CHAPTER 12 – INTELLIGENT SYSTEMSIN BUSINESS

CHAPTER PREVIEW
For generations people have attempted to make smart
machines to perform tasks that require intelligence. In this
chapter we present the achievement of this goal as it is
related to the world of business. Available intelligent systems
range from expert systems to industrial robots. These systems
can be used by themselves or in conjunction with other
systems, to increase productivity, quality, and customer
service, and to reduce cycle time. They can also be integrated
among themselves or embedded in other in- formation,
electrical, or mechanical systems to improve the functionality
of those systems. Intelligent systems also can be used to
facilitate communication and collaboration among people
within and between organizations, expanding the capabilities
of the latter. Intelligent systems help us to communicate
better with people who speak other languages as well as to
communicate with computers. In addition, intelligent systems
help us to overcome the information overload, enabling us to
quickly find, compare, and analyze data and to better conduct
electronic commerce and customer service. Finally, such
systems can act as advisers and tutors to people.
CHAPTER OUTLINE
12.1 Artificial Intelligence and Intelligent Systems
12.2 Expert Systems
12.3 Other Intelligent Systems
12.4 Intelligent Agents
12.5 10rtual Reality: An Emerging Technology
12.6 ethical and Global Issues of Intelligent Systems

ANALOG DEVICES USES INTELLIGENT SYSTEMS TO SUPPORT COLLABORATION WITH

CUSTOMERS
The Business Problem

Analog Devices designs, manufactures, and markets a broad line of precision integrated circuits (ICs)
used in analog and digital signal-processing applications. The products are sold to various
manufacturers that use ICs in their own products. The market for such ICs is very competitive.

With thousands of products, Analog Devices had been printing new catalogs and data sheets
each year some of which measured up to two feet thick. The cost of printing and shipping catalogs
to 50,000 customers world wide reached about $3 million each year.

Analog's sales engineers used to take customer requirements by phone and try to manually
find a match in the company's product range. This complex process involves considering dozens of
constraints while interacting with customers (usually design engineers) to ascertain their needs and
priorities. Only well-trained engineers are successful in this lengthy process. Since it is very difficult
to find and retain such engineers, there were problems with matching products to customers.

Analog Devices, like its competitors, tried to find a better way to service its customers.
Initially, projects were developed using an algorithm-based search engine combined with a standard
database management system. This approach failed because this type of search returns a value only
when all conditions are exactly met. When customers provided an incomplete set of specifications,
the answer was "no match"; when the customers relaxed some specifications, hundreds of matches
were found. Thus, the process was lengthy, expensive, and error-prone.

The IT Solution
 Analog Devices decided to change the process by improving the customer-company
communication. Using an IT-based intelligent system called case-based reasoning, which derives
conclusions from historical cases, and combining it with a decision- support optimization model, the
company allows customers to specify product requirements interactively, online, in order to find
the right product, or the one closest to their needs by themselves.

With this system the customer enters specifications directly on the screen. Values can be
numbers or information such as "the best," "sort of” or “less than”. The system always provides an
answer, a list of the top-ten Analog Devices products that most closely meet the specified
requirements. The customer then examines the products online. If the customer is not satisfied,
another search begins with new specification and priorities. This process can be continue until the
right product is undentified.

The system was initially delivered to customers with the entire catalog on a ROM. Today,
the system is accessible to customers through an extranet, so they can use the inexpensive Internet
to save money on communication and collaboration. The company's engineers can also use the
system on the company's intranet.

The Result

Analog Devices saved initially about $2 million a year, because the cost to produce and ship 120,000
CD-ROMs was far less expensive than the paper version of the catalog. The extranet savings are
much larger since there is no need to make and ship the CD- ROMs whenever significant changes are
made. In addition, the quality of the service provided by Web-based intelligent systems makes a
difference in this competitive mar- Now. when customers call sales support they usually know exactly
what they want, and what they order is exactly what they need. The company's support engineers
now have time to accommodate more complex customer requirements. As the system tracks
customers' requests, a future extension will use data collected to analyze this information and input
them to an improved design of new products.

Sources: Compiled from D. Kress, "Al at work." pc A1 (March/April 1998), and from (2002)

What We learned from This Case

The opening case demonstrates how an intelligent system solved a difficult business problem by
improving and expediting communication and collaboration between the company and its customers.
The system facilitated the work of the sales engineers. Previously, only well-trained engineers were
successful, but it took them a considerable amount of time. Now much of the search is done by the
customers themselves, freeing the sales engineers to do other tasks. The opening case also
demonstrates that the intelligent system solution was integrated with other information technologies
(CD-ROM, Internet, extranet, search engine) as well as with a DSS. Case-based reasoning is one of
several intelligent systems that businesses can use to improve their operations. This case is also an
example of collaborative commerce (Chapter 9).
 The fundamentals of the major intelligent systems and the support they provide for problem
solving and seizing business opportunities are the subjects of this chapter. We will also discuss a
related application, virtual reality.

12.1 ARTIFICIAL INTELLIGENCE AND INTELLIGENT SYSTEMS

As the opening case illustrated, the introduction of an intelligent system enabled non- experts to
perform a task previously done by experts. This is only one benefit of intelligent systems, which are
the commercial applications of artificial intelligence (A1).

Artificial Intelligence and Intelligent Behavior

Artificial intelligence (A1) is a term that encompasses many definitions. Most experts agree that A1 is
concerned with two basic ideas. First. it involves studying the thought Processes of humans; second, it
deals with representing those processes via machines (computers, robots, and so on). one well-
publicized definition of A1 is "behavior by a machine that, if performed by a human being, would be
called intelligent." The three Objectives of artificial intelligence are (1) to make machines smarter. (2)
to under- stand what intelligence is, and (3) to make machines more useful.

What is the meaning of the term intelligent behavior? Several capabilities are con- sidered to
be signs of intelligence:

 Learning or understanding from experience

 Making sense of ambiguous or contradictory messages
 Responding quickly and successfully to a new situation
 Using reasoning to solve problems and direct actions effectively
 Dealing with complex situations
 Understanding and inferring in ordinary, rational ways Intelligent ways
 Applying knowledge to manipulate the environment
 Recognizing the relative importance of different elements in a situation

Although A1's ultimate goal is to build machines that will mimic human intelligence current
intelligent systems found in commercial A1 products are far from exhibiting any significant
intelligence. Nevertheless, intelligent systems are currently conducting many tasks that require
some human intelligence, for a significant improvement of productivity, quality and cycle time.

An interesting test to determine whether a computer exhibits intelligent behavior was

designed by Alan Turing, a British A1 pioneer. According to the Turing test, a computer could be
considered "smart" only when a human interviewer, conversing with both an unseen human being
and an unseen computer, cannot determine which is which.
 So far we have concentrated on the notion of intelligence. According to another definition,
artificial intelligence is the branch of computer science that deals with ways of representing
knowledge using symbols in addition to numbers and using heuristics (rules of thumb) rather than
just algorithms for processing information.

Knowledge and A1. A1 is frequently associated with the concept of knowledge. The computer
cannot have experiences or study and learn as the human mind can, but it can use knowledge given
to it by human experts. Such knowledge consists of facts, concepts, theories, heuristic methods,
procedures, and relationships. As defined in Chapters 1 and 11, knowledge is information organized
and analyzed to make it understandable and applicable to problem solving or decision making, and
to incorporate procedures, ideas, and human experience. The collection of knowledge related to a
problem (or an opportunity) to be used in an intelligent system is organized and stored in what we
call a knowledge base, and it is specific to a problem.

Comparing Artificial and Natural Intelligence

The potential value of A1 can be better understood by contrasting it with natural (human)
intelligence. A1 has several commercial advantages over natural intelligence:

• A1 is more permanent. Natural intelligence is perishable from a commercial stand- point, because
workers may take knowledge with them when they leave their place of employment, or they may
forget their knowledge. A1, however, is permanent as long as the computer systems and programs
remain unchanged.

• A1 can be less expensive than natural intelligence. There are many circumstances in which
developing or buying an intelligent system costs less than having human be- ings carry out the same
tasks, as was shown in the opening case.

• A1 is consistent and thorough. Natural intelligence is erratic because people are ratic; they may
not perform consistently.

