Artificial Intelligence

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Date: 2019
Encyclopedia of Management
From: Encyclopedia of Management(Vol. 1. 8th ed.)
Publisher: Gale, part of Cengage Group
Document Type: Topic overview
Pages: 5
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Artificial Intelligence

Artificial intelligence (AI) refers to computer software that exhibits intelligent behavior. The term “intelligence” is difficult to define and has been the subject of heated debate by philosophers, educators, and psychologists for generations. Nevertheless, it is possible to enumerate many important characteristics of intelligent behavior. Intelligence includes the capacity to learn, maintain a large storehouse of knowledge, utilize commonsense reasoning, apply analytical abilities, discern relationships between facts, communicate ideas to others and understand communications from others, and perceive and make sense of the world around us. Thus, artificial intelligence systems are computer programs that exhibit one or more of these behaviors.

AI systems can be divided into two broad categories: knowledge representation systems and machine learning systems. Knowledge representation systems, also known Page 19  |  Top of Articleas expert systems, provide a structure for capturing and encoding the knowledge of a human expert in a particular domain. For example, the knowledge of medical doctors might be captured in a computerized model that can be used to help diagnose patient illnesses.


The second category of AI, machine learning systems, creates new knowledge by finding previously unknown patterns in data. In contrast to knowledge representation approaches, which model the problem-solving structure of human experts, machine learning systems derive solutions by “learning” patterns in data with little or no intervention by an expert. There are three main machine learning techniques: neural networks, induction algorithms, and genetic algorithms.

Neural Networks. Neural networks simulate the human nervous system. According to K. Saraswathi and V. Ganese Babu in Discovery, neural networks “were designed to mimic how the brain learns and analyzes information.” The concepts that guide neural network research and practice stem from studies of biological systems. These systems model the interaction between nerve cells. Components of a neural network include neurons (sometimes called “processing elements”), input lines to the neurons (called dendrites), and output lines from the neurons (called axons).

Figure 1 Figure 1

Neural networks are composed of richly connected sets of neurons forming layers. The neural network architecture consists of an input layer, which inputs data to the network; an output layer, which produces the resulting guess of the network; and a series of one or more hidden layers, which assist in propagating. This is illustrated in Figure 1 .

During processing, each neuron performs a weighted sum of inputs from the neurons connecting to it; this is called activation. The neuron chooses to fire if the sum of inputs exceeds some previously set threshold value; this is called transfer.

Inputs with high weights tend to give greater activation to a neuron than inputs with low weights. The weight of an input is analogous to the strength of a synapse in a biological system. In biological systems, learning occurs by strengthening or weakening the synaptic connections between nerve cells. An artificial neural network simulates synaptic connection strength by increasing or decreasing the weight of input lines into neurons.

Neural networks are trained with a series of data points. The networks guess which response should be Page 20  |  Top of Articlegiven, and the guess is compared against the correct answer for each data point. If errors occur, the weights into the neurons are adjusted and the process repeats itself. This learning approach is called back propagation and is similar to statistical regression.

Neural networks are used in a wide variety of business problems, including optical character recognition, financial forecasting, market demographics trend assessment, and various robotics applications. Neural networks also have potential as life changing and lifesaving tools. In September 2009, the Mayo Clinic announced a new artificial neural network (ANN) designed to mimic the cognitive functions of the brain. The program was developed in order to assist in the diagnosis of a cardiac infection, referred to as endocarditis, without the need for an invasive exam. The Mayo Clinic reported that “when tested on cases with known diagnosis of endocarditis, the best-trained ANN was correct most of the time (72 of 73 implant-related infections and 12 of 13 endocarditis cases) with a confidence level greater than 99 percent.” The Mayo Clinic continued to be innovative nearly a decade later when it launched a startup with nference, a technology company, to devise treatments for rare diseases and those currently lacking viable treatments. The startup, Qrativ, was to use deep learning neural networks to discover and develop drugs from data mined from biomedical literature, patient records, and molecular drug evidence.

