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Understanding data analysis: A beginner's guide

Before data can be used to tell a story, it must go through a process that makes it usable. Explore the role of data analysis in decision-making.

What is data analysis?

Data analysis is the process of gathering, cleaning, and modeling data to reveal meaningful insights. This data is then crafted into reports that support the strategic decision-making process.

Types of data analysis

There are many different types of data analysis. Each type can be used to answer a different question.

  • Descriptive analytics

    Descriptive analytics refers to the process of analyzing historical data to understand trends and patterns. For example, success or failure to achieve key performance indicators like return on investment.

    An example of descriptive analytics is generating reports to provide an overview of an organization's sales and financial data, offering valuable insights into past activities and outcomes.

  • Predictive analytics

    Predictive analytics uses historical data to help predict what might happen in the future, such as identifying past trends in data to determine if they’re likely to recur.

    Methods include a range of statistical and machine learning techniques, including neural networks, decision trees, and regression analysis.

  • Diagnostic analytics

    Diagnostic analytics helps answer questions about what caused certain events by looking at performance indicators. Diagnostic analytics techniques supplement basic descriptive analysis.

    Generally, diagnostic analytics involves spotting anomalies in data (like an unexpected shift in a metric), gathering data related to these anomalies, and using statistical techniques to identify potential explanations.

  • Cognitive analytics

    Cognitive analytics is a sophisticated form of data analysis that goes beyond traditional methods. This method uses machine learning and natural language processing to understand, reason, and learn from data in a way that resembles human thought processes.

    The goal of cognitive analytics is to simulate human-like thinking to provide deeper insights, recognize patterns, and make predictions.

  • Prescriptive analytics

    Prescriptive analytics helps answer questions about what needs to happen next to achieve a certain goal or target. By using insights from prescriptive analytics, organizations can make data-driven decisions in the face of uncertainty.

    Data analysts performing prescriptive analysis often rely on machine learning to find patterns in large semantic models and estimate the likelihood of various outcomes.

  • analyticsText analytics

    Text analytics is a way to teach computers to understand human language. It involves using algorithms and other techniques to extract information from large amounts of text data, such as social media posts or customer previews.

    Text analytics helps data analysts make sense of what people are saying, find patterns, and gain insights that can be used to make better decisions in fields like business, marketing, and research.

The data analysis process

Compiling and interpreting data so it can be used in decision making is a detailed process and requires a systematic approach. Here are the steps that data analysts follow:

  • 1. Define your objectives.

    Clearly define the purpose of your analysis. What specific question are you trying to answer? What problem do you want to solve? Identify your core objectives. This will guide the entire process.

  • 2. Collect and consolidate your data.

    Gather your data from all relevant sources using data analysis software. Ensure that the data is representative and actually covers the variables you want to analyze.

  • 3. Select your analytical methods.

    Investigate the various data analysis methods and select the technique that best aligns with your objectives. Many free data analysis software solutions offer built-in algorithms and methods to facilitate this selection process.

  • 4. Clean your data.

    Scrutinize your data for errors, missing values, or inconsistencies using the cleansing features already built into your data analysis software. Cleaning the data ensures accuracy and reliability in your analysis and is an important part of data analytics.

  • 5. Uncover valuable insights.

    Delve into your data to uncover patterns, trends, and relationships. Use statistical methods, machine learning algorithms, or other analytical techniques that are aligned with your goals. This step transforms raw data into valuable insights.

  • 6. Interpret and visualize the results.

    Examine the results of your analyses to understand their implications. Connect these findings with your initial objectives. Then, leverage the visualization tools within free data analysis software to present your insights in a more digestible format.

  • 7. Make an informed decision.

    Use the insights gained from your analysis to inform your next steps. Think about how these findings can be utilized to enhance processes, optimize strategies, or improve overall performance.

By following these steps, analysts can systematically approach large sets of data, breaking down the complexities and ensuring the results are actionable for decision makers.

The importance of data analysis

  • Data analysis is critical because it helps business decision makers make sense of the information they collect in our increasingly data-driven world. Imagine you have a massive pile of puzzle pieces (data), and you want to see the bigger picture (insights). Data analysis is like putting those puzzle pieces together—turning that data into knowledge—to reveal what’s important.

  • Whether you’re a business decision maker trying to make sense of customer preferences or a scientist studying trends, data analysis is an important tool that helps us understand the world and make informed choices.

Primary data analysis methods

There are two main ways of processing data: quantitative analysis and qualitative analysis.
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Quantitative analysis

Quantitative analysis deals with numbers and measurements (for example, looking at survey results captured through ratings). When performing quantitative analysis, you’ll use mathematical and statistical methods exclusively and answer questions like ‘how much’ or ‘how many.’ 

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Qualitative analysis

Qualitative analysis is about understanding the subjective meaning behind non-numerical data. For example, analyzing interview responses or looking at pictures to understand emotions. Qualitative analysis looks for patterns, themes, or insights, and is mainly concerned with depth and detail.

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