Industrial Management & Data Systems

A review of data mining techniques

Sang Jun Lee Keng Siau

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A review of data mining techniques

Sang Jun Lee

University of Nebraska-Lincoln, Lincoln, Nebraska, USA
Keng Siau
University of Nebraska-Lincoln, Lincoln, Nebraska, USA

Downloaded by Grand Canyon University At 20:15 26 May 2015 (PT)

Keywords

Data mining,
Artificial intelligence, Algorithms,
Decision trees

Abstract

Terabytes of data are generated

everyday in many organizations.
To extract hidden predictive
information from large volumes of
data, data mining (DM)
techniques are needed.
Organizations are starting to
realize the importance of data
mining in their strategic planning
and successful application of DM
techniques can be an enormous
payoff for the organizations. This
paper discusses the requirements
and challenges of DM, and
describes major DM techniques
such as statistics, artificial
intelligence, decision tree
approach, genetic algorithm, and
visualization.

Introduction
The technologies for generating and
collecting data have been advancing rapidly.
At the current stage, lack of data is no longer
a problem; the inability to generate useful
information from data is! The explosive
growth in data and database results in the
need to develop new technologies and tools to
process data into useful information and
knowledge intelligently and automatically.
Data mining (DM), therefore, has become a
research area with increasing importance
(Weiss and Indurkhya, 1998; Technology
Forecast, 1997; Fayyad et al., 1996; PiatetskyShapiro and Frawley, 1991).
DM is the search for valuable information
in large volumes of data (Weiss and
Indurkhya, 1998). It is the process of
nontrivial extraction of implicit, previously
unknown and potentially useful information
such as knowledge rules, constraints, and
regularities from data stored in repositories
using pattern recognition technologies as
well as statistical and mathematical
techniques (Technology Forecast, 1997;
Piatetsky-Shapiro and Frawley, 1991). Many
companies have recognized DM as an
important technique that will have an impact
on the performance of the companies.
DM is an active research area and research
is ongoing to bring statistical analysis and
artificial intelligence (AI) techniques
together to address the issues.

Current trends on data mining

Industrial Management &

Data Systems
101/1 [2001] 4146
# MCB University Press
[ISSN 0263-5577]

Just five years ago, only 50 researchers took

part in the knowledge discovery and data
mining conference workshop. Today,
however, knowledge discovery nuggets, the
well-known monthly electronic newsletter by
Gregory Piatetsky-Shapiro, has more than
The current issue and full text archive of this journal is available at
http://www.emerald-library.com/ft

4,000 readers. Moreover, data mining

continues to attract more and more attention
in the business and scientific communities.
In a 1997 report, Stamford, Conneticut-based
Gartner Group mentioned: ``Data mining and
artificial intelligence are at the top of the five
key technology areas that will clearly have a
major impact across a wide range of
industries within the next three to five
years.'' Many companies currently use
computers to capture details of business
transactions such as banking and credit card
records, retail sales, manufacturing
warranty, telecommunications, and myriad
other transactions. Data mining tools are
then used to uncover useful patterns and
relationships from the data captured.
Currently, data mining techniques, tools,
and researches are being expanded to the
various fields. For example, the DM tool,
intelligent text-mining system, extracts text
fragments relevant to user queries,
automatically creates and processes a series
of new queries, and assembles a new text.
The output enables the user to see the new
aspects of a given theme. This tool is a rulebased system using complex heuristics.
Data warehousing is one of the most
important research areas related to DM. A
data warehouse is a read-only database
developed for analyzing business situations
and supporting decision makers. The data
warehouse includes large volumes of subjectoriented data, where all levels of an
organization can find the information in a
timely manner. DM goes together with the
data warehousing which is necessary to
organize historical information gathered
from large-scale client/server-based
applications. In other words, DM can add
values to the information assets of
organizations in different sectors, through
effective induction of large corporate data
warehouses into a client-server. Therefore,
developing an advanced client-server
induction system capable of supporting
efficient and effective data mining of large

[ 41 ]

Sang Jun Lee and Keng Siau

A review of data mining
techniques
Industrial Management &
Data Systems
101/1 [2001] 4146

databases in business environment is one of

the active research areas.

Requirements and challenges of

DM
DM is a relatively new field and there are
many challenges to be faced. Extracting
useful information from data can be a
complicated and sometimes a difficult
process. In this section, we look at some of
the requirements and challenges of data
mining (adapted from Chen et al., 1996).