Induction Algorithms. Induction algorithms form another approach to machine learning. In contrast to neural networks, which are highly mathematical in nature, induction approaches tend to involve symbolic data. As the name implies, these algorithms work by implementing inductive reasoning approaches.

Induction is a reasoning method that can be characterized as “learning by example.” Unlike rule-based deduction, induction begins with a set of observations and constructs rules to account for these observations.

Inductive reasoning attempts to find general patterns that can fully explain the observations. As Kathryn Schulz writes in the Boston Globe, “Psychologists and neuroscientists increasingly think that inductive reasoning undergirds virtually all of human cognition—the decisions you make every day, as well as how you learned almost everything you know about the world. To take just the most sweeping examples, you used inductive reasoning to learn language, organize the world into meaningful categories, and grasp the relationship between cause and effect in the physical, biological, and psychological realms.”

When an artificial intelligence system uses induction algorithms, the system is presented with a large set of data consisting of several input variables and one decision variable. The system constructs a decision tree by recursively partitioning data sets based on the variables that best distinguish between the data elements. That is, it attempts to partition the data so that each partition contains data with the same value for a decision variable. It does this by selecting the input variables that do the best job of dividing the data set into homogeneous partitions. For example, consider Figure 2 , which contains the data set pertaining to decisions that were made on credit loan applications.

Figure 2 Artificial Intelligence & Expert Systems Figure 2 Artificial Intelligence & Expert Systems

An induction algorithm would infer the rules in Figure 3 to explain this data.

As this example illustrates, an induction algorithm is able to induce rules that identify the general patterns in data. In doing so, these algorithms can prune out irrelevant or unnecessary attributes. In the example above, salary was irrelevant in terms of explaining the loan decision of the data set.

Further studies are also being done to help induction models more closely model the way humans think. As reported by Ann Trafton in MIT News, Josh Tenenbaum, a researcher at the Massachusetts Institute of Technology, states that he and his former student Charles Kemp “came up with a broader algorithm that is able to look all of these structures and weigh them against each other.” While computers typically only look where they are directed for data, the MIT model is instead able to review multiple sets of data and determine which to look at to resolve the problem or deal with the input it has been given. The researchers hope that creating an artificial intelligence program that has the ability to identify which data source to use, instead of simply seeking a specific set of data it has been programmed to seek, will help advance the field of artificial intelligence.

Induction algorithms are often used for data mining applications, such as marketing problems that help companies decide on the best market strategies for new product lines. Data mining is a common service included in data warehouses, which are frequently used as decision support tools.

Genetic Algorithms. Genetic algorithms use an evolutionary approach to solve optimization problems. These are Page 21  |  Top of Articlebased on Darwin's theory of evolution, and in particular the notion of survival of the fittest. Concepts such as reproduction, natural selection, mutation, chromosome, and gene are all included in the genetic algorithm approach.

Figure 3 Figure 3

Genetic algorithms are useful in optimization problems that must select from a very large number of possible solutions to a problem. A classic example of this is the traveling salesperson problem. Consider a salesman who must visit n cities. The salesperson's problem is to find the shortest route by which to visit each of these n cities exactly once, so that the salesman will tour all the cities and return to the origin. For such a problem there are (n − 1)! possible solutions, or (n − 1) factorial. For six cities, this would mean 5 × 4 × 3 × 2 × 1 = 120 possible solutions. Suppose that the salesman must travel to 100 cities. This would involve 99 possible solutions, an astronomically high number.

Obviously, for this type of problem, a brute strength method of exhaustively comparing all possible solutions will not work. This requires the use of heuristic methods, of which the genetic algorithm is a prime example. For the traveling salesperson problem, a chromosome would be one possible route through the cities, and a gene would be a city in a particular sequence on the chromosome. The genetic algorithm would start with an initial population of chromosomes (routes) and measure each according to a fitness function (the total distance traveled in the route). Those with the best fitness functions would be selected and those with the worst would be discarded. Then random pairs of surviving chromosomes would mate in a process called crossover. This involves swapping city positions between the pair of chromosomes, resulting in a pair of child chromosomes. In addition, some random subset of the population would be mutated, such that some portion of the sequence of cities would be altered. The process of selection, crossover, and mutation results in a new population for the next generation. This procedure is repeated through as many generations as necessary in order to obtain an optimal solution.

