What is Data Analytics?

As the process of analyzing raw data to find trends and answer questions, the definition of data analytics captures its broad scope of the field. However, it includes many techniques with many different goals.

The data analytics process has some components that can help a variety of initiatives. By combining these components, a successful data analytics initiative will provide a clear picture of where you are, where you have been and where you should go.


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  • Generally, this process begins with descriptive analytics. This is the process of describing historical trends in data. Descriptive analytics aims to answer the question “what happened?” This often involves measuring traditional indicators such as return on investment (ROI). The indicators used will be different for each industry. Descriptive analytics does not make predictions or directly inform decisions. It focuses on summarizing data in a meaningful and descriptive way.
  • The next essential part of data analytics is advanced analytics. This part of data science takes advantage of advanced tools to extract data, make predictions and discover trends. These tools include classical statistics as well as machine learning. Machine learning technologies such as neural networks, natural language processing, sentiment analysis and more enable advanced analytics. This information provides new insight from data. Advanced analytics addresses “what if?” questions.
  • The availability of machine learning techniques, massive data sets, and cheap computing power has enabled the use of these techniques in many industries. The collection of big data sets is instrumental in enabling these techniques. Big data analytics enables businesses to draw meaningful conclusions from complex and varied data sources, which has been made possible by advances in parallel processing and cheap computational power.

Types of Data Analytics

Data analytics is a broad field. There are four primary types of data analytics: descriptive, diagnostic, predictive and prescriptive analytics. Each type has a different goal and a different place in the data analysis process. These are also the primary data analytics applications in business.

  • Descriptive analytics helps answer questions about what happened. These techniques summarize large datasets to describe outcomes to stakeholders. By developing key performance indicators (KPIs,) these strategies can help track successes or failures. Metrics such as return on investment (ROI) are used in many industries. Specialized metrics are developed to track performance in specific industries. This process requires the collection of relevant data, processing of the data, data analysis and data visualization. This process provides essential insight into past performance.
  • Diagnostic analytics helps answer questions about why things happened. These techniques supplement more basic descriptive analytics. They take the findings from descriptive analytics and dig deeper to find the cause. The performance indicators are further investigated to discover why they got better or worse. This generally occurs in three steps:
    • Identify anomalies in the data. These may be unexpected changes in a metric or a particular market.
    • Data that is related to these anomalies is collected.
    • Statistical techniques are used to find relationships and trends that explain these anomalies.
  • Predictive analytics helps answer questions about what will happen in the future. These techniques use historical data to identify trends and determine if they are likely to recur. Predictive analytical tools provide valuable insight into what may happen in the future and its techniques include a variety of statistical and machine learning techniques, such as: neural networks, decision trees, and regression.
  • Prescriptive analytics helps answer questions about what should be done. By using insights from predictive analytics, data-driven decisions can be made. This allows businesses to make informed decisions in the face of uncertainty. Prescriptive analytics techniques rely on machine learning strategies that can find patterns in large datasets. By analyzing past decisions and events, the likelihood of different outcomes can be estimated.

These types of data analytics provide the insight that businesses need to make effective and efficient decisions. Used in combination they provide a well-rounded understanding of a company’s needs and opportunities.

What is the Role of Data Analytics?

Data analysts exist at the intersection of information technology, statistics and business. They combine these fields in order to help businesses and organizations succeed. The primary goal of a data analyst is to increase efficiency and improve performance by discovering patterns in data.

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The work of a data analyst involves working with data throughout the data analysis pipeline. This means working with data in various ways. The primary steps in the data analytics process are data mining, data management, statistical analysis, and data presentation. The importance and balance of these steps depend on the data being used and the goal of the analysis.

Data mining is an essential process for many data analytics tasks. This involves extracting data from unstructured data sources. These may include written text, large complex databases, or raw sensor data. The key steps in this process are to extract, transform, and load data (often called ETL.) These steps convert raw data into a useful and manageable format. This prepares data for storage and analysis. Data mining is generally the most time-intensive step in the data analysis pipeline.

Data management or data warehousing is another key aspect of a data analyst’s job. Data warehousing involves designing and implementing databases that allow easy access to the results of data mining. This step generally involves creating and managing SQL databases. Non-relational and NoSQL databases are becoming more common as well.

Statistical analysis allows analysts to create insights from data. Both statistics and machine learning techniques are used to analyze data. Big data is used to create statistical models that reveal trends in data. These models can then be applied to new data to make predictions and inform decision making. Statistical programming languages such as R or Python (with pandas) are essential to this process. In addition, open source libraries and packages such as TensorFlow enable advanced analysis.

The final step in most data analytics processes is data presentation. This step allows insights to be shared with stakeholders. Data visualization is often the most important tool in data presentation. Compelling visualizations can help tell the story in the data which may help executives and managers understand the importance of these insights.

Why Data Analytics is Important?

The applications of data analytics are broad. Analyzing big data can optimize efficiency in many different industries. Improving performance enables businesses to succeed in an increasingly competitive world.

One of the earliest adopters is the financial sector. Data analytics has an important role in the banking and finance industries, used to predict market trends and assess risk. Credit scores are an example of data analytics that affects everyone. These scores use many data points to determine lending risk. Data analytics is also used to detect and prevent fraud to improve efficiency and reduce risk for financial institutions.

The use of data analytics goes beyond maximizing profits and ROI, however. Data analytics can provide critical information for healthcare (health informatics), crime prevention, and environmental protection. These applications of data analytics use these techniques to improve our world.

Though statistics and data analysis have always been used in scientific research, advanced analytic techniques and big data allow for many new insights. These techniques can find trends in complex systems. Researchers are currently using machine learning to protect wildlife.

The use of data analytics in healthcare is already widespread. Predicting patient outcomes, efficiently allocating funding and improving diagnostic techniques are just a few examples of how data analytics is revolutionizing healthcare. The pharmaceutical industry is also being revolutionized by machine learning. Drug discovery is a complex task with many variables. Machine learning can greatly improve drug discovery. Pharmaceutical companies also use data analytics to understand the market for drugs and predict their sales.

The internet of things (IoT) is a field that is used alongside machine learning. These devices provide a great opportunity for data analytics. IoT devices often contain many sensors that collect meaningful data points for their operation. Devices like the Nest thermostat track movement and temperature to regulate heating and cooling. Smart devices like this can use data to learn from and predict your behavior. This will provide advance home automation that can adapt to the way you live.

The applications of data analytics are seemingly endless. More and more data is being collected every day — this presents new opportunities to apply data analytics to more parts of business, science and everyday life.

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Data Analytics FAQ

What is the role of data analytics?

Data analytics helps individuals and organizations make sense of data. Data analysts typically analyze raw data for insights and trends. They use various tools and techniques to help organizations make decisions and succeed.

What are the types of data analytics?

There are various types of data analysis including descriptive, diagnostic, prescriptive and predictive analytics. Each type is used for specific purposes depending on the question a data analyst is trying to answer. For example, a data analyst would use diagnostic analytics to figure out why something happened.

What are the analytical tools used in data analytics?

There are various tools used in data analysis. Some data analysts use business intelligence software, such as Tableau. Others may use programming languages such as SQL or Python, which have various statistical and visualization libraries.

What is the career growth in data analytics?

According to O*NET, the projected growth for data analysts is 15% between 2020-2030. On average, data analysts earned $98,230 in 2020. However, salary compensation for data analysts varies depending on where they work and what industry they work in.

Last updated: April 2022