• A1 can be documented. Decisions made by a computer can be easily documented by tracing the
activities of the system. Natural intelligence is difficult to document.

• A1 offers ease of duplication and dissemination. Transferring a body of knowledge from one
person to another usually requires a lengthy process of apprenticeship: some expertise can never
be duplicated completely. Knowledge embodied in a com- puter system can be copied and easily
moved to another computer, anywhere and any time. For example, the knowledge needed to match
customers' needs with Ana- log Devices' products is now available on the extranet for the
company's customers to use when needed; knowledge distribution can be made rapidly and to
thousands of customers worldwide.
On the other hand, natural intelligence has several advantages over A1:

 Natural intelligence is creative, whereas A1 is rather uninspired. The ability to acquire

knowledge is inherent in human beings. But with A1, tailored knowledge must be built into a
carefully constructed system.
 Natural intelligence enables people to benefit from and directly use sensory experiences.
Many A1 sys- tens must first interpret information collected by sensors, thus providing users
with indirect sensory experiences.
 Natural intelligence enables people to recognize relationships between things, to sense
qualities, and to spot patterns that explain how various items interrelate.
 Perhaps most important, human reasoning is always able to make use of a wide context of
experiences and bring that to bear on individual problems. In contrast, A1 systems typically
gain their power by having a very narrow focus.

Despite their limitations, A1 methods can be extremely valuable. They can make computers
easier to use and make knowledge more widely available. Furthermore, with the passage of
time, the magnitude of these limitations is decreasing. The major potential benefits of A1 are
shown in Manager's Checklist 12.1.

Conventional versus A1 Computing

Conventional computer programs are based on algorithms (mathematical formulas or sequential

procedures that lead to a solution). An algorithm is converted into a com- puter program that
tells the computer exactly what operations to carry out in order to solve problems.
Conventional computing is therefore done by numerical processing. A1 programs go beyond
conventional computing by including heuristics, or rules of thumb that express knowledge.

A1 software also uses symbolic processing of knowledge. In A1, a symbol can be a letter, word, or
number that represents objects, processes, and their relationships. Objects can be people, things,
ideas, concepts, events, or statements of facts. Using symbols, it is possible to create a knowledge
base of facts and concepts, and the relationships that exist among them. The major differences
between A1 computing and conventional computing are shown in Table 12.1.

Manager Checklist 12.1 (The potential benefits of artificial intelligent)

 Makes the use of some computer applications very friendly.

 Significantly increases the speed and consistency of problem solving.
 Helps solve problems that cannot be solved by conventional computing.
 Helps solve problems that have incomplete or unclear data. Helps in handling the information overload (by
summarizing or interpreting Information).
 Significantly increases the productivity of performing many tasks.
 Helps in searching and finding relationships among large amounts of data.
 Facilitates the delivery of fast customer service at a low cost.
 Table 12.1 Conventional versus A1 Computing
Dimension Conventional AI
Processing Primarily algorithmic Includes symbolic conceptualization
Nature of input Must be complete Can be incomplete
Search approach Frequently based on algorithms Frequently uses rules and heuristics
(rules of thumb)
Explanation Usually not provided Provided
Focus Data, information Knowledge
Maintenance and update Usually difficult Relatively easy changes can be made
in self-contained modules
Reasoning capability No Yes

Does a computer really think? Knowledge bases and search techniques certainly make computers
more useful, but can they really make computers more intelligent? The fact that most A1 programs
are implemented by search and pattern-matching techniques leads to the conclusion that
computers are not really intelligent. You the computer a lot of information and some guidelines
about how to use this informa- tion. The computer can then come up with a solution. But all it does
is test the various alternatives and attempt to find some combination that meets the designated
criteria. The computer appears to be "thinking"' and often gives a satisfactory solution. How- ever,
the human mind is just too complex to duplicate. Computers certainly cannot think in the same way
humans do, but they can be very useful for increasing our ductivity. This is done by several
commercial A1 technologies.

Commercial Artificial Intelligence Systems

The development of machines that exhibit intelligent characteristics draws on several sciences and
technologies, ranging from linguistics to mathematics. The major gent systems are: expert systems,
natural language processing, speech understand, robotics and sensory systems, computer vision and
scene recognition, intelligent computer-aided instruction, fuzzy logic, neural computing, and case-
based reasoning. A combination of two or more of the above is considered a hybrid intelligent
systems follows.

Expert systems. Expert systems (ESs) are computerized advisory programs tempt to imitate the
reasoning processes of experts in solving difficult problems pert systems are of great interest to
organizations because they can productivity and augment workforces in specialty areas where it is
becoming. -used ingly difficult to find and retain human experts. Expert systems are further in
Section 12.2.

Natural language technology. Natural language processing (NLP) users the ability to communicate
with computers in human language naturral language processing is discussed in detail in Section
12.3.
Speech (voice) understanding. Speech understanding is the recognition and under- standing by a
computer of a spoken language. Details are given in Section 12.3.

Robotics and sensory systems. Sensory systems such as vision recognition combined with A1 define
a broad category of systems generally referred to as robotics. A robot an electromechanical device
that can be programmed and to automate manual tasks.

Robots combine sensory systems with intelligent systems and mechanical motions to
produce machines of widely varying abilities. Robotics is used mainly in welding, painting, cleaning,
and simple material handling. Assembly-line operations, particularly those that are highly repetitive
or hazardous, are also beginning to be performed by robots. Robots are used for finding, moving,
and packing items in automated e-commerce warehouses, for example. Robots are getting more
and more capable. They are being put to use in ways that ease life by performing tasks in hazardous
environments and by performing household tasks ranging from cutting the grass in your backyard,
to cooking, to cleaning the floor.

Computer vision and scene recognition. Visual recognition has been defined as the addition of
some form of computer intelligence and decision making to digitized visual information received
from a machine sensor. The resultant information is then used to perform or control such
operations as robotics movement, conveyor speeds, and production-line quality control. The. basic
objective of computer vision is to interpret scenarios. Computer vision is used extensively in
performing industrial-quality control tasks (such as inspection of products). Would you believe that
every Tylenol or other brand-name pill is checked by computer vision for defects? Defective pills are
removed.

Intelligent computer-assisted instruction. Computer-assisted instruction (CAI), which has been in

use for several decades and now is the base of e-learning, brings the power of the computer to the
educational process. Now CAI methods are being applied to the development of intelligent
computer-assisted instruction (ICAI) systems that can tutor humans by shaping their teaching
techniques to fit the learning patterns Of individual students. To a certain extent, such a machine
can be viewed as an expert system. However, the major objective of an expert system is to render
advice, whereas the purpose of ICAI is to teach.

ICAI applications are not limited to schools. As a matter of fact, they have found a sizable niche in
the military and corporate sectors. ICAI systems are being used today for various tasks such as
problem solving, simulationv discovery, learning, drill and practice, games, and testing. Such
systems are also used to support people with Physical or learning impairments. An increasing
number of ICAI programs are now offered on the Internet and intranet, supporting virtual schools
and universities. ICAI can be COmbined with distance learning, learning situations in which teachers
and stu- dents are in different locations. Another application of ICAI is interpretive testing. Using
this approach, GMAT (the MBA admission test) and other infamously long have shortened their
length of testing time. By being able to better interpret the answer test can more accurately
pinpoint the strengths and weaknesses of the rs by asking fewer but more relevant questions.
Machine learning• Conventional computerized problem-solving techniques cannot *pelt x Problems
where specialized knowledge is needed such knowledge can , In some cases, by an expert system
(ES). However, the use of an ES is by factors such as its rule structure, difficulties in knowledge
acquisition, and the inability of the ES to learn from experiences. For Situations where an ES is in
appropriate, machine learning can be used. Machine learning refers to a set of method that attempt
to teach computers to solve problems or to support problem analyzing (learning from) historical and
current cases. This task, however, is not simple. One problem is that there are many models of
learning, and sometimes difficult to match a learning model with the type of problem that needs to
be solved. Three methods of machine learning—neural computing, case-based reasoning, and fuzzy
logic—are described in Section 12.3.

