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NOTESFROMTHEAIFRONTIERINSIGHTSFROMHUNDREDSOFUSECASES
DISCUSSIONPAPER
APRIL2018
MichaelChui|SanFranciscoJamesManyika|SanFranciscoMehdiMiremadi|ChicagoNicolausHenke|London
RitaChung|SiliconValleyPieterNel|NewYorkSankalpMalhotra|NewYork
Sinceitsfoundingin1990,theMcKinseyGlobalInstitute(MGI)hassoughttodevelopadeeperunderstandingoftheevolvingglobaleconomy.AsthebusinessandeconomicsresearcharmofMcKinsey&Company,MGIaimstoprovideleadersinthecommercial,public,andsocialsectorswiththefactsandinsightsonwhichtobasemanagementandpolicydecisions.
MGIresearchcombinesthedisciplinesofeconomicsandmanagement,employingtheanalyticaltoolsofeconomicswiththeinsightsofbusinessleaders.Our“micro-to-macro”methodologyexaminesmicroeconomicindustrytrendstobetterunderstandthebroadmacroeconomicforcesaffectingbusinessstrategyandpublicpolicy.MGI’sin-depthreportshavecoveredmorethan20countriesand30industries.Currentresearchfocusesonsixthemes:productivityandgrowth,naturalresources,labormarkets,theevolutionofglobalfinancialmarkets,theeconomicimpactoftechnologyandinnovation,andurbanization.Recentreportshaveassessedthedigitaleconomy,theimpactofAIandautomationonemployment,incomeinequality,theproductivitypuzzle,theeconomicbenefitsoftacklinggenderinequality,aneweraofglobalcompetition,Chineseinnovation,anddigitalandfinancialglobalization.
MGIisledbythreeMcKinsey&Companyseniorpartners:JacquesBughin,JonathanWoetzel,andJamesManyika,whoalsoservesasthechairmanofMGI.MichaelChui,SusanLund,AnuMadgavkar,JanMischke,SreeRamaswamy,andJaanaRemesareMGIpartners,andMekalaKrishnanandJeongminSeongareMGIseniorfellows.
ProjectteamsareledbytheMGIpartnersandagroupofseniorfellows,andincludeconsultantsfromMcKinseyofficesaroundtheworld.TheseteamsdrawonMcKinsey’sglobalnetworkofpartnersandindustryandmanagementexperts.AdviceandinputtoMGIresearchareprovidedbytheMGICouncil,membersofwhicharealsoinvolvedinMGI’sresearch.MGICouncilmembersaredrawnfromaroundtheworldandfromvarioussectorsandincludeAndrésCadena,SandrineDevillard,RichardDobbs,TarekElmasry,KatyGeorge,RajatGupta,EricHazan,EricLabaye,AchaLeke,ScottNyquist,
GaryPinkus,SvenSmit,OliverTonby,andEckartWindhagen.Inaddition,leadingeconomists,includingNobellaureates,actasresearchadviserstoMGIresearch.
ThepartnersofMcKinseyfundMGI’sresearch;itisnotcommissionedbyanybusiness,government,orotherinstitution.ForfurtherinformationaboutMGIandtodownloadreports,pleasevisit
/mgi
.
MCKINSEYANALYTICS
McKinseyAnalyticshelpsclientsachievebetterperformancethroughdata.Weworktogetherwithclientstobuildanalytics-drivenorganizations,helpingthemdevelopthestrategies,operations,andcapabilitiestoderiverapidandsustainedimpactfromanalytics.Overthepastfiveyears,wehaveworkedwithmorethan2,000clientsacrosseveryindustryandbusinessfunction.McKinseyAnalyticsisledgloballybyNicolausHenkeandNoshirKaka,togetherwithanexecutivecommitteecomprisedof40McKinseyseniorpartnersrepresentingallregionsandpractices.Today,McKinseyAnalytics
bringstogethermorethan1,900advancedanalyticsandAIexpertsandspansmorethan125domains(industry-andfunction-specificteamswithpeople,data,andtoolsfocusedonuniqueapplicationsofanalytics).McKinseyAnalyticsincludesseveralacquiredcompaniessuchasQuantumBlack,aleadingadvancedanalyticsfirmthatMcKinseyacquiredin2015.
Learnmoreat
/business-functions/mckinsey-analytics/our-insights.
