Data Mining

1. Data Mining Ketaki Borkar CS157A November 29, 2007

2. Agenda 1. Definition 2. Overview 3. History 4. Evolution 5. Scope 6. Stages 7. Process 8. Relationships 9. Elements 10. Data Warehousing 11. Techniques 12. Examples 13. Advantages/Disadvantages 14. References

3. Definition “Datamining is the process of discovering meaningful new correlations, patterns and trends by sifting through large amounts of data stored in repositories, using pattern recognition technologies as well as statistical and mathematical techniques.”

4. Overview • Data mining tools predict future trends and behaviors, allowing businesses to make proactive, knowledge driven decisions. • Prospective analysis offered by data mining move beyond analyses of past events provided by retrospective tools typical of decision support systems. • Data mining tools can answer business questions that traditionally were too time consuming to resolve. • They scour databases for hidden patterns, finding predictive information that experts may miss because it lies outside their expectations. • Data mining techniques can be implemented rapidly on existing software and hardware platforms to enhance the value of existing information resources, and can be integrated with new products and systems as they are brought on-line.

5. History • Data mining is the evolution of a field with a long history, but the term itself was only introduced relatively recently, in the 1990s • Statistics are the foundation of most technologies on which data mining is built. • Its roots can be traced back to along three family lines: • Classical statistics • Artificial intelligence • Machine learning • It is finding increasing acceptance in science and business areas which need to analyze large amounts of data to discover trends which they could not otherwise find.

6. Classical Statistics • Classical statistics embrace concepts such as regression analysis, standard distribution, standard deviation, standard variance, cluster analysis, all of which are used to study data and data relationships. • These are the building blocks with which more advanced statistical analysis are underpinned. • Within the heart of today’s data mining tools and techniques, classical statistical analysis plays a significant role.

7. Artificial Intelligence (AI) • It is built upon heuristics (method that often rapidly leads to a solution that is usually close to the best possible answer) as opposed to statistics, attempts to apply human-thought-like processing to statistical problems. • Since this approach requires vast computer processing power, it was not practical until the early 1980s, when computers began to offer useful power at reasonable prices. • Certain AI concepts were adopted by some high-end commercial products, such as query optimization modules for Relational Database Management Systems (RDBMS).

8. Machine Learning • Union of statistics and artificial intelligence. • Is an evolution of artificial intelligence because it blends artificial intelligence heuristics with advanced statistical analysis. • Machine learning attempts to let computer programs learn about the data they study, such that programs make different decisions based on the qualities of the studied data, using statistics for fundamental concepts, and adding more advanced AI heuristics and algorithms to achieve its goals.

9. Evolution of Data Mining

10. Scope of Data Mining • Automated prediction of trends and behaviors. A typical example of a predictive problem is targeted marketing. Data mining uses data on past promotional mailings to identify the targets most likely to maximize return on investment in future mailings. • EX: • forecasting bankruptcy • identifying segments of a population likely to respond similarly to given events. • Automated discovery of previously unknown patterns. Data mining tools sweep through databases and identify previously hidden patterns in one step. • EX: • analysis of retail sales data to identify seemingly unrelated products that are often purchased together (ex  beer and diapers). • detecting fraudulent credit card transactions and identifying anomalous data that could represent data entry keying errors.

11. Stages • Stage 1: Exploration • Data preparation, cleaning and transformation. • Stage 2: Model building and validation • Considering various models and choosing the best one based on their performance. • Stage 3: Deployment • Using the selected model as best in Stage 2 and applying it to new data in order to generate predictions or estimates of the expected outcome.

12. Data Mining Process

13. Relationships • Classes: Stored data is used to locate data in predetermined groups. For example, a restaurant chain could mine customer purchase data to determine when customers visit and what they typically order. This information could be used to increase traffic by having daily specials. • Clusters: Data items are grouped according to logical relationships or consumer preferences. For example, data can be mined to identify market segments or consumer affinities. • Associations: Data can be mined to identify associations. The beer-diaper example is an example of associative mining. • Sequential patterns: Data is mined to anticipate behavior patterns and trends. For example, an outdoor equipment retailer could predict the likelihood of a backpack being purchased based on a consumer's purchase of sleeping bags and hiking shoes.

14. Elements • Extract, transform, and load transaction data onto the data warehouse system. • Store and manage the data in a multidimensional database system. • Provide data access to business analysts and information technology professionals. • Analyze the data by application software. • Present the data in a useful format, such as a graph or table.

15. Date Warehousing vs. Data Mining • Data Warehouse: “is a repository (or archive) of information gathered from multiple sources, stored under a unified schema, at a single site.” (Silberschatz) • Collect data  Store in single repository • Allows for easier query development as a single repository can be queried. • Data Mining: • Analyzing databases or Data Warehouses to discover patterns about the data to gain knowledge. • Knowledge is power

16. Data Mining Techniques • Clustering is the method by which like records are grouped together.  Usually this is done to give the end user a high level view of what is going on in the database.  Clustering is sometimes used to mean segmentation - which most marketing people will tell you is useful for coming up with a birds eye view of the business. • EX: 1) Clustering people with similar movie preferences 2) Amazon.com displays “Customers who brought this book also bought…” • Nearest neighbor algorithm is a refinement of clustering. It perfoms prediction by finding the prediction value of records (near neighbors) similar to the record to be predicted.

17. Techniques…continued • Decision Tree: A decision tree takes as input an object or situation described by a set of properties, and outputs a yes/no decision. Decision trees therefore represent Boolean functions.  Specifically each branch of the tree is a classification question and the leaves of the tree are partitions of the dataset with their classification.  • CART: Classification and Regression Trees. • CHAID: Chi-Square Automatic Interaction Detector

18. Examples – Amazon.com

19. Credit Risk – Decision Tree

20. Advantages • Historical data can be used to predict future trends • Knowledge about new trends can be used to improve products and services • Extracting knowledge hidden in large volumes of data • Data mining is used in developing models to predict outcomes of future situations.

21. Disadvantages • Background checks • Spam • Privacy concerns • Birthdates, SSNs, personal information scrutinized for corporate gain. • Telemarketing • Surveillance and profiling

22. References • http://seattlepi.nwsource.com/business/154986_privacychallenge02.html • http://en.wikipedia.org/wiki/Data_mining • http://www.eco.utexas.edu/~norman/BUS.FOR/course.mat/Alex/ • http://www.dwreview.com/Data_mining/DM_models.html • http://www.cs.sjsu.edu/faculty/lee/cs157/cs157a.html