
model works best. This model allows the analyst to set parameters for the data, including
the number of clusters, the number of allowed data points in the cluster, and its
allowed dimensions.

Cannot link
Must link

Image Source

Several algorithms work for constraint-based clustering. It’s important to note that the
algorithms mentioned in this section are not an exhaustive list of possible algorithms,
and various algorithms work for multiple types of data modeling. If you use any software
to help plot your data, your software will likely suggest programmed algorithms to help
you best sort your data points, making it much more efficient for your analysts.

35
Introduction to Data Analytics

Decision tree analysis

While seeking answers in a crystal ball is, unfortunately, fiction, with
the help of software, you can use decision tree models to manipulate
your data to help you find answers and outcomes. These models use
supervised machine learning to compute numerical or categorical data
to outline all possible options and their outcomes, meaning you have
the best shot of taking the most appropriate course of action for your
business based on your data.

“supervised machine learning” means the model needs to be trained

and tested on your data. Based on the outcomes of the training set,
the algorithm can make predictions based on the rest of your data. It’s
important to note that these models do not tolerate large sets of data
well, and outliers and noise can throw off the outcomes. While you do
not necessarily need to clean your data first, you might want to look it
over and throw out missing or incorrect data. This will help produce more
accurate results later on.

Simply put, a decision tree model consists of one question that points to
multiple options. Normally, the questions have binary answers, like yes or
no. As you move further down the tree, more questions and options may
present themselves. The beauty of a decision tree is you can weigh all of
the outcomes against the risks and rewards.

There are two decision tree types: categorical variable decision trees and
continuous variable decision trees. A categorical variable decision tree
is a simple model. It categorizes data based on the question provided.
Continuous variable decision trees, though, do not always provide a
simple answer. These models are called regression trees because the
outcome depends on previous and sometimes multiple variables.

36
Introduction to Data Analytics

Like a living tree, you can cut out branches of your decision tree based on inaccurate
data (like noise or outliers). Decision trees are easy to understand, but large data sets
can quickly become complicated. Therefore, you must ensure an appropriate sample
size before running a decision tree model on your data.

Decision Tree

End
Decision 1
Node

Chance
Node
End
n1 Decision 2 Node
c isio
De
Decision Node
De
cis
io
n
2

Chance End
Node Decision 3 Node

Image Source

Decision tree models are great for evaluating business outcomes, and you can also
employ them in your systems to help suggest customer recommendations.

37
Introduction to Data Analytics

Time series analysis

Time series analysis, as the name suggests, is an analytical technique used to understand
data collected over a series of specific intervals. Many data analysts run time series
analyses to detect and understand how time affects seasonality. This kind of analysis is
also helpful to identify patterns, trends, and behaviors and make forecasted predictions.

This analytical method assumes that time is an independent variable and all other
variables, regardless of what they are, depend upon the continuation of time. Large
amounts of data are collected over a series of evenly spaced intervals to get the most
accurate results from this kind of analysis. The massive volume of data helps to ensure
the consistency and reliability of your results, and it also cuts through noise and ensures
any detected trends or patterns are not influenced by outliers.

Time series data analysis is a simplistic idea that can quickly become complicated,
depending on how you want to run your data and the metrics you are looking for in your
dataset. This type of analysis is broken into two important classifications: stock time
series data and flow time series data. Think of stock time series data as a snapshot
of the collected data. The data within that snapshot is measured and assessed for its
patterns and trends. While stock time series data is only one period, flow time series data
refers to a continuous data flow over a predetermined time.

0.8
HadCRU
0.6

Global Temperature Anomaly (°C)

GISTEMP
NOAA
C&W 0.4
ECMWF
0.2
Berkeley Earth
0

-0.2

-0.4

-0.6

-0.8
95% confidence internal shown for Berkeley Earth -1
Temperature anomalies relative to 1981-2010 average
-1.2
1860 1800 1900 1920 1940 1960 1980 2000 2020
Image Source

38
Introduction to Data Analytics

There are also general variations in this kind of analysis, too. For instance, if you want to
look at notable trends, you’ll want to run a functional analysis. If you wanted to see if the
pattern flowed in one direction, you would run a trend analysis. And, if you wanted to see
if the data is consistent on a seasonal basis, you’d run a seasonal variation analysis.

No matter which kind of analysis you choose, a few key indicators concerning possible
patterns are essential to understand. When a trend is revealed, the data will most likely
follow a specific pattern, either in an increasing or decreasing direction. Some patterns
reveal seasonality, which means the pattern is regular and repeats at specified intervals,
like days or weeks. The data could also reveal a cyclic pattern, meaning the fluctuations
in the data do not follow a designated time. And finally, the pattern could be irregular,
completely random, and unpredictable.

