Data mining and warehousing

What is Data Mining?

Data mining is the process of discovering useful patterns and trends in large amounts of data. It
helps businesses and researchers find meaningful insights from raw information. Another name
for data mining is Knowledge Discovery in Databases (KDD).

A famous quote related to data mining is:

"We’re drowning in information but starving for knowledge." – John Naisbitt
This means that while we have a lot of data, we still struggle to turn it into valuable knowledge.

Fields Related to Data Mining

Data mining is connected to many other areas, including:

 Machine Learning – Teaching computers to learn from data and make predictions.
 Databases – Storing and managing large amounts of data.
 Statistics – Analyzing numbers and patterns in data.
 Information Retrieval – Finding useful information from a large dataset.
 Visualization – Presenting data in a way that is easy to understand.
 High-Performance Computing – Using powerful computers to process huge amounts of
data.

Where is Data Mining Used?

Data mining is used in many industries, such as:

 E-commerce – Understanding customer behavior and recommending products.

 Marketing & Retail – Predicting sales trends and customer preferences.
 Finance – Detecting fraud and managing risks.
 Telecommunications – Optimizing networks and predicting service issues.
 Medicine & Drug Research – Finding patterns in patient data and improving drug
design.
 Manufacturing & Process Control – Identifying defects and improving efficiency.
 Space & Earth Sensing – Analyzing satellite images and weather patterns.

Steps in Data Mining Process

The process of data mining involves:

 1. Understanding the Domain & Goals – Knowing the industry and setting clear
objectives.
2. Data Collection & Integration – Gathering data from different sources.
3. Data Cleaning & Preprocessing – Removing errors and organizing data properly.
4. Pattern Identification & Modeling – Finding trends and relationships in the data.
5. Interpreting the Results – Making sense of the discovered patterns.
6. Using the Knowledge – Applying the insights to solve real-world problems.
7. Repeating the Process – Continuous improvement by analyzing new data.

Common Data Mining Techniques

 Classification – Sorting data into different categories (e.g., spam vs. non-spam emails).
 Regression – Predicting numerical values (e.g., stock prices, house prices).
 Clustering – Grouping similar items together (e.g., customer segmentation).
 Association Detection – Finding relationships between data points (e.g., "people who
buy milk also buy bread").
 Summarization – Creating simple summaries from complex data.
 Trend & Deviation Detection – Identifying patterns and unusual changes in data.

Inductive Learning (Making Predictions from Data)

 Classification – Predicting categories (e.g., Is this email spam or not?)

 Regression – Predicting numbers (e.g., What will be next month’s sales?)
 Probability Estimation – Predicting likelihood (e.g., What is the chance that a customer
will buy a product?)

Popular Data Mining Methods

1. Decision Trees – A step-by-step way to make decisions.

2. Rule Induction – Finding if-then rules from data.
3. Bayesian Learning – Using probability to make predictions.
4. Neural Networks – A system that mimics the human brain for complex tasks.
5. Genetic Algorithms – Finding the best solutions using evolution-like techniques.
6. Instance-Based Learning – Making predictions by comparing new data with past
examples.

What Makes a Good Data Mining System?

A good data mining system should be:

 Computationally Efficient – It should process data quickly.

 Statistically Reliable – The results should be accurate and based on proper calculations.
 Easy to Use – The system should be user-friendly.

Components of a Data Mining System

 Representation – How data and patterns are stored.

 Evaluation – Measuring how good the patterns are.
 Search – Finding useful information from data.
 Data Management – Handling large amounts of data.
 User Interface – A way for users to interact with the system.

What is a Data Warehouse?

A data warehouse is a large collection of structured data used for decision-making. Unlike
regular databases used for daily transactions, a data warehouse stores historical data for analysis.

A common definition is:

"A data warehouse is a subject-oriented, integrated, time-variant, and non-volatile collection of
data that helps managers make decisions." – W. H. Inmon

Data warehousing is the process of collecting, organizing, and storing data in a data warehouse.