Ability to handle different types of data

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Many database systems have complex data

types, such as hypertext, multimedia data,
and spatial data. If a DM technique is robust
and powerful, it should be able to perform
effective DM on various types of data
structures. Though ideal, it is impractical to
expect a DM technique to handle all kinds of
data and to perform different goals of DM
effectively. In general, a specific DM system
is built for mining knowledge from a specific
kind of data.

Graceful degeneration of DM algorithms

The DM algorithms should be efficient and

scaleable. The performance of the algorithm
should degenerate gracefully. In other words,
the searching, mining, or analyzing time of a
DM algorithm should be predictable and
acceptable as the size of the database
increases.

Mining at different abstraction levels

It is very difficult to specify exactly what to

look for in a database or how to extract useful
information from a database. Besides, the
value of a piece of information is in the eyes
of the beholder one person's ``gold mine''
could easily be another person's garbage. To
facilitate the mining process, the systems
should allow the users to mine at different
abstraction levels. For example, a high-level
query might disclose an interesting trace
that warrants further exploration. Thus, it is
important for DM tools to support mining at
different levels of granularity.

Mining information from different sources

of data

In the ages of the Internet, Intranets,

Extranets, and data warehouses, many
different sources of data in different formats
are available. Mining information from
heterogeneous database and new data
formats can be challenges in DM. The DM
algorithms should be flexible enough to
handle data from different sources.

Protection of privacy and data security

DM is a threat to privacy and data security

because when data can be viewed from many
different angles at different abstraction
levels, it threatens the goal of keeping data
secured and guarding against the intrusion
on privacy. For example, it is relatively easy
to compose a profile of an individual (e.g.
personality, interests, spending habits, etc.)
with data from various sources.

Valuable DM results

DM system should be able to handle noise

and exceptional data efficiently. The
discovered information must precisely depict
the contents of the database and be beneficial
for certain applications. Also, the quality of
the discovered information should be
interesting and reliable.

Representation of DM requests and results

DM identifies facts or conclusions based on

sifting through the data to discover patterns
or anomalies (Technology Forecast, 1997). To
be effective, the systems should allow users
to discover information from their own
perspectives and the information should be
presented to the users in forms that are
comfortable and easy to understand. Highlevel query languages or graphical user
interface is required to express the DM
requests and the discovered information.
End users should be able to specify task
commands for the DM system and the results
from the DM system should be
understandable and usable.

[ 42 ]

Data mining steps

In general, there are three main steps in DM:
preparing the data, reducing the data and,
finally, looking for valuable information. The
specific approaches, however, differ from
companies to companies and researchers to
researchers. For example, IBM (reported in
Technology Forecast, 1997) defined four major
operations for DM:
1 Predictive modeling: using inductive
reasoning techniques such as neural
networks and inductive reasoning
algorithms to create predictive models.
2 Database segmentation: using statistical
clustering techniques to partition data
into clusters.
3 Link analysis: identifying useful
associations between data.
4 Deviation detection: detecting and
explaining why certain records cannot be
put into specific segments.
Fayyad et al. (1996), on the other hand,
proposed the following steps:

Sang Jun Lee and Keng Siau

A review of data mining
techniques
Industrial Management &
Data Systems
101/1 [2001] 4146

1 Retrieving the data from a large database.

2 Selecting the relevant subset to work
with.
3 Deciding on the appropriate sampling
system, cleaning the data and dealing with
missing fields and records.
4 Applying the appropriate
transformations, dimensionality
reduction, and projections.
5 Fitting models to the preprocessed data.

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Classifying DM techniques
Many DM techniques and systems have been
developed and designed. These techniques
can be classified based on the database, the
knowledge to be discovered, and the
techniques to be utilized. In this section, we
review one of the classification schemes
proposed by Chen et al. (1996).

Based on the database

There are many database systems that are

used in organizations, such as relational
database, transaction database, objectoriented database, spatial database,
multimedia database, legacy database, and
Web database. A DM system can be
classified based on the type of database it is
designed for. For example, it is a relational
DM system if the system discovers
knowledge from relational database and it is
an object-oriented DM system if the system
finds knowledge from object-oriented
database.

Major DM techniques
In this section, we review and discuss the
major DM techniques.

Statistics

Statistics is an indispensable component in

data selection, sampling, DM, and extracted
knowledge evaluation. It is used to evaluate
the results of DM to separate the good from
the bad. In data cleaning process, statistics
offer the techniques to detect ``outliers'', to
smooth data when necessary, and to estimate
noise. Statistics can also deal with missing
data using estimation techniques.
Techniques in clustering and designing of
experiments come into play for exploratory
data analysis. Work in statistics, however,
has emphasized generally on theoretical
aspects of techniques and models. As a result,
search, which is crucial in DM, has received
little attention. In addition, interface to
database, techniques to deal with massive
data sets, and techniques for efficient data
management are very important issues in
DM. These issues, however, have only begun
to receive attention in statistics (Kettenring
and Pregibon, 1996).

