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What is Data Analytics? Types, Steps & Tools for Beginners

Techlife   -  

February 15, 2024

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In today’s digital world, data is king. From tracking website clicks to analyzing social media trends, information surrounds us like never before. But what’s the value of this vast data if we can’t decipher its meaning? That’s where data analytics comes in, the superpower that transforms raw numbers into actionable insights.

Understanding data analytics is crucial in today’s world. It’s a tool that helps your business know exactly what your customers crave, how to optimize your marketing, or where to invest for explosive growth. 

Even if you’re a complete beginner, this guide is your friendly roadmap to understanding data analytics from A to Z. We’ll break down the different types, walk you through the key steps involved, and even introduce you to some handy tools used by the pros. 

But before that, you may wonder: What is data analytics, anyway? Let’s find it out!

What is Data Analytics?

What is data analytics?

Data analytics is the science of analyzing raw data to extract meaningful insights and patterns. It involves the use of specialized systems and software to look at data and draw conclusions, which can help organizations make informed decisions.

While it may seem similar to data analysis, there’s a subtle difference. Data analysis is a broader term, encompassing the entire process of inspecting, cleaning, transforming, and modeling data. On the other hand, data analytics is more focused on the interpretation of data, often using statistical, mathematical, and computational techniques.

In simple terms, if data analysis is about “seeing” what’s in the data, data analytics is about “understanding” what the data tells us. It’s not just about collecting and managing data, but also about translating that data into actionable insights.

How Data Analytics is Applied in Practice

Data analytics has a broad spectrum of practical uses across different industries. Here are a few examples:

Finance: The BFSI (Banking, financial services, and insurance) industry dominates the big data analytics market with 23% of market share. So what is data analytics in finance? Financial institutions use data analytics for risk assessment, fraud detection, investment decisions, and customer segmentation. For instance, by analyzing transaction data, a bank can identify unusual patterns and prevent fraudulent activities.

Retail: Retailers use data analytics to understand customer behavior, optimize pricing, manage inventory, and improve their marketing strategies. For instance, by analyzing sales data, a retailer can identify which products are popular and stock more of those items.

Healthcare: In healthcare, data analytics can help predict disease outbreaks, improve patient care, and optimize treatment plans. For example, by analyzing patient data, doctors can predict the likelihood of a patient developing a certain condition and take preventive measures.

Manufacturing: Manufacturers use data analytics to optimize production processes, improve quality control, and reduce operational costs. For example, by analyzing machine data, a manufacturer can predict when a machine is likely to fail and schedule maintenance accordingly.

4 Types of Data Analytics

4 types of data analytics

Data analytics can be broadly categorized into four types, each answering a specific question:

Descriptive Analytics

This type helps you answer the question, “What happened?” It summarizes your business’s historical data to reveal a clearer picture of your past performance. For example, your business might use descriptive analytics to understand sales trends over the previous quarter.

Diagnostic Analytics

This type helps you answer the question, “Why did it happen?” It delves deeper into your data to identify the root cause of problems. For instance, if you notice a sudden drop in sales, diagnostic analytics could help identify the cause.

Predictive Analytics

This type helps you answer the question, “What is likely to happen?” It uses historical data, coupled with statistical and predictive techniques, to forecast trends and anticipate what might happen. For example, analyzing customer purchase patterns allows you to predict future demand and optimize stock levels, avoiding costly shortages or overstocking.

Prescriptive Analytics

This type helps you answer the question, “What should we do about it?” It leverages simulation and optimization algorithms to analyze various scenarios and suggest optimal solutions. For instance, when your business faces customer churn risk, using prescriptive analytics helps you identify customers at risk and suggest personalized incentives to retain them.

The Importance of Data Analytics in Businesses

The importance of data analytics in business

Designveloper (DSV) already helped you answer the question: What is data analytics? And now, you may wonder: Is it worth investing? 

This number reveals the answer: 45% of chief data officers (CDOs) identified data analytics as the most in-demand data skill. This indicates that businesses today are increasingly realizing the immense potential of what data analytics can unlock. Therefore, they also raise their concerns about seeking and retaining the top talents in this skill.