There are several benefits to running a time series analysis. Besides revealing patterns
and trends dependent on time, this analysis often provides better data visualization.
Depending on the analysis model you choose, either the Box Jenkins ARIMA Model or the
Box Jenkins Multivariate Model, you can plot a singular variable or multiple variables. Be
careful, though, with the temptation to plot all your known variables at once, as too many
variables can quickly become too complicated to understand, making it difficult to spot
any trend.

With the help of algorithms and machine learning, there are multiple ways to categorize
and explore your data. You can use machine learning for:

• Classification: Or identifying and classifying data according to its

trends and behaviors

• Curve Fitting: Curve fitting refers to plotting data along a curve

to make comparisons and understand the relationships in
the dataset.

• Descriptive analysis: Reviewing the historical data to make

connections within the dataset.

• Explanatory analysis: Explanatory analysis means that data is

used to explain why an event occurred.

• Exploratory analysis: Exploring the dataset to predict outcomes

based on the historical data.

39
Introduction to Data Analytics

• Forecasting: Forecasting involves studying the dataset to predict

future events.

• Intervention: Or determining how a single event changes the

outcome of the data.

• Segmentation: Segmentation means that data is split into

digestible segments to understand its underlying properties and
the data’s source.

Time series analysis is useful and can be used in various business functions. Demand
forecasting, financial analysis, resource and inventory management, and risk
management can all be determined with this analysis.

Now that you understand the different types of analysis you can do on your data, let’s
look at some best practices to ensure the best data analytics results.

40
Introduction to Data Analytics

Best Practices in Data Analytics

As we’ve learned, there are several moving parts surrounding data analytics. Data
analytics is a huge undertaking and an even bigger responsibility. Data points are more
than just numbers (or texts, images, and sounds). Most of the time, the data represent
individuals, and it’s important to treat your data carefully. Implementing best practices
for data analytics is a smart choice.

Let’s look at how you can establish and follow best practices for each facet of
data analytics.

Establishing Data-Driven Decision-Making Processes

The goal of conducting data analytics is to help your company better understand
key metrics indicated by the data. Those metrics can help you and your team make
better choices and decisions for the direction of your company. However, before your
company’s leaders make any decisions, it's best to establish and define some best
practices for the decision-making process. This can help reduce confusion and conflict
later on.

Involve Your Stakeholders

It goes without saying your stakeholders are essential to your company’s success.
Those stakeholders should be included and involved in the decision-making process,
whether they are investors, directors, or key team members. Make a list of important
stakeholders and do what you can to ensure their opinions and concerns are heard in
discussions regarding important data-driven decisions.

Define Roles and Responsibilities

Data analytics is certainly a cross-department collaboration. Although several
departments have a role in how data is collected, stored, and processed, not even
a team needs a seat at the table when company decisions are made. This can lead
to too many kitchen cooks and not enough chefs. So, before you begin with your
data analytics endeavor, take a moment to clearly define and communicate each
department and team member’s roles and responsibilities. This allows for consistency,
transparency, and understanding. Plus, open communication makes teamwork easier.

41
Introduction to Data Analytics

Define the Context of a Decision

It’s easy to make a decision on a whim or at the drop of a hat. But when decisions are
made under these circumstances, there usually is not a lot of thought regarding the
impact of the decision or its possible consequences. You should avoid this situation in
the business world because it could be a costly mistake.

Data analytics helps you understand the risks and possible solutions to some of your
business questions. However, you and the team must take the time to understand
the decision, the relevant data, the analysis results, and the criteria for making a
decision. Clearly defining the context of a decision allows for thorough analysis and
understanding of the impact before executing new business initiatives.

Document Your Decisions

Record-keeping is necessary for any business, and keeping records concerning any
business decisions is important. This document should contain a summary of the initial
question, any relevant information concerning the data and how it was processed,
an overview of the potential outcomes and risks, a brief detailing the decision made,
and a list of key people involved. This might sound like a lot of information for one
document, but it is helpful for compliance reasons and for reviewing past decisions in
the future.

Defining Clear KPIs

It’s tough to check data analysis without

understanding what you are looking for
and attempting to monitor. This is why it’s
important to determine key performance
indicators or KPIs, before you begin an
analysis. Like defining your decision-
making process, you should follow a few
best practices when choosing your KPIs.

