what are different models of data analysis? With example from service and manufacturing industry.

As you move from descriptive to

prescriptive analytics, each model offers increasing value to an organisation. But, at the same time, they increase in complexity.

-----------------------------------------------------------------------------------------

Introduction:

In today's data-driven business landscape, organizations are inundated with vast amounts of data generated from various sources such as customer
interactions, transactions, and operations. Extracting meaningful insights from this data is paramount for informed decision-making and gaining a
competitive edge. To harness the power of data effectively, businesses employ various models of data analysis. These models serve as analytical
frameworks that enable organizations to explore, interpret, and leverage data to drive strategic initiatives. In this context, we will delve into four key
models of data analysis: Descriptive, Diagnostic, Predictive, Prescriptive, and also explore Collaborative Analysis. Each model offers distinct methodologies
and tools to uncover insights, understand past trends, predict future outcomes, and prescribe actionable recommendations. Understanding these models is
essential for aspiring business analysts and managers to navigate the complexities of data analytics and propel their organizations towards success. Let's
explore each model in detail, accompanied by examples, quotes, statistics, and relevant details.

1. Descriptive Analysis:

 Descriptive analysis involves summarizing historical data to understand past trends and patterns.

 Example: A retail company analyzing sales data from the previous year to identify which products sold the most and in which regions.

 Quote: "Descriptive analytics provides insights into what has happened in the past and what is currently happening within the business." -
Business Analyst

2. Diagnostic Analysis:

 Diagnostic analysis focuses on determining why certain events occurred by investigating underlying causes.

 Example: An e-commerce platform examining customer feedback and product reviews to identify reasons behind a sudden drop in sales.
  Statistic: "Diagnostic analysis revealed that 80% of customers who left negative reviews cited slow delivery as the main issue."

3. Predictive Analysis:

 Predictive analysis utilizes historical data to make informed predictions about future events or trends.

 Example: A bank using customer transaction data and credit history to forecast the likelihood of loan default for new applicants.

 Statistic: "Predictive modeling accurately predicted customer churn with 85% accuracy, allowing the company to implement targeted
retention strategies."

4. Prescriptive Analysis:

 Prescriptive analysis goes beyond predicting outcomes by recommending actions to achieve desired results.

 Example: A healthcare provider analyzing patient data to suggest personalized treatment plans based on medical history and genetic
factors.

 Quote: "Prescriptive analytics not only tells us what is likely to happen, but also what we should do about it to optimize outcomes." - Data
Scientist

5. Collaborative Analysis:

 Collaborative analysis involves combining insights from various stakeholders or departments to gain a comprehensive understanding of
complex issues.

 Example: A manufacturing company bringing together input from production, marketing, and supply chain teams to optimize inventory
management strategies.

 Statistic: "Collaborative analysis resulted in a 20% reduction in excess inventory, saving the company $1.5 million annually."

In business analytics, these models serve as a roadmap for extracting actionable insights from data, empowering organizations to make informed decisions
and drive strategic initiatives forward.

-----------------------------------------------------------------------------------

Descriptive analytics

Descriptive analytics answer the question: What happened?

This is the most common type of analytics found in business. It generally uses historical data from a single internal source to pinpoint when an event
occurred.

For example:

 How many sales did we make in the last week/day/hour?

 Which customers required the most help from our customer service team?

 How many people viewed our website?

 Which product had the most defects?

Descriptive analytics are often displayed on dashboards and in reports, which are convenient ways to consume data and inform decisions. Descriptive
analytics account for most of the statistics we use, including basic aggregation (e.g. count or sum of values filtered from a column or data), averages, and
percentage changes.

Diagnostic analytics

Diagnostic analytics help us to answer the next question: Why did it happen?

To do this, analysts dive deeper into an organisation’s historical data, combining multiple sources in search of patterns, trends, and correlations.

Why would you use diagnostic analytics?

 Identify anomalies: Analysts use the results from descriptive analysis to identify areas that need further investigation and raise questions that can’t
be answered by simply looking at the data. For example: Why have sales increased in a region that had no change in marketing?

 Drill down into data: To explain anomalies, analysts must find patterns outside existing data sets to identify correlations. They might need to use
techniques such as data mining, and use data from external sources.

