Data and Databases
This chapter covers the concepts of data and databases. Businesses are becoming more and more "data-driven"; understanding how data is collected, stored, and managed is essential for anyone wanting to succeed in business. Pay special attention to the sections on data warehouses and data mining, as they provide examples of how companies use data strategically.
Finding Value in Data: Business Intelligence
As organizations have begun to utilize databases as the centerpiece of their operations, the need to fully understand and leverage the data they are collecting has become more and more apparent. However, directly analyzing the data that is needed for day-to-day operations is not a good idea; we do not want to tax the operations of the company more than we need to. Further, organizations also want to analyze data in a historical sense: How does the data we have today compare with the same set of data this time last month, or last year? From these needs arose the concept of the data warehouse.
The concept of the data warehouse is simple: extract data from one or more of the organization's databases and load it into the data warehouse (which is itself another database) for storage and analysis. However, the execution of this concept is not that simple. A data warehouse should be designed so that it meets the following criteria:
- It uses non-operational data. This means that the data warehouse is using a copy of data from the active databases that the company uses in its day-to-day operations, so the data warehouse must pull data from the existing databases on a regular, scheduled basis.
- The data is time-variant. This means that whenever data is loaded into the data warehouse, it receives a time stamp, which allows for comparisons between different time periods.
- The data is standardized. Because the data in a data warehouse usually comes from several different sources, it is possible that the data does not use the same definitions or units. For example, each database uses its own format for dates (e.g., mm/dd/yy, or dd/mm/yy, or yy/mm/dd, etc.). In order for the data warehouse to match up dates, a standard date format would have to be agreed upon and all data loaded into the data warehouse would have to be converted to use this standard format. This process is called extraction-transformation-load (ETL).
There are two primary schools of thought when designing a data warehouse: bottom-up and top-down. The bottom-up approach starts by creating small data warehouses, called data marts, to solve specific business problems. As these data marts are created, they can be combined into a larger data warehouse. The top- down approach suggests that we should start by creating an enterprise-wide data warehouse and then, as specific business needs are identified, create smaller data marts from the data warehouse.
Data Warehouse Process (top-down)
Benefits of Data Warehouses
Organizations find data warehouses quite beneficial for a number of reasons:
- The process of developing a data warehouse forces an organization to better understand the data that it is currently collecting and, equally important, what data is not being collected.
- A data warehouse provides a centralized view of all data being collected across the enterprise and provides a means for determining data that is inconsistent.
- Once all data is identified as consistent, an organization can generate "one version of the truth". This is important when the company wants to report consistent statistics about itself, such as revenue or number of employees.
- By having a data warehouse, snapshots of data can be taken over time. This creates a historical record of data, which allows for an analysis of trends.
- A data warehouse provides tools to combine data, which can provide new information and analysis.