Data Mining Is Very Important for Operational Essay

Excerpt from Essay :

Data mining is very important for operational effectiveness but when / how to stop mining data before it becomes more trouble than it's worth?

Over the last several years, advancements in technology have meant that an increasing number of companies are using data mining to be able to understand the demographics of their customers. This is when they will look at large amounts of information to figure out specific buying habits and patterns. However, the rise in the large number of corporations that are using these practices has been facing increasing levels of scrutiny. This is because these techniques are being utilized as a way to: understand the overall demographics of customers and their shopping patterns. As a result, the use of this technique has been the focus as to how and when data mining should be conducted by organizations. To understand this, we will look at a number of different factors including: how it can be utilized as a problem solving technique and to evaluate the results of data mining. Once this occurs, it will provide specific insights about how and when this approach should be used by an organization.

How and when data mining can be used as a problem solving technique.

One of the biggest advantages that data mining is offering is the ability for a company to: be able to effectively analyze their customers and determine their underlying buying patterns. This is useful, because it helps them in their marketing efforts to reach out to prospects who are most interested in what they have to offer. (Reidy, 2005, pp. 183 -- 206)

A good example of this can be seen with the pharmaceutical industry. As, many of the large drug manufacturers will use this as a way to be able market new prescription medication, based upon the latest information that was obtained about an individual's usage. The way that this works is many different pharmaceutical companies will work in conjunction with: a number of pharmacies around the country to data mine their information. Inside the different files that they have is specific information about: how often a patient will refill their medication, the kinds of drugs that they are prescribed and the last time it was refilled within the past two weeks.

For a major drug company, they can use this information to help their salesman most effectively target individuals, who may have an interest in purchasing a particular product over those that are manufactured by a competitor. This is important, because it gives these kinds of firms a major advantage in effectively targeting someone, who could have a need for their drugs. At the same time, they may be seeking out some kind of alternative they could use that is cheaper. In the case of the drug company, this allows them to effectively focus their sales force on finding those individuals who are interested in what they have to offer, based on the most recent data that was obtained. (Saul, 2006) (Reidy, 2005, pp. 183 -- 206)

In these kinds of situations, data mining is useful because it providing corporations with an effective way of locating new customers. This is far more efficient than giving salesman leads to cold call about: a particular product or service that they are offering. Instead, they can most effectively focus their efforts on finding someone who is most interested in what they have to offer. This increases the chances that they will have more sales and can be able to improve productivity during any kind of related activities. (Reidy, 2005, pp. 183 -- 206)

Insights into how to evaluate the results of data mining.

The best way to evaluate the results of data mining is based upon a number of different factors. The most notable include: the effectiveness of this kind of technique for organizations and possible ethical / legal issues that could arise. The best way to analyze the effectiveness for an entity is when you are looking at how data mining is helping to benefit a corporation. Where, you are examining specific factors that could have an impact on the way a corporation is using this information to: increase their productivity and reduce their underlying costs.

A good example of this can be seen with the traveling salesman. One of the biggest problems that most organizations have faced over the years are determining, who are the most likely prospects to buy. When you are using data mining you can effectively decide those individuals that will have the greatest chances of purchasing a particular product from the salesman. This reduces the costs that they have associated with laying out the routes that individuals will travel when they are on different sales calls. As, they can use data mining to: focus on those prospects that have the highest possibilities of making a purchase. In this aspect, data mining is an effective tool for helping a company to focus its resources on: those customers who are more likely to buy a particular product or service. (Graettinger, 2010)

This is significant, because it shows how data mining is a useful tool in helping a company to efficiently utilize their resources on those individuals who are most likely to make a purchase from them. As, they can reduce their costs and the amount of time wasted in: contacting prospects that have no interest in the products or services they are offering. At which point, this will help to increase their profit margins and reduce the underlying costs associated with these kinds of activities.

There is also the possibility that data mining can cross into areas that are involving possible ethical and legal issues. What is happening in these situations, are that this practice will often require companies obtaining personal information about a particular customer. At which point, they are giving these facts to their salespeople about contacting them regarding a possible purchase of: a new product or service that has been introduced. The problem begins with possible ethical and legal issues, as this will contain personal information about the prospect. This could cross into violations of different ethical codes for select career fields. At the same time, this increases the chances that there will be some kind of legal violations that are occurring when this data is being shared with the sales force.

A good example of this can be seen with the pharmaceutical companies obtaining the personal information about: an individual's purchase of prescription drugs. In this case, many of the drug companies have found this practice to be a good way of effectively determining; who are the most likely prospects that will use a particular product. The problem is that they are obtaining personal medical data about these people. This could be considered to be a violation of possible state laws that ban these kinds of practices.

Evidence of this can be seen by looking no further than a recent case that Supreme Court agreed to hear. What happened was that in 2007, the State of Vermont passed a law telling drug companies that they can no longer use data mining to be able to obtain personal information surrounding individuals, who are receiving prescription drugs from doctors or pharmacies. The reason why, is because they believed that these practices were a violation of different state privacy standards surrounding a person's medical history. The major drug companies sued the state, arguing that the law was a violation of the First Amendment (the right to free speech). At which point, the state appealed the decision to the Supreme Court claiming that the law was constitutional based on: the fact that it is protecting the personal information of individuals who are receiving prescription medication from their doctors. While this case is yet to be decided, it is an example of how the practice of data mining could be considered to be in violation of these different laws. ("Supreme Court Takes up Case on Data Mining," 2011)

At the same time, the fact that drug companies are receiving this kind of information about doctor's patients could be considered to be a violation of the Health Insurance Portability and Accountability Act (HIPPA). This states that patients are entitled to their privacy surrounding their personal medical records. As, certain entities must receive some kind of written confirmation from the individual prior to releasing any information including: health care clearinghouses that receive data about patients. When any organization is using this kind of personal information about an individual's prescription drugs, this could be considered to be a violation of the HIPPA Privacy Rule. At which point, there is the possibility that these kinds of organizations could be violating the law by receiving this kind of data. This problematic, because no one has yet to challenge the major drug companies on this issues. However, if they are not careful there is the possibility that they could be found in violation of the law. ("Health Information Privacy," 2011)

These different elements are significant, because they are illustrating how data…

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