 Determine causal relationships: Having identified anomalies and searched for patterns that could be correlated, analysts use more advanced
statistical techniques to determine whether these are related.

Traditionally, data analysts performed diagnostic analytics manually, but as data volume, variety, and velocity increase, fully manual analysis is no longer
feasible. Instead, modern diagnostic analytics solutions employ machine-learning techniques to augment the analyst’s skills. Computers can process vast
amounts of data and recognise patterns, detect anomalies, and expose ‘unusual’ events, and they can apply analytical techniques from a portfolio of
algorithms to identify drivers of change and determine causation.

Predictive analytics

As an organisation increases its analytical maturity and embarks on predictive analytics, it shifts its focus from understanding historical events to creating
insights about a current or future state. Predictive analytics is at the intersection of classical statistical analysis and modern artificial intelligence (AI)
techniques. It tries to answer the question: What will happen next?

It’s impossible to predict exactly what will happen in the future, but by employing predictive analytics, organisations identify the likelihood of possible
outcomes and can increase the chance of taking the best course of action. We see predictive analytics used in many sectors.
For example:

 Aerospace – Predictive analytics are used to predict the effect of specific maintenance operations on aircraft reliability, fuel use, availability, and
uptime.

 Financial services – Predictive analytics are used to develop credit-risk models and forecast financial market trends.

 Manufacturing – Predictive analytics are used to predict the location and rate of machine failures, and to optimise ordering and delivery of raw
materials based on projected future demands.

 Online retail – Systems monitor customer behaviour, and predictive models determine whether providing additional product information or
incentives will increase the likelihood of a sale.

Simple predictive models can be created using tools such as Excel or Tableau. As these models start to accommodate more variables, with more complex
relationships, these analytics become the responsibility of data scientists.

Prescriptive analytics

Prescriptive analytics is the most complex type of analytics. It combines internal data, external sources, and machine-learning techniques to provide the
most effective outcomes. In prescriptive analytics, a decision-making process is applied to descriptive and predictive models to find the combinations of
existing conditions and possible decisions that are likely to have the most effect in the future. This process is both complex and resource intensive but,
when done well, can provide immense value to an organisation.

Applications of prescriptive analytics include:

 risk management[2]

 improving healthcare[3]

 guided marketing, selling and pricing[4].

As the most complex form of analytics, prescriptive analytics not only pose technical challenges, but are also influenced by external factors such as
government regulation, market risk, and existing organisational behaviour. If you are considering deploying prescriptive analytics, be sure you have a solid
business case that identifies why machine-generated recommendations are appropriate and trustworthy for each decision.

As well as identifying and programming each decision, data scientists developing prescriptive models need to prevent missteps by ensuring that all possible
outcomes are considered. After deploying these systems they must test their models repeatedly, to ensure they are making meaningful recommendations
and there’s no risk of costly mistakes.

1. Descriptive Analysis

The goal of descriptive analysis is to describe or summarize a set of data. Here’s what you need to know:

 Descriptive analysis is the very first analysis performed in the data analysis process.

 It generates simple summaries about samples and measurements.

 It involves common, descriptive statistics like measures of central tendency, variability, frequency and position.

Descriptive Analysis Example

Take the Covid-19 statistics page on Google, for example. The line graph is a pure summary of the cases/deaths, a presentation and description of the
population of a particular country infected by the virus.

Descriptive analysis is the first step in analysis where you summarize and describe the data you have using descriptive statistics, and the result is a simple
presentation of your data.

MORE ON DATA ANALYSIS:Data Analyst vs. Data Scientist: Similarities and Differences Explained

2. Diagnostic Analysis

Diagnostic analysis seeks to answer the question “Why did this happen?” by taking a more in-depth look at data to uncover subtle patterns. Here’s what
you need to know:

 Diagnostic analysis typically comes after descriptive analysis, taking initial findings and investigating why certain patterns in data happen.

 Diagnostic analysis may involve analyzing other related data sources, including past data, to reveal more insights into current data trends.

 Diagnostic analysis is ideal for further exploring patterns in data to explain anomalies.

Diagnostic Analysis Example

A footwear store wants to review its website traffic levels over the previous 12 months. Upon compiling and assessing the data, the company’s marketing
team finds that June experienced above-average levels of traffic while July and August witnessed slightly lower levels of traffic.