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Introduction to Data Analytics

Choose Relevant KPIs

It can be tempting to track every performance indicator relevant to your business.
But the truth is, while most performance indicators have some weight and can tell you
something about your company’s performance, not everyone is essential to track and
understand.

Before running an analysis, take time to brainstorm with your team and make a list of
relevant KPIs. Your key metrics should be SMART indicators. SMART means that the
metric is specific, measurable, achievable, relevant, and time-specific. You should also
consider creating a balance of leading and lagging indicators. Leading indicators will
help predict future performance and lagging indicators will help you understand past
performance.

Taking relevant KPIs into account and tracking them will help you and your team
effectively make more intelligent decisions with your data.

Conduct Regular Audits

When you first choose your KPIs, it’s not uncommon to discover that the metric is
less relevant than you thought. And this is okay; it happens. That’s why it’s essential to
conduct regular audits of your KPIs. You and your team might find that there are other,
more helpful metrics available.

Ultimately, your KPIs help you make decisions for improved performance. Continually
auditing your metrics is a good practice to ensure you have the best data in your hands.

Clearly Communicate KPIs to Your Teams

Communication is essential for smooth business operations. As a best practice, you
should communicate which KPIs you and your team are tracking. That way, everyone is
on the same page, and those with the power to influence your KPIs (think sales teams
and customer service reps) can better understand what they can do to help improve the
numbers. Clear communication also helps your stakeholders to make sense of
the metrics.

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Introduction to Data Analytics

Applying Data Governance and Ethics Principles

Have you ever thought about the huge responsibility attached to data collection and
analysis? Data, particularly how it’s collected and what a company does with it, is tricky,
and it’s why there are entire government departments devoted to regulating data
collection practices. Not following government regulations and guidelines can open
your business to fines and lawsuits. Save your company from scandal by following best
practices regarding data governance and ethics.

Establish Policies and Guidelines

Obviously, you’ll want to make government policies, like GDPR, the center for any
governance framework you and your team create. But you should consider going further
and enacting your policies for an extra layer of protection.

It’s a good idea to involve relevant stakeholders, including lawyers and policy analysts, to
help you create your documents. These policies should define what your company plans
to do with the data, who can review it, and outline protections for whistleblowers if it
occurs. You should also consider enacting a policy to help mitigate bias and
ensure fairness.

Ensure Data Privacy Compliance

Your data is sensitive and often represents individuals. Even though data is easily
generated, you need to acquire informed consent from your users before you add their
data to your database. Take the time to create an opt-in form that clearly describes your
intent for user data and have your users consent to it. It goes without saying, but for any
user who declines to consent, their data is off limits, and you should have the appropriate
measures to ensure their data does not enter your system.

Again, you’ll want to be transparent with your users' private data. Plus, this adds a layer
of public accountability for compliance.

Ethical AI Practices
Artificial intelligence is a smart technology that can quickly become complicated and
hard to understand. Not understanding the AI technology you choose for your business
operations is a big no-no. If you cannot clearly explain your AI to another person, it can
seem like you are hiding a major part of your business practices. Hiding your business
practices, whether you intend to or not, is unethical and should be avoided.

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Introduction to Data Analytics

Have you heard the phrase, “Explain it to me like I’m five?” This just means explaining a
topic on a level a five-year-old can understand. Keep this phrase in mind when choosing
an AI technology for your business. Having the ability to clearly explain the technologies
you use leads to transparency and trust.

Ensuring Data Security and Privacy

It cannot be stressed enough that the data your company collects is private and
confidential. And it goes without saying data encryption should be a top priority.
Depending on your business, you may collect information containing medical records,
financial statements, or other sensitive data. Data security and privacy are essential
to running your business well. Follow the below best practices to help ensure you are
protecting your data.

Collect Only Necessary Information

Let’s be honest: there is a lot of information your company could collect, but only a small
amount of it is relevant to the success of your company. You can reduce security risks
and ensure privacy by only collecting necessary data critical to your business. If you
need to collect data from other parties, take the time to ensure the privacy and security
of those lists before adding them to your own data warehouse.

Limit Access to Data

One of the easiest ways to ensure your data is safe is to limit who has access to it.
Determine key team members who need access to your data management systems
and give necessary permissions to only those members. It’s also important that these
members are provided security training to refresh their knowledge base of security and
privacy practices consistently.

