J Scott Dutcher and Dr. William H Baker, Organizational Leadership
Making the most of the information that is available to you is what data mining is all about. Surprisingly, large numbers of organizations have yet to incorporate data mining techniques that drive many of their operations and decisions. Instead, upper management is trying to solve many puzzles without looking at the pieces. For those organizations that currently use data mining strategies, better mining methods can always be found. These missed mining opportunities have resulted in poorer service, lost revenue, security threats, and more. Data mining will be essential for the survival of businesses and organizations in the 21st Century. As an introduction into data mining, the following questions are answered below: What is data mining? What data is used? How does it work? and What are some of its benefits?
WHAT IS DATA MINING?
Data mining is a technique where a company or an organization gathers and uses all the information available within its databases as well as any external information to either improve or enhance its management, human resource, and marketing efforts.
WHAT DATA IS USED?
The information in the accounting, human resources, shipping, and sales departments is more than enough to create a data warehouse. This inside data can be supplemented later on with the purchase of more external information regarding employee and consumer demographics (income ranges, ages, race, marital status, etc.), credit history, preferences, purchasing behavior, etc. However, an organization’s first step should be to gather and organize all of the information that it already has.
Companies need to organize and integrate the information from all of their different departments together into a single database. Without combining all the data scattered throughout a company, the complete picture of each employee or consumer is very difficult to see. For example, suppose Mr. Jones calls the support line four times regarding the same problem. He is also the same customer with over $500,000 in assets in that same company. As a consequence of his dissatisfaction he starts withdrawing his assets even though he has been a loyal customer for over 15 years. Valuable customers may be lost when each of the pieces of a story is held separately (Ketola and Palmquist 29).
HOW DOES DATA MINING WORK?
The best way to explain this concept is by example. Suppose a sales firm is nearing the time to begin its annual college recruiting. Normally, the recruiters select approximately 10 schools to visit that have good reputations. This year will be different, however. The sales firm first identifies all schools that have been visited by recruiters over the past 10 years and the number of graduates hired from each school. Next, the sales firm will query its database to find out which schools the top 10 percent of its sales representatives came from. Finally, these two sets of data will be analyzed with an algorithm that selects the top 10 schools where the sales firm would likely benefit the most from recruiting. Clearly, this targeted approach to employee recruiting will produce far better results than previous methods.
WHAT ARE SOME OF DATA MINING’S BENEFITS?
Through the use of data mining technology, an organization will be better equipped to evaluate its employee’s and customer’s value, distinguish between profitable and unprofitable customers, select target markets more carefully, and service its employees and customers better. In addition, the government and many organizations have found data mining to be very useful in preventing possible security threats and attacks. Because data mining has so many different applications, the list of its benefits appears almost endless.
To know who the unprofitable customers are is of utmost importance to save money, time, and resources. For example, VISA does not want people who pay off their balances on time every month. Nor does VISA want customers who hold only no-annual-fee cards and are constantly changing cards to take advantage of free rewards. By recognizing the unprofitable customers, credit-card companies realize not to send them card offers that include such things as free gas or cash back. After finding these “bad” names, companies can decide how to treat them differently (Orr 22).
One month ago, I participated in an employee survey for Course Technology (CT). The survey questions were designed to discover what employees thought about the company performance, their associations with other employees and their supervisors, their needs, and more. “This survey vehicle has historically been used to help shape our people strategy here at Course Technology” (Dougherty). Changes and improvements to CT’s benefits plan, communication plan, attention to diversity, compensation, etc. have their roots directly traceable to information gathered from this survey. CT will then be better equipped to reduce employee turnover and increase employee productivity.
Since the September 11 terrorist attacks, the airline industry has been using data mining strategies to prevent possible security threats and more attacks. Last February I made two oneway flights a few days apart on different airlines. Just before boarding the Alaska Airline’s plane for the first flight, the security personnel selected me to undergo further searching. As they rifled through my carry-on bag and checked by person for unauthorized items, I thought to myself, What luck! When I was searched for the second time a few days later on America West, I realized that luck had nothing to do with it. I was selected by the computer not at random, but rather because my profile posed a great threat than others’ on the same flight. Not only was I flying only one way, but I had also not checked in any bags on either flight.
DATA MINING helps an organization get to know both its employees and customers better and service them better. It assists in analyzing and evaluating a customer’s lifetime value and purchasing behavior and the potential of new markets. Data mining is essential to effectively manage a working atmosphere in which employees can thrive. Again, data mining will be essential for the survival of businesses and organizations in the 21st Century.
____________________________________
- Dougherty, Joe. Interview. 25 July 2002
- Ketola, Lisa, and Joan Palmquist. “Turning Data Into Knowledge.” Marketing Research Summer 1999: 28-32. ProQuest. Online. 13 July 2002
- Orr, Alicia. “The Customer Nobody Wants.” Target Marketing Feb. 1999: 5. ProQuest. Online. 21 June 2002