To find out why this difference occurred, the marketing team takes a deeper look. Team members break down the data to focus on specific categories of
footwear. In the month of June, they discovered that pages featuring sandals and other beach-related footwear received a high number of views while
these numbers dropped in July and August.

Marketers may also review other factors like seasonal changes and company sales events to see if other variables could have contributed to this trend.

3. Exploratory Analysis (EDA)

Exploratory analysis involves examining or exploring data and finding relationships between variables that were previously unknown. Here’s what you need
to know:

 EDA helps you discover relationships between measures in your data, which are not evidence for the existence of the correlation, as denoted by the
phrase, “Correlation doesn’t imply causation.”

 It’s useful for discovering new connections and forming hypotheses. It drives design planning and data collection.

Exploratory Analysis Example

Climate change is an increasingly important topic as the global temperature has gradually risen over the years. One example of an exploratory data analysis
on climate change involves taking the rise in temperature over the years from 1950 to 2020 and the increase of human activities and industrialization to
find relationships from the data. For example, you may increase the number of factories, cars on the road and airplane flights to see how that correlates
with the rise in temperature.

Exploratory analysis explores data to find relationships between measures without identifying the cause. It’s most useful when formulating hypotheses.

4. Inferential Analysis

Inferential analysis involves using a small sample of data to infer information about a larger population of data.

The goal of statistical modeling itself is all about using a small amount of information to extrapolate and generalize information to a larger group. Here’s
what you need to know:

 Inferential analysis involves using estimated data that is representative of a population and gives a measure of uncertainty or standard deviation to
your estimation.

 The accuracy of inference depends heavily on your sampling scheme. If the sample isn’t representative of the population, the generalization will be
inaccurate. This is known as the central limit theorem.

Inferential Analysis Example

The idea of drawing an inference about the population at large with a smaller sample size is intuitive. Many statistics you see on the media and the internet
are inferential; a prediction of an event based on a small sample. For example, a psychological study on the benefits of sleep might have a total of 500
people involved. When they followed up with the candidates, the candidates reported to have better overall attention spans and well-being with seven-to-
nine hours of sleep, while those with less sleep and more sleep than the given range suffered from reduced attention spans and energy. This study drawn
from 500 people was just a tiny portion of the 7 billion people in the world, and is thus an inference of the larger population.

Inferential analysis extrapolates and generalizes the information of the larger group with a smaller sample to generate analysis and predictions.

5. Predictive Analysis

Predictive analysis involves using historical or current data to find patterns and make predictions about the future. Here’s what you need to know:

 The accuracy of the predictions depends on the input variables.

 Accuracy also depends on the types of models. A linear model might work well in some cases, and in other cases it might not.

 Using a variable to predict another one doesn’t denote a causal relationship.

Predictive Analysis Example

The 2020 US election is a popular topic and many prediction models are built to predict the winning candidate. FiveThirtyEight did this to forecast the 2016
and 2020 elections. Prediction analysis for an election would require input variables such as historical polling data, trends and current polling data in order
to return a good prediction. Something as large as an election wouldn’t just be using a linear model, but a complex model with certain tunings to best serve
its purpose.

Predictive analysis takes data from the past and present to make predictions about the future.

MORE ON DATA:Explaining the Empirical for Normal Distribution

6. Causal Analysis

Causal analysis looks at the cause and effect of relationships between variables and is focused on finding the cause of a correlation. Here’s what you need
to know:

 To find the cause, you have to question whether the observed correlations driving your conclusion are valid. Just looking at the surface data won’t
help you discover the hidden mechanisms underlying the correlations.

 Causal analysis is applied in randomized studies focused on identifying causation.

 Causal analysis is the gold standard in data analysis and scientific studies where the cause of phenomenon is to be extracted and singled out, like
separating wheat from chaff.

 Good data is hard to find and requires expensive research and studies. These studies are analyzed in aggregate (multiple groups), and the observed
relationships are just average effects (mean) of the whole population. This means the results might not apply to everyone.