Copyright?McKinsey&Company2018
INBRIEF
NOTESFROMTHEAIFRONTIER:
INSIGHTSFROMHUNDREDSOFUSECASES
Forthisdiscussionpaper,partofourongoingresearchintoevolvingtechnologiesandtheireffectonbusiness,economies,andsociety,wemappedtraditionalanalyticsandnewer“deeplearning”techniquesandtheproblemstheycansolvetomorethan400specific
usecasesincompaniesandorganizations.DrawingonMGIresearchandtheappliedexperiencewithartificialintelligence(AI)ofMcKinseyAnalytics,weassessboththepracticalapplicationsandtheeconomicpotentialofadvancedAItechniquesacrossindustriesandbusinessfunctions.WecontinuetostudytheseAItechniquesandadditionalusecases.Fornow,hereareourkeyfindings:
AI,whichforthepurposesofthispaperwecharacterizeas“deeplearning”techniquesusingartificialneuralnetworks,canbeusedtosolveavarietyofproblems.Techniquesthataddressclassification,estimation,andclusteringproblemsarecurrentlythemostwidelyapplicableintheusecaseswehaveidentified,reflectingtheproblemswhosesolutionsdrivevalueacrosstherangeofsectors.
ThegreatestpotentialforAIwehavefoundistocreatevalueinusecasesinwhichmoreestablishedanalyticaltechniquessuchasregressionandclassificationtechniques
canalreadybeused,butwhereneuralnetworktechniquescouldprovidehigherperformanceorgenerateadditionalinsightsandapplications.Thisistruefor69percentoftheAIusecasesidentifiedinourstudy.Inonly16percentofusecasesdidwefinda“greenfield”AIsolutionthatwasapplicablewhereotheranalyticsmethodswouldnotbeeffective.
BecauseofthewideapplicabilityofAIacrosstheeconomy,thetypesofusecaseswiththegreatestvaluepotentialvarybysector.Thesevariationsprimarilyresultfromtherelativeimportanceofdifferentdriversofvaluewithineachsector.Theyarealsoaffectedbytheavailabilityofdata,itssuitabilityforavailabletechniques,andtheapplicabilityofvarioustechniquesandalgorithmicsolutions.Inconsumer-facingindustriessuchasretail,forexample,marketingandsalesistheareawiththemostvalue.Inindustriessuchasadvancedmanufacturing,inwhichoperationalperformancedrivescorporateperformance,thegreatestpotentialisinsupplychain,logistics,andmanufacturing.
Thedeeplearningtechniquesonwhichwefocused—feedforwardneuralnetworks,recurrentneuralnetworks,andconvolutionalneuralnetworks—accountforabout
40percentoftheannualvaluepotentiallycreatedbyallanalyticstechniques.Thesethreetechniquestogethercanpotentiallyenablethecreationofbetween$3.5trillionand
$5.8trillioninvalueannually.Withinindustries,thatistheequivalentof1to9percentof2016revenue.
Capturingthepotentialimpactofthesetechniquesrequiressolvingmultipleproblems.Technicallimitationsincludetheneedforalargevolumeandvarietyofoftenlabeledtrainingdata,althoughcontinuedadvancesarealreadyhelpingaddressthese.Tougherperhapsmaybethereadinessandcapabilitychallengesforsomeorganizations.Societalconcernandregulation,forexampleaboutprivacyanduseofpersonaldata,canalsoconstrainAIuseinbanking,insurance,healthcare,andpharmaceuticalandmedicalproducts,aswellasinthepublicandsocialsectors,iftheseissuesarenotproperlyaddressed.
Thescaleofthepotentialeconomicandsocietalimpactcreatesanimperativeforalltheparticipants—AIinnovators,AI-usingcompaniesandpolicy-makers—toensureavibrantAIenvironmentthatcaneffectivelyandsafelycapturetheeconomicandsocietalbenefits.
