5 Key Differences between Data Mining and Business Intelligence Simplified

on Business Analytics, Business Growth, Business Intelligence, Data Extraction, Data Mining, Data Processing • May 13th, 2022 • Write for Hevo

In data-driven organizations, the terms Data Mining and Business Intelligence are often used interchangeably. But in reality, these are two different concepts that play distinct roles in the world of Big Data. When combined, Data Mining and Business Intelligence assist businesses in leveraging their data to keep a pulse on the constant changes in consumer behavior and preferences. Businesses can accurately predict what their customers want.

This blog will exactly break down the differences between Data Mining and Business Intelligence. But first, let’s get started with an overview of Data Mining and Business Intelligence and their importance in the world of Big Data.

Table of Contents

What is Data Mining?

Data Mining
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Data Mining is the process of analyzing large data sets to identify patterns and relationships that can be used to solve business problems through data analysis. Data Mining techniques and tools enable businesses to forecast future trends and make better-informed decisions. Data Mining is an interdisciplinary subfield of computer science and statistics that aims to extract information from a data set and transform it into a comprehensible structure for further use.

Due to the evolution of Data Warehousing technology and the rise of Big Data, the adoption of Data Mining techniques has accelerated over the last few decades, assisting businesses in transforming raw data into useful knowledge. 

How does Data Mining work?

Working of Data Mining
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An ideal Data Mining process consists of the following six steps:

  • Business Understanding: The first step in starting any Data Mining project is identifying the business problem that needs to be solved. Without a clear focus on a meaningful business outcome, you may end up poring over the same set of data over and over again without uncovering any meaningful insight. 
  • Data Understanding: Develop an understanding of the available data that will be required to solve the business problem.
  • Data Preparation: This step involves making the data ready for analysis. Most of the time, the data extracted from disparate sources is not in the appropriate format to perform exploratory analysis. Hence, such data needs to be transformed into a suitable format for Data Analysis.
  • Modeling: Algorithms can be used to identify patterns in data and then you can apply those patterns to a predictive model. This phase entails selecting and applying modeling techniques based on calibrated parameters and may necessitate additional data transformation.
  • Evaluation: Evaluation involves determining whether and how well the results produced by a given model will aid in the achievement of the business goal. Iterative phases are frequently used to fine-tune the algorithm in order to achieve the best results. The primary goal is to determine whether the Data Mining algorithm meets the original business goal.
  • Deployment: Once the above steps are completed the results of the project are deployed to make it available to the decision-makers. Data Mining is used in this phase to extract actionable information and insights from the target environment. It may entail scoring, obtaining model details, or integrating Data Mining models into Data Warehouse infrastructure, applications, or query and reporting tools.

What is Business Intelligence?

Business Intelligence
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Business intelligence (BI) is a collection of processes, architectures, and technologies that transform raw data into meaningful information and helps businesses drive informed decisions. It is a collection of software and services designed to turn data into actionable intelligence and knowledge. Business Intelligence has a direct impact on strategic, tactical, and operational business decisions in organizations. It allows for fact-based decision-making based on historical data rather than assumptions and gut instinct. Business Intelligence tools analyze data and generate reports, summaries, dashboards, maps, graphs, and charts to provide users with detailed business intelligence.

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Why is Business Intelligence important?

Now that you have a basic understanding of what Business Intelligence is, it’s time to learn why is Business Intelligence so vital in modern businesses:

  • Produce new Customer Insights: One of the primary reasons businesses invest time, money, and effort in Business Intelligence is because it allows them to better observe and analyze current customer purchasing trends. Once you’ve used BI to understand what your customers are buying and why they’re buying it, you can use that knowledge to create products and product improvements that meet their expectations and needs which will ultimately improve your organization’s bottom line.
  • Actionable Information: An effective Business Intelligence system identifies key organizational patterns and trends. A Business Intelligence system also enables you to comprehend the implications of various organizational processes and changes, allowing you to make informed decisions and take appropriate action.
  • Efficiency Improvements: Business Intelligence Systems aid in the improvement of organizational efficiency, which increases productivity and, potentially, revenue. Business intelligence systems enable organizations to easily share critical information across departments, saving time on reporting, data extraction, and data interpretation. Making information sharing easier and more efficient allows organizations to eliminate redundant roles and duties by allowing employees to focus on their work rather than data processing.

Key Differences between Data Mining and Business Intelligence

1) Key Differences between Data Mining and Business Intelligence: Purpose 

The goal of Business Intelligence is to transform data into information that executives can use. Business Intelligence monitors Key Performance Indicators and presents data in a way that promotes data-driven decision-making. Data Mining, on the other hand, is focused on exploring data and identifying solutions to specific business problems. Data Mining employs computational intelligence and algorithms to detect patterns, which are then interpreted and presented to management through Business Intelligence.

2) Key Differences between Data Mining and Business Intelligence: Type of the Solution

Business Intelligence involves monitoring the performance of Key Performance Indicators and therefore it is volumetric in nature. Data Mining, on the other hand, employs scientific methodology and algorithms to discover data patterns and behaviors. Furthermore, it assists in identifying management blind spots and provides extensive case-by-case statistical analysis.

3) Key Differences between Data Mining and Business Intelligence: Results Expected

 Data Mining produces unique datasets because it is more aligned with getting data into a usable format and resolving unique business problems. Data Mining provides reports with recommendations for strategic decision making. Business intelligence results, on the other hand, are presented in charts, graphs, dashboards, and reports. It is critical to display BI results in order to influence data-driven decisions.

4) Key Differences between Data Mining and Business Intelligence: Focus of the Approach

Data Mining helps businesses in developing new Key Performance Indicators for Business Intelligence by studying patterns. As a result, Business Intelligence is focused on demonstrating progress toward Data Mining-defined KPIs. Broad metrics such as total revenue, total customer support tickets, and ARR over time paint a comprehensive picture of company performance and provide stakeholders with the confidence to make important decisions.

5) Key Differences between Data Mining and Business Intelligence: Volume of Data

Large datasets are typically introduced by BI techniques; however, they are limited to the processing of relational databases. Data Mining requires smaller datasets, which results in higher data processing costs. Data Mining is best suited for processing datasets focused on a specific department, customer segment, or competitor (s). It can uncover hidden trends and patterns to specific business questions by analyzing these smaller datasets. Unlike Data Mining, Business Intelligence analyses dimensional or relational databases to determine how an enterprise is performing overall.

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How do Data Mining and Business Intelligence work together?

While the definitions of Business Intelligence and Data Mining are completely different, the two processes complement each other well. Data Mining can be thought of as the forerunner of Business Intelligence. When data is collected, it is generally raw and unstructured, making it difficult to produce insights. Data Mining decodes these complex datasets, producing a cleaner version from which the Business Intelligence team can derive insights.

Data Mining can also delve into smaller datasets. This enables businesses to determine the root cause of a specific trend and then use Business Intelligence to suggest ways to capitalize on it. Data Mining is used by analysts to gather specific information in the format they require, and then they use Business Intelligence tools to determine and present why the information is important. In a nutshell, Businesses that invest in both Business Intelligence and Data Mining tools can quickly perform, test, and interpret complex analyses. As a result, Data Mining and Business Intelligence produce more streamlined processes and higher financial yields.

Summary Table

You can also refer to the table given below. It very well summarizes the differences between Data Mining and Business Intelligence.

ParametersData MiningBusiness Intelligence
PurposeDesigned to explore data and find a solution to a specific business problem.Converting raw and unstructured data to meaningful insights
Type of the SolutionBased on algorithms and scientific methodologiesVolumetric in nature and capable of displaying accurate results during visualizations
Results ExpectedIdentifies the solution to a problem so that it can be represented as one of the KPIs in dashboards or reports.Visual Representation of KPIs in the form of Dashboards, Charts, and Graphs
Focus of the ApproachIdentifies a solution to a problem by developing new BI KPIsDepicts KPIs
Volume of DataSmall datasets processed with high processing costs
Large datasets processed in relational/dimensional databases

Conclusion

This blog introduced you to the underlying details of Data Mining and Business Intelligence. You also learned about the key differences between Data Mining and Business Intelligence and how they can be utilized in the most optimal manner when used in tandem. If you want to integrate data from various data sources into your desired Database/destination for free and seamlessly visualize it in a BI tool of your choice, Hevo Data is the right choice for you! It will help simplify the ETL and management process of both the data sources and destinations.

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Share your experience of learning about the key differences between Data Mining and Business Intelligence in the comments below!

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