Causal Analysis Example

Say you want to test out whether a new drug improves human strength and focus. To do that, you perform randomized control trials for the drug to test its
effect. You compare the sample of candidates for your new drug against the candidates receiving a mock control drug through a few tests focused on
strength and overall focus and attention. This will allow you to observe how the drug affects the outcome.

Causal analysis is about finding out the causal relationship between variables, and examining how a change in one variable affects another.

7. Mechanistic Analysis

Mechanistic analysis is used to understand exact changes in variables that lead to other changes in other variables. Here’s what you need to know:

 It’s applied in physical or engineering sciences, situations that require high precision and little room for error, only noise in data is measurement
error.

 It’s designed to understand a biological or behavioral process, the pathophysiology of a disease or the mechanism of action of an intervention.

Mechanistic Analysis Example

Many graduate-level research and complex topics are suitable examples, but to put it in simple terms, let’s say an experiment is done to simulate safe and
effective nuclear fusion to power the world. A mechanistic analysis of the study would entail a precise balance of controlling and manipulating variables
with highly accurate measures of both variables and the desired outcomes. It’s this intricate and meticulous modus operandi toward these big topics that
allows for scientific breakthroughs and advancement of society.

Mechanistic analysis is in some ways a predictive analysis, but modified to tackle studies that require high precision and meticulous methodologies for
physical or engineering science.

8. Prescriptive Analysis

Prescriptive analysis compiles insights from other previous data analyses and determines actions that teams or companies can take to prepare for predicted
trends. Here’s what you need to know:

 Prescriptive analysis may come right after predictive analysis, but it may involve combining many different data analyses.

 Companies need advanced technology and plenty of resources to conduct prescriptive analysis. AI systems that process data and adjust automated
tasks are an example of the technology required to perform prescriptive analysis.

Prescriptive Analysis Example

Prescriptive analysis is pervasive in everyday life, driving the curated content users consume on social media. On platforms like TikTok and
Instagram, algorithms can apply prescriptive analysis to review past content a user has engaged with and the kinds of behaviors they exhibited with specific
posts. Based on these factors, an algorithm seeks out similar content that is likely to elicit the same response and recommends it on a user’s personal feed.

A tutorial on the different types of data analysis. | Video: Shiram Vasudevan

When to Use the Different Types of Data Analysis

 Descriptive analysis summarizes the data at hand and presents your data in a comprehensible way.

 Diagnostic analysis takes a more detailed look at data to reveal why certain patterns occur, making it a good method for explaining anomalies.

 Exploratory data analysis helps you discover correlations and relationships between variables in your data.

 Inferential analysis is for generalizing the larger population with a smaller sample size of data.

 Predictive analysis helps you make predictions about the future with data.

 Causal analysis emphasizes finding the cause of a correlation between variables.

 Mechanistic analysis is for measuring the exact changes in variables that lead to other changes in other variables.

 Prescriptive analysis combines insights from different data analyses to develop a course of action teams and companies can take to capitalize on
predicted outcomes.

Four Types of Data Analysis

The four types of data analysis are:

 Descriptive Analysis

 Diagnostic Analysis

 Predictive Analysis

 Prescriptive Analysis

Below, we will introduce each type and give examples of how they are utilized in business.

Descriptive Analysis
The first type of data analysis is descriptive analysis. It is at the foundation of all data insight. It is the simplest and most common use of data in business
today. Descriptive analysis answers the “what happened” by summarizing past data, usually in the form of dashboards.

The biggest use of descriptive analysis in business is to track Key Performance Indicators (KPIs). KPIs describe how a business is performing based on chosen
benchmarks.

Business applications of descriptive analysis include:

 KPI dashboards

 Monthly revenue reports

 Sales leads overview

Diagnostic Analysis

After asking the main question of “what happened”, the next step is to dive deeper and ask why did it happen? This is where diagnostic analysis comes in.

Diagnostic analysis takes the insights found from descriptive analytics and drills down to find the causes of those outcomes. Organizations make use of this
type of analytics as it creates more connections between data and identifies patterns of behavior.

A critical aspect of diagnostic analysis is creating detailed information. When new problems arise, it is possible you have already collected certain data
pertaining to the issue. By already having the data at your disposal, it ends having to repeat work and makes all problems interconnected.