McKinseyGlobalInstitute
NotesfromtheAIfrontier:Insightsfromhundredsofusecases
PAGE
11
PAGE
2
McKinseyGlobalInstitute
1.MappingAItechniquestoproblemtypes
What’sinside
Introduction
Page1
MappingAItechniques
toproblemtypes
Page2
Insightsfrom
usecases
Page7
Sizingthepotential
valueofAI
Page17
Theroadtoimpact
andvalue
Page26
Acknowledgments
Page31
INTRODUCTION
Artificialintelligence(AI)standsoutasatransformationaltechnologyofourdigitalage.Questionsaboutwhatitis,whatitcanalreadydo—andwhatithasthepotentialtobecome—cutacrosstechnology,psychology,politics,economics,sciencefiction,law,andethics.AIisthesubjectofcountlessdiscussionsandarticles,fromtreatisesabouttechnicaladvancestotabloidheadlinesaboutitseffects.Evenasthedebatecontinues,thetechnologiesunderpinningAIcontinuetomoveforward,enablingapplicationsfromfacialrecognitioninsmartphonestoconsumerappsthatuseAIalgorithmstodetectdiabetesandhypertensionwithincreasingaccuracy.1Indeed,whilemuchofthepublicdiscussionofAIfocusesonsciencefiction-likeAIrealizationsuchasrobots,thenumberofless-noticedpracticalapplicationsforAIthroughouttheeconomyisgrowingapaceandpermeatingourlives.
ThisdiscussionpaperseekstocontributetothebodyofknowledgeaboutAIbymappingAItechniquestothe
typesofproblemstheycanhelpsolveandthenmappingtheseproblemtypestomorethan400practicalusecasesandapplicationsinbusinessesacross19industries,fromaerospaceanddefensetotravelandthepublicsector,and
ninebusinessfunctionsrangingfrommarketingandsalesandsupply-chainmanagementtoproductdevelopmentandhumanresources.2Drawingonawidevarietyofpublic
andproprietarydatasources,includingtheexperiencesofourMcKinsey&Companycolleagues,wealsoassessthepotentialeconomicvalueofthelatestgenerationsofAItechnologies.TheAItechniqueswefocusonaredeeplearningtechniquesbasedonartificialneuralnetworks,whichweseeasgeneratingasmuchas40percentofthetotalpotentialvaluethatallanalyticstechniquescouldprovide.
Ourfindingshighlightthesubstantialpotentialofapplyingdeeplearningtechniquestousecasesacrosstheeconomy;thesetechniquescanprovideanincrementalliftbeyondthatfrommoretraditionalanalyticstechniques.Weidentifytheindustriesandbusinessfunctionsinwhichthereisvaluetobecaptured,andweestimatehowlargethatvaluecouldbeglobally.Forallthepotential,muchworkneedstobedonetoovercomearangeoflimitationsandobstaclestoAIapplication.Weconcludewithabriefdiscussionofthese
obstaclesandoffutureopportunitiesasthetechnologiescontinuetheiradvance.Ultimately,thevalueofAIisnottobefoundinthemodelsthemselves,butinorganizations’abilitiestoharnessthem.Businessleaderswillneedtoprioritizeandmakecarefulchoicesabouthow,when,andwheretodeploythem.
Thispaperispartofourcontinuingresearchintoanalytics,automation,andAItechnologies,andtheireffectonbusiness,theeconomy,andsociety.3ItisnotintendedtoserveasacomprehensiveguidetodeployingAI;forexample,weidentifybutdonotelaborateonissuesofdatastrategy,dataengineering,governance,orchangemanagementandculture
1GeoffreyH.Tisonetal.,“Cardiovascularriskstratificationusingoff-the-shelfwearablesandamulti-maskdeeplearningalgorithm,”Circulation,volume136,supplement1,November14,2017.
2Wedonotidentifythecompaniesbynameorcountry,forreasonsofclientconfidentiality.
3PreviousMcKinseyGlobalInstitutereportsontheseissuesincludeTheageofanalytics:Competinginadata-drivenworld,December2016;Afuturethatworks:Automation,employmentandproductivity,January2017;andArtificialintelligence:Thenextdigitalfrontier?June2017.Seealistofourrelatedresearchattheendofthispaper.
thatarevitalforcompaniesseekingtocapturevaluefromAIandanalytics.4Theusecasesweexaminedarenotexhaustive;indeed,wecontinuetoidentifyandexamineothers,andwemayupdateourfindingsinduecourse.Nonetheless,webelievethatthisresearchcanmakeausefulcontributiontoourunderstandingofwhatAIcanandcan’t(yet)do,andhowmuchvaluecouldbederivedfromitsuse.Itisimportanttohighlightthat,evenasweseeeconomicpotentialintheuseofAItechniques,theuseofdatamustalwaystakeintoaccountconcernsincludingdatasecurity,privacy,andpotentialissuesofbias,issueswehaveaddressedelsewhere.5
MAPPINGAITECHNIQUESTOPROBLEMTYPES
Asartificialintelligencetechnologiesadvance,sodoesthedefinitionofwhichtechniquesconstituteAI(seeBox1,“Deeplearning’soriginsandpioneers”).6Forthepurposesofthispaper,weuseAIasshorthandspecificallytorefertodeeplearningtechniquesthatuseartificialneuralnetworks.Inthissection,wedefinearangeofAIandadvancedanalyticstechniquesaswellaskeyproblemtypestowhichthesetechniquescanbeapplied.