Characteristics of a Data Warehouse

1. Subject-Oriented – Focuses on key areas like customers, products, and sales.

2. Integrated – Combines data from multiple sources, ensuring consistency.
3. Time-Variant – Stores data over a long period, often years.
4. Non-Volatile – Data is not changed or updated in real time; it is only added and
retrieved.

Data Warehouse vs. Traditional Databases

 Traditional Database (Heterogeneous DBMS) – Stores current data and is used for
daily operations.
 Data Warehouse – Stores historical data and is optimized for data analysis.
OLTP vs. OLAP

OLTP (Online Transaction OLAP (Online Analytical

Feature
Processing) Processing)
Users Clerks, IT professionals Analysts, decision-makers
Function Daily business transactions Data analysis and decision-making
Data Type Current, detailed Historical, summarized
Usage Frequent, simple operations Complex queries
Access Read & write Mostly read
Records
Small transactions Large data sets
Processed
Database Size MB to GB 100 GB to TB

OLTP is for daily operations like sales and banking transactions, while OLAP is for decision-
making based on past data.

Why Have a Separate Data Warehouse?

A separate data warehouse improves performance by optimizing systems for their specific
purposes:

 Operational Databases (OLTP): Optimized for fast transactions, data entry, and
retrieval.
 Data Warehouses (OLAP): Optimized for analytical queries, multidimensional analysis,
and reporting.

Other key reasons include:

 Historical Data: Warehouses store long-term data for decision-making, unlike

operational databases.
 Data Consolidation: Merges data from multiple sources to provide a unified view.
 Data Quality: Standardizes data from different formats, making it consistent and
reliable.

What is a Data Warehouse?

A data warehouse is a system for storing and analyzing large amounts of structured data using a
multidimensional model. It involves:

 Data Cube: Organizes data into multiple dimensions (e.g., time, product, location).
 Architecture: Includes storage, transformation, and analytical processing.
  Implementation: Involves extracting data, transforming it, and loading it into the
warehouse (ETL process).
 Extensions: Data cubes can be enhanced for advanced data mining.

From Tables & Spreadsheets to Data Cubes

A data cube allows complex data to be represented in multiple dimensions:

 Dimensions: Attributes like time (year, month), product (brand, category), and location
(city, country).
 Fact Table: Stores key metrics like sales revenue, total units sold.
 Hierarchy of Cubes:
o Base Cuboid (n-D): The lowest level of detail.
o Apex Cuboid (0-D): The highest level of summarized data.

Data Warehouse Schema Models

1. Star Schema: A simple model where a central fact table links to dimension tables.
2. Snowflake Schema: A refined version of the star schema where dimension tables are
further normalized.
3. Fact Constellation (Galaxy Schema): Multiple fact tables share dimension tables.

Types of Measures in Data Warehousing

 Distributive: Can be split and aggregated (e.g., sum, count).

 Algebraic: Computed from distributive functions (e.g., average).
 Holistic: Require full data access (e.g., median, rank).

OLAP Operations (Data Analysis Techniques)

 Roll-up (Drill-up): Summarizing data at a higher level.

 Drill-down: Getting detailed data by breaking down summaries.
 Slice and Dice: Filtering and segmenting data for specific analysis.
 Pivot (Rotate): Changing the data view by reorganizing dimensions.
 Drill-across: Combining multiple fact tables.
 Drill-through: Accessing raw data from the underlying databases.
Data Warehouse Design Process

1. Define the granularity (level of detail) for storing data.

2. Identify the business process (e.g., sales, orders).
3. Determine dimensions (time, product, location).
4. Select measures (sales, revenue, profit).

Data Warehouse Architecture

A multi-tiered structure includes:

 Data Sources: Extracting data from operational databases.

 ETL Process: Extract, Transform, Load data into the warehouse.
 Data Storage: Organizing data for analysis.
 OLAP Server: Supports complex queries.
 Front-End Tools: Reporting, analytics, and visualization tools.