Techniques for mining transactional/

relational database

DM systems can discover various types of

knowledge, including association rules,
characteristic rules, classification rules,
clustering, evolution, and deviation
analysis. DM systems can also be classified
according to the abstraction level of the
discovered knowledge. The knowledge may
be classified into general knowledge,
primitive-level knowledge, and multiplelevel knowledge.

Mining association rules in transactional or

relational database has been the most
attractive topics in database field (Agrawal et
al., 1993; Han and Fu, 1995; Mannila et al., 1994;
Savasere et al., 1995; Srikant and Agrawal,
1995). The task is to derive a set of strong
association rules in the form of
``A1 ^ . . . ^ Am )B1 ^ . . . ^ Bn ,'' where
Ai for i 2 f1; . . . ; mg and Bj for j 2 f1; . . . ; ng)
are attribute-value sets, from the associated
data sets in a database. For example, one may
find the association rule: if a customer buys
one brand of beer, he/she usually buys
another brand of chips in the same
transaction. Because mining association rules
might require scanning through a massive
transaction database repeatedly, the required
processing power could be enormous.

Based on the techniques

Artificial intelligence (AI) techniques

Based on the knowledge

DM systems can also be categorized by DM

techniques. For example, a DM system can be
categorized according to the driven method,
such as autonomous knowledge mining, datadriven mining, query-driven mining, and
interactive DM techniques. Alternatively, it
can be classified according to its underlying
mining approach, such as generalizationbased mining, pattern-based mining,
statistical- or mathematical-based mining
and integrated approaches.

AI techniques are widely used in DM.

Techniques such as pattern recognition,
machine learning, and neural networks have
received much attention. Other techniques in
AI such as knowledge acquisition, knowledge
representation, and search, are relevant to
the various process steps in DM.
Classification is one of the major DM
problems. Classification is the process of
dividing a data set into mutually exclusive
groups such that the members of each group

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Sang Jun Lee and Keng Siau

A review of data mining
techniques

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Industrial Management &

Data Systems
101/1 [2001] 4146

are as ``close'' as possible to one another, and

the members of different groups are as ``far''
as possible from one another. For example, a
typical classification problem is to divide a
database of customers into groups that are as
homogeneous as possible with respect to a
variable such as creditworthiness. One
solution to the classification problem is to
use neural network. According to Lu et al.
(1996), neural network-based DM approach
consists of three major phases:
1 Network construction and training: in this
phase, a layered neural network based on
the number of attributes, number of
classes, and chosen input coding method
are trained and constructed.
2 Network pruning: in this phase, redundant
links and units are removed without
increasing the classification error rate of
the network.
3 Rule extraction: classification rules are
extracted in this phase.
Other AI techniques that can be used for DM
include case-based reasoning and intelligent
agents. Case-based reasoning uses historical
cases to recognize patterns and the intelligent
agent approach employs a computer program
(i.e. an agent) to sift through data.

Decision tree approach

Decision trees are tree-shaped structures that

represent sets of decisions. The decision tree
approach can generate rules for the
classification of a data set. Specific decision
tree methods include Classification and
Regression Trees (CART) and Chi Square
Automatic Interaction Detection (CHAID).
CART and CHAID are decision tree
techniques used for classification of a data
set. They provide a set of rules that can be
applied to a new (unclassified) data set to
predict which records will have a given
outcome. CART typically requires less data
preparation than CHAID.

Genetic algorithm

Genetic algorithm is a relatively new

software paradigm inspired by Darwin's
theory of evolution. A population of rules,
each representing a possible solution to a
problem, is initially created at random. Then
pairs of rules (usually the strongest rules are
selected as parents) are combined to produce
offspring for the next generation. A mutation
process is used to randomly modify the
genetic structures of some members of each
new generation. The system runs for dozens
or hundreds of generations. The process is
terminated when an acceptable or optimum
solution is found, or after some fixed time
limit. Genetic algorithms are appropriate for

[ 44 ]

problems that require optimization with

respect to some computable criterion. This
paradigm can be applied to DM problems.
The quantity to be minimized is often the
number of classification errors on a training
set. Large and complex problems require a
fast computer in order to obtain appropriate
solutions in a reasonable amount of time.
Mining large data sets by genetic algorithms
has become practical only recently due to the
availability of affordable high-speed
computers.