NEURALNETWORKSANDOTHERMACHINELEARNINGTECHNIQUES
Welookedatthevaluepotentialofarangeofanalyticstechniques.Thefocusofourresearchwasonmethodsusingartificialneuralnetworksfordeeplearning,whichwecollectivelyrefertoasAIinthispaper,understandingthatindifferenttimesandcontexts,othertechniquescanandhavebeenincludedinAI.Wealsoexaminedothermachinelearningtechniquesandtraditionalanalyticstechniques(Exhibit1).WefocusedonspecificpotentialapplicationsofAIinbusinessandthepublicsector(sometimesdescribed
as“artificialnarrowAI”)ratherthanthelonger-termpossibilityofan“artificialgeneralintelligence”thatcouldpotentiallyperformanyintellectualtaskahumanbeingiscapableof.
Exhibit1
Artificialintelligence,machinelearning,andotheranalyticstechniquesthatweexaminedforthisresearch
Techniques ConsideredAIforourresearch
LikelihoodtobeusedinAIapplications
LessMore
Advancedtechniques
Deeplearningneuralnetworks(e.g.,feedforwardneuralnetworks,CNNs,RNNs,GANs)
Instancebased(e.g.,KNN)
Dimensionalityreduction(e.g.,PCA,tSNE) Ensemblelearning(e.g.,random
forest,gradientboosting)
Decisiontreelearning
MonteCarlo Linearclassifiers(e.g.,Fisher’smethods lineardiscriminant,SVM)
Statisticalinference(e.g.,Bayesianinference,ANOVA)
Clustering(e.g.,k-means,treebased,dbscan)
Markovprocess RegressionAnalysis(e.g.,(e.g.,Markovchain) linear,logistic,lasso)
Descriptivestatistics(e.g.,confidenceinterval)
Traditionaltechniques
NaiveBayesclassifier
Reinforcementlearning
Transferlearning
SOURCE:McKinseyGlobalInstituteanalysis
4SeeJacquesBughin,BrianMcCarthy,andMichaelChui,“Asurveyof3,000executivesrevealshowbusinessessucceedwithAI,”HarvardBusinessReview,August28,2017.
5MichaelChui,JamesManyika,andMehdiMiremadi,“WhatAIcanandcan’tdo(yet)foryourbusiness,”
McKinseyQuarterly,January2018.
6ForadetailedlookatAItechniques,seeAnexecutive’sguidetoAI,McKinseyAnalytics,January2018.
/business-functions/mckinsey-analytics/our-insights/an-executives-guide-to-ai
Box1:Deeplearning’soriginsandpioneers
Itistooearlytowriteafullhistoryofdeeplearning—andsomeofthedetailsarecontested—butwecanalreadytraceanadmittedlyincompleteoutlineofitsoriginsandidentifysomeofthepioneers.TheyincludeWarrenMcCullochandWalterPitts,whoasearlyas1943proposed
anartificialneuron,acomputationalmodelofthe“nervenet”inthebrain.1BernardWidrowandTedHoffatStanfordUniversity,developedaneuralnetworkapplicationbyreducingnoiseinphonelinesinthelate1950s.2Aroundthesametime,FrankRosenblatt,anAmericanpsychologist,introducedtheideaofadevicecalledthePerceptron,whichmimickedthe
neuralstructureofthebrainandshowedanabilitytolearn.3MIT’sMarvinMinskyandSeymourPapertthenputadamperonthisresearchintheir1969book“Perceptrons”,byshowingmathematicallythatthePerceptroncouldonlyperformverybasictasks.4Theirbookalsodiscussedthedifficultyoftrainingmulti-layerneuralnetworks.In1986,GeoffreyHintonattheUniversityofToronto,alongwithcolleaguesDavidRumelhartandRonaldWilliams,solvedthistrainingproblemwiththepublicationofanowfamousbackpropagationtrainingalgorithm—althoughsomepractitionerspointtoaFinnishmathematician,SeppoLinnainmaa,ashavinginventedbackpropagationalreadyinthe1960s.5YannLeCunatNYUpioneeredtheuse
