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Data Mining

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Overview

Data mining, the extraction of hidden predictive information fromlarge databases, is a powerful new technology with great potentialto help companies focus on the most important information in theirdata warehouses. Data mining tools predict future trends andbehaviors, allowing businesses to make proactive, knowledge-

driven decisions. The automated, prospective analyses offered by data mining move

beyond the analyses of past events provided by retrospective toolstypical of decision support systems. Data mining tools can answerbusiness questions that traditionally were too time consuming toresolve. They scour databases for hidden patterns, finding

predictive information that experts may miss because it lies outsidetheir expectations.

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Introduction

Data mining (the advanced analysis step of the"Knowledge Discovery in Databases" process, orKDD), an interdisciplinary subfield of computerscience, is the computational process of

discovering patterns in large data sets involvingmethods at the intersection of artificialintelligence, machine learning, statistics, anddatabase systems. The overall goal of the data

mining process is to extract information from adata set and transform it into an understandablestructure for further use.

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The Foundations of Data Mining

Massive data collection

Powerful multiprocessor computers

Data mining algorithms

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Steps in the Evolution of Data Mining.

EvolutionaryStep

BusinessQuestion

EnablingTechnologies

ProductProviders

Characteristics

Data Collection

(1960s)

"What was my

total revenue

in the last fiveyears?"

Computers,

tapes, disks

IBM, CDC Retrospective,

static data

delivery

Data Access

(1980s)

"What were

unit sales in

New England

last March?"

Relational

databases

(RDBMS),

Structured

Query Language

(SQL), ODBC

Oracle,

Sybase,

Informix, IBM,

Microsoft

Retrospective,

dynamic data

delivery at

record level

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Evolutionary

Step

Business

Question

Enabling

Technologies

Product

Providers

Characteristics

Data

Warehousing &

DecisionSupport

(1990s)

"What were

unit sales in

New England

last March?Drill down to

Boston."

On-line analytic

processing

(OLAP),

multidimensional databases,

data

warehouses

Pilot,

Comshare,

Arbor, Cognos,

Microstrategy

Retrospective,

dynamic data

delivery at

multiple levels

Data Mining

(Emerging

Today)

"Whats likelyto happen to

Boston unit

sales next

month? Why?"

Advancedalgorithms,

multiprocessor

computers,

massive

databases

Pilot,Lockheed, IBM,

SGI, numerous

startups

(nascent

industry)

Prospective,proactive

information

delivery

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The Scope of Data Mining

Data mining derives its name from the similarities between

searching for valuable business information in a large

database for example, finding linked products in gigabytes

of store scanner data and mining a mountain for a vein of

valuable ore. Both processes require either sifting through animmense amount of material, or intelligently probing it to find

exactly where the value resides. Given databases of sufficient

size and quality, data mining technology can generate new

business opportunities by providing these capabilities:

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Automated prediction of trends and behaviors. Data mining automatesthe process of finding predictive information in large databases. Questionsthat traditionally required extensive hands-on analysis can now beanswered directly from the data quickly. A typical example of apredictive problem is targeted marketing. Data mining uses data on pastpromotional mailings to identify the targets most likely to maximize return

on investment in future mailings. Other predictive problems includeforecasting bankruptcy and other forms of default, and identifyingsegments of a population likely to respond similarly to given events.

Automated discovery of previously unknown patterns. Data mining toolssweep through databases and identify previously hidden patterns in onestep. An example of pattern discovery is the analysis of retail sales data to

identify seemingly unrelated products that are often purchased together.Other pattern discovery problems include detecting fraudulent credit cardtransactions and identifying anomalous data that could represent dataentry keying errors.

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Commonly used techniques in

datamining Artificial neural networks: Non-linear predictive models that learn

through training and resemble biological neural networks in structure.

Decision trees: Tree-shaped structures that represent sets of decisions.These decisions generate rules for the classification of a dataset. Specificdecision tree methods include Classification and Regression Trees (CART)and Chi Square Automatic Interaction Detection (CHAID) .

Genetic algorithms: Optimization techniques that use processes such asgenetic combination, mutation, and natural selection in a design based onthe concepts of evolution.

Nearest neighbor method: A technique that classifies each record in adataset based on a combination of the classes of the k record(s) mostsimilar to it in a historical dataset (where k 1). Sometimes called the k-

nearest neighbor technique. Rule induction: The extraction of useful if-then rules from data based on

statistical significance.