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Introduction to Data Analytics

Create an Incident Response Plan

Unfortunately, there are bad actors out there who are determined to hack data
management systems. Hopefully, this will not happen to your organization, but you
must be prepared if it does. Brainstorm with your team members and create an incident
response plan that outlines the exact steps you and your team will take to mitigate any
incidents if they occur. Be sure to outline each critical role and their responsibilities for
shutting down an incident so there is no confusion if something were to happen.
Ensure Regulatory Compliance

Regulatory compliance extends to all facets of data analytics. Like ensuring your
data collection methods align with government regulations, you also need to confirm
your privacy measures align with government policies. This includes managing the
data lifecycle from start to finish. Ensure your data deletion policies are founded on
government rules to comply with regulatory standards.

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Introduction to Data Analytics

Data Visualization and

Data Analytics
If data analytics is your company’s bread, data visualization is the butter.
Remember how we talked about the different types of analytics and how certain
types uncover patterns and trends? That information is usually visualized in a
chart or a graph. The term “data visualization” refers to how you can display
numbers, statistics, and other data in a diagram or graph to make it easier to
understand and present.

Download HubSpot’s ebook, Introduction to Data Visualization.

Importance and Benefits of Data Visualization

One of the primary purposes of data analytics is to help spot trends and
patterns within your business. Any appropriate algorithm can detect these
trends, but it’s helpful to visualize a trend rather than read about it. This is why
data visualization is essential. Creating a chart or a graph can help analysts
quickly spot trends, patterns, and outliers.

A chart or a graph can aid your analysts in communicating the data to others,
too. Instead of talking about what they’ve learned by analyzing data, they can
quickly and effectively highlight insights on a graph or a chart to help provide a
visual aid for their audience. Plus, if they’re using this information to present to
new stakeholders, they can develop a diagram or a graph in your business colors
to impress your audience with your company branding.

If you are using data analytics to help plan or set goals, showing business
projections on a graph can be beneficial. A negative or positive trend is easily
recognizable. Depending on the direction, the positive or negative movement
can help your entire team understand what your goals intend to solve.

Principles of Effective Data Visualisation

Most algorithms and analytical software have built-in features to make graphs
or charts. However, there are a few things you can do and a few tweaks you
can make to ensure your data is effectively visualized.

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Keep it Clear and Concise

A graph or chart that is overly complicated is not a good visual at all. A complicated
visual often leads to more questions than answers. An excellent visual seeks to answer
just one specific question and features different colors representing various data
segments. It also keeps the data in context, meaning the graphic does not make
invalid claims.

When creating a visual, also keep your audience in mind. How your audience will view the
data will help you understand the best way to present it.

Choose the Most Appropriate Visual for Your Data

Effective data visualization relies on choosing the right type of visual to represent your
information. There are all kinds of graphs and charts you can use, including, but not
limited to, a line graph, bar graph, pie chart, histogram, or scatter plot. While each one
essentially performs the same function and is a visual representation, not every graph
or chart is an excellent match for your data. For example, it wouldn’t make sense to
represent revenue growth on a scatter plot. Instead, growth is best represented on a line
graph or bar graph.

Because data analysis helps tell your company’s story, you should choose the best visual
to represent your data accurately.

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Techniques and Tools for Visualizing Data

If you’re worried about visualizing data by hand, don’t sweat it. You can use numerous
techniques and tools to help make data visualization easier for everyone.

For starters, you will need some analyzed data before attempting any type of
visualization. Once you have your analyzed data, you can enter it into a spreadsheet,
like Google Sheets or Microsoft Excel, and use the built-in functions to create a graph
or chart. If you use Excel, grab a copy of our free Excel Graph Generator Template
to simplify the process. Some software, like your CRM or analytical software, also have
built-in features to graph the data it analyzes quickly and easily.

But you have options if you want to make your graphs by hand. Programs like Canva
are simple to use. Canva’s graphics also feature various customizable graphs and
charts. Not only can you make the visual fit your data, but you can also brand it to
your company’s colors. If you need a heat map, input your data into Hotjar and let the
program do the rest.

For an in-depth look at data visualization, check out the free ebook, An Introduction to
Data Visualization.

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Closing
At first glance, analyzing your data can
seem daunting. However, with the right data
management system, a responsive algorithm,
and an appropriate method of analysis, you can
dive into the world of data analytics and uncover
patterns and trends within your collected data.

With the drive to move towards more data-driven

business approaches, implementing data analytics
is more important than ever. The results of data
analysis can help you make better, more informed
business decisions, reduce the risks associated with
making a decision, project future performance, and
help enhance your customer experience. With data
analysis in your hands, there is no telling what your
company can achieve!

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