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What is Data Mining? Process, Challenges and Applications

  • Vrinda Mathur
  • Aug 04, 2022
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In the information industry, there is a massive amount of data available. This information is useless until it is converted into useful information. This massive amount of data must be analyzed and useful information extracted.


Data mining entails additional processes such as data cleaning, data integration, data transformation, data mining, pattern evaluation, and data presentation in addition to information extraction. 


Once all of these processes are completed, we will be able to use this data in a variety of applications such as fraud detection, market analysis, production control, science exploration, and so on.


Also Read | Top Data Mining Tools


What is Data Mining?


Data mining is the process of extracting information from large sets of data to identify patterns, trends, and useful data that will allow businesses to make data-driven decisions.


In other words, data mining is the process of investigating hidden patterns of information from various perspectives for categorization into useful data, which is collected and assembled in specific areas such as data warehouses, efficient analysis, data mining algorithms, assisting decision making, and other data requirements to eventually cost-cutting and revenue generation.


Data mining is the process of automatically searching large databases for trends and patterns that go beyond simple analysis procedures. Data mining employs complex mathematical algorithms for data segments and assesses the likelihood of future events. Data mining is also known as Data Knowledge Discovery (KDD).


Data mining is a process used by businesses to extract specific data from massive databases in order to solve business problems. Its primary function is to convert raw data into useful information.


Data Mining is similar to Data Science in that it is performed by a person in a specific situation, on a specific data set, with an objective. Text mining, web mining, audio and video mining, pictorial data mining, and social media mining are all part of this process. It is done with simple or highly specific software. By outsourcing data mining software, all work can be completed more quickly and at a lower cost.


The most difficult challenge is analyzing the data to extract important information that can be used to solve a problem or advance the company. There are numerous powerful tools and techniques available to mine data and gain more insight from it.



What is the Data Mining Process?


To extract valuable information from large data sets, the data mining process involves a number of steps, from data collection to data visualization. Data mining techniques, as previously stated, are used to generate descriptions and predictions about a target data set. 


Data scientists describe data by noticing patterns, associations, and correlations. They also use classification and regression methods to classify and cluster data, as well as identify outliers for use cases such as spam detection.


Setting objectives, gathering and preparing data, applying data mining algorithms, and evaluating results are the four main steps in data mining. Some of the steps of data mining are discussed below :- 

The image shows the Process of Data Mining which includes Establish Business Objectives, Collect Data, Data Collection, Model Building and Pattern Mining, Estimate Model and Model Interpretation and Conclusion

Process of Data Mining

  1. Establish Business Objectives


This can be the most difficult part of the data mining process, and many organizations spend insufficient time on this critical step. Data scientists and business stakeholders must collaborate to define the business problem, which informs data questions and project parameters. Analysts may also need to conduct additional research to fully comprehend the business context.


At this stage, several hypotheses could be developed for a single problem. The first step necessitates the combined expertise of an application domain and a data-mining model. In practice, this always entails a thorough interaction between a data-mining expert and an application expert. This collaboration does not end with the initial phase of successful data-mining applications. It continues throughout the data mining process.


  1. Collect Data 


This step is concerned with how information is generated and collected. In general, there are two distinct options. The first is when the data-generation process is managed by an expert (modeler). This method is known as a planned experiment. 


The second possibility is that the expert has no influence over the data generation process. This is known as the observational approach. Most data-mining applications assume an observational setting, namely random data generation. 


Typically, the sampling distribution is completely unknown after the data is collected, or it is only partially and implicitly provided during the data-collection procedure. 


However, it is critical to understand how data collection affects theoretical distribution because such prior knowledge is frequently useful for modeling and, later, ultimate interpretation of results.


It is also critical to ensure that the information used to estimate a model, and thus the data used later for testing and applying a model, comes from an equivalent, unknown sampling distribution. If this is not the case, the estimated model cannot be used successfully in the final application of results.


  1. Data Collection


Once the scope of the problem is defined, data scientists can more easily identify which set of data will help answer the pertinent business questions. They will clean the data after collecting it, removing any noise such as duplicates, missing values, and outliers. 


Depending on the dataset, an additional step may be taken to reduce the number of dimensions, as having too many features can cause any subsequent computation to slow down. To ensure optimal accuracy in any models, data scientists will look to retain the most important predictors.


  1. Model Building and Pattern Mining


Data scientists may investigate any interesting data relationships, such as sequential patterns, association rules, or correlations, depending on the type of analysis. While high frequency patterns have broader applications, data deviations can be more interesting at times, highlighting areas of potential fraud.


Deep learning algorithms can also be used to classify or cluster a data set based on the information available. If the input data is labeled (supervised learning), a classification model can be used to categorize the data, or a regression model can be used to predict the likelihood of a specific assignment. 


If the dataset is not labeled (unsupervised learning), individual data points in the training set are compared to one another to discover underlying   similarities, clustering them based on those characteristics.