Handwriting recognizers. The dream of every post office in the world is to be automate the reading
of all handwritten address characters, regardless of their shape. Today's scanners are good at
"reading" typed or printed material, but they are not very good at handwriting recognition.
Handwriting recognition is supported by technologies such as expert systems and neural computing
and is available in some pen-based computers. Handwriting interfaces are especially popular with
nontypists because they can convert handwritten text into typed digital text. Of special interest are
products such as Pen Computing (see Chapter 3 and Palm.com).

Intelligent agents. One of the most interesting applications of intelligent systems is their inclusion in
intelligent agents, which perform a variety of tasks for their masters much like a human agent does.
Intelligent agents, as we will see in Section 12.4 and as demonstrated in Chapter 9, are extremely
important for e-commerce and other Web- based applications.

Other applications. Artificial intelligence can be applied to several other tasks such as automatic
programming, which automatically writes computer programs in response to and in accordance with
the specifications of a program developer. Recently,

Box 12.1: General Electric's SCISOR analyzes financial news

General Electric's Research and Development Center has developed a natural language system called SCISSOR (System foe
Conceptual Information Summarization, Organization and Retrival) that performs text analysis and question-answering in a
limited predefined subject area (called a constrained domain). One application-of this system deals with analyzing financial
news. For ex- ample, SCISOR automatically selects and analyzes stories about corporate mergers and acquisitions from the
online financial service of Dow Jones. It is able to process news in less than 10 seconds per story. First, it determines
whether the story is about a corporate merger or acquisition. Then, it selects information such as the target, suitor, and
price per share. The system allows the user to browse and ask questions such as, "What price was offered for Polaroid?" or
"How much was Bruck Plastics sold for?"

The system's effectiveness was demonstrated in testing, when it proved to me 100 percent accurate in identifying
all 31 merger and acquisitions stories that were included in a universe of 731 financial news releases from the newswire
service. A similar application is a Web-based personalized new system news available in English, Chinese, and Malay,
summarize it, and extract desired personalized news in any of these languages.

Question:
1. What are the benefits of analyzing financial news via a machine?
2. What other applications might be developed vuth this type of system?
3. How could such a system be combined with an ln- ternet news dissemination portal such as money.cnn.com?

an automatic translation of Web pages to other languages has become very popular. Other
applications are preparation of news summaries and translation from one computer language to
another. Some computer programs, for example, “read" stories in newspapers or other
documents, including those available on the Internet, and make summaries in English or other
languages. This capability helps handle the problem of information overload, as described in IT's
About Business 12.1.

Before yog go on

1. List the major advantages that artificial intelligence has over natural intelligence.
2. List the major disadvantages of artificial intelligence compared with natural intelligence.
3. List and briefly define the commercial A1 application tools.

12.2 EXPERT SYSTEMS

Of all the intelligent systems, the one with the most business applications is the expert system.
When an organization has a complex decision to make or a problem to solve, it often turns to
experts for advice. These experts have Specific knowledge and experience in the problem area.
They are aware of alternative solutions, chances of success, and costs that the organization may
incur if the problem is not solved. Companies engage experts for advice on many matters,
ranging from mergers and acquisitions to advertising strategy. Experts can diagnose problems
correctly and solve them satisfactorily within a reasonable time frame. The more unstructured
the situation, the more specialized is the advice. However, human experts are expensive, and
they may not be readily available. Expert systems (ES) are an attempt to mimic human experts.

Concepts of Expert Systems

In order to explore the concepts involved in ES, read IT's About Business 12.2 (page 398), which
describes a well-known application case at General Electric. The case of GE's David Smith
demonstrates that the basic idea behind an ES is simple: Expertise IS transferred from an expert,
or other sources of expertise, to a computer and is stored there. Expertise is the extensive, task-
specific knowledge acquired from train- learning, and experience. It enables experts to make
better and faster decisions than non-experts in solving complex problems. Expertise takes a long
time (usually Years) to acquire. Users can call on the computer's stored expertise for specific
advice as needed. The computer can make inferences and arrive at a conclusion. Then, like a
human expert, the computer program advises the nonexperts and explains, if necessary the logic
behind the advice. When they contain the wisdom of several experts, expert systems can
sometimes perform better than any single expert can.

The goal of an expert system is to transfer expertise from an expert and documented
sources to a computer and then to the user. This process involves four activity knowledge
acquisition (from experts or other sources), knowledge representation in the computer,
knowledge inferencing, and knowledge transfer and use to solve a problem. Though the activity
of knowledge representation, acquired knowledge is organized as rules or objects, and is stored
electrically in a knowledge based.

Box 12.2: GE's expert system models human troubleshooters

General Electric's top locomotive field service engineer, David I. Smith, had been with the company for more than 40
years and was expert at troubleshooting diesel electric locomotive engines. Smith traveled throughout the country to
places where locomotives were in need of repair to determine what was wrong and to advise young engineers. The
company was dependent on Smith. There was just one problem: Smith was nearing retirement.

GE's traditional approach to such a situation was to set up apprenticeship teams that paired senior and junior engineers
for several months or even years. By the time the older engineers retired, the younger engineers had absorbed enough 0T
their expertise to carry on. It was a good short-term solution, but GE still wanted a more ef- fective and dependable way
of disseminating expertise among its engineers and preventing valuable knowledge from retiring with people like David
Smith.

GE decided to build an expert system to solve the problem by modeling the way a human troubleshooter works. The
system builders spent several months inter- viewing Smith and transferring his knowledge to a computer. The computer
program was developed over a three-year period, slowly increasing the knowledge and number of decision rules stored in
the cömputer. The resulting diagnostic technology enables a novice engineer or even a technician to uncover a fault by
spending a few minutes at the computer terminal. The system2 also explain to the user the logic of its advice, se rving as
a teacher. Furthermore, the system can lead through the required repair procedures, presenting tailed, computer-aided
drawings of parts and subsystems and providing specific how-to instruction demonstro ions. It is based on a flexible,
humanlike thought process, rather than rigid procedures expressed in flow. charts or decision trees.

The system is currently installed at every railroad pair shop served by GE, thus eliminating delays, preserve ing
Smith's expertise, and boosting maintenance productivity. After his retirement, Smith was hired a consultant to help in
updating and maintaining the system's knowledge.

Questions

1. Why was this application ideal for an expert sys- tem approach?

2. What are the major advantages of the computerized ES?

3. How can GE keep the knowledge in the system up to date after Smith stops his consultancy?

A unique feature of an expert system is its ability to "reason." Given the necessary expertise
stored in the knowledge base and accessibility to databases, the computer is programmed so that it
can make inferences, based on a search-and-match process. Knowledge inferencing is performed in
a component called the inference engine and results in advice or a recommendation for novices. ES
can explain its recommendation through a subsystem called the justifier or the explanation facility.

During the past few years, the technology of expert systems has been successfully applied in
thousands of organizations worldwide to problems ranging from identifying credit card fraud to
medical diagnosis to the analysis of dust in mines. Two illustrative applications are listed next.

EXAMPLE

Helping the Navajo Nation. The states of Arizona, New Mexico. and Utah transferring management
of the welfare program to the Navajo Nation, which self-administers the program for its own
people. The program provides Financial human services to approximately 30,()00 Navajo clients. An
expert system facilitates self-management of the welfare program. The interactive solution Case
Worker sor (from exsys.com) integrates the tribe's unique cultural heritage while complex tribal,
federal, and state guidelines.

Carrier configures equipment order Carrier Corporation, a major air conditioning manufacturers
introduced expert systems into its operations. For each customized order, Carrier must procure all
the parts and subsystems so that orders can be filled on order. The ES configures a set of part
numbers for each customer's equipment order. Using the ES, Carrier was able to maximize both
pricing and configuration, error, reduce cycle time, and increase customer satisfaction as well as
profitability (carrier.com). In summer 2001, Carrier teamed up with IBM to create a web-enabled air
conditioner that allows customers to turn on their home air conditioners before they home.
Commands are given from cellphones or PCs, through myappliance.com. The system also can
monitor performance for early detection of problems.

