1

Define data mining. Why are there many different names and definitions for data
mining?
Data mining is the process through which previously unknown patterns in data
were discovered. Another definition would be a process that uses statistical,
mathematical, artificial intelligence, and machine learning techniques to extract
and identify useful information and subsequent knowledge from large databases.
This includes most types of automated data analysis. A third definition: Data
mining is the process of finding mathematical patterns from (usually) large sets of
data; these can be rules, affinities, correlations, trends, or prediction models.

Data mining has many definitions because its been stretched beyond those limits
by some software vendors to include most forms of data analysis in order to
increase sales using the popularity of data mining.
What recent factors have increased the popularity of data mining?
Following are some of most pronounced reasons:

More intense competition at the global scale driven by customers everchanging needs and wants in an increasingly saturated marketplace.

General recognition of the untapped value hidden in large data sources.

Consolidation and integration of database records, which enables a single

view of customers, vendors, transactions, etc.

Consolidation of databases and other data repositories into a single

location in the form of a data warehouse.

The exponential increase in data processing and storage technologies.

Significant reduction in the cost of hardware and software for data storage
and processing.

Movement toward the de-massification (conversion of information

resources into nonphysical form) of business practices.

Is data mining a new discipline? Explain.

Although the term data mining is relatively new, the ideas behind it are not.
Many of the techniques used in data mining have their roots in traditional
statistical analysis and artificial intelligence work done since the early part of the
1980s. New or increased use of data mining applications makes it seem like data
mining is a new discipline.
In general, data mining seeks to identify four major types of patterns:
Associations, Predictions, Clusters and Sequential relationships. These types of
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patterns have been manually extracted from data by humans for centuries, but the
increasing volume of data in modern times has created a need for more automatic
approaches. As datasets have grown in size and complexity, dir ct manual data
analysis has increasingly been augmented with indirect, automatic data processing
tools that use sophisticated methodologies, methods, and algorithms. The
manifestation of such evolution of automated and semiautomated means of
processing large datasets is now commonly referred to as data mining.

What are some major data mining methods and algorithms?

Generally speaking, data mining tasks can be classified into three main categories:
prediction, association, and clustering. Based on the way in which the patterns are
extracted from the historical data, the learning algorithms of data mining methods
can be classified as either supervised or unsupervised. With supervised learning
algorithms, the training data includes both the descriptive attributes (i.e.,
independent variables or decision variables) as well as the class attribute (i.e.,
output variable or result variable). In contrast, with unsupervised learning the
training data includes only the descriptive attributes. Figure 4.4 (p. 142) shows a
simple taxonomy for data mining tasks, along with the learning methods, and
popular algorithms for each of the data mining tasks.
What are the key differences between the major data mining methods?
Prediction is the act of telling about the future. It differs from simple guessing
by taking into account the experiences, opinions, and other relevant information
in conducting the task of foretelling. A term that is commonly associated with
prediction is forecasting. Even though many believe that these two terms are
synonymous, there is a subtle but critical difference between the two. Whereas
prediction is largely experience and opinion based, forecasting is data and model
based. That is, in order of increasing reliability, one might list the relevant terms
as guessing, predicting, and forecasting, respectively. In data mining
terminology, prediction and forecasting are used synonymously, and the
term prediction is used as the common representation of the act.
Classification: analyzing the historical behavior of groups of entities with similar
characteristics, to predict the future behavior of a new entity from its similarity to
those groups
Clustering: finding groups of entities with similar characteristics
Association: establishing relationships among items that occur together
Sequence discovery: finding time-based associations

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Visualization: presenting results obtained through one or more of the other

methods
Regression: a statistical estimation technique based on fitting a curve defined by
a mathematical equation of known type but unknown parameters to existing data
Forecasting: estimating a future data value based on past data values.

Section 4.2 Review Questions

1

What are the major application areas for data mining?