Three Data Warehouse Models

1. Enterprise Data Warehouse: Stores all organizational data for company-wide use.
2. Data Mart: A focused subset of data for specific teams (e.g., Marketing Data Mart).
3. Virtual Warehouse: A set of views over existing databases without physical storage.

Simplified Summary

A data warehouse is a specialized system for storing and analyzing large datasets. It integrates
data from multiple sources, provides historical insights, and supports business intelligence. The
data is structured in cubes and schemas to enable fast, multidimensional analysis using OLAP
techniques. Organizations use different warehouse models based on their size and needs.

Understanding Data Warehousing and OLAP in Simple Words

Why Keep a Separate Data Warehouse?

 Better Performance: Keeps business databases (OLTP) and analytical databases (OLAP) running
efficiently.
 Different Uses: Business databases handle real-time transactions, while data warehouses store
and analyze historical data.
 Combining Data: Data warehouses gather information from different sources and make it
consistent.
  Better Data Quality: Fixes inconsistencies in formats, codes, and missing values.

What is a Data Warehouse?

A data warehouse is a system that collects, stores, and manages large amounts of data from
different sources. It helps businesses analyze data for decision-making.

How Data is Stored: From Tables to Data Cubes

 Data is stored in a multidimensional format called a data cube.

 A data cube allows users to analyze data from multiple angles, such as sales by time, location,
and product.
 Data is organized into:
o Dimension Tables: Contain descriptive information (e.g., time, location, product details).
o Fact Tables: Store numbers (e.g., sales amount, units sold) and connect to dimension
tables.

Ways to Organize a Data Warehouse

1. Star Schema: A simple design with a central fact table linked to dimension tables.
2. Snowflake Schema: A more detailed version of the star schema, breaking dimensions into
smaller tables.
3. Fact Constellation (Galaxy Schema): Multiple fact tables share dimension tables.

Types of Measures (Values in Fact Tables)

 Distributive: Can be summed or counted (e.g., total sales, max price).

 Algebraic: Can be calculated using a fixed number of distributive measures (e.g., average sales).
 Holistic: Require all data to be calculated (e.g., median, rank).

OLAP: Analyzing Data in a Warehouse

OLAP (Online Analytical Processing) allows businesses to explore data interactively using:

 Roll-up (Drill-up): Summarize data to a higher level (e.g., sales by year instead of month).
 Drill-down: Show more details (e.g., sales by day instead of month).
  Slice & Dice: Filter and view specific data.
 Pivot (Rotate): Change the perspective of the data.
 Drill-through: Go from summary data to raw data.

OLAP Storage Methods

1. ROLAP (Relational OLAP): Uses traditional relational databases (SQL-based).

2. MOLAP (Multidimensional OLAP): Uses specialized databases that store data in cubes for fast
access.
3. HOLAP (Hybrid OLAP): A mix of both, offering flexibility.

Building a Data Warehouse

1. Define Data Models: Plan how data is structured.

2. Extract, Transform, Load (ETL): Gather, clean, and load data.
3. Store Data: Keep data in a warehouse and organize it.
4. Use OLAP & Data Mining Tools: Analyze and discover insights.

Data Cube Computation & Querying

 A data cube contains different levels of summarized data.

 Some parts of the cube can be precomputed for faster queries.
 Queries in SQL can use CUBE BY to group and summarize data across multiple dimensions.

Metadata in a Data Warehouse

 Metadata is "data about data," helping users understand:

o The structure of the warehouse.
o Data origins and transformations.
o Performance details.

Back-End Tools in a Data Warehouse

 Extract Data: Gather information from multiple sources.

 Clean Data: Fix errors and inconsistencies.
 Transform Data: Convert data into a consistent format.
  Load Data: Store data and prepare it for analysis.
 Refresh Data: Keep the warehouse up to date.

From Data Warehousing to Data Mining

 Data warehousing organizes and stores data.

 OLAP helps analyze data using summaries.
 Data mining finds patterns and insights using AI and statistics.
 OLAM (Online Analytical Mining) combines OLAP and data mining for deeper insights.

Key Takeaways

 A data warehouse helps businesses make better decisions.

 Data cubes allow flexible and fast analysis.
 OLAP tools enable interactive data exploration.
 Data mining extracts valuable insights from the warehouse.
 Businesses use OLAM to combine analytics and mining for better predictions.

Chapter 1

Simplified Explanation of Data Mining Concepts

Why Data Mining?

We are generating huge amounts of data every day—from business transactions and scientific
research to social media and online videos. However, raw data alone is not useful; we need ways
to extract meaningful information from it. Data mining helps us do this by automatically
analyzing large datasets to uncover patterns and insights.

What is Data Mining?

Data mining, also known as knowledge discovery, is the process of finding useful and hidden
patterns in large datasets. It goes beyond simple searches or reports to uncover valuable insights
that were previously unknown. It is widely used in business intelligence, healthcare, finance, and
many other fields.

How Has Data Science Evolved?

1. Empirical Science (Before 1600s): Scientists relied on observation and experiments.

2. Theoretical Science (1600-1950s): Mathematical models were developed to explain
observations.
3. Computational Science (1950s-1990s): Computer simulations helped study complex problems.
 4. Data Science (1990s-Present): Massive data is analyzed using computing power, enabling
discoveries in many fields.

Where is Data Mining Used?

 Business: Customer behavior analysis, fraud detection, targeted marketing.

 Science: Bioinformatics, weather predictions, space research.
 Everyday Life: Personalized recommendations on YouTube, social media trends, healthcare
diagnosis.

How Data Mining Works (KDD Process)

1. Data Collection: Gathering data from various sources (databases, files, web).
2. Data Cleaning & Integration: Removing errors and combining data from different places.
3. Data Selection: Choosing relevant data for analysis.
4. Data Mining: Identifying patterns and relationships in data.
5. Pattern Evaluation: Checking the quality and usefulness of the discovered patterns.
6. Knowledge Presentation: Visualizing and interpreting the results for decision-making.

Types of Data That Can Be Mined

 Structured Data: Data stored in databases (e.g., customer records).

 Semi-Structured Data: Data with some organization, like emails or XML files.
 Unstructured Data: Text documents, images, videos, social media posts.

Types of Patterns Found in Data Mining

1. Generalization: Summarizing data into understandable categories.

2. Association & Correlation: Finding relationships between data points (e.g., "People who buy
bread often buy butter").
3. Classification: Assigning labels to data based on past patterns (e.g., spam email detection).
4. Clustering: Grouping similar data points together (e.g., customer segmentation).
5. Outlier Analysis: Identifying unusual data points that don’t fit patterns (e.g., fraud detection).

Technologies Used in Data Mining

 Databases & Data Warehouses: Store and manage large datasets.

 Machine Learning & AI: Algorithms that learn from data and make predictions.
 Statistics & Pattern Recognition: Finding trends and relationships in data.
 Big Data Technologies: Processing massive datasets (e.g., Hadoop, Spark).

Key Applications of Data Mining

 Retail: Customer purchase analysis, inventory management.

 Healthcare: Disease prediction, medical diagnosis.
 Finance: Fraud detection, risk assessment, stock market prediction.
 Web & Social Media: Personalized recommendations, trend analysis.
Challenges in Data Mining

 Data Privacy: Ensuring user data is secure and not misused.

 Data Quality: Handling missing or incorrect information.
 Scalability: Analyzing extremely large datasets efficiently.
 Interpretability: Making results easy to understand and actionable.

Data Mining Functions: Association and Correlation Analysis

1. Frequent Patterns (or Frequent Itemsets)

 Frequent patterns are sets of items that often appear together in large datasets.
 A common example is in retail: stores analyze transaction data to see which items customers
buy together.
 Example: If many customers buy bread and butter together, that’s a frequent pattern.