BENEFITS
 Increased output and productivity: Many tasks (e.g., diagnosis) can be performed much faster.
 Increased quality and reliability: Consistent output, lower error rate, important data not overlooked.
 Capture of scarce expertise: Top experts' knowledge is captured for dissemination to many.
 Ability to operate in hazardous environment: ES can be installed on robots that operate in toxic and other
dangerous environments.
 Improved customer service: Fast access to information and to FAQs facilitates customer service by help- desk
employees.
 Humanlike intelligence: Can make other computer systems smarter and more powerful when embedded in
them.
 Facilitated fault tolerance: Can work with incomplete input information and generate good conclusions even
if some input data are missing.
 Complex problem solving and decision making: Can integrate multiple opinions, quickly analyze data, and
suggest solutions.
 Training capabilities: Can simulate decisions and explain reasoning behind the decisions
 Reduction Of cycle time and in time: Advice is available annhere, at any time, and analysis Performed quickly.
 Embedded system : ESS are easily embedded il=sands of mechanical, and IT limitations

LIMITATION
  Limited expertise: Knowledge to be captured is not always readily available; expertise can be hard to extract
from humans. In some instances, experts may refuse to contribute their knowledge, or may contribute
incorrect or incomplete knowledge.
 No single correct solution: The approach of each expert to a given situation may be different, yet correct.
 Natural cognitive limits: Users of expert systems may not use the benefits of the system to the fullest extent
because of limited understanding.
 Narrowly defined subject areas: ES works well only for certain tasks such as diagnosing a malfunction in a
machine.
 Occasional incorrect recommendations: Many expert systems have no independent means of checking
whether their conclusions are reasonable or correct.
 Limited vocabulary, orjargon:The terminology that experts use for expressing facts and relations is frequently
not understood by others
 Cost: Help in building ESS is frequently required from knowledge engineers who are rare and expensive.
 Lack of trust by end users: Users may not trust a machine.
 Bias: Knowledge transfer is subject to perceptual and judgmental biases.
 Liability issues: Liability for bad advice provided by an ES is difficult to assess.

Benefits and Limitations of Expert Systems

Why have ESS become popular? Because of the large number of capabilities benefits they provide at
a reasonable cost. However, available ES methodologi$are not always straightforward and effective,
and some problems have slowed the mercial spread of ES. Despite some limitations, though, the use
of ES is rapidly. The major benefits and limitations are compiled in Manager's Checklist (on page
399).

The Process and Components of Expert Systems

The process in which expert systems are constructed and used is indicated in Figure 12.1 and
described here. The major component parts of expert systems shown in figure are also discussed.

The process of ES. The process of ES can be divided into two parts: the System development
environment and the consultation environment. The development environment (shown on the left
side of Figure 12.1) is the part in which the ES is constructed. The consultation environment (shown
on the right side of Figure 12.1) describes how advice is rendered to the users.

The development process starts with a knowledge engineer, who can also be the system
builder, acquiring knowledge from experts and/or documented sources. This knowledge is
programmed in the system's knowledge base together with facts about the subject area (domain),
usually in terms of "if—then" rules.

In the consultation environment, the user contacts the system via the user inter face to ask
for advice. The ES collects information from the user, usually by asking questions about symptoms
and conditions, and then activates the inference eve, which searches the knowledge base for
recommended actions.

The components of ES. The following major components exist in an expert system: a knowledge
base, a memory area called the blackboard, an inference engine, a user interface, and an
explanation facility. The functions of these components are briefly described here:
 The knowledge base contains knowledge necessary for understanding, formulating, and
solving a specific class of problems. It includes two basic elements: (1) facts, such as the
problem and its various states, and (2) rules, that direct the use of knowledge to solve the
specific class of problems.
 The blackboard is an area of working memory set aside for the description of a current
problem, as specified by the input data; it is also used for storing intermediate results. It is a
temporary database used by the inference engine to execute its tasks.
 The "brain" of the ES is the inference engine, which is essentially a computer program that
provides a methodology for reasoning and formulating conclusions.
 The user interface in ES allows for user-computer dialogue, which can be best carried out in
a natural language, usually presented as questions and answers sometimes supplemented
by graphics. The question-and-answer dialogue trigger the inference engine to match the
problem symptoms with the knowledge in the knowledge base and to generate advice.
 The explanation subsystem can trace responsibility for conclusions to their source which is
crucial both in the transfer of expertise and in problem solving. This subsystem explains the
ES'S behavior by interactively answering questions such as the following: Why was a certain
question asked by the expert system? How was certain conclusion reached? Why was a
certain alternative rejected? What is the plan to reach the solution?

Human experts have a kind of knowledge-refining system with which they analyze their own
performance, learn from it, and improve it for future consultations. Similarly, such evaluation is
necessary in computerized learning so that the program will be able to improve by analyzing the
reasons for its success or failure. Such a component is not currently available in commercial
expert systems, but it is being developed in experimental expert systems.

Illustrative Applications

Expert systems are in use today in all types of organizations. They are especially useful in certain
generic categories, displayed in Table 12.2. The following examples illustrate the diversity and
nature of ES applications.

Table 12.2 Generic Categories of Expert Systems

Category Task or Problem Addressed
l. Interpretation Inferring situation descriptions from observations
2. Prediction Inferring likely consequences of given situations
3. Diagnosis Inferring system malfunctions from observations
4. Design/configuration Configuring objects under constraints
5. Planning Developing plans to achieve goal(s)
6. Monitoring Comparing observations to plans and flagging exceptions
Detecting problems and inconsistencies and prescribing
7. Debugging remedies for malfunctions
8. Repair Executing a plan to administer a prescribed remedy
Monitoring performance, diagnosing, debugging, and correcting
9. Instruction learning
10. Control Monitoring system behavior: interpreting, predicting, repairing,
 and sometimes alerting operators
II. Data analysis Quantitative and qualitative analysis of complex data
12. Customer/product
support Solving help-desk problems
13. Decision support Interactive advisory systems

EXAMPLE

The U.S Treasury fights criminals with an expert system. One of the major tasks of Financial crime
Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, is to prevent and detect
money laundering. One area of investigation is cash transactions over $10,000, which all banks must report.
The problem is that there are more than 200,000 such transactions every week (more than per year). FinCEN
does not have the budget or the staff to conduct the analysis necessary to manually examine all of these
transactions.

The practical solution is the use of a rule-based expert system that contains the expertise of FinCEN's
top experts. The expert system is used to automatically detect suspicious transactions and changes in
transaction patterns. Then, these are checked manually. Since its inception in 1993, the expert system has
helped to uncover cases of money-laundering activities valued at over $250 million annually.

Ticket auditing at Northwest Airlines. When Northwest Airlines (NWA) acquired Republic Airlines, its volume
of operations increased to 70,000 tickets per day. These tickets needed to be audited by comparing a copy of
each ticket against fare information, including travel agent commissions. Manual comparison was slow and
expensive. Therefore, only samples of the tickets (about 1 were audited. The sample indicated an error rate of
about 10 percent (usually a loss to the airline).

NWA's solution to this problem was to build a ticket-auditing ES that scans all tickets electronically
and stores the information in a database. Another database stores all the fares and commission agreements.
Then the expert system goes to work. The ES first determines the correct fare, using only 250 rules. The most
favorable commission to travel agents is determined, and any discrepancy results in a report to the agent
with a debit or credit and an appropriate explanation. The system also pro- vides information for marketing,
contract management, planning, and control. The reduction in agent errors saves NWA about $10 million
annually.

Expert Systems and the Internet/lntranets The relationship between expert systems and the Internet and
intranets is a two-way street. The Net supports ES (and other A1) applications, and expert systems support
the Net.

One of the justifications for an ES is the potential to provide knowledge and the advice to large
numbers of users. The widespread use of the Internet and intranets provides the opportunity to disseminate
expertise and knowledge to mass audiences. By disseminating knowledge to many users, the cost per user
become small, making an ES very attractive. Implementing expert systems (and other intelligent systems) as
knowledge servers, it becomes economically feasible and profitable to publish expertise on the Net, as the
following examples demonstrate.
EXAMPLE

OSHA uses an expert system. The U.S. Department tem provides guidance to help employers protect workers from the
hazards of entry permit-required confined spaces. The system helps determine to the site covered by OSHA's regulation
on such spaces. For example, by (osha.gov) and using the web browser interface, you can see If you need a special
government permit to work in your room. (See Problem-solving of the chapter.)

