Analytics, Data Science, and Artificial Intelligence, 11th Editi.docx

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ANALYTICS, DATA SCIENCE, &
ARTIFICIAL INTELLIGENCE
SYSTEMS FOR DECISION SUPPORT
E L E V E N T H E D I T I O N
Ramesh Sharda
Oklahoma State University
Dursun Delen
Oklahoma State University
Efraim Turban
University of Hawaii
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iii
Preface xxv
About the Authors xxxiv
PART I Introduction to Analytics and AI 1
Chapter 1 Overview of Business Intelligence, Analytics,
Data Science, and Artificial Intelligence: Systems
for Decision Support 2
Chapter 2 Artificial Intelligence: Concepts, Drivers, Major
Technologies, and Business Applications 73
Chapter 3 Nature of Data, Statistical Modeling, and

Visualization 117
PART II Predictive Analytics/Machine Learning 193
Chapter 4 Data Mining Process, Methods, and Algorithms 194
Chapter 5 Machine-Learning Techniques for Predictive
Analytics 251
Chapter 6 Deep Learning and Cognitive Computing 315
Chapter 7 Text Mining, Sentiment Analysis, and Social
Analytics 388
PART III Prescriptive Analytics and Big Data 459
Chapter 8 Prescriptive Analytics: Optimization and
Simulation 460
Chapter 9 Big Data, Cloud Computing, and Location Analytics:
Concepts and Tools 509
PART IV Robotics, Social Networks, AI and IoT 579
Chapter 10 Robotics: Industrial and Consumer Applications 580
Chapter 11 Group Decision Making, Collaborative Systems,
and
AI Support 610
Chapter 12 Knowledge Systems: Expert Systems,
Recommenders,
Chatbots, Virtual Personal Assistants, and Robo
Advisors 648
Chapter 13 The Internet of Things as a Platform for Intelligent
Applications 687

PART V Caveats of Analytics and AI 725
Chapter 14 Implementation Issues: From Ethics and Privacy to
Organizational and Societal Impacts 726
Glossary 770
Index 785
BRIEF CONTENTS
iv
CONTENTS
Preface xxv
About the Authors xxxiv
PART I Introduction to Analytics and AI 1
Chapter 1 Overview of Business Intelligence, Analytics, Data
Science, and Artificial Intelligence: Systems for Decision
Support 2
1.1 Opening Vignette: How Intelligent Systems Work for
KONE Elevators and Escalators Company 3
1.2 Changing Business Environments and Evolving Needs for
Decision Support and Analytics 5
Decision-Making Process 6
The Influence of the External and Internal Environments on the

Process 6
Data and Its Analysis in Decision Making 7
Technologies for Data Analysis and Decision Support 7
1.3 Decision-Making Processes and Computerized Decision
Support Framework 9
Simon’s Process: Intelligence, Design, and Choice 9
The Intelligence Phase: Problem (or Opportunity) Identification
10
0 APPLICATION CASE 1.1 Making Elevators Go Faster! 11
The Design Phase 12
The Choice Phase 13
The Implementation Phase 13
The Classical Decision Support System Framework 14
A DSS Application 16
Components of a Decision Support System 18
The Data Management Subsystem 18
The Model Management Subsystem 19
0 APPLICATION CASE 1.2 SNAP DSS Helps OneNet Make
Telecommunications Rate Decisions 20
The User Interface Subsystem 20

The Knowledge-Based Management Subsystem 21
1.4 Evolution of Computerized Decision Support to Business
Intelligence/Analytics/Data Science 22
A Framework for Business Intelligence 25
The Architecture of BI 25
The Origins and Drivers of BI 26
Data Warehouse as a Foundation for Business Intelligence 27
Transaction Processing versus Analytic Processing 27
A Multimedia Exercise in Business Intelligence 28
Contents v
1.5 Analytics Overview 30
Descriptive Analytics 32
0 APPLICATION CASE 1.3 Silvaris Increases Business with
Visual
Analysis and Real-Time Reporting Capabilities 32
0 APPLICATION CASE 1.4 Siemens Reduces Cost with the
Use of Data
Visualization 33
Predictive Analytics 33
0 APPLICATION CASE 1.5 Analyzing Athletic Injuries 34