Genetic algorithms are very effective at finding good solutions to optimization problems. Scheduling, configuration, and routing problems are good candidates for a genetic algorithm approach. Genetic algorithms have been used to teach computers to play music and to customize the appearance of bodywork in the car industry. Such programs are also used to help police sketch artists create more accurate pictures. A program called the EFIT-V, which is used in by law enforcement in United Kingdom and South Africa, makes use of genetic algorithms to progressively change the appearance of a sketch using both evolutionary principles and witness recall. Although genetic algorithms do not guarantee the absolute best solution, they do consistently arrive at very good solutions in a relatively short period of time.


Artificial intelligence systems provide a key component in many computer applications that serve the world of business. In fact, AI is so prevalent that many people encounter such applications on a daily basis without even being aware of it.

One of the most ubiquitous uses of AI can be found in network servers that route email and in email spam-filtering devices. Expert systems are routinely utilized in the medical field, where they take the place of doctors to assess the results of tests like mammograms or electrocardiograms; credit card companies, banks, and insurance firms commonly use neural networks to help detect fraud. These AI systems can, for example, monitor consumer spending habits, detect patterns in the data, and alert the company when uncharacteristic patterns arise. Genetic algorithms serve logistics planning functions in airports, factories, and even military operations, where they are used to help solve incredibly complex resource allocation problems. And perhaps most familiar, many companies employ AI systems to help monitor calls in their customer service call centers. These systems can analyze the emotional tones of callers' voices or listen for specific words, and route those calls to human supervisors for follow-up attention.

Another example of artificial intelligence that many consumers are familiar with has the deceptively simple name of “recommender system.” This program, used by companies such as Amazon and Netflix, recommends to customers similar products they may enjoy based on analyzing connections among past purchases and product ratings. The system gathers data each time a customer buys something or expresses an opinion about a product, and uses this information to search for connections and draw conclusions. Alexander Bell, a member of a research team that participated in a contest to improve the software, is quoted by Annalle Newitz in the Washington Post as saying, “because the factors are determined automatically by algorithms, they may correspond to hard-to-describe concepts such as quirkiness, or they may not be interpretable by humans at all.” The Netflix system, which, Newitz writes, “owes its existence to over half a Page 22  |  Top of Articlecentury of research into artificial intelligence” accounts for approximately 60 percent of Netflix rentals.

Artificial intelligence is routinely used by enterprises in supply chain management through the use of a set of intelligent software agents that are responsible for one or more aspects of the supply chain. These agents interact with one another in the planning and execution of their tasks. For instance, a logistics agent is responsible for coordinating the factories, suppliers, and distribution centers. This agent provides inputs to the transportation agent, which is responsible for assignment and scheduling transportation resources. The agents coordinate their activities with the optimization of the supply chain as the common goal.

Customer relationship management uses artificial intelligence to connect product offers and promotions with consumer desires. AI software profiles customer behavior by finding patterns in transaction data. The software generates algorithms for evaluating different data characteristics, such as what products are frequently bought together or the time of year a product sells the most. Thus, the software is able to use historical data to predict customer behavior in the future.

Artificial intelligence is also used on Wall Street in the selection of stocks. Analysts use AI software to discover trading patterns. For instance, an algorithm could find that the price movements of two stocks are similar; when the stocks diverge, a trader might buy one stock and sell the other on the assumption that their prices will return to the historical norm. As the use of trading algorithms becomes more commonplace, there is less potential for profit.

Although computer scientists have thus far failed to create machines that can function with the complex intelligence of human beings, they have succeeded in creating a wide range of AI applications that make people's lives simpler and more convenient.

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SEE ALSO Expert Systems .



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Gale Document Number: GALE|CX7617900015