Customer service online in Japan. Ebara Manufacturing, a Japanese pump manufacturer, produces
several thousand kinds of pumps for many industries. Traditionally, customers would just ask for a
pump. Sales personnel had to figure out what kind was really needed. As products got more
numerous and sophisticated, this system started to break down. Ebara fixed this problem with an
online expert system. The system takes customers through a series of questions that connect their
needs to specific products, often in less than a minute.

Before you go on…

1. List and briefly describe the major components of an ES.

2. What are the potential advantages of an ES?

3. List the 13 generic categories of an ES.

12.3 OTHER INTELLIGENT SYSTEMS

An expert system's major objective is to provide expert advice. However, expert systems can be
used only for the special situations for which they have been developed. Other intelligent systems
can broaden the range of applications. Four such technologies are described next.

Natural Language Processing and Voice Technology

Typically, when you want to tell a computer what to do, you type commands on the keyboard using
predetermined commands, or you click on an icon. In responding to your commands, thé computer
outputs message symbols or other short, cryptic notes of information. Many problems would be
minimized or even eliminated if we could communicate with the computer in our own languages,
rather than the command- language that at this point is the necessary intermediary. We would
simply type indirections, instructions, or information in our natural language. Better yet, we would
converse with the computer using voice. The computer would be smart enough to interpret the
input, regardless of its format. Natural language processing (NLP) refers to communicating with a
computer in English or whatever language you speak.
 To understand a natural language inquiry, a computer must have the knowledge to analyze
and then interpret the input. This may include linguistic knowledge about words, domain (subject
area) knowledge, common-sense knowledge, and even knowledge about the users and their goals.
Once the computer understands the input, it can take the desired action. In this section we briefly
discuss applications of NLP grams, voice recognition, voice portals, and voice generation.

Applications of natural language processing. Natural language processing have been applied in
several areas. The most important are human-computer faces (mainly to databases), abstracting
and summarizing text, grammar translation of a natural language to another natural language,
translation of a computer language to another computer language, speech understanding, and
letter position. By far the most dominant use of NLP is in interfaces, or "front-ends other software
packages, especially databases.

Voice (speech) recognition and understanding. Voice (or speech) recognition process that allows
users to communicate with a computer by speaking to it' the speech recognition is sometimes
applied only to the first part of the process—recognizing words that have been spoken without
necessarily interpreting their meanings. The other part of the process, wherein the meaning of
speech is ascertained, is called speech understanding. It may be possible to understand the meaning
of a spoken sentence with actually recognizing every word, and vice versa. When speech recognition
system is combined with a natural language processing system, the result is an overall system that
not only recognizes voice input but also understands it.

The ultimate goal of voice recognition is to allow a computer to understand the natural
speech of any human speaker at least as well as a human listener could understand it. In addition to
the fact that this is the most natural method of communication, voice recognition offers several
other advantages. as shown in Manager's Checklist 12.3.

There are a few limitations to voice recognition. The major limitation or to recognize speech
fast enough. The better the system in this respect, the higher the cost. An additional limitation of
speech recognition systems is that they do not (yet) interface well with icons and windows, so
speech may need to be combined with the keyboard operation, which slows down the system.

Voice portals. Use of an ordinary telephone as an Internet appliance is known as a voice portal.
Customers dial a toll-free number and use voice to request information ranging from a traffic report
to stock prices. That is, the site the customer reaches through the phone acts like an Internet portal
(like Yahoo! or Lycos). The difference is that information is accessed by voice rather than by pointing
and clicking a mouse. One of the first applications was deployed at autobytel.com. Customers use
the portal to obtain information purchases. The system greets customers (by name if the company
knows name) and asks what kind of a car you are interested in buying. The major voice portal
companies in 2001 were Heyanita.com, Tellme.com, and Telsurf.com.

Voice generation (voice synthesis). Natural language generation strives to allow computers to
produce ordinary English language, on the screen or by voice so that people
Manager's Checklist 12.3 (Benefits of Voice Recognition)

 Ease of access: Many more people can speak than can type. As long as communication with a computer depends
on developing typing skills, many people may not be able to use computers effectively.
 Speed: Even the most competent typists speak more quickly than they type. It is estimated that the average
person can speak twice as quickly as a proficient typist can type.
 Manual freedom: There are many situations in which computers might be useful to people whose hands are
otherwise occupied, such as product assemblers, pilots of military aircraft, and busy executives.
 Remote access: Many computers are set up to be accessed remotely by telephone. If a remote database includes
speech recognition capabilities, could retrieve information by issuing oral commands into a telephone.
 Accuracy: In typing information, people are prone to make mistakes, especially in spelling. These are minimized
with voice input.

can understand computers more easily. The technology by which computers speak is known as
voice synthesis. The synthesis of voice by computer differs from simple the playback ofa
prerecorded voice by either analog or digital means. As the terms implies, sounds that make up
words and phrases are constructed electronically from basic sound components and can be made to
form any desired voice pattern.

In July 2001, AT&T Labs started selling speech software called Natural Voices that is so good
at reproducing the sound, inflections, and intonations of a that it can recreate voices—even the
voices of long-dead celebrities or any one for which a sample voice is available. Priced at thousands
of dollars, the software is to producers of animated movies, publishers of video games, car
manufacturers that provide voice driving directions, and books-on-tape publishers.

Applications of voice technology. As voice recognition and synthesis technology has improved in
recent years, many applications have been developed for commercial use Table 12.3 lists a sampling
of such applications via input or output devices; two are presented in more detail below.

Table 12.3 Sample of Voice Technology Applications

Company Application
Answering inquiries about reservations, schedules. lost
Scandinavian Airlines, other airlines baggage, etc.
Informing credit card holders about balances and credits,
providing bank account balances and other information to
Citibank, many other banks customers
Delta Dental Plan (CA) Verifying coverage information
Requesting pickups, responding to inquiries about delivery of
Federal Express specific shipments
Illinois Bell, other telephone companies Giving information about services, receiving orders

Domino's Pizza Enabling stores to order supplies, providing price information

General Electric, Rockwell International,
Austin Rover, Westpoint Pepperell, Eastman
Kodak Allowing inspectors to report results of quality assurance tests
 Allowing receivers of shipments to report weights and inventory
Cara Donna Provisions levels of various meats and cheese
Weidner Insurance, AT&T Conducting market research and telemarketing

U.S. Department of Energy, Idaho National

Engineering Laboratory, Honeywell
New Jersey Department of Education
Kaiser-Permanente Health Foundation (HMO)
Car manufacturers
Texoma Medical Center
St. Elizabeth's Hospital
Hospital Corporation of America
Notifying people of emergencies detected by sensors
Notifying parents when students are absent and about
cancellation of classes'
Calling patients to remind them of appointments, summarizing
and reporting results
Activating radios, heaters, and so on, by voice
Logging in and out by voice to payroll department
Prompting doctors in the emergency room to conduct all
necessary tests, reporting results by doctors
Sending and receiving patient data by voice, searching for
doctors prepanrg schedules and medical records

EXAMPLE:

Minnesota wrestles with tax inquiries. With limited staffing and many Minnesota residents without
touch-tone dialing service, the Department of Revenue needed to an innovative solution to meet its
increasing tax inquiry phone load and expand its service. The department put speech recognition
technology into place with an interactive voice system via the telephone. As a result, it was able to
respond immediately to an additional 100,000 taxpayer phone inquiries per year that could not
have bee; handled otherwise.

American Express books flights. American Express Travel Related Services (AETRS) uses a voice
recognition system that allows its customers to check and book domestic flights by talking to a
computer over the phone. The system asks customers questions such as: Where do you want to
travel to? From where? When? and so on. The system can recognize 350 city and airport names, and
it lets callers use more than 10,000 different ways to identify a location. Compared to telephone
service by an operator, reservation transaction cost is reduced by 50 percent. The average
transaction time is reduced from 7 to 2 minutes. AETRS offers a similar service on the Web.