2. Association, Correlation, and Causality

 Association: Finding relationships between items in a dataset.

o Example: Customers who buy diapers often buy baby wipes too.
 Correlation: Measures how strongly items are related.
o Example: If buying milk and cereal have a high correlation, it means they often appear
together in purchases.
 Causality: Means one thing causes another (which is different from just appearing together).
o Example: Rain causes more umbrella sales, but buying an umbrella does not cause rain.

3. Typical Association Rule Example

 An association rule takes this format:

o If a customer buys X, they are likely to buy Y.
o Example: “80% of customers who buy coffee also buy sugar.”
o This helps businesses decide product placement or promotions.

4. Are Strongly Associated Items Also Strongly Correlated?

 Not necessarily! Just because two items appear together frequently doesn’t mean they have a
strong mathematical correlation.
 Example: People might frequently buy milk and eggs together, but that doesn't mean one
causes the other.

5. Efficient Pattern Mining in Large Datasets

 Since datasets are huge, smart algorithms are needed to find patterns quickly.
 Techniques like Apriori Algorithm or FP-Growth Algorithm are used for fast and efficient
mining.
6. Using Patterns for Classification, Clustering, and Other Applications

 Classification: Assigning items to categories based on discovered patterns.

o Example: If a customer buys fitness-related items, they might be classified as a "health-
conscious" shopper.
 Clustering: Grouping similar data points together.
o Example: Grouping customers based on shopping habits.
 Other Applications: Fraud detection, recommendation systems (Netflix, Amazon), and more.

What is Data Mining?

Data mining is the process of discovering patterns and useful information from large amounts of
data. It helps businesses, researchers, and analysts make decisions based on insights found in
databases.

Why is Data Mining Important?

 Organizations collect massive amounts of data daily.

 Extracting useful patterns from this data can improve decision-making.
 It’s widely used in industries like finance, healthcare, marketing, and more.

Main Functions of Data Mining

1. Association and Correlation Analysis

 Identifies relationships between data items.

 Example: Supermarkets discover that customers who buy bread often buy butter too.
 Helps in product placement and marketing strategies.

2. Classification (Supervised Learning)

 Categorizes data into predefined groups using past examples (training data).
 Example:
o Banks classify customers as low or high credit risk.
o Emails are classified as spam or not spam.
 Common techniques:
o Decision trees, neural networks, logistic regression, support vector machines, etc.

3. Clustering (Unsupervised Learning)

 Groups data without predefined labels to identify hidden patterns.

 Example:
o Market segmentation: Grouping customers based on buying habits.
o Clustering houses based on location, price, and size.
 Goal: Maximize similarity within clusters and minimize similarity between clusters.
4. Outlier Analysis

 Detects data points that do not fit the general pattern.

 Example:
o Fraud detection: Unusual credit card transactions may indicate fraud.
o Medical diagnosis: Uncommon symptoms might indicate rare diseases.

5. Time-Series and Trend Analysis

 Analyzes patterns over time.

 Example:
o Stock market trends.
o Weather prediction.
 Includes sequence mining (e.g., customers buying cameras first, then memory cards).

6. Structure and Network Analysis

 Studies relationships in structured data like graphs and social networks.

 Example:
o Social media connections (friend suggestions).
o Web mining (Google’s PageRank algorithm).

Applications of Data Mining

 Marketing: Customer segmentation, targeted advertising, recommendation systems.

 Finance: Fraud detection, risk assessment, stock market analysis.
 Healthcare: Disease diagnosis, drug discovery, patient clustering.
 Web & Social Media: Opinion mining, community discovery, ranking pages.
 Security: Identifying cyber threats, criminal investigations.

Challenges in Data Mining

1. Data Quality Issues: Handling missing, noisy, or incomplete data.

2. Scalability: Processing massive datasets efficiently.
3. Privacy & Security: Protecting sensitive user information.
4. Interpretability: Ensuring results are understandable and actionable.

Conclusion

Data mining helps businesses and researchers find valuable insights from data. It combines
various techniques from machine learning, statistics, and databases to analyze patterns, trends,
and relationships. With its applications across industries, data mining continues to shape the
future of data-driven decision-making.