Prescriptive Analytics 34
0 APPLICATION CASE 1.6 A Specialty Steel Bar Company
Uses Analytics
to Determine Available-to-Promise Dates 35
1.6 Analytics Examples in Selected Domains 38
Sports Analytics—An Exciting Frontier for Learning and
Understanding
Applications of Analytics 38
Analytics Applications in Healthcare—Humana Examples 43
0 APPLICATION CASE 1.7 Image Analysis Helps Estimate
Plant Cover 50
1.7 Artificial Intelligence Overview 52
What Is Artificial Intelligence? 52
The Major Benefits of AI 52
The Landscape of AI 52
0 APPLICATION CASE 1.8 AI Increases Passengers’ Comfort
and
Security in Airports and Borders 54
The Three Flavors of AI Decisions 55
Autonomous AI 55
Societal Impacts 56
0 APPLICATION CASE 1.9 Robots Took the Job of Camel-
Racing Jockeys

for Societal Benefits 58
1.8 Convergence of Analytics and AI 59
Major Differences between Analytics and AI 59
Why Combine Intelligent Systems? 60
How Convergence Can Help? 60
Big Data Is Empowering AI Technologies 60
The Convergence of AI and the IoT 61
The Convergence with Blockchain and Other Technologies 62
0 APPLICATION CASE 1.10 Amazon Go Is Open for Business
62
IBM and Microsoft Support for Intelligent Systems
Convergence 63
1.9 Overview of the Analytics Ecosystem 63
1.10 Plan of the Book 65
1.11 Resources, Links, and the Teradata University Network
Connection 66
Resources and Links 66
Vendors, Products, and Demos 66
Periodicals 67
The Teradata University Network Connection 67

vi Contents
The Book’s Web Site 67
Chapter Highlights 67 • Key Terms 68
Questions for Discussion 68 • Exercises 69
References 70
Chapter 2 Artificial Intelligence: Concepts, Drivers, Major
Technologies, and Business Applications 73
2.1 Opening Vignette: INRIX Solves Transportation
Problems 74
2.2 Introduction to Artificial Intelligence 76
Definitions 76
Major Characteristics of AI Machines 77
Major Elements of AI 77
AI Applications 78
Major Goals of AI 78
Drivers of AI 79
Benefits of AI 79
Some Limitations of AI Machines 81
Three Flavors of AI Decisions 81

Artificial Brain 82
2.3 Human and Computer Intelligence 83
What Is Intelligence? 83
How Intelligent Is AI? 84
Measuring AI 85
0 APPLICATION CASE 2.1 How Smart Can a Vacuum Cleaner
Be? 86
2.4 Major AI Technologies and Some Derivatives 87
Intelligent Agents 87
Machine Learning 88
0 APPLICATION CASE 2.2 How Machine Learning Is
Improving Work
in Business 89
Machine and Computer Vision 90
Robotic Systems 91
Natural Language Processing 92
Knowledge and Expert Systems and Recommenders 93
Chatbots 94
Emerging AI Technologies 94
2.5 AI Support for Decision Making 95

Some Issues and Factors in Using AI in Decision Making 96
AI Support of the Decision-Making Process 96
Automated Decision Making 97
0 APPLICATION CASE 2.3 How Companies Solve Real-
World Problems
Using Google’s Machine-Learning Tools 97
Conclusion 98
Contents vii
2.6 AI Applications in Accounting 99
AI in Accounting: An Overview 99
AI in Big Accounting Companies 100
Accounting Applications in Small Firms 100
0 APPLICATION CASE 2.4 How EY, Deloitte, and PwC Are
Using AI 100
Job of Accountants 101
2.7 AI Applications in Financial Services 101
AI Activities in Financial Services 101
AI in Banking: An Overview 101
Illustrative AI Applications in Banking 102

Insurance Services 103
0 APPLICATION CASE 2.5 US Bank Customer Recognition
and
Services 104
2.8 AI in Human Resource Management (HRM) 105
AI in HRM: An Overview 105
AI in Onboarding 105
0 APPLICATION CASE 2.6 How Alexander Mann
Solution
s (AMS) Is
Using AI to Support the Recruiting Process 106
Introducing AI to HRM Operations 106
2.9 AI in Marketing, Advertising, and CRM 107
Overview of Major Applications 107
AI Marketing Assistants in Action 108

Customer Experiences and CRM 108
0 APPLICATION CASE 2.7 Kraft Foods Uses AI for
Marketing
and CRM 109
Other Uses of AI in Marketing 110
2.10 AI Applications in Production-Operation
Management (POM) 110
AI in Manufacturing 110
Implementation Model 111
Intelligent Factories 111
Logistics and Transportation 112
References 114
Chapter 3 Nature of Data, Statistical Modeling, and

Visualization 117
3.1 Opening Vignette: SiriusXM Attracts and Engages a
New Generation of Radio Consumers with Data-Driven
Marketing 118
3.2 Nature of Data 121
3.3 Simple Taxonomy of Data 125
0 APPLICATION CASE 3.1 Verizon Answers the Call for
Innovation: The
Nation’s Largest Network Provider uses Advanced Analytics to
Bring
the Future to its Customers 127
viii Contents
3.4 Art and Science of Data Preprocessing 129
0 APPLICATION CASE 3.2 Improving Student Retention with
Data-Driven Analytics 133

3.5 Statistical Modeling for Business Analytics 139
Descriptive Statistics for Descriptive Analytics 140
Measures of Centrality Tendency (Also Called Measures of
Location or
Centrality) 140
Arithmetic Mean 140
Median 141
Mode 141
Measures of Dispersion (Also Called Measures of Spread or
Decentrality) 142
Range 142
Variance 142
Standard Deviation 143
Mean Absolute Deviation 143

Quartiles and Interquartile Range 143
Box-and-Whiskers Plot 143
Shape of a Distribution 145
0 APPLICATION CASE 3.3 Town of Cary Uses Analytics to
Analyze Data
from Sensors, Assess Demand, and Detect Problems 150
3.6 Regression Modeling for Inferential Statistics 151
How Do We Develop the Linear Regression Model? 152
How Do We Know If the Model Is Good Enough? 153
What Are the Most Important Assumptions in Linear
Regression? 154
Logistic Regression 155
Time-Series Forecasting 156
0 APPLICATION CASE 3.4 Predicting NCAA Bowl Game
Outcomes 157

3.7 Business Reporting 163
0 APPLICATION CASE 3.5 Flood of Paper Ends at FEMA 165
3.8 Data Visualization 166
Brief History of Data Visualization 167
0 APPLICATION CASE 3.6 Macfarlan Smith Improves
Operational
Performance Insight with Tableau Online 169
3.9 Different Types of Charts and Graphs 171
Basic Charts and Graphs 171
Specialized Charts and Graphs 172
Which Chart or Graph Should You Use? 174
3.10 Emergence of Visual Analytics 176
Visual Analytics 178
High-Powered Visual Analytics Environments 180

3.11 Information Dashboards 182
Contents ix
0 APPLICATION CASE 3.7 Dallas Cowboys Score Big with
Tableau
and Teknion 184
Dashboard Design 184
0 APPLICATION CASE 3.8 Visual Analytics Helps Energy
Supplier Make
Better Connections 185
What to Look for in a Dashboard 186
Best Practices in Dashboard Design 187
Benchmark Key Performance Indicators with Industry Standards
187
Wrap the Dashboard Metrics with Contextual Metadata 187

Validate the Dashboard Design by a Usability Specialist 187
Prioritize and Rank Alerts/Exceptions Streamed to the
Dashboard 188
Enrich the Dashboard with Business-User Comments 188
Present Information in Three Different Levels 188
Pick the Right Visual Construct Using Dashboard Design
Principles 188
Provide for Guided Analytics 188
References 192
PART II Predictive Analytics/Machine Learning 193
Chapter 4 Data Mining Process, Methods, and Algorithms 194
4.1 Opening Vignette: Miami-Dade Police Department Is
Using

Predictive Analytics to Foresee and Fight Crime 195
4.2 Data Mining Concepts 198
0 APPLICATION CASE 4.1 Visa Is Enhancing the Customer
Experience while Reducing Fraud with Predictive Analytics
and Data Mining 199
Definitions, Characteristics, and Benefits 201
How Data Mining Works 202
0 APPLICATION CASE 4.2 American Honda Uses Advanced
Analytics to
Improve Warranty Claims 203
Data Mining Versus Statistics 208
4.3 Data Mining Applications 208
0 APPLICATION CASE 4.3 Predictive Analytic and Data
Mining Help
Stop Terrorist Funding 210
4.4 Data Mining Process 211

Step 1: Business Understanding 212
Step 2: Data Understanding 212
Step 3: Data Preparation 213
Step 4: Model Building 214
0 APPLICATION CASE 4.4 Data Mining Helps in
Cancer Research 214
Step 5: Testing and Evaluation 217
x Contents
Step 6: Deployment 217
Other Data Mining Standardized Processes and Methodologies
217
4.5 Data Mining Methods 220
Classification 220

Estimating the True Accuracy of Classification Models 221
Estimating the Relative Importance of Predictor Variables 224
Cluster Analysis for Data Mining 228
0 APPLICATION CASE 4.5 Influence Health Uses Advanced
Predictive
Analytics to Focus on the Factors That Really Influence
People’s
Healthcare Decisions 229
Association Rule Mining 232
4.6 Data Mining Software Tools 236
0 APPLICATION CASE 4.6 Data Mining goes to Hollywood:
Predicting
Financial Success of Movies 239
4.7 Data Mining Privacy Issues, Myths, and Blunders 242
0 APPLICATION CASE 4.7 Predicting Customer Buying
Patterns—The

Target Story 243
Data Mining Myths and Blunders 244
References 250
Chapter 5 Machine-Learning Techniques for Predictive
Analytics 251
5.1 Opening Vignette: Predictive Modeling Helps
Better Understand and Manage Complex Medical
Procedures 252
5.2 Basic Concepts of Neural Networks 255
Biological versus Artificial Neural Networks 256
0 APPLICATION CASE 5.1 Neural Networks are Helping to
Save
Lives in the Mining Industry 258
5.3 Neural Network Architectures 259

Kohonen’s Self-Organizing Feature Maps 259
Hopfield Networks 260
0 APPLICATION CASE 5.2 Predictive Modeling Is Powering
the Power
Generators 261
5.4 Support Vector Machines 263
0 APPLICATION CASE 5.3 Identifying Injury Severity Risk
Factors in
Vehicle Crashes with Predictive Analytics 264
Mathematical Formulation of SVM 269
Primal Form 269
Dual Form 269
Soft Margin 270
Nonlinear Classification 270

Kernel Trick 271
Contents xi
5.5 Process-Based Approach to the Use of SVM 271
Support Vector Machines versus Artificial Neural Networks 273
5.6 Nearest Neighbor Method for Prediction 274
Similarity Measure: The Distance Metric 275
Parameter Selection 275
0 APPLICATION CASE 5.4 Efficient Image Recognition and
Categorization with knn 277
5.7 Naïve Bayes Method for Classification 278
Bayes Theorem 279
Naïve Bayes Classifier 279

Process of Developing a Naïve Bayes Classifier 280
Testing Phase 281
0 APPLICATION CASE 5.5 Predicting Disease Progress in
Crohn’s
Disease Patients: A Comparison of Analytics Methods 282
5.8 Bayesian Networks 287
How Does BN Work? 287
How Can BN Be Constructed? 288
5.9 Ensemble Modeling 293
Motivation—Why Do We Need to Use Ensembles? 293
Different Types of Ensembles 295
Bagging 296
Boosting 298
Variants of Bagging and Boosting 299

Stacking 300
Information Fusion 300
Summary—Ensembles are not Perfect! 301
0 APPLICATION CASE 5.6 To Imprison or Not to Imprison:
A Predictive Analytics-Based Decision Support System for
Drug Courts 304
Internet Exercises 312 • References 313
Chapter 6 Deep Learning and Cognitive Computing 315
6.1 Opening Vignette: Fighting Fraud with Deep Learning
and Artificial Intelligence 316
6.2 Introduction to Deep Learning 320
0 APPLICATION CASE 6.1 Finding the Next Football Star
with

Artificial Intelligence 323
6.3 Basics of “Shallow” Neural Networks 325
0 APPLICATION CASE 6.2 Gaming Companies Use Data
Analytics to
Score Points with Players 328
0 APPLICATION CASE 6.3 Artificial Intelligence Helps
Protect Animals
from Extinction 333
xii Contents
6.4 Process of Developing Neural Network–Based
Systems 334
Learning Process in ANN 335
Backpropagation for ANN Training 336
6.5 Illuminating the Black Box of ANN 340

0 APPLICATION CASE 6.4 Sensitivity Analysis Reveals
Injury Severity
Factors in Traffic Accidents 341
6.6 Deep Neural Networks 343
Feedforward Multilayer Perceptron (MLP)-Type Deep Networks
343
Impact of Random Weights in Deep MLP 344
More Hidden Layers versus More Neurons? 345
0 APPLICATION CASE 6.5 Georgia DOT Variable Speed
Limit Analytics
Help Solve Traffic Congestions 346
6.7 Convolutional Neural Networks 349
Convolution Function 349
Pooling 352
Image Processing Using Convolutional Networks 353

0 APPLICATION CASE 6.6 From Image Recognition to Face
Recognition 356
Text Processing Using Convolutional Networks 357
6.8 Recurrent Networks and Long Short-Term Memory
Networks 360
0 APPLICATION CASE 6.7 Deliver Innovation by
Understanding
Customer Sentiments 363
LSTM Networks Applications 365
6.9 Computer Frameworks for Implementation of Deep
Learning 368
Torch 368
Caffe 368
TensorFlow 369
Theano 369

Keras: An Application Programming Interface 370
6.10 Cognitive Computing 370
How Does Cognitive Computing Work? 371
How Does Cognitive Computing Differ from AI? 372
Cognitive Search 374
IBM Watson: Analytics at Its Best 375
0 APPLICATION CASE 6.8 IBM Watson Competes against
the
Best at Jeopardy! 376
How Does Watson Do It? 377
What Is the Future for Watson? 377
References 385

Contents xiii
Chapter 7 Text Mining, Sentiment Analysis, and Social
Analytics 388
7.1 Opening Vignette: Amadori Group Converts Consumer
Sentiments into Near-Real-Time Sales 389
7.2 Text Analytics and Text Mining Overview 392
0 APPLICATION CASE 7.1 Netflix: Using Big Data to Drive
Big
Engagement: Unlocking the Power of Analytics to Drive
Content and Consumer Insight 395
7.3 Natural Language Processing (NLP) 397
0 APPLICATION CASE 7.2 AMC Networks Is Using
Analytics to
Capture New Viewers, Predict Ratings, and Add Value for
Advertisers
in a Multichannel World 399

7.4 Text Mining Applications 402
Marketing Applications 403
Security Applications 403
Biomedical Applications 404
0 APPLICATION CASE 7.3 Mining for Lies 404
Academic Applications 407
0 APPLICATION CASE 7.4 The Magic Behind the Magic:
Instant Access
to Information Helps the Orlando Magic Up their Game and the
Fan’s
Experience 408
7.5 Text Mining Process 410
Task 1: Establish the Corpus 410
Task 2: Create the Term–Document Matrix 411
Task 3: Extract the Knowledge 413

0 APPLICATION CASE 7.5 Research Literature Survey with
Text
Mining 415
7.6 Sentiment Analysis 418
0 APPLICATION CASE 7.6 Creating a Unique Digital
Experience to
Capture Moments That Matter at Wimbledon 419
Sentiment Analysis Applications 422
Sentiment Analysis Process 424
Methods for Polarity Identification 426
Using a Lexicon 426
Using a Collection of Training Documents 427
Identifying Semantic Orientation of Sentences and Phrases 428
Identifying Semantic Orientation of Documents 428

7.7 Web Mining Overview 429
Web Content and Web Structure Mining 431
7.8 Search Engines 433
Anatomy of a Search Engine 434
1. Development Cycle 434
2. Response Cycle 435
Search Engine Optimization 436
Methods for Search Engine Optimization 437
xiv Contents
0 APPLICATION CASE 7.7 Delivering Individualized Content
and
Driving Digital Engagement: How Barbour Collected More
Than 49,000
New Leads in One Month with Teradata Interactive 439

7.9 Web Usage Mining (Web Analytics) 441
Web Analytics Technologies 441
Web Analytics Metrics 442
Web Site Usability 442
Traffic Sources 443
Visitor Profiles 444
Conversion Statistics 444
7.10 Social Analytics 446
Social Network Analysis 446
Social Network Analysis Metrics 447
0 APPLICATION CASE 7.8 Tito’s Vodka Establishes Brand
Loyalty with
an Authentic Social Strategy 447

Connections 450
Distributions 450
Segmentation 451
Social Media Analytics 451
How Do People Use Social Media? 452
Measuring the Social Media Impact 453
Best Practices in Social Media Analytics 453
References 457
PART III Prescriptive Analytics and Big Data 459
Chapter 8 Prescriptive Analytics: Optimization and Simulation
460
8.1 Opening Vignette: School District of Philadelphia Uses

Prescriptive Analytics to Find Optimal

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