Visualization

A picture is worth thousands of numbers!

Visual DM techniques have proven the value
in exploratory data analysis, and they also
have a good potential for mining large
database. This approach requires the
integration of human in the DM process.
Tufte (1983, 1990) provided many examples of
visualization techniques that have been
extended to work on large data sets and
produce interactive displays. There are
several well-known techniques for
visualizing multidimensional data sets:
scatterplot matrices, coplots, prosection
matrices, parallel coordinates, projection
matrices, and other geometric projection
techniques such as icon-based techniques,
hierarchical techniques, graph-based
techniques, and dynamic techniques.

Managerial implications, directions

and strategies
The real question is what DM can do in real
business field? DM can give solutions for
banking and credit industry such as credit
scoring, fraud detection, and customer
segmentation. In today's competitive
environment, maintaining widely-used
bureau based tools may not be an effective
long-term strategy. However, DM can develop
proprietary bureau scores for general risk,
bankruptcy, revenue and response, among
others, that are not available to competitors
and are optimized for the business needs.
Tools adapting DM techniques provide credit
managers and underwriters for rapidly
building and analyzing credit application
scorecards allowing increased acceptances
and reduced bad debt. When provided with a
history of fraudulent and genuine credit
applications, DM tools learn the patterns of
fraud and subsequently identify fraud
successfully.
Nowadays, the Internet is one of the most
important markets and channels in the
business environment. It is so important to
deliver the right message at the right time to

Sang Jun Lee and Keng Siau

A review of data mining
techniques

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Industrial Management &

Data Systems
101/1 [2001] 4146

the right people. In fact, the Internet

environment, especially, World Wide Web
(WWW) has very unstructured data format
from a DM point of view. DM has been applied
to the structured databases. However, the
potential of Web mining to help people
navigate, search, and visualize the contents of
Web is enormous, and the Web mining is
feasible in practice (Etzioni, 1996). DM tools
adapting the Internet technology can provide a
targeted banner campaign, rich media, a
storefront, a promotion, or direct e-mail.
Different services are provided to different
people. DM tools anticipate customers' needs
before, during, and after running a campaign.
It reports behavioral data about Web visitors,
such as who is visiting, what content they
access, where they came from, and why they
purchase. The knowledge gained from the tool
can be used to measure return on investment
(ROI) of marketing campaigns and make better
online business decisions. One second can turn
a browser into a buyer. The key is making the
right suggestion to the right buyer at the right
time. It is called suggestive selling, and DM
tools can do the job in this Internet arena.
DM has been recognized as one of the most
important techniques in e-commerce market
especially in providing filtering techniques
that are key to success of today's top Internet
marketers. They drive the personalized
recommendations that turn more site
browsers into buyers, increase cross-selling
and up-selling, and deepen customers' loyalty
with every purchase. In e-commerce
marketing, most of the market analysis tools
rely on data mining and data warehousing.
These technologies are used to uncover
relationships among products ``product
affinities'' and between customers and
products ``market segmentation''.
DM techniques are even used for sports
and entertainment solutions. IBM has
prototyped leading DM technology to help
National Basketball Association (NBA)
coaches and league officials organize and
interpret the mountains of data amassed at
every game. Using DM software called
Advanced Scout to prepare for a game, a
coach can quickly review countless statistics:
shots attempted, shots blocked, assists made,
and personal fouls. The tool can also detect
patterns in these statistics that a coach may
not know about. For example, the tool may
uncover information such as this player is
most effective with these players and under
these circumstances.
Nowadays, the use of DM technology is
widespread in any industry. A large multinational retailer uses DM technique to refine
inventory stocking levels, by store and by
item, to dramatically reduce out-of-stock or

overstocking situations and thereby improve

revenues and reduce forced markdowns. A
health maintenance group uses DM
technique to predict which of its members
are most at risk of specific major illnesses.
This presents opportunities for timely
medical intervention and preventative
treatment to promote the patients' well-being
and reduce the healthcare provider's costs.

Conclusion
Having the right information at the right
time is crucial for making the right decision.
The problem of collecting data, which used to
be a major concern for most organizations, is
almost resolved. In the millennium,
organizations will be competing in
generating information from data and not in
collecting data. Industry surveys indicated
that over 80 percent of Fortune 500 companies
believe that data mining would be a critical
factor for business success by the year 2000
(Baker and Baker, 1998). Obviously, DM will
be one of the main competitive focuses of
organizations. Although progresses are
continuously been made in the DM field,
many issues remain to be resolved and much
research has to be done.

References

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[ 45 ]

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techniques

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Data Systems
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