Applications are listed near the beginning of this section (pp. 145-147): CRM,
banking, retailing and logistics, manufacturing and production, brokerage,
insurance, computer hardware and software, government, travel, healthcare,
medicine, entertainment, homeland security, and sports.

Identify at least five specific applications of data mining and list five common
characteristics of these applications.
This question expands on the prior question by asking for common characteristics.
Several such applications and their characteristics are listed on (pp. 145-147):
CRM, banking, retailing and logistics, manufacturing and production, brokerage,
insurance, computer hardware and software, government, travel, healthcare,
medicine, entertainment, homeland security, and sports.
What do you think is the most prominent application area for data mining? Why?
Students answers will differ depending on which of the applications (most likely
banking, retailing and logistics, manufacturing and production, government,
healthcare, medicine, or homeland security) they think is most in need of greater
certainty. Their reasons for selection should relate to the application areas need
for better certainty and the ability to pay for the investments in data mining.
Can you think of other application areas for data mining not discussed in this section?
Explain.
Students should be able to identify an area that can benefit from greater prediction
or certainty. Answers will vary depending on their creativity.

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Business Intelligence (2nd Edition) Instructors Manual

Section 4.3 Review Questions

1

What are the major data mining processes?

Similar to other information systems initiatives, a data mining project must follow
a systematic project management process to be successful. Several data mining
processes have been proposed: CRISP-DM, SEMMA, and KDD.

Why do you think the early phases (understanding of the business and understanding of
the data) take the longest in data mining projects?
Students should explain that the early steps are the most unstructured phases
because they involve learning. Those phases (learning/understanding) cannot be
automated. Extra time and effort are needed upfront because any mistake in
understanding the business or data will most likely result in a failed BI project.
List and briefly define the phases in the CRISP-DM process.
CRISP-DM provides a systematic and orderly way to conduct data mining
projects. This process has six steps. First, an understanding of the data and an
understanding of the business issues to be addressed are developed concurrently.
Next, data are prepared for modeling; are modeled; model results are evaluated;
and the models can be employed for regular use.
What are the main data preprocessing steps? Briefly describe each step and provide
relevant examples.
Data preprocessing is essential to any successful data mining study. Good data
leads to good information; good information leads to good decisions. Data
preprocessing includes four main steps (listed in Table 4.4 on page 153):
data consolidation: access, collect, select and filter data
data cleaning: handle missing data, reduce noise, fix errors
data transformation: normalize the data, aggregate data, construct new attributes
data reduction: reduce number of attributes and records; balance skewed data
How does CRISP-DM differ from SEMMA?
The main difference between CRISP-DM and SEMMA is that CRISP-DM takes a
more comprehensive approachincluding understanding of the business and the
relevant datato data mining projects, whereas SEMMA implicitly assumes that
the data mining projects goals and objectives along with the appropriate data
sources have been identified and understood.

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Business Intelligence (2nd Edition) Instructors Manual

Section 4.4 Review Questions

1

Identify at least three of the main data mining methods.

Classification learns patterns from past data (a set of informationtraits,
variables, featureson characteristics of the previously labeled items, objects, or
events) in order to place new instances (with unknown labels) into their respective
groups or classes. The objective of classification is to analyze the historical data
stored in a database and automatically generate a model that can predict future
behavior.
Cluster analysis is an exploratory data analysis tool for solving classification
problems. The objective is to sort cases (e.g., people, things, events) into groups,
or clusters, so that the degree of association is strong among members of the same
cluster and weak among members of different clusters.
Association rule mining is a popular data mining method that is commonly used
as an example to explain what data mining is and what it can do to a
technologically less savvy audience. Association rule mining aims to find
interesting relationships (affinities) between variables (items) in large databases.

