1. K.S. School of Business Management (MIS)
Complex Decisions & AI
K.S. School of Business Management
(MIS)

2. Why do you need Expert Systems?
Diagnostic Problems
Speed
Consistency
Training

3. Why do you need Expert Systems?
Diagnostic Problems
Situations are like symptoms
Compare symptoms and diagnosis to situations and solutions
Discuss:
A firm uses a complex machine. For machine breakdowns, an engineer needs to be hired, coz he understands the problem language.
The company wishes to expand to more locations => more machines
More engineers too? Cost?
Company wants to expand to international locations too!
Even more engineers? Even more cost?
Solution?

4. Expert System

5. Why do you need Expert Systems?
Speed
Faster, much more quicker responses
Advantage situations?
Stock markets!
Market analysis – First mover’s advantage!
Discuss
Bank loans – Traditional versus via IS

6. Why do you need Expert Systems?
Consistency
Why is consistency important?
Most business decisions are subject to a wide variety of non-discrimination laws!
Discuss:
Bank Loan case
If an officer uses individual discretion to take a decision, what about being in line with corporate policies?
Time taken to verify rules?
Employee promotions and increments

7. Why do you need Expert Systems?
Training
All organizations must train employees
Complex tasks and unstructured decisions
Employees can take years to learn the rules and gain experience required to deal with problems
Two features of expert systems help employees learn:
Learn what questions need to be asked
Be able to explain your answers (Why it reached a certain conclusion)

8. Another example of an Expert System
Knowledge Base
Symbolic &
Numeric Knowledge
Expert decisions
made by
non-experts
Rules
If income > 20,000
or expenses < 3000
and good credit history
or . . .
Then 10% chance of default

9. DSS versus ES DSS ES Goal Help user make a decision
Provide Expert Advice
Method
Data – Model – Presentation
Asks Questions, applies rules, explains
Type of Problems
General, limited by user models
Narrow domain

10. Welcome to the Loan Evaluation System
ES Example: Bank Loan
Welcome to the Loan Evaluation System
What is the purpose of the loan? car
How much money will be loaned? 10,000
For how many years? 5
The current interest rate is 10%.
The payment will be $ per month.
What is the annual income? 24,000
What is the total monthly payments of other loans? Why?
Because the payment is more than 10% of the monthly income.
What is the total monthly payments of other loans?
The loan should be approved, there is only a 2% chance of default.

11. Decision Tree: Bank Loan
Payments
< 10%
monthly income?
Other loans
total < 30%
Credit
History
Job
Stability
Approve
the loan
Deny No
Yes
Good
Bad
So-so
Poor

12. Frame-based ES Rules Job History Customer Data
Name ____
Address ____
Years at address__
Co-applicant___
Job History
Employer, Salary, Date Hired
...
Loan Details
Purpose Boat
Loan Amount _____
Time _____
Data for Boat Loans
Length:
Engine:
Cost New:
Cost Used:
Recommendation
Lend $$$$
at ___ interest rate
for ___ months,
with ___ initial costs.
Rules