ofneuralnetworksonimagerecognitiontasksandhis1998paperdefinedtheconceptofconvolutionalneuralnetworks,whichmimicthehumanvisualcortex.6Inparallel,JohnHopfieldpopularizedthe“Hopfield”networkwhichwasthefirstrecurrentneuralnetwork.7ThiswassubsequentlyexpandeduponbyJurgenSchmidhuberandSeppHochreiterin1997with
theintroductionofthelongshort-termmemory(LSTM),greatlyimprovingtheefficiencyandpracticalityofrecurrentneuralnetworks.8Hintonandtwoofhisstudentsin2012highlightedthepowerofdeeplearningwhentheyobtainedsignificantresultsinthewell-knownImageNetcompetition,basedonadatasetcollatedbyFei-FeiLiandothers.9Atthesametime,JeffreyDeanandAndrewNgweredoingbreakthroughworkonlargescaleimagerecognitionatGoogleBrain.10Deeplearningalsoenhancedtheexistingfieldofreinforcementlearning,ledbyresearcherssuchasRichardSutton,leadingtothegame-playingsuccessesofsystemsdevelopedbyDeepMind.11In2014,IanGoodfellowpublishedhispaperongenerativeadversarialnetworks,whichalongwithreinforcementlearninghasbecomethefocusofmuchoftherecentresearchinthefield.12ContinuingadvancesinAIcapabilitieshaveledtoStanford
University’sOneHundredYearStudyonArtificialIntelligence,foundedbyEricHorvitz,buildingonthelong-standingresearchheandhiscolleagueshaveledatMicrosoftResearch.Wehavebenefitedfromtheinputandguidanceofmanyofthesepioneersinourresearchoverthepastfewyears.
1WarrenMcCullochandWalterPitts,“Alogicalcalculusoftheideasimmanentinnervousactivity,”BulletinofMathematicalBiophysics,volume5,1943.
2AndrewGoldstein,“BernardWidroworalhistory,”IEEEGlobalHistoryNetwork,1997.
3FrankRosenblatt,“ThePerceptron:Aprobabilisticmodelforinformationstorageandorganizationinthebrain,”
Psychologicalreview,volume65,number6,1958.
4MarvinMinskyandSeymourA.Papert,Perceptrons:Anintroductiontocomputationalgeometry,MITPress,January1969.
5DavidE.Rumelhart,GeoffreyE.Hinton,andRonaldJ.Williams,“Learningrepresentationsbyback-propagatingerrors,”Nature,volume323,October1986;foradiscussionofLinnainmaa’sroleseeJuergenSchmidhuber,Whoinventedbackpropagation?,Blogpost
http://people.idsia.ch/~juergen/who-invented-backpropagation.html,
2014.
6YannLeCun,PatrickHaffner,LeonBotton,andYoshuaBengio,Objectrecognitionwithgradient-basedlearning,ProceedingsoftheIEEE,November1998.
7JohnHopfield,Neuralnetworkdsandphysicalsystemswithemergentcollectivecomputationalabilities,PNAS,April1982.
8SeppHochreiterandJuergenSchmidhuber,“Longshort-termmemory,”NeuralComputation,volume9,number8,December1997.
9AlexKrizhevsky,IlyaSutskever,andGeoffreyE.Hinton,ImageNetclassificationwithdeepconvolutionalneuralnetworks,NIPS12proceedingsofthe25thInternationalConferenceonNeuralInformationProcessingSystems,December2012.
10JeffreyDeanetal.,Largescaledistributeddeepnetworks,NIPS2012.
11RichardS.SuttonandAndrewG.Barto,Reinforcementlearning:Anintroduction,MITPress,1998.
12IanJ.Goodfellow,Generativeadversarialnetworks,ArXiv,June2014.