Give examples of situations in which classification would be an appropriate data mining

technique. Give examples of situations in which regression would be an
appropriate data mining technique.
Students answers will differ, but should be based on the following issues.
Classification is for prediction that can be based on historical data and
relationships, such as predicting the weather, product demand, or a students
success in a university. If what is being predicted is a class label (e.g., sunny,
rainy, or cloudy) the prediction problem is called a classification, whereas if it
is a numeric value (e.g., temperature such as 68F), the prediction problem is
called a regression.
List and briefly define at least two classification techniques.

Decision tree analysis. Decision tree analysis (a machine-learning

technique) is arguably the most popular classification technique in the data
mining arena.

Statistical analysis. Statistical classification techniques include logistic

regression and discriminant analysis, both of which make the assumptions
that the relationships between the input and output variables are linear in
nature, the data is normally distributed, and the variables are not correlated
and are independent of each other.

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Case-based reasoning. This approach uses historical cases to recognize

commonalities in order to assign a new case into the most probable
category.

Bayesian classifiers. This approach uses probability theory to build

classification models based on the past occurrences that are capable of
placing a new instance into a most probable class (or category).

Genetic algorithms. The use of the analogy of natural evolution to build

directed search-based mechanisms to classify data samples.

Rough sets. This method takes into account the partial membership of
class labels to predefined categories in building models (collection of
rules) for classification problems.

What are some of the criteria for comparing and selecting the best classification
technique?

The amount and availability of historical data

The types of data, categorical, interval, ration, etc.

What is being predictedclass or numeric value

The purpose or objective

Briefly describe the general algorithm used in decision trees.

A general algorithm for building a decision tree is as follows:
2. Create a root node and assign all of the training data to it.
3. Select the best splitting attribute.
4. Add a branch to the root node for each value of the split. Split the data into
mutually exclusive (non-overlapping) subsets along the lines of the
specific split and mode to the branches.
5. Repeat the steps 2 and 3 for each and every leaf node until the stopping
criteria is reached (e.g., the node is dominated by a single class label).
Define Gini index. What does it measure?
The Gini index and information gain (entropy) are two popular ways to determine
branching choices in a decision tree.
The Gini index measures the purity of a sample. If everything in a sample belongs
to one class, the Gini index value is zero.

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Business Intelligence (2nd Edition) Instructors Manual

Give examples of situations in which cluster analysis would be an appropriate data

mining technique.
Cluster algorithms are used when the data records do not have predefined class
identifiers (i.e., it is not known to what class a particular record belongs).

What is the major difference between cluster analysis and classification?

Classification methods learn from previous examples containing inputs and the
resulting class labels, and once properly trained they are able to classify future
cases. Clustering partitions pattern records into natural segments or clusters.
What are some of the methods for cluster analysis?
The most commonly used clustering algorithms are k-means and self-organizing
maps.
Give examples of situations in which association would be an appropriate data mining
technique.
Association rule mining is appropriate to use when the objective is to discover
two or more items (or events or concepts) that go together. Students answers will
differ.

Section 4.5 Review Questions

1

What are neural networks?

Neural computing refers to a pattern-recognition methodology for machine
learning. The resulting model from neural computing is often called an artificial
neural network (ANN) or a neural network. Neural network computing is a key
component of any data mining tool kit.

What are the commonalities and differences between biological and artificial neural
networks?
Biological neural networks are composed of many massively interconnected
neurons. Each neuron possesses axons and dendrites, fingerlike projections that
enable the neuron to communicate with its neighboring neurons by transmitting
and receiving electrical and chemical signals. More or less resembling the
structure of their biological counterparts, ANN are composed of interconnected,
simple processing elements (PE) called artificial neurons.

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Business Intelligence (2nd Edition) Instructors Manual

When processing information, the processing elements in an ANN operate

concurrently and collectively, similar to biological neurons. ANNs possess some
desirable traits similar to those of biological neural networks, such as the abilities
to learn, to self-organize, and to support fault tolerance. Figure 4.14 (p. 170)
shows the resemblance between biological and artificial neural networks.