Business applications of diagnostic analysis include:

 A freight company investigating the cause of slow shipments in a certain region

 A SaaS company drilling down to determine which marketing activities increased trials

Predictive Analysis

Predictive analysis attempts to answer the question “what is likely to happen”. This type of analytics utilizes previous data to make predictions about future
outcomes.

This type of analysis is another step up from the descriptive and diagnostic analyses. Predictive analysis uses the data we have summarized to make logical
predictions of the outcomes of events. This analysis relies on statistical modeling, which requires added technology and manpower to forecast. It is also
important to understand that forecasting is only an estimate; the accuracy of predictions relies on quality and detailed data.

While descriptive and diagnostic analysis are common practices in business, predictive analysis is where many organizations begin show signs of difficulty.
Some companies do not have the manpower to implement predictive analysis in every place they desire. Others are not yet willing to invest in analysis
teams across every department or not prepared to educate current teams.

Business applications of predictive analysis include:

 Risk Assessment

 Sales Forecasting

 Using customer segmentation to determine which leads have the best chance of converting

 Predictive analytics in customer success teams

Prescriptive Analysis

The final type of data analysis is the most sought after, but few organizations are truly equipped to perform it. Prescriptive analysis is the frontier of data
analysis, combining the insight from all previous analyses to determine the course of action to take in a current problem or decision.

Prescriptive analysis utilizes state of the art technology and data practices. It is a huge organizational commitment and companies must be sure that they
are ready and willing to put forth the effort and resources.

Artificial Intelligence (AI) is a perfect example of prescriptive analytics. AI systems consume a large amount of data to continuously learn and use this
information to make informed decisions. Well-designed AI systems are capable of communicating these decisions and even putting those decisions into
action. Business processes can be performed and optimized daily without a human doing anything with artificial intelligence.

Currently, most of the big data-driven companies (Apple, Facebook, Netflix, etc.) are utilizing prescriptive analytics and AI to improve decision making. For
other organizations, the jump to predictive and prescriptive analytics can be insurmountable. As technology continues to improve and more professionals
are educated in data, we will see more companies entering the data-driven realm.

Conclusion
As we have shown, each of these types of data analysis are connected and rely on each other to a certain degree. They each serve a different purpose and
provide varying insights. Moving from descriptive analysis towards predictive and prescriptive analysis requires much more technical ability, but also
unlocks more insight for your organization.

Of course! Let's delve into each model of data analysis with examples from both the manufacturing and service industries:

**1. Descriptive Analysis:**

**Manufacturing Industry Example:**

In a manufacturing plant, descriptive analysis could involve analyzing production data to understand trends in output, downtime, and quality. For instance,
a car manufacturer might analyze production records to identify which assembly line processes are most efficient and which ones are causing delays.

**Service Industry Example:**

In a retail bank, descriptive analysis might involve examining customer transaction data to understand patterns in banking behavior. For example, the bank
could analyze ATM usage data to determine peak withdrawal times and optimize cash replenishment schedules accordingly.

**2. Collaborative Analysis:**

**Manufacturing Industry Example:**

In a manufacturing setting, collaborative analysis could involve bringing together input from different departments such as production, supply chain, and
quality control. For example, a furniture manufacturer might collaborate to optimize inventory levels, ensuring that raw materials are available when
needed without excess stockpiling.

**Service Industry Example:**

In a customer service call center, collaborative analysis might involve integrating feedback from frontline agents, IT support, and customer feedback
surveys. For instance, analyzing customer complaints alongside IT system performance data could reveal areas for improvement in both service delivery and
system reliability.

**3. Predictive Analysis:**

**Manufacturing Industry Example:**

In manufacturing, predictive analysis could be used to forecast equipment failures before they occur, minimizing costly downtime. For example, a
semiconductor manufacturer might use predictive maintenance algorithms to monitor machine sensor data and predict when a tool is likely to malfunction,
allowing for proactive repairs.

**Service Industry Example:**

In the insurance industry, predictive analysis could be employed to assess the risk of policyholders filing claims. For instance, an insurance company might
use predictive modeling techniques to analyze customer demographics, past claim history, and external factors like weather patterns to forecast the
likelihood of future claims and adjust premiums accordingly.