Neuralnetworksareasubsetofmachinelearningtechniques.Essentially,theyareAIsystemsbasedonsimulatingconnected“neuralunits,”looselymodelingthewaythatneuronsinteractinthebrain.Computationalmodelsinspiredbyneuralconnectionshavebeenstudiedsincethe1940sandhavereturnedtoprominenceascomputerprocessingpowerhasincreasedandlargetrainingdatasetshavebeenusedtosuccessfullyanalyzeinputdatasuchasimages,video,andspeech.AIpractitionersrefertothesetechniquesas“deeplearning,”sinceneuralnetworkshavemany(“deep”)layersofsimulatedinterconnectedneurons.Beforedeeplearning,neuralnetworksoftenhadonlythreetofive
layersanddozensofneurons;deeplearningnetworkscanhaveseventotenormorelayers,withsimulatedneuronsnumberingintothemillions.
Inthispaper,weanalyzedtheapplicationsandvalueofthreeneuralnetworktechniques:
Feedforwardneuralnetworks.Oneofthemostcommontypesofartificialneuralnetwork.Inthisarchitecture,informationmovesinonlyonedirection,forward,fromtheinputlayer,throughthe“hidden”layers,totheoutputlayer.Therearenoloopsinthenetwork.Thefirstsingle-neuronnetworkwasproposedin1958byAIpioneerFrankRosenblatt.Whiletheideaisnotnew,advancesincomputingpower,trainingalgorithms,andavailabledataledtohigherlevelsofperformancethanpreviouslypossible.
Recurrentneuralnetworks(RNNs).Artificialneuralnetworkswhoseconnectionsbetweenneuronsincludeloops,well-suitedforprocessingsequencesofinputs,whichmakesthemhighlyeffectiveinawiderangeofapplications,fromhandwriting,totexts,tospeechrecognition.InNovember2016,OxfordUniversityresearchersreportedthatasystembasedonrecurrentneuralnetworks(andconvolutionalneuralnetworks)hadachieved95percentaccuracyinreadinglips,outperformingexperiencedhumanlipreaders,whotestedat52percentaccuracy.
Convolutionalneuralnetworks(CNNs).Artificialneuralnetworksinwhichtheconnectionsbetweenneurallayersareinspiredbytheorganizationoftheanimalvisualcortex,theportionofthebrainthatprocessesimages,wellsuitedforvisualperceptiontasks.
Weestimatedthepotentialofthosethreedeepneuralnetworktechniquestocreatevalue,aswellasothermachinelearningtechniquessuchastree-basedensemblelearning,classifiers,andclustering,andtraditionalanalyticssuchasdimensionalityreductionandregression.
Forourusecases,wealsoconsideredtwoothertechniques—generativeadversarialnetworks(GANs)andreinforcementlearning—butdidnotincludetheminourpotentialvalueassessmentofAI,sincetheyremainnascenttechniquesthatarenotyetwidelyappliedinbusinesscontexts.However,aswenoteintheconcludingsectionofthispaper,theymayhaveconsiderablerelevanceinthefuture.
Generativeadversarialnetworks(GANs).Theseusuallyusetwoneuralnetworkscontestingeachotherinazero-sumgameframework(thus“adversarial”).GANscanlearntomimicvariousdistributionsofdata(forexampletext,speech,andimages)andarethereforevaluableingeneratingtestdatasetswhenthesearenotreadilyavailable.
Reinforcementlearning.Thisisasubfieldofmachinelearninginwhichsystemsaretrainedbyreceivingvirtual“rewards”or“punishments,”essentiallylearningbytrialanderror.GoogleDeepMindhasusedreinforcementlearningtodevelopsystemsthatcanplaygames,includingvideogamesandboardgamessuchasGo,betterthanhumanchampions.
PROBLEMTYPESANDTHEANALYTICTECHNIQUESTHATCANBEAPPLIEDTOSOLVETHEM
Inabusinesssetting,thoseanalytictechniquescanbeappliedtosolvereal-lifeproblems.Forthisresearch,wecreatedataxonomyofhigh-levelproblemtypes,characterizedbytheinputs,outputs,andpurposeofeach.Acorrespondingsetofanalytictechniquescanbeappliedtosolvetheseproblems.Theseproblemtypesinclude:
Classification.Basedonasetoftrainingdata,categorizenewinputsasbelongingtooneofasetofcategories.Anexampleofclassificationisidentifyingwhetheranimagecontainsaspecifictypeofobject,suchasatruckoracar,oraproductofacceptablequalitycomingfromamanufacturingline.
Continuousestimation.Basedonasetoftrainingdata,estimatethenextnumericvalueinasequence.Thistypