---
title: "Data analysis"
chunk: 3/5
source: "https://en.wikipedia.org/wiki/Data_analysis"
category: "reference"
tags: "science, encyclopedia"
date_saved: "2026-05-05T03:43:31.459045+00:00"
instance: "kb-cron"
---

McKinsey and Company named a technique for breaking down a quantitative problem into its component parts called the MECE principle. MECE means "Mutually Exclusive and Collectively Exhaustive". Each layer can be broken down into its components; each of the sub-components must be mutually exclusive of each other and collectively add up to the layer above them.  For example, profit by definition can be broken down into total revenue and total cost.
Analysts may use robust statistical measurements to solve certain analytical problems.  Hypothesis testing is used when a particular hypothesis about the true state of affairs is made by the analyst and data is gathered to determine whether that hypothesis is true or false. For example, the hypothesis might be that "Unemployment has no effect on inflation", which relates to an economics concept called the Phillips Curve. Hypothesis testing involves considering the likelihood of Type I and type II errors, which relate to whether the data supports accepting or rejecting the hypothesis.
Regression analysis may be used when the analyst is trying to determine the extent to which independent variable X affects dependent variable Y (e.g., "To what extent do changes in the unemployment rate (X) affect the inflation rate (Y)?").
Necessary condition analysis (NCA) may be used when the analyst is trying to determine the extent to which independent variable X allows variable Y (e.g., "To what extent is a certain unemployment rate (X) necessary for a certain inflation rate (Y)?"). Whereas (multiple) regression analysis uses additive logic where each X-variable can produce the outcome and the X's can compensate for each other (they are sufficient but not necessary), necessary condition analysis (NCA) uses necessity logic, where one or more X-variables allow the outcome to exist, but may not produce it (they are necessary but not sufficient). Each single necessary condition must be present and compensation is not possible.

== Analytical activities of data users ==

Users may have particular data points of interest within a data set, as opposed to the general messaging outlined above. Such low-level user analytic activities are presented in the following table. The taxonomy can also be organized by three poles of activities: retrieving values, finding data points, and arranging data points.

== Barriers to effective analysis ==
Barriers to effective analysis may exist among the analysts performing the data analysis or among the audience. Distinguishing fact from opinion, cognitive biases, and innumeracy are all challenges to sound data analysis.

=== Confusing fact and opinion ===

Effective analysis requires obtaining relevant facts to answer questions, support a conclusion or formal opinion, or test hypotheses. Facts by definition are irrefutable, meaning that any person involved in the analysis should be able to agree upon them. The auditor of a public company must arrive at a formal opinion on whether financial statements of publicly traded corporations are "fairly stated, in all material respects". This requires extensive analysis of factual data and evidence to support their opinion.

=== Cognitive biases ===
There are a variety of cognitive biases that can adversely affect analysis. For example, confirmation bias is the tendency to search for or interpret information in a way that confirms one's preconceptions. In addition, individuals may discredit information that does not support their views.
Analysts may be trained specifically to be aware of these biases and how to overcome them. In his book Psychology of Intelligence Analysis, retired CIA analyst Richards Heuer wrote that analysts should clearly delineate their assumptions and chains of inference and specify the degree and source of the uncertainty involved in the conclusions. He emphasized procedures to help surface and debate alternative points of view.

=== Innumeracy ===
Effective analysts are generally adept with a variety of numerical techniques. However, audiences may not have such literacy with numbers or numeracy; they are said to be innumerate. Persons communicating the data may also be attempting to mislead or misinform, deliberately using bad numerical techniques.
For example, whether a number is rising or falling may not be the key factor. More important may be the number relative to another number, such as the size of government revenue or spending relative to the size of the economy (GDP) or the amount of cost relative to revenue in corporate financial statements. This numerical technique is referred to as normalization or common-sizing. There are many such techniques employed by analysts, whether adjusting for inflation (i.e., comparing real vs. nominal data) or considering population increases, demographics, etc.
Analysts may also analyze data under different assumptions or scenarios. For example, when analysts perform financial statement analysis, they will often recast the financial statements under different assumptions to help arrive at an estimate of future cash flow, which they then discount to present value based on some interest rate, to determine the valuation of the company or its stock. Similarly, the CBO analyzes the effects of various policy options on the government's revenue, outlays and deficits, creating alternative future scenarios for key measures.

== Other applications ==

=== Analytics and business intelligence ===

Analytics is the "extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions." It is a subset of business intelligence, which is a set of technologies and processes that uses data to understand and analyze business performance to drive decision-making.

=== Education ===
In education, most educators have access to a data system for the purpose of analyzing student data. These data systems present data to educators in an over-the-counter data format (embedding labels, supplemental documentation, and a help system and making key package/display and content decisions) to improve the accuracy of educators' data analyses.

== Practitioner notes ==
This section contains rather technical explanations that may assist practitioners but are beyond the typical scope of a Wikipedia article.