**4. Prescriptive Analysis:**

**Manufacturing Industry Example:**

In manufacturing, prescriptive analysis could involve optimizing production schedules to maximize efficiency and minimize costs. For example, a food
processing plant might use prescriptive analytics to determine the most cost-effective combination of production runs based on factors such as ingredient
availability, machine capacity, and shipping deadlines.

**Service Industry Example:**

In the healthcare sector, prescriptive analysis could be utilized to personalize treatment plans for patients based on their medical history and genetic
makeup. For instance, a hospital might use prescriptive analytics to recommend tailored medication regimens or lifestyle interventions for patients with
chronic conditions, improving health outcomes and reducing hospital readmissions.
By understanding and applying these models of data analysis in both manufacturing and service industries, businesses can leverage data-driven insights to
optimize processes, enhance customer experiences, and drive strategic decision-making.

Certainly! Here are real-life examples of companies using different data analysis models:

**1. Descriptive Analysis:**

**Company Example: Amazon**

- **Description:** Amazon uses descriptive analysis to understand customer purchasing behavior by analyzing historical sales data.

- **Example:** Amazon tracks customer buying patterns to identify popular products and trends, helping them optimize inventory management and
recommend personalized product suggestions.

**2. Collaborative Analysis:**

**Company Example: Airbnb**

- **Description:** Airbnb employs collaborative analysis by integrating feedback from hosts, guests, and property managers to improve the overall user
experience.

- **Example:** Airbnb collects and analyzes feedback from hosts and guests to identify areas for improvement in property listings, booking processes, and
customer support, enhancing satisfaction and loyalty.

**3. Predictive Analysis:**

**Company Example: Netflix**

- **Description:** Netflix utilizes predictive analysis to recommend personalized content to subscribers based on their viewing history and preferences.

- **Example:** Netflix analyzes user data, such as viewing habits and ratings, to predict which movies or TV shows a subscriber is likely to enjoy, enhancing
the viewing experience and increasing user engagement.

**4. Prescriptive Analysis:**

**Company Example: Starbucks**

- **Description:** Starbucks employs prescriptive analysis to optimize store locations and product offerings based on customer demographics and
preferences.

- **Example:** Starbucks uses prescriptive analytics to recommend menu items and promotional offers tailored to specific locations and customer
segments, maximizing sales and customer satisfaction.

These examples demonstrate how companies leverage different data analysis models to derive insights, improve decision-making, and enhance business
outcomes in various industries.

Certainly! Let's provide some additional examples keeping them simple and current:

**1. Descriptive Analysis:**

**Manufacturing Industry Example:**

A textile factory analyzes production data to understand which fabric designs are most popular among customers, helping them prioritize production
schedules and inventory management.

**Service Industry Example:**

A ride-sharing company examines customer usage patterns to identify peak hours and popular routes, allowing them to allocate drivers more efficiently and
reduce wait times for passengers.
**2. Collaborative Analysis:**

**Manufacturing Industry Example:**

A car manufacturer collaborates with suppliers, dealerships, and logistics partners to streamline the supply chain, ensuring timely delivery of parts and
reducing lead times for production.

**Service Industry Example:**

A hotel chain collaborates with travel agencies, online booking platforms, and customer feedback forums to gather insights on guest preferences and
satisfaction levels, informing decisions on service offerings and marketing strategies.

**3. Predictive Analysis:**

**Manufacturing Industry Example:**

An electronics manufacturer uses predictive maintenance algorithms to anticipate when machinery is likely to malfunction, enabling proactive repairs and
minimizing production downtime.

**Service Industry Example:**

A retail bank employs predictive analytics to forecast customer demand for financial products and services, allowing them to optimize staffing levels and
resource allocation at different branches.

**4. Prescriptive Analysis:**

**Manufacturing Industry Example:**

A food processing company utilizes prescriptive analytics to optimize recipe formulations based on ingredient availability, market trends, and nutritional
requirements, ensuring product quality while minimizing costs.

**Service Industry Example:**

A healthcare provider uses prescriptive analytics to recommend personalized wellness plans for patients based on their medical history, lifestyle factors,
and genetic predispositions, promoting preventive care and improving overall health outcomes.

By applying these examples of data analysis models in manufacturing and service industries, businesses can gain valuable insights, enhance operational
efficiency, and deliver better experiences to their customers.