  1. Estimate Model


The main task during this phase is to select and implement an acceptable data-mining technique. This procedure is not simple. In practice, implementation is usually based on several models, and determining the simplest one is a separate task.


  1. Model Interpretation and Conclusion


In most cases, data-mining models should aid in decision making. As a result, such models must be interpretable in order to be useful, as humans are unlikely to base their decisions on complex "black-box" models. It should be noted that the goals of model accuracy and model interpretation accuracy are somewhat contradictory. 


Simple models are usually more interpretable, but they are also less accurate. Using high-dimensional models, modern data-mining methods are expected to produce highly accurate results. The interpretation of these models, which is also critical, is treated as a separate task, with specific techniques to validate results.


Also Read | Top 10 Data Mining Tools


Challenges Faced By Data Mining


Data mining is one of the most useful techniques that help entrepreneurs, researchers, and individuals to extract valuable information from huge sets of data. Some of the challenges faced by data mining are :- 


  1. Mining various types of knowledge in databases - The requirements of different users differ. Different types of knowledge may pique the interest of different users. As a result, data mining must cover a wide range of knowledge discovery tasks.


  1. Interactive knowledge mining at multiple levels of abstraction - Because it allows users to focus on searching for patterns, providing and refining data mining requests based on returned results, the data mining process must be interactive.


  1. Background Knowledge - This can be used to express discovered patterns not only in concise terms but at multiple levels of abstraction to guide the discovery process and express discovered patterns.


  1. Ad-hoc data mining and data mining query languages - A data mining query language that allows users to describe ad-hoc mining tasks should be integrated with a data warehouse query language and optimized for efficient and flexible data mining.


  1. Data mining results presentation and visualization - Once patterns are identified, they must be expressed in high-level languages and visual representations. Users should be able to easily understand these representations.


  1. Handling noisy or incomplete data - Data cleaning methods that can handle noise and incomplete objects while mining data regularities are required. Without data cleaning methods, the accuracy of discovered patterns will be low.


  1. Handling noisy or incomplete data - Data cleaning methods that can handle noise and incomplete objects while mining data regularities are required. Without data cleaning methods, the accuracy of discovered patterns will be low.


  1. Pattern evaluation - This refers to the problem's interest. The discovered patterns should be interesting because they either represent common knowledge or a lack of novelty.


Also Read | Best Data Mining Techniques 


Applications of Data Mining 


The following is a list of different Data Mining Applications -


  1. Financial institutions, Banks, and their Analyses


Many data mining techniques are used in critical banking and financial data provisioning and retention firms whose data is critical. 


Distributed data mining is one such method, which is researched, modeled, crafted, and developed to aid in the tracking of suspicious activities or any mischievous or fraudulent transactions involving a credit card, net banking, or any other banking service.


Analysis becomes quite simple after sampling and identifying a large set of customer data. Furthermore, tracking suspicious activities becomes a comparatively easier task by keeping track of parameters such as transaction duration, geographical locations, mode of payment, customer activity history, and so on. 


Based on these parameters, the customer's relative measure is calculated, which can then be applied to any form of usage based on the calculated indices.


  1. Domains of Healthcare and Insurance


Data mining-related applications can track and monitor a patient's health condition and aid in accurate diagnosis based on previous sickness records. 


Similarly, the growth of the insurance industry is dependent on the ability to convert data into knowledge or to provide various details about customers, markets, and prospective competitors. 


As a result, all companies that used data mining techniques effectively reaped the benefits. This is applied to claims and their analysis, i.e., identifying the medical procedures claimed at the same time. It allows for the forecasting of new policies, the detection of risky customer behavior patterns, and the detection of fraudulent behavior.


  1. Transportation-related Applications


The historic or batch form of data will assist in identifying the mode of transport that a specific customer prefers when traveling to a specific location, say his hometown, allowing him to receive enticing offers and substantial discounts on newly launched products and services. 


As a result, this will be included in targeted and organic advertisements where the prospective customer's leader generates the right to convert the lead. It is also useful for determining the distribution of schedules among different warehouses and outlets in order to analyze load-based patterns.


  1. Education


The application of data mining in education has been widespread, with the emerging field of educational data mining focusing primarily on the ways and methods by which data can be extracted from age-old processes and systems of educational institutions. 


The goal is frequently provided by allowing a student to grow and learn in a variety of areas by utilizing advanced scientific knowledge. Here, data mining plays a significant role in ensuring that the education departments receive high-quality knowledge and decision-making content.


Also Read | Applications of Data Mining


We investigated the fundamental overview and layout of various data mining applications in various domains. The scope of this vast and limitless technique is not limited to these industries, but also to every other area in which a business can thrive.


It only takes the right techniques and some analysis to set your regular business apart from competitors. The world today is running behind data and its management, and efficient handling is a key factor that has a significant impact on an organization's growth, particularly in today's times.

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