What is a neural network architecture? What are the most common neural network
architectures?
Each ANN is composed of a collection of neurons (or PE) that are grouped into
layers. Several hidden layers can be placed between the input and output layers,
although it is common to use only one hidden layer. This layered structure of
ANN is commonly called as multi-layered perceptron (MLP). MLP architecture
is known to produce highly accurate prediction models for both classification as
well as regression type prediction problems. In addition to MLP, ANN also has
other architectures such as Kohonens self-organizing feature maps (commonly
used for clustering type problems), Hopfield network (used to solve complex
computational problems), recurrent networks (as opposed to feedforward, this
architecture allows for backward connections as well), and probabilistic networks
(where the weights are adjusted based on the statistical measures obtained from
the training data).
How does an MLP type neural network learn?
Backpropagation is the learning mechanism for feedforward MLP networks. It
follows an iterative process where the difference between the network output and
the desired output is fed back to the network so that the network weights would
gradually be adjusted to produce outputs closer to the actual values.

Section 4.6 Review Questions

1

What are the most popular commercial data mining tools?

Examples of these vendors include SPSS (PASW Modeler), SAS (Enterprise
Miner), StatSoft (Statistica Data Miner), Salford (CART, MARS, TreeNet,
RandomForest), Angoss (KnowledgeSTUDIO, KnowledgeSeeker), and
Megaputer (PolyAnalyst). Most of the more popular tools are developed by the
largest statistical software companies (SPSS, SAS, and StatSoft).

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Business Intelligence (2nd Edition) Instructors Manual

Why do you think the most popular tools are developed by statistics companies?
Data mining techniques involve the use of statistical analysis and modeling. So
its a natural extension of their business offerings.
What are the most popular free data mining tools?
Probably the most popular free and open source data mining tool is Weka. Others
include RapidMiner, and Microsofts SQL Server.
What are the main differences between commercial and free data mining software tools?
The main difference between commercial tools, such as Enterprise Miner, PASW,
and Statistica, and free tools, such as Weka and RapidMiner, is computational
efficiency. The same data mining task involving a rather large dataset may take a
whole lot longer to complete with the free software, and in some cases it may not
even be feasible (i.e., crashing due to the inefficient use of computer memory).
What would be your top five selection criteria for a data mining tool? Explain.
Students answers will differ. Criteria they are likely to mention include cost, userinterface, ease-of-use, computational efficiency, hardware compatibility, type of
business problem, vendor support, and vendor reputation.

Section 4.7 Review Questions

1

What are the most common myths about data mining?

Data mining provides instant, crystal-ball predictions.

Data mining is not yet viable for business applications.

Data mining requires a separate, dedicated database.

Only those with advanced degrees can do data mining.

Data mining is only for large firms that have lots of customer data.

What do you think are the reasons for these myths about data mining?
Students answers will differ. Some answers might relate to fear of analytics, fear
of the unknown, or fear of looking dumb.
What are the most common data mining mistakes? How can they be minimized and/or
eliminated?
1. Selecting the wrong problem for data mining
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10

2. Ignoring what your sponsor thinks data mining is and what it really can
and cannot do
3. Leaving insufficient time for data preparation. It takes more effort than
one often expects
4. Looking only at aggregated results and not at individual records
5. Being sloppy about keeping track of the mining procedure and results
6. Ignoring suspicious findings and quickly moving on
7. Running mining algorithms repeatedly and blindly (It is important to think
hard enough about the next stage of data analysis. Data mining is a very
hands-on activity.)
8. Believing everything you are told about data
9. Believing everything you are told about your own data mining analysis
10. Measuring your results differently from the way your sponsor measures
them
Ways to minimize these risks are basically the reverse of these items.