According to a 2024 WaveStone survey, a whopping 87% of companies report achieving measurable business value from their data and analytics investments. How? Let’s explore the tangible benefits you can obtain from data analytics to improve your business value:

Smarter Decision-Making: By analyzing customer behavior, marketing performance, and operational metrics, businesses can ditch guesswork and make informed decisions. This leads to reduced risks, improved accuracy of decision making, and flexible adaptation to changing market trends and customer preferences.

Enhanced Efficiency and Productivity: Data analytics isn’t just about insights; it’s about streamlining processes. By analyzing operational data, businesses can identify and eliminate inefficiencies, leading to faster turnaround times, reduced costs, and increased productivity.

Unlocking Competitive Advantage: In today’s data-rich world, information is power. What data analytics does is turn that power into a competitive advantage. By understanding your customers better, predicting market trends, and optimizing your offerings, you can create unique value propositions and marketing strategies that stand out from the crowd.

A 5-Step Process of Implementing Data Analytics

5 steps to implement data analytics

Having unlocked the secrets behind “What is data analytics?” and its impact on business success, you might be wondering: how can I turn this knowledge into action? The answer lies in a structured process, your very own roadmap to harnessing the power of data analytics within your business.

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Now, let’s explore the essential steps in deploying data analytics!

Step 1: Define Goals and Objectives

The first step in the process of implementing data analytics is to define your goals and objectives. 

Ask yourself: What exactly do I want to achieve with data analytics? This could range from understanding customer behavior, improving operational efficiency, and predicting future trends, to driving strategic decision-making. 

Having clear goals and objectives not only provides direction but also helps in determining the kind of data you need to collect and the type of analysis to be performed.

Step 2: Collect Data

Once the goals and objectives are set, the next step is identifying and gathering relevant data. This could come from various sources such as internal databases, customer feedback, social media platforms, public datasets, and more. 

The key here is to ensure that the data collected is relevant to the goals and objectives defined in the first step. This sets the stage for efficient and qualified data analytics afterward.

Step 3: Clean and Prepare Data

After collecting the data, the next step is to clean and prepare it for analysis. This involves checking for and handling missing values, outliers, and inconsistencies in the data. It also includes transforming the data into a suitable format for analysis. 

Ensuring data accuracy and consistency before analysis is crucial as it directly impacts the reliability of the insights derived from the data analysis. Remember, garbage in, garbage out – the quality of your output is determined by the quality of your input.

Step 4: Analyze Data

Now that your data is clean and ready to go, it’s time to unleash its hidden potential through analysis. 

In this step, the focus is on using appropriate tools and techniques to extract valuable insights from the collected data. Depending on the nature of the data and the goals of the analysis, different methods may be employed.

Don’t get caught up in the latest trends; choose what effectively unlocks the insights you need. Remember, the most powerful tool is the one that empowers you to ask the right questions and extract meaningful answers from your data.

For instance, statistical analysis might be used to identify trends and patterns, while machine learning algorithms could be applied to make predictions or discover complex relationships within the data.

Step 5: Visualize and Communicate Findings

Once the data has been analyzed, the final step is to visualize and communicate your findings in a way that resonates with your audience.

Think of it like translating a foreign language. Data might be clear to analysts, but it needs to be translated into a format that stakeholders, managers, and even non-technical audiences can easily understand. That’s why you need visualization tools to decipher your complex data.

Charts, graphs, and interactive dashboards can transform complex data into clear, compelling narratives. By presenting your findings visually, you capture attention, engage your audience, and ensure your insights translate into actionable strategies. Using data visualization tools like Tableau or PowerBI can be very helpful in this regard.

But visualization is only part of the equation. It’s equally important to effectively communicate the insights derived from the data. This might involve writing a detailed report, giving a presentation, or even just having a conversation with stakeholders.

Remember, the value of data analysis lies not just in uncovering insights, but in communicating those insights in a way that others can understand and act upon. 

Tools and Techniques Used in Data Analytics

For effective implementation of data analytics, it’s essential to have the right tools integrated seamlessly into each stage of the process. But with so many options out there, where should you begin? 

Fear not! Before ending your exploration of “What is data analytics?”, let’s dive into essential tools, techniques, and the best tips to build a tech stack that seamlessly integrates with your needs.


Tools used in data analytics

CDOs and data analysts can use different tools based on their specific goals and skills:

Spreadsheets and Databases

For basic data manipulation and analysis, familiar tools like spreadsheets (Excel, Google Sheets) and databases (MySQL, PostgreSQL) are excellent starting points. They’re user-friendly, allowing you to organize, clean, and perform simple calculations on your data. 

With these features, you can use them for data organization, cleaning, and preliminary analysis in smaller datasets.

Data Visualization Tools

Once you’ve extracted meaning from your data, it’s time to communicate your findings. Using data visualization tools like Tableau, Power BI, and QlikView proves helpful in transforming complex data into clear, compelling visuals. 

Charts, graphs, and interactive dashboards allow you to present insights in engaging and digestible formats for various audiences.

Programming Languages

Python, R, and SQL are popular choices for advanced analytics. They offer a high degree of flexibility and power, making them suitable for complex analysis tasks. For example, SQL is often used for data extraction and manipulation, while Python and R offer a wide range of libraries for data analysis and machine learning.

Machine Learning Algorithms & Emergent AI

ML algorithms prove helpful for your business to predict future outcomes, automate decisions, and even identify hidden patterns in data. They act as your data-powered oracles, providing insights that traditional methods might miss.

Besides, emergent AI like Chat GPT and Generative AI also stands out as one of the top trends in data and analytics, according to Gartner. Why? It’s because the use of Generative AI helps businesses to achieve exponential productivity gains (49.1%), free knowledge workers from mundane tasks (23.6%), and improve customer service with experience (22.6%).

Techniques & Skills

Techniques used in data analytics

Despite having advanced tools at your disposal for data analytics, the absence of crucial techniques and skills can hinder precise data comprehension. So, on the way to analyzing data, consider these techniques: 

Statistical Analysis

This involves applying statistical methods to analyze data, validate assumptions, and uncover deeper relationships within your data. From hypothesis testing and correlation analysis to regression models, these methods ensure your findings are reliable and supported by evidence. Tools like SPSS and SAS aid in this process.

Data Mining Techniques

These techniques are often used in conjunction with machine learning algorithms to extract valuable insights from large datasets. Applying these techniques effectively, you can identify hidden patterns and relationships within vast datasets. This can reveal previously unknown trends, customer segments, and market opportunities.

Choosing the Right Tool: It’s All About You

Selecting the right tools and techniques is essential for your data analytics success. Remember, the “best” tool doesn’t exist in a vacuum. The ideal choice depends on the nature of the task at hand, the characteristics of the data, and the skills and expertise of the user. 

So, when choosing tools and techniques for data analytics, consider factors like:

  • Your goals: What are you trying to achieve with data analytics?
  • Your data size and complexity: Are you working with small spreadsheets or massive datasets?
  • Your technical skills: Are you comfortable with coding, or do you prefer user-friendly interfaces?

By understanding your needs and exploring the available options, you’ll find the perfect tools and techniques to unlock the full potential of your data. So, dive in, experiment, and discover the power of data analytics at your fingertips!

What’s Next?

Congratulations! You’ve unlocked the first door to the amazing world of “What is data analytics?”. This guide equipped you with the basics: understanding different types of data analytics, navigating the steps involved, and even exploring some cool tools.

But remember, data analytics is a vast ocean, and this is just your first dip. The future holds even more exciting possibilities, like artificial intelligence and real-time analysis, making data insights even more powerful.

So, don’t stop here! Keep exploring! The more you understand what data analytics can do, the more you can unlock its potential to transform your world, whether in business, studies, or even your personal life. Remember, data is everywhere, waiting to be your guide – so grab your curiosity and start exploring!

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