Neural Computing

The tools of A1 described so far have been mostly restricted to stored knowledge and logic, A
different approach is intelligent systems that use architecture that mimics certain processing
capabilities of the brain. The results are knowledge representations and processing based on
massive parallel processing (executing multiple processing instructions simultaneously) rather than
Sequential information processing, fast retrieval of large amounts of information, and the ability to
recognize patterns based on experiences. One technology that attempts to achieve such results is
called neural computing or artificial neural networks (ANNs).
An artificial neural network is a computer model that emulates a biological neural network.
Today's neural computing uses a very limited set of concepts from biological neural systems to
implement software simulations of massively parallel processes artificial neuron receives inputs
analogous to the electrochemical impulses that logical neurons receive from other neurons. The
neurons in an ANN receive information from other neurons or from external sources, transform the
information, and pass it on to other neurons or as external outputs.
The value of neural network technology includes its usefulness for pattern recognition,
learning, and the interpretation of incomplete inputs. Figure 12.2 (page 407) is a simplified
explanation of how a neural network can recognize characters. Sets of neurons extract features
from the input images. (Here, neurons extract the locations of vertical, horizontal, and diagonal
strokes.) The locations of these features indicate possible choices of the character class. Most of the
evidence shows that 6 is the best choice.
Neural networks have the potential to provide some of the human character is of problem
solving that are difficult to simulate using the logical, analytical techniques of DSSs or even expert
systems. For example, neural networks can analyze large quantities of data to discover patterns and
characteristics in situations where the logic or rules are not known. An example would be loan
applications. By reviewing many historical cases of applicants' responses to questionnaires and the
granting decisions (yes or no), the ANN can create "patterns" or "profiles" of applications that
should be approved, or those that should be denied. A new application is matched against the
pattern. If it comes close enough, the computer classifies it as a "yes" or "no"; other. wise it goes to
a human to decide. Applications can thus be processed more rapidly. The benefits of neural
networks are summarized in Manager's Checklist 12.4.

Specific business areas that are well-suited to the use of ANNs are:

• Data mining: Finding data in large and complex databases, as explained in Chapter 11
• Tar fraud: Identifying, enhancing, and finding irregularities
• Financial services: Identification of patterns in stock market data and assistance in bond trading strategies,
mortgage underwriting and foreign rate exchange forecast
• Loan application evaluation: Judging worthiness of loan applications based on patterns in previous
application information (e.g., customer credit scoring)
• Solvency prediction: Assessing the strengths and weaknesses of corporations and predicting possible
failures
• New product analysis: Sales forecasting and targeted marketing evaluation
• Airline management: Seat demand forecasting and crew scheduling
• Prediction of consumer behavior on the Internet: Predicting consumer behavior in order to plan e-
commerce advertising )
Evaluate of personnel and job candidates

• Matching personnel data to job re-intelligent Systems, Resource allocation based on historical,
experiential Finding allocations Foreign exchange rate evaluation: Evaluating exchange rates of
various current takeover targets: Predicting which companies are most likely to be ac- , stocks,
bonds, and commodity selection and trading: Analyzing various invest- ment alternatives, including
pricing of initial public offerings
• Signature validation: Matching against previous signatures Human resources prediction
• Predicting employee performance and behavior and Credit card fraud detection: Detecting fraud
by analyzing purchasing patterns.

For a more specific example of the use of neural network technology in a credit card fraud detection
application, see Manager’s Check 12.4.
Manager's Checklist 12.4 (Fits of Neural Networks)

Pattern recognition: Can analyze large quantities of data to establish patterns and characteristics in
situations where the logic or rules are not known.
Fault tolerance: Since there are many processing nodes, damage to a few nodes or links does not bring the
system to a halt.
• Generalization: When a neural network is presented with an incomplete or previously unseen input, it can
generalize to produce a reasonable response
• Adaptability: The network learns in new environments. New cases are immediately to retrain the program
and keep it updated.
• Forecasting capabilities: Similar to statistics, predictions can be made based on historical data.

Case-based Reasoning

The idea of case-based reasoning (CBR) is to adapt successful solutions used in the past in order to
solve new problems. Case-based reasoning first finds the solutions that solved problems similar to
the current problem. It then adapts the previous solution

Box 12.4: Visa cracks down on credit card fraud

Only 0.2% of Visa International's revenues in 1995 were to fraud lost but when that percentage means a loss of $685
million, it is well worth addressing. In 1996, Visa began using of central network technology in order to reverse the
number of fraudulent transactions By 2002 the company was using the system globally.

Most people stick to well-established patterns of card use and only rarely splurge on expensive nonessentials.
Neural networks are designed to notice when a card that is usually used to buy gasoline once a week is suddenly used to
a buy a number of tickets to the latest theater premier to Broadway.

Bank Of America field-tested Visa's cardholder risk indentify system (CRIS) and believe that the system cuts
fraudulent cars use by up to two-thirds. The Toronto Dominion Bank that losses were reduces, and overall customer
service improved, with the introduction of neutral computing. Another bank recording savings of $5.5 million in six
months. Visa member bank cut their loses by more than 16 percent in the first year of the system’s use. With numbers like
that, the $2 million Visa spent to implement CRIS certainly seems worth the investment. In fact, Visa says, CRIS paid for
itself in less than a year. In 1995, CRIS conducted more than 16 billion transactions. In 2002, Visanet (a data warehouse
and e-mail operation) and CRIS handled more than 210 billion transactions.

The only downside to CRIS is that occasionally the system prompts a call to a card holder’s spouse when an out-
of-the-ordinary item, such as a surprise vacation trip or a diamond ring, is charged. After all, no one wants to spoil
surprises for loves ones.

Questions:

1. How does the system detect fraud?

2. What is the advantage of CRIS over an automatic check against the balance in the account and against a set
of rules such as “Call a human authorizer when the purchase price is more than 200% of the average previous
bill
3. Why do you think neural networks were not expert systems?
to fit the current problem, taking into account any differences between the current and previous
situations. Finding relevant cases involves several steps: (l) characterizing the input problem by
assigning appropriate features to it, (2) retrieving memory the cases with those features, and (3)
picking the case or cases that best much to input.

Case-based reasoning has proved to be an extremely effective approach in complex cases.

The basic justification for the use of CBR is that it processes the right information retrieved at the
right time. Case-based reasoning can be used by itself can be combined with other reasoning
paradigms. Target applications include tactical planning, political analysis, situation assessment,
legal planning, diagnosis, fraud detection, design/configuration, message classification, and complex
searches. Analog Devices' IT system described in the opening case is an example of case-based
reasoning.

Fuzzy Logic

Fuzzy logic deals with uncertainties by simulating the process of qualitative human reasoning,
allowing the computer to behave less precisely and logically than do conventional computers. The
rationale behind this approach is that decision making is not always a matter of true or false, black
and white. It often involves gray areas where the terms approximately, possible, and similar are
more appropriate.

Take, for example, the variable "height." Most people would agree that if you are above 6
feet, you are tall. Similarly, if your height is less than 5 feet, you are short. But between 6 feet and
5.75 feet, there is less probability that you will be considered tall. Similarly, between 5 and 5.25 feet
some will consider you short. Notice that in the area between 5.25 and 5.75 feet you have a chance
for being considered either short or tall.

Currently there are only a few examples of fuzzy logic applications in business, but the
results are significant improvements in productivity. More often, fuzzy logic is used together with
other intelligent systems, as illustrated in the following example.

EXAMPLE

Developing marketing strategy. An international investment firm used IT systems to develop

marketing strategy. Developing marketing strategy is a complex process performed sequentially,
with contributions from corporate experts. Numerous marketing strategy models were developed
over the years to support the process. Unfortunately, most of the models supported only one goal
(e.g., to perform forecasting). However, one firm developed a system that integrates expert
systems, fuzzy logic, and ANN, shown in Figure 12.3, to solve this problem. The systems components
are:
Neural networks. These are used to predict future market share and growth' •
Expert systems. These provide intelligent advice on developing market strategy to individuals and
to a planning team. •
Fuzzy logic. This helps managers handle uncertainties and fuzzines of data and formation.
The integration of the technologies helps in sharing information, coordination and evaluation. The
system is designed to support both individuals and groups

Any of the intelligent systems described in this and the previous sections can be used as a
knowledge component of an intelligent agent, the topic we turn to in the next section.

Before you go on..

1. Describe natural language processing and its major benefits.

2. List the major benefits of voice recognition.
3. What are the major benefits of neural computing? What are some popular applications of
ANNs?
4. Define case-based reasoning and fuzzy logic.

