Chapter 4 DECISION SUPPORT AND ARTIFICIAL INTELLIGENCE Brainpower for Your Business

Types of Systems Transaction Processing Systems(TPS) Systems used to process and collect data on day to day transactions (core business activity) Transaction - An exchange or trade, as of ideas, money, goods, etc Management Information Systems (MIS) Use data from TPS to help with day to day management and short term strategies. Executive Information Systems (EIS) Uses data from the MIS (and other sources) to assist in strategic decision-making

Types of Decisions You Face Structured decision – processing a certain information in a specified way so that you will always get the right answer Nonstructured decision – one for which there may be several “right” answers, without a sure way to get the right answer Recurring decision – happens repeatedly Nonrecurring (ad hoc) decision – one you make infrequently

Types of Decisions You Face EASIEST MOST DIFFICULT

Business Decisions Business decisions often relate to solving specific problems. These types of decisions consist of four phases. Intelligence – find or recognize a problem, need, or opportunity Design – consider possible ways of solving the problem Choice – weigh the merits of each solution Implementation – carry out the solution

Four Phases of Problem Solving

DECISION SUPPORT SYSTEMS Decision support system (DSS) – a highly flexible and interactive system that is designed to support decision making when the problem is not structured Decision support systems help you analyze, but YOU must know how to solve the problem, and how to use the results of the analysis

You and a DSS

Components of a DSS Model Data management User interface management Consists of both the DSS models and the model management system A model is representation of something (e.g. we all operate on some model of how the world “works”) Data management Stores and maintains the information that you want your DSS to use User interface management Allows you to communicate with the DSS

Components of a DSS

Types of Decision Support Systems Try to identify the base model that each of the following system is based upon

GEOGRAPHIC INFORMATION SYSTEMS Geographic information system (GIS) – DSS designed specifically to analyze spatial information Spatial information is any information in map form Businesses use GIS software to analyze information, generate business intelligence, and make decisions

Zillow GIS Software for Denver

ARTIFICIAL INTELLIGENCE DSSs and GISs support decision making; you are still completely in charge Artificial intelligence, the science of making machines imitate human thinking and behavior, can replace human decision making in some instances Expert systems Neural networks (and fuzzy logic) Genetic algorithms Intelligent agents (or agent-based technologies)

EXPERT SYSTEMS (AI) Expert (knowledge-based) system – an artificial intelligence system that applies reasoning capabilities to reach a conclusion Used for Diagnostic problems (what’s wrong?) Prescriptive problems (what to do?)

Traffic Light Expert System

What Expert Systems Can and Can’t Do An expert system can Reduce errors Improve customer service Reduce cost An expert system can’t Use common sense Automate all processes

NEURAL NETWORKS AND FUZZY LOGIC (AI) Neural network (artificial neural network or ANN) – an artificial intelligence system that is capable of finding and differentiating patterns

Neural Networks Can… Learn and adjust to new circumstances on their own Take part in massive parallel processing Function without complete information Cope with huge volumes of information Analyze nonlinear relationships

Fuzzy Logic Fuzzy logic – a mathematical method of handling imprecise or subjective information Used to make ambiguous information such as “short” usable in computer systems Applications Google’s search engine Washing machines Antilock breaks

GENETIC ALGORITHMS (AI) Genetic algorithm – an artificial intelligence system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem

Evolutionary Principles of Genetic Algorithms Selection – or survival of the fittest or giving preference to better outcomes Crossover – combining portions of good outcomes to create even better outcomes Mutation – randomly trying combinations and evaluating the success of each

Genetic Algorithms Can… Take thousands or even millions of possible solutions and combine and recombine them until it finds the optimal solution Work in environments where no model of how to find the right solution exists

INTELLIGENT AGENTS (AI) Intelligent agent – software that assists you, or acts on your behalf, in performing repetitive computer-related tasks Types Information agents intelligent agents that search for information of some kind and bring it back Monitoring-and-surveillance or predictive agents intelligent agents that constantly observe and report on something of interest, such as a network or manufacturing equipment Data-mining agents operates in a data warehouse discovering information User or personal agents takes action on your behalf such as prioritizing e-mail, acting as gaming partner, assembling customized news reports, and filling out forms for you

Other types of AI based Models Biomimicry – learning from ecosystems and adapting their characteristics to human and organizational situations Used to Learn how people-based systems behave Predict how they will behave under certain circumstances Improve human systems to make them more efficient and effective

Agent-Based Modeling Agent-based modeling – a way of simulating human organizations using multiple intelligent agents, each of which follows a set of simple rules and can adapt to changing conditions Multi-agent system – groups of intelligent agents have the ability to work independently and to interact with each other

Swarm Intelligence Swarm (collective) intelligence – the collective behavior of groups of simple agents that are capable of devising solutions to problems as they arise, eventually leading to coherent global patterns Distinguishing characteristics are: Flexibility – adaptable to change Robustness – tasks are completed even if some individuals are removed Decentralization – each individual has a simple job to do