Data analysis and interpretation have now taken center stage with the advent of the digital age… and the sheer amount of data can be frightening. In fact, a Digital Universe study found that the total data supply in 2012 was 2.8 trillion gigabytes! Based on that amount of data alone, it is clear the calling card of any successful enterprise in today’s global world will be the ability to analyze complex data, produce actionable insights and adapt to new market needs… all at the speed of thought.
Business dashboards are the digital age tools for big data. Capable of displaying key performance indicators (KPIs) for both quantitative and qualitative data analyses, they are ideal for making the fast-paced and data-driven market decisions that push today’s industry leaders to sustainable success. Through the art of streamlined visual communication, data dashboards permit businesses to engage in real-time and informed decision-making and are key instruments in data interpretation. First of all, let’s find a definition to understand what lies behind data interpretation meaning.
What Is Data Interpretation?
Data interpretation refers to the process of using diverse analytical methods to review data and arrive at relevant conclusions. The interpretation of data helps researchers to categorize, manipulate, and summarize the information in order to answer critical questions.
The importance of data interpretation is evident and this is why it needs to be done properly. Data is very likely to arrive from multiple sources and has a tendency to enter the analysis process with haphazard ordering. Data analysis tends to be extremely subjective. That is to say, the nature and goal of interpretation will vary from business to business, likely correlating to the type of data being analyzed. While there are several different types of processes that are implemented based on individual data nature, the two broadest and most common categories are “quantitative analysis” and “qualitative analysis”.
Yet, before any serious data interpretation inquiry can begin, it should be understood that visual presentations of data findings are irrelevant unless a sound decision is made regarding scales of measurement. Before any serious data analysis can begin, the scale of measurement must be decided for the data as this will have a long-term impact on data interpretation ROI. The varying scales include:
- Nominal Scale: non-numeric categories that cannot be ranked or compared quantitatively. Variables are exclusive and exhaustive.
- Ordinal Scale: exclusive categories that are exclusive and exhaustive but with a logical order. Quality ratings and agreement ratings are examples of ordinal scales (i.e., good, very good, fair, etc., OR agree, strongly agree, disagree, etc.).
- Interval: a measurement scale where data is grouped into categories with orderly and equal distances between the categories. There is always an arbitrary zero point.
- Ratio: contains features of all three.
Once scales of measurement have been selected, it is time to select which of the two broad interpretation processes will best suit your data needs. Let’s take a closer look at those specific data interpretation methods and possible data interpretation problems.
How To Interpret Data?
When interpreting data, an analyst must try to discern the differences between correlation, causation, and coincidences, as well as much other bias – but he also has to consider all the factors involved that may have led to a result. There are various data interpretation methods one can use.
The interpretation of data is designed to help people make sense of numerical data that has been collected, analyzed, and presented. Having a baseline method (or methods) for interpreting data will provide your analyst teams with a structure and consistent foundation. Indeed, if several departments have different approaches to interpret the same data while sharing the same goals, some mismatched objectives can result. Disparate methods will lead to duplicated efforts, inconsistent solutions, wasted energy, and inevitably – time and money. In this part, we will look at the two main methods of interpretation of data: a qualitative and quantitative analysis.
Qualitative Data Interpretation
Qualitative data analysis can be summed up in one word – categorical. With qualitative analysis, data is not described through numerical values or patterns, but through the use of descriptive context (i.e., text). Typically, narrative data is gathered by employing a wide variety of person-to-person techniques. These techniques include:
- Observations: detailing behavioral patterns that occur within an observation group. These patterns could be the amount of time spent in an activity, the type of activity, and the method of communication employed.
- Focus groups: Group people and ask them relevant questions to generate a collaborative discussion about a research topic.
- Secondary Research: much like how patterns of behavior can be observed, different types of documentation resources can be coded and divided based on the type of material they contain.
- Interviews: one of the best collection methods for narrative data. Inquiry responses can be grouped by theme, topic, or category. The interview approach allows for highly-focused data segmentation.
A key difference between qualitative and quantitative analysis is clearly noticeable in the interpretation stage. Qualitative data, as it is widely open to interpretation, must be “coded” so as to facilitate the grouping and labeling of data into identifiable themes. As person-to-person data collection techniques can often result in disputes pertaining to proper analysis, qualitative data analysis is often summarized through three basic principles: notice things, collect things, think about things.
Quantitative Data Interpretation
If quantitative data interpretation could be summed up in one word (and it really can’t) that word would be “numerical.” There are few certainties when it comes to data analysis, but you can be sure that if the research you are engaging in has no numbers involved, it is not quantitative research. Quantitative analysis refers to a set of processes by which numerical data is analyzed. More often than not, it involves the use of statistical modeling such as standard deviation, mean and median. Let’s quickly review the most common statistical terms:
- Mean: a mean represents a numerical average for a set of responses. When dealing with a data set (or multiple data sets), a mean will represent a central value of a specific set of numbers. It is the sum of the values divided by the number of values within the data set. Other terms that can be used to describe the concept are arithmetic mean, average and mathematical expectation.
- Standard deviation: this is another statistical term commonly appearing in quantitative analysis. Standard deviation reveals the distribution of the responses around the mean. It describes the degree of consistency within the responses; together with the mean, it provides insight into data sets.
- Frequency distribution: this is a measurement gauging the rate of a response appearance within a data set. When using a survey, for example, frequency distribution has the capability of determining the number of times a specific ordinal scale response appears (i.e., agree, strongly agree, disagree, etc.). Frequency distribution is extremely keen in determining the degree of consensus among data points.
Typically, quantitative data is measured by visually presenting correlation tests between two or more variables of significance. Different processes can be used together or separately, and comparisons can be made to ultimately arrive at a conclusion. Other signature interpretation processes of quantitative data include:
- Regression analysis: Essentially, regression analysis uses historical data to understand the relationship between a dependent variable and one or more independent variables. Knowing which variables are related and how they developed in the past allows you to anticipate possible outcomes and make better decisions going forward. For example, if you want to predict your sales for next month you can use regression analysis to understand what factors will affect them such as products on sale, the launch of a new campaign, among many others.
- Cohort analysis: This method identifies groups of users who share common characteristics during a particular time period. In a business scenario, cohort analysis is commonly used to understand different customer behaviors. For example, a cohort could be all users who have signed up for a free trial on a given day. An analysis would be carried out to see how these users behave, what actions they carry out, and how their behavior differs from other user groups.
- Predictive analysis: As its name suggests, the predictive analysis method aims to predict future developments by analyzing historical and current data. Powered by technologies such as artificial intelligence and machine learning, predictive analytics practices enable businesses to spot trends or potential issues and plan informed strategies in advance.
- Prescriptive analysis: Also powered by predictions, the prescriptive analysis method uses techniques such as graph analysis, complex event processing, neural networks, among others, to try to unravel the effect that future decisions will have in order to adjust them before they are actually made. This helps businesses to develop responsive, practical business strategies.
- Conjoint analysis: Typically applied to survey analysis, the conjoint approach is used to analyze how individuals value different attributes of a product or service. This helps researchers and businesses to define pricing, product features, packaging, and many other attributes. A common use is menu-based conjoint analysis in which individuals are given a “menu” of options from which they can build their ideal concept or product. Like this analysts can understand which attributes they would pick above others and drive conclusions.
- Cluster analysis: Last but not least, cluster analysis is a method used to group objects into categories. Since there is no target variable when using cluster analysis, it is a useful method to find hidden trends and patterns in the data. In a business context clustering is used for audience segmentation to create targeted experiences, and in market research, it is often used to identify age groups, geographical information, earnings, among others.
Now that we have seen how to interpret data, let's move on and ask ourselves some questions: what are some data interpretation benefits? Why do all industries engage in data research and analysis? These are basic questions, but they often don’t receive adequate attention.
Why Data Interpretation Is Important
The purpose of collection and interpretation is to acquire useful and usable information and to make the most informed decisions possible. From businesses to newlyweds researching their first home, data collection and interpretation provides limitless benefits for a wide range of institutions and individuals.
Data analysis and interpretation, regardless of the method and qualitative/quantitative status, may include the following characteristics:
- Data identification and explanation
- Comparing and contrasting of data
- Identification of data outliers
- Future predictions
Data analysis and interpretation, in the end, help improve processes and identify problems. It is difficult to grow and make dependable improvements without, at the very least, minimal data collection and interpretation. What is the keyword? Dependable. Vague ideas regarding performance enhancement exist within all institutions and industries. Yet, without proper research and analysis, an idea is likely to remain in a stagnant state forever (i.e., minimal growth). So… what are a few of the business benefits of digital age data analysis and interpretation? Let’s take a look!
1) Informed decision-making: A decision is only as good as the knowledge that formed it. Informed data decision-making has the potential to set industry leaders apart from the rest of the market pack. Studies have shown that companies in the top third of their industries are, on average, 5% more productive and 6% more profitable when implementing informed data decision-making processes. Most decisive actions will arise only after a problem has been identified or a goal defined. Data analysis should include identification, thesis development, and data collection followed by data communication.
If institutions only follow that simple order, one that we should all be familiar with from grade school science fairs, then they will be able to solve issues as they emerge in real-time. Informed decision-making has a tendency to be cyclical. This means there is really no end, and eventually, new questions and conditions arise within the process that needs to be studied further. The monitoring of data results will inevitably return the process to the start with new data and sights.
2) Anticipating needs with trends identification: data insights provide knowledge, and knowledge is power. The insights obtained from market and consumer data analyses have the ability to set trends for peers within similar market segments. A perfect example of how data analysis can impact trend prediction can be evidenced in the music identification application, Shazam. The application allows users to upload an audio clip of a song they like, but can’t seem to identify. Users make 15 million song identifications a day. With this data, Shazam has been instrumental in predicting future popular artists.
When industry trends are identified, they can then serve a greater industry purpose. For example, the insights from Shazam’s monitoring benefits not only Shazam in understanding how to meet consumer needs, but it grants music executives and record label companies an insight into the pop-culture scene of the day. Data gathering and interpretation processes can allow for industry-wide climate prediction and result in greater revenue streams across the market. For this reason, all institutions should follow the basic data cycle of collection, interpretation, decision making, and monitoring.
3) Cost efficiency: Proper implementation of data analysis processes can provide businesses with profound cost advantages within their industries. A recent data study performed by Deloitte vividly demonstrates this in finding that data analysis ROI is driven by efficient cost reductions. Often, this benefit is overlooked because making money is typically viewed as “sexier” than saving money. Yet, sound data analyses have the ability to alert management to cost-reduction opportunities without any significant exertion of effort on the part of human capital.
A great example of the potential for cost efficiency through data analysis is Intel. Prior to 2012, Intel would conduct over 19,000 manufacturing function tests on their chips before they could be deemed acceptable for release. To cut costs and reduce test time, Intel implemented predictive data analyses. By using historic and current data, Intel now avoids testing each chip 19,000 times by focusing on specific and individual chip tests. After its implementation in 2012, Intel saved over $3 million in manufacturing costs. Cost reduction may not be as “sexy” as data profit, but as Intel proves, it is a benefit of data analysis that should not be neglected.
4) Clear foresight: companies that collect and analyze their data gain better knowledge about themselves, their processes, and performance. They can identify performance challenges when they arise and take action to overcome them. Data interpretation through visual representations lets them process their findings faster and make better-informed decisions on the future of the company.
This concludes part 1 of the article. Interested in the remainder of the article? Read part 2 here!
Author: Bernardita Calzon
Source: Datapine