12.4 INTELLIGENT AGENTS

Intelligent agents (IAs) have the potential to become one of the most important tools of information
technology in the twenty-first century. IAS can alleviate the most critical limitation of the Internet—
information glut or overload—and can facilitate electonic commerce. Before we look at their
capabilities, let's determine what we mean by IAs.
The term agent is derived from the concept of agency, which means someone to act on
your behalf. A computerized agent represents a person and acts with others to accomplish a
predefined task. Several names are used to intelligent agents: software agents, wizards,
knowbots, and softbots. The names reflect the nature of the agent. A good working definition is
this: An intelligent software entity that senses its environment and then carries out some behalf
of a user (or a program), with a certain degree of autonomy, and in so employs knowledge or
representation of the user's goals or desires.

Characteristics of Intelligent Agents

There are several traits or abilities that many people think of when they discussing intelligent
agents: capability to work on their own (autonomy); exhibition of goal oriented of behavior;
mobility (transportable over networks); dedication to a single repetitive task; ability to interact
with humans, systems, and other agents; inclusion of a knowledge base; and ability to learn.
Although not all intelligent agents have all capabilities, they are very useful in facilitating tasks
such as the following.

Information access and navigation. Information access is today's major application of intelligent
agents, and it is done by use of different search engines.

Decision support and empowerment. Knowledge workers need support, especial} in decision-
making. Intelligent agents can facilitate decision making and empower employees, as shown in
IT's About Business 12.5.

Repetitive office activities. There is a pressing need to automate repetitive ta±; performed by
administrative and clerical personnel in functional areas, such as said or customer support, in
order to reduce labor costs and increase office productivity.

Box 12.5: Empowering employees by using intelligent agents

Fringe benefits are frequently likened to a cafeteria— people mix and match what they like within the constraints of
what is available and how much they can use. The management of fringe benefits is a very resource intensive
process, especially when thousands of employees are involved. Nike and Signet Bank both installed manage their own
fringe benefits selections online. Employees access the human resources databases and conduct activities such as
selecting and changing benefits or making charitable contributions through payroll deductions.

The software agent that supports these activities is called Electronic Workforce (from Edify Corp.). It enables
employers to delegate to employees some time- consuming and repetitive tasks that were previously conducted by
human resources (HR) employees. Employees enter and delete data, command the computer to perform certain
transactions, and interpret information. If they make mistakes or request benefits for which they are not eligible, the
agent immediately alerts them to the problem. Previously, paperwork would have to routed to an employee for
corrections and then bad to the HR department. The use of the agent enables companies to increase benefits options
and employee satisfaction, with the same or even fewer human resources employees. Some new applications involve
recognition capabilities and enhanced customer e-mail.

Questions:
1. Can you imagine what would happen if there no agents in this case?
2. How can an agent know that an employee made mistake?
3. Enter edify.com and examine the new capabilities of Electronic Workforce and other agent- products.

Today, labor costs are estimated to be as much as 60 percent of the total cost of information
delivery.
Mundane personal activities. In our fast-paced society, time-strapped individuals need new ways to
minimize the time spent on routine personal tasks like booking air- line tickets. One specific form of
intelligent agents is the voice-activated interface agent that reduces the burden on the user of
having to explicitly command the computer.

Search and retrieval. It is not economically possible to directly manipulate a data- base system in a
business setting that involves millions of data objects. Users have to delegate to agents the tasks of
searching and cost comparison. These agents perform the tedious, time-consuming, and repetitive
tasks of searching databases, retrieving and filtering information, and delivering results to the user.

Electronic commerce agents. Some of the agents described earlier are used in vari- ous EC activities
(see Chapter 9). Domain experts. It is advisable to capture costly expertise, model it, and make it
widely available. "Expert" software agents can be models of real-world experts, such as translators,
lawyers, diplomats, union negotiators, and even clergy.

Management activities. Intelligent agents can even be used to assist managers in performing their
activities. Some management-oriented tasks that an agent can do are: advise, alert, broadcast,
browse, critique, distribute, enlist, empower, explain, filter, guide, identify, match, monitor,
navigate, negotiate, organize, present, query, re- port, remind, retrieve, schedule, search, secure,
solicit, store, suggest, summarize, teach, translate, and watch.

Mobile Agents

Agents may be either static, residing on the client machine to manage a user interface, for instance,
or mobile. Mobility is the degree to which the agents travel through networks. Mobile agents can
move from one Internet site to another and can send data to and retrieve data from the user, who
can focus on other work in the meantime. This can be very helpful to users. For example, if users
want to continuously monitor an electronic auction that takes a few days, they essentially would
have to be online continuously for days.

Table 12.4 Applications of Intelligent Agents (Non-lnternet)

Application Description
Monitor usage and suggest improvement.
User interface agents Example: Microsoft's wizards.
Add accounts, do group management,
manage access, add/remove programs and
Operating systems agents devices, monitor licenses.
Offer suggestions for improvements. Can
Spreadsheet agents tutor novice users. Sometimes called wizards.
Administer workflow management – monitor
activities, alert, and remind. Example: Ginkgo
from IBM. (See
Workflow and task networking.ibm.com/iag/aighome, and IBM’s
management agents intelligent agent custom services.)
Software development Assist in routine activities such as data
agents filtering.
Mobile agents that automatically watch auctions and stocks for you are readily availabk Another
example of a mobile agent is one that travels from site to site, looking for infor_ mation on a certain
stock as instructed by the user. When the stock price hits a certain level, or if there is news about the
stock, the agent alerts the user.

Applications of Intelligent Agents

Most intelligent agent applications can be classified into three categories: (1) Internet agents, (2)
elecirofiic commerce agents, and (3) other agents. The first two categories are illustrated in Chapters
7 and 9. "Other agents" are shown in Table 12.4 (page 413).

Before you go on …

1. Define intelligent agents.

2. List the major characteristics of intelligent agents.
3. List some typical applications of intelligent agents.

12.5 VIRTUAL REALITY: AN EMERGING TECHNOLOGY

What Is Virtual Reality?

There is no universal definition of virtual reality (VR). The most common definitions imply that virtual
reality is interactive, uses computer-generated, three-dimensional graphics, and is delivered to the
user through a head-mounted display. Defined technically, VR is an "environment and/or technology
that provides artificially generated sensory cues sufficient to engender in the user some willing
suspension of disbelief." The user gets the feeling of physically being in an environment by
interacting with a simulation of it.
The benefits of virtual reality are obvious: More than one person and even a large group can
share and interact in the same environment. VR thus can be a powerful medium for communication,
collaborative entertainment, and learning. The user can grasp and move virtual objects. In VR a
person "believes" that what he or she is doing is real, even though it is artificially created. This
capability can be utilized for gaining a competitive business advantage.
Sophisticated VR systems simulate sight, sound, and touch and combine these senses with
computer-generated input to users' eyes, ears, and skin. By using a head- mounted display, gloves,
and a bodysuit, or by means of large projected images in simulator cabs, users can "enter" and
interact with artificially generated environments. For example, Figure 12.4 shows a skier in the NEC
Corporation (Japan) Lab. NEC used the laboratory to develop a ski simulator, which is available in
amusement centers and is also used for training.

Business Applications of Virtual Reality

Extensive use of virtual reality is expected in marketing. For example, Tower Records
(towerrecords.com) Offers a virtual music store on the Internet; customers can “meet” in front of the
store, go inside, and preview CDs and videos. They select and purchase their choices electronically
and interactively from a sales associate. Similarly, virtual supermarkets could spark interest in home
grocery shopping. In the future, shopper will enter a virtual supermarket, walk through the virtual
aisles, select virtual products, and put them in a virtual cart; actual groceries will later be delivered
to customers' homes. Several real estate companies use VR to present properties even before they
are built. Applications in these and other areas are shown in Table 12.5.
Virtual reality is just beginning to move into many business applications. Three- dimensional
worlds on the Internet should prove popular because they provide metaphors to which everyone
can relate.
Table 12.5 Example of Virtual Reality Applications
Industry Applicationa
Manufacturing Worker training •
Design, testing, and virtual prototyping of products and processes •
Engineering and ergonomic analysis •
Simulation of assembly, production, and maintenance •
Transortation Virtual aircraft mockups •
New-car design and testing of cars in virtual accidents •
Simulation of flying first class in airplanes •
Finance View stock prices and characteristics •
Architecture Display of building and other structures •
Military Training (pilots, astronauts, drivers) and battlefield simulation •
Medicine Training of surgeons (with simulators) and planning surgeries •
Planning physical therapy •
Marketing Store and product display •
Electronic shopping

Before you go on
1. Define virtual reality.
2. List the advantages of virtual reality.
3. Describe some business applications of virtual reality.

12.6 ETHICAL AND GLOBAL ISSUES OF INTELLIGENT SYSTEMS

There are many issues related to the implementation Of intelligent systems. We'll discuss three of
these issues here: ethical and societal issues, legal issues, and global issues.

Ethical and Societal Issues

In general, scientists and managers are concerned with the possibility of power misuse and harm to
people from the use of intelligent systems. Professor Rheingold, a virtual reality Pioneer, raised the
issue of behavior in a world where the distinction between the real and the virtual is unclear. For
example, when the line between reality and virtual reality is blurred, some people might use real
weapons with as little thought for the actual consequences as they use virtual ones. Several Of the
ethical issues discussed in Chapter 15 are directly related to intelligent systems. For example,
privacy is a major concern in knowledge bases (who will have access to information store d in the
knowledge base?), and experts' knowledge is related to intellectual property.
If you have watched or read any science fiction, you no doubt have found iOS in which
robots turn against humans. Isaac Asimov, a famous science fiction writer, suggested that the
following laws of robotics be followed in developing robotic applications:

1. A robot may not injure a human being or, through inaction, allow a human to be harmed.
2. A robot must obey orders given by humans except when that conflicts with the first law.
3. A robot must protect its own existence unless that conflicts with the first or second laws.

EXAMPLE
Movie Robots. If you saw the classic science fiction film 2001: A Space Odyssey, you might
remember the astronaut, Dave, saying to the robot (which was named HAL), "Open the pod bay
door, HAL" HAL replies, "I'm sorry, Dave, I can't do that." A similar scenario occurred with a robot
named David in the movie Artificial Intelligence (A1). As these scenes make clear, computers with
intelligent systems might be able to refuse human orders, and they might hurt people. This example
relates to the issue of how much decision-making power to delegate to computers and how to
guard against malfunctions.

The knowledge embedded in intelligent system is often acquires from human experts. This
knowledge is frequently available in terms of rules, some of which are difficult to explain whereas
others have not even been tested. Therefore, an ES based on such rules may not be accurate.
Furthermore, the use of such rules may damage not only property, but people as well. Like any
other knowledge, computerized rules must be tested before they are used and then must be
constantly updated and maintained.

Legal Issues

 The use of intelligent systems raises interesting legal issues such as: •
 What happens if a manager or expert enters an incorrect judgment value into an ES and the result is damage
or a disaster? •
 Who is liable for wrong advice (or information) provided by an ES? For example' what happens if a physician
accepts an incorrect diagnosis made by a computer and performs an act, based on this diagnosis, that results
in the death of a patient? Isit the fault of the physician, the knowledge engineer that solicited the expertise,
the knowledge contributor, the software manufacturer, the system builder, or some combination of them? •
 Who owns the knowledge in a knowledge base? •
 Who is an expert? What if several experts disagree? •
 Can management force experts to contribute their expertise? •
 Should royalties be paid to experts who provide the knowledge to ES, and if so, in what amount? •
 What is the value Of an expert opinion in court when the expertise is encoded in a computer?

These legal issues are largely not addressed by current laws. There are many pending related to IT,
the Internet' and e-commerce, some of which are directly related to intelligent systems.

Global Aspects of Intelligent Systems Intelligent systems are used in many applications related to
global trade. Although most intelligent systems, whether used domestically or globally, are similar
to any other information system, some do have unique global aspects. The following examples
demonstrate the variety of global applications.

Foreign trade. An expert system that advises companies on how to exploit opportunities related to
the NAFTA agreement (which promotes trade among the United states, Mexico, and Canada) is
available online (corporateinformation.com). For example, the system determines whether a
finished product qualifies for preferential tariff treatment, and it helps companies set up buying
policies.
Foreign exchange transactions. An application called the FS System advises on foreign exchange
trading—trading of the currencies of various nations as their values rise and fall in relation to each
other. It contains trading, hedging, and risk-control strategies (athenagroup.com). Similarly, TARA is
an intelligent assistant for traders making foreign exchange transactions. Foreign exchange traders
need to consider historical trends, a country's risks, economic directions, and more. Manufacturers
Hanover Trust is using this system to facilitate its traders' investment decisions. (For more see
afexco.com, and forex-trc.com.)

Employee training. Many companies train their employees online before they go to a foreign
country. The intelligent systems cut the training time by as much as 50 percent, and employees can
be trained anywhere.

Weather forecasting. Climatic expert systems provide long-range climate forecasts for the North
Pacific, North Atlantic, North America, Europe, and the European Arc- tic seas. Such forecasts are
critical for global commodity traders. The service is pro- vided for free on the Internet
(onlineweather.com).

Automatic language translations. As countries' borders begin to disappear in global trading,

language translation is becoming very' important. This topic is very important in e-commerce,
where appropriate translation of Web pages is a critical success factor. The use of intelligent
systems in language translation has been progressing rapidly since the mid-1990s.
Many other systems and applications are used to facilitate international trade. Several
examples were provided earlier (e.g., the use of ES to fight money laundering across international
borders, and the use of a hybrid intelligent system for developing global marketing strategy). As
international trade is expanding, mainly due to the internet and trading blocks like the European
Union and NAFTA, expertise will be needed in many areas, ranging from legal issues to export and
import licenses. Such expertise can be provided to a global audience online. Also, expert systems
can provide to users in developing countries the advice of top experts in the fields of medi- cine,
safety, agriculture, and crime fighting.

Before you go on …
1. List the laws of robotics.
2. Describe some major legal issues in intelligent systems,
3. Relate intelligent systems to global trade.

FOR THE ACCOUNTING MAJOR

Intelligent systems are used extensively in auditing to uncover irregularities. They are also used to uncover
and prevent fraud. Today's CPAs use intelligent systems for many of their duties, ranging from risk analysis to
cost control. Intelligent agents are also used for several mundane tasks such as managing accounts in
operating systems or monitoring employees' Internet usage.
FOR THE FINANCE MAJOR
People have been using computers for decades to solve financially oriented problems. Innovative applications
exist in stock market decisions, bond refinancing, debt risk assessment, analysis of financial conditions,
business failure prediction, financial forecasting, investment in global markets, and more. Intelligent systems
were found to be superior to other computerized methods in many instances. Intelligent agents can facilitate
the use of spreadsheets and other computerized systems used in finance. Finally, intelligent systems can help
in reducing fraud in credit cards, stocks, and other financial services.

FOR THE MARKETING MAJOR

New marketing approaches such as targeted marketing and marketing transaction databases are heavily
dependent on IT in general and on intelligent systems in particular. Intelligent systems are partially useful in
mining customer databases and predicting customer behavior. Successful applications are noted in almost
any area of marketing and sales, from analyzing the success of one-to-one advertisement to sup porting
customer help desks. With the increased importance of customer service, the use of intelligent agents is
becoming critical for the provision of fast response.

THE PRODUCTION/OPERATIONS MANAGEMENT MAJOR

Many of the early expert systems were developed in the production/operations management field for tasks
ranging from diagnosis of machine failures and prescription of repairs to complex production scheduling and
inventory control. Some companies such as DuPont and Kodak. have deployed hundreds of expert systems in
the planning, organizing, and control of their operational systems.

THE HUMAN RESOURCES MANAGEMENT MAJOR

HRM departments use intelligent systems for many applications. For example, intelligent agents can find
resumes of applicants posted on the Web and sort them to match needed skills. Expert systems are used in
evaluating candidates (tests, interviews). Intelligent systems are used to facilitate training and to support
self-management of fringe benefits. Neural computing is used to predict employee performance on the job as
well as to predict labor needs. Voice recognition systems provide benefits information to employees.