ANSWERS TO QUESTIONS FOR DISCUSSION

Define data mining. Why are there many names and definitions for data mining?
Data mining is the process through which previously unknown patterns in data
were discovered. Another definition would be a process that uses statistical,
mathematical, artificial intelligence, and machine learning techniques to extract
and identify useful information and subsequent knowledge from large databases.
This includes most types of automated data analysis. A third definition: Data
mining is the process of finding mathematical patterns from (usually) large sets of
data; these can be rules, affinities, correlations, trends, or prediction models.
Data mining has many definitions because its been stretched beyond those limits
by some software vendors to include most forms of data analysis in order to
increase sales using the popularity of data mining.

What are the main reasons for the recent popularity of data mining?
Following are some of most pronounced reasons:

Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall

Business Intelligence (2nd Edition) Instructors Manual

11

More intense competition at the global scale driven by customers everchanging needs and wants in an increasingly saturated marketplace

General recognition of the untapped value hidden in large data sources

Consolidation and integration of database records, which enables a single

view of customers, vendors, transactions, etc.

Consolidation of databases and other data repositories into a single

location in the form of a data warehouse

The exponential increase in data processing and storage technologies

Significant reduction in the cost of hardware and software for data storage
and processing

Movement toward the de-massification (conversion of information

resources into nonphysical form) of business practices

Discuss what an organization should consider before making a decision to

purchase data mining software.
Before making a decision to purchase data mining software, organizations should
consider the standard criteria to use when investing in any major software:
cost/benefit analysis, people with the expertise to use the software and perform
the analyses, availability of historical data, a business need for the data mining
software.

Distinguish data mining from other analytical tools and techniques.

Students can view the answer in Figure 4.2 (p. 138) which shows that data mining
is a composite or blend of multiple disciplines or analytical tools and techniques.
5

Discuss the main data mining methods. What are the fundamental differences
among them?
Three broad categories of data mining methods are prediction (classification or
regression), clustering, and association.
Prediction is the act of telling about the future. It differs from simple guessing
by taking into account the experiences, opinions, and other relevant information
in conducting the task of foretelling. A term that is commonly associated with
prediction is forecasting. Even though many believe that these two terms are
synonymous, there is a subtle but critical difference between the two. Whereas
prediction is largely experience and opinion based, forecasting is data and model
based.

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Business Intelligence (2nd Edition) Instructors Manual

12

Classification: analyzing the historical behavior of groups of entities with similar

characteristics, to predict the future behavior of a new entity from its similarity to
those groups
Clustering: finding groups of entities with similar characteristics
Association: establishing relationships among items that occur together

The fundamental differences are:

Prediction (classification or regression) predicts future cases or conditions

based on historical data

Clustering partitions pattern records into natural segments or clusters.

Each segments members share similar characteristics.

Association is used to discover two or more items (or events or concepts)

that go together.

What are the main data mining application areas? Discuss the commonalities of
these areas that make them a prospect for data mining studies.
Applications are listed near the beginning of this section (pp. 145-147): CRM,
banking, retailing and logistics, manufacturing and production, brokerage,
insurance, computer hardware and software, government, travel, healthcare,
medicine, entertainment, homeland security, and sports.
The commonalities are the need for predictions and forecasting for planning
purposes and to support decision making.

Why do we need a standardized data mining process? What are the most
commonly used data mining processes?
In order to systematically carry out data mining projects, a general process is
usually followed. Similar to other information systems initiatives, a data mining
project must follow a systematic project management process to be successful.
Several data mining processes have been proposed: CRISP-DM, SEMMA, and
KDD.

Discuss the differences between the two most commonly used data mining
process.
The main difference between CRISP-DM and SEMMA is that CRISP-DM takes a
more comprehensive approachincluding understanding of the business and the
relevant datato data mining projects, whereas SEMMA implicitly assumes that
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Business Intelligence (2nd Edition) Instructors Manual

13

the data mining projects goals and objectives along with the appropriate data
sources have been identified and understood.
9

Are data mining processes a mere sequential set of activities?

Even though these steps are sequential in nature, there is usually a great deal of
backtracking. Because data mining is driven by experience and experimentation,
depending on the problem/situation and the knowledge/experience of the analyst,
the whole process can be very iterative (i.e., one should expect to go back and
forth through the steps quite a few times) and time consuming. Because latter
steps are built on the outcome of the former ones, one should pay extra attention
to the earlier steps in order not to put the whole study on an incorrect path from
the onset.
10 Why do we need data preprocessing? What are the main tasks and relevant
techniques used in data preprocessing?
Data preprocessing is essential to any successful data mining study. Good data
leads to good information; good information leads to good decisions. Data
preprocessing includes four main steps (listed in Table 4.4 on page 153):
data consolidation: access, collect, select and filter data
data cleaning: handle missing data, reduce noise, fix errors
data transformation: normalize the data, aggregate data, construct new attributes
data reduction: reduce number of attributes and records; balance skewed data

11 Discuss the reasoning behind the assessment of classification models.

The model-building step also encompasses the assessment and comparative
analysis of the various models built. Because there is not a universally known best
method or algorithm for a data mining task, one should use a variety of viable
model types along with a well-defined experimentation and assessment strategy to
identify the best method for a given purpose.
12 What is the main difference between classification and clustering? Explain using
concrete examples.
Classification learns patterns from past data (a set of informationtraits,
variables, featureson characteristics of the previously labeled items, objects, or
events) in order to place new instances (with unknown labels) into their respective
groups or classes. The objective of classification is to analyze the historical data
stored in a database and automatically generate a model that can predict future
behavior. Classifying customer-types as likely to buy or not buy is an example.

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Business Intelligence (2nd Edition) Instructors Manual

14

Cluster analysis is an exploratory data analysis tool for solving classification

problems. The objective is to sort cases (e.g., people, things, events) into groups,
or clusters, so that the degree of association is strong among members of the same
cluster and weak among members of different clusters. Customers can be
grouped according to demographics.
13 Moving beyond the chapter discussion, where else can association be used?
Students answers will vary.
14 What should an organization consider before making a decision to purchase data
mining software?
This is the same question as Question #3.
Before making a decision to purchase data mining software, organizations should
consider the standard criteria to use when investing in any major software:
cost/benefit analysis, people with the expertise to use the software and perform
the analyses, availability of historical data, a business need for the data mining
software.
15 What is ANN? How does it compare to biological neural networks?
See answer to question 2 in section 4.5

ANSWERS TO END- OF- CHAPTER APPLICATION CASE QUESTIONS

Why do you think that consulting companies are more likely to use data mining
tools and techniques? What specific value proposition do they offer?
Consulting companies use data mining tools and techniques because the results
are valuable to their clients. Consulting companies can develop data mining
expertise and invest in the hardware and software and then earn a return on those
investments by selling those services. Data mining can lead to insights that
provide a competitive advantage to their clients.

Why was it important for argonauten360 to employ a comprehensive tool that

has all modeling capabilities?
In order to offer a comprehensive set of intelligence services, the company needed
a comprehensive toolor else their analysts needed to learn many different tools.
After 12 months of evaluating a wide range of data mining tools, the company
chose Statistica Data Miner because it provided the ideal combination of features
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15

to satisfy most every analysts needs and requirements with user-friendly

interfaces.
3

What was the problem that argonauten360 helped solve for a call-by-call
provider?
It is a very competitive business, and the success of the call-by-call
telecommunications provider depends greatly on attractive per-minute calling
rates. Rankings of those rates are widely published, and the key is to be ranked
somewhere in the top-five lowest-cost providers while maintaining the best
possible margins.

Can you think of other problems for telecommunication companies that are likely
to be solved with data mining?

Predicting customer churn (lost customers)

Predicting demand for capacity

Predicting the volume of calls for customer service based on time of day.

Predicting demographic shifts

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