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Electric Pickaxes: Data Minings Benefits, Concerns, and Limitations

Jason Faulk
June 5, 2014
Keagan Samuel
CIS 500: Information Systems Decision-making

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Electric Pickaxes: Data Minings Benefits, Concerns, and Limitations
Humanity has always wanted to know what the future holds and what others were
thinking. Crystal balls, tarot cards, and tea leaves have all been employed with mixed results. If
someone could figure out how to predict the future- the next big trend, what way the stock
market will head- then that person could make a lot of money, and if a company could just figure
out how to read their customers minds then their stock would skyrocket. Since mind reading and
fortunetelling are still impossible, companies have found a new way to predict the future and see
what their customers are thinking- data mining. Data mining offers unique benefits to businesses
through predictive analytics, associations discovery, web mining and clustering, but depends on
complex algorithms that may have some reliability flaws, and raises privacy concerns among the
customers whose data is being mined.

Tools in the Mine Cart: The Techniques Used in Data Mining
There are several different techniques that can be used in data mining to provide unique
benefits to businesses. These techniques allow companies to predict trends, estimate performance,
and offer the right products in a way that companies that dont use data mining cannot offer. By
utilizing these techniques, companies are able to gain a distinct advantage over their competitors.
Almost every field can benefit from data mining techniques and using them has become almost
required in certain fields.
The first technique is using predictive analytics to find meaning in customer actions.
Predict analytics was developed as a way for companies to use data to make educated guesses
about the future. In their book, Information Technology for Management, Turban and Volonino
describe predictive analytics as the branch of data mining that focuses on forecasting trends
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(e.g., regression analysis) and estimating probabilities of future events (2011). They also list the
top five reasons companies use predictive analytics, which are: improving customer loyality and
satisfaction, improving growth strategies, discovering process inefficiencies, identifying and
responding to adverse situations, and optimizing resources (2011).
Secondly, data mining uses association discovery to find what else customers might want
to buy based on what items are typically purchased together. Association discovery uses data
rules- if/then rules that predict what seemingly unrelated item a customer might buy based data
mined from past purchase history. Kaur, Bedi, and Gupta in their article, Review of Association
Rule Mining, explain that association rules mining is an important data mining task that used to
find out correlations, association between a set of trans-actions in the databases (2014). By
using this technique, retailers can determine which two random items are usually bought together.
This knowledge allows them to place these items close to each other encouraging sales or offer
coupons on one for the other item.
Another techniques used in data mining is web mining to see what can be gleaned from
the web activities of customers. Turban and Volonino define it as the application of data mining
techniques to discover actionable and meaningful patterns, profiles, and trends from Web
resources (2011). Everyone is familiar with ads on Google or Facebook that seem targeted
specifically at you. These ads are created by those companies mining your web activity and web
purchases to determine what ads you would be more likely to click. Companies can also mine
their own traffic to see how successful ad placement and web design are on their site.
Finally, data mining uses clustering to bring like customers and determine what that
cluster likes. Clustering is simply bringing together groups of like things that are different from
other groups of like things. Companies may sort their customers by age, race, gender, education,
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income or a variety of other things. They can then analyze the purchases or web habits of these
groups to determine their success among a certain demographic or which cluster they should
target. It also helps companies know what kind of customers they have and how they should
market to those customers.

Keystone or Weak Link: The Importance of Algorithms in Data Mining
Data mining depends on complex algorithms that while tested and trustworthy cannot
predict every action an autonomous human being may make or count for variables that are
unpredictable. An algorithm is defined by Turban and Volonino as a set of rules instructions for
solving a problem in a finite number of steps (2011). Algorithms can be simple or extremely
complex. The more complex an algorithm the more factors it takes into account and the more
specific the answer produced. This allows companies to look at a large group of data, fator in
many variables and produce a specific answer. Of course the two major problems with
algorithms are changing variables and unaccounted for variables. When a variable changes
suddenly, an algorithm might not catch it in time and produce obsolete data. When a variable
that was not accounted for suddenly has a major impact on the data being mined, then the
algorithm may even be rendered useless. Finally algorithms can only make reasonable and
logical predictions and sometimes people are anything but reasonable and logical.

Questionable Digging: The Privacy Concerns of Customers
While data mining provides a wealth of data to companies, some consumers are worried
about their privacy when every click, swipe, tweet, and status update is mined for information. It
has already been mentioned that companies like Google and Facebook mine the data they gather
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from peoples web activities, but these days they also have access to users private emails and
instant messages. People are beginning to question the use of their private communications to
produce web ads and privacy for electronic communication is being pushed. Some consumers are
even fighting back legally. A recent lawsuit was filed against Google by California students,
claiming that Google mined their private education files to produce web ads targeted at them
(Neal, 2014). Consumers are not only getting wise online but also taking notice of how things
like point and membership cards are really just tools for companies to collect data on their
customers. As more people become aware of the scope of data mining, many are choosing to opt
out or avoid ways their data can be tracked. Consumers are also beginning to backlash against
companies that mine data to aggressively.

In Conclusion
In conclusion, data mining is a useful tool that can offer businesses distinct advantages
over their completion. Data mining uses a variety of techniques to predict if future trends, likely
purchases, characteristics of customers, and successfulness of websites. While the algorithms
used in data mining are usually dependable, rapid changes in variables and unpredictable
variables can cause obsolete or untrustworthy data. The biggest threat to data mining is its
privacy concerns. Customers are beginning to feel uncomfortable with being studied constantly.
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References
Kaur, Bedi, and Gupta. (2014) Review of association rule mining. Available at
http://www.ijater.com/Files/dba82d0e-c39c-4ab6-9629-
b9951bffe9eb_IJATER_15_03.pdf
Neal, R.C. (2014) Google sued for data-mining: California students claim violation of
educational privacy. Available at http://www.ibtimes.com/google-sued-data-mining-
california-students-claim-violation-educational-privacy-1562198
Turban, E., & Volonino, L. (2011) Information technology for management (8th ed.). Hoboken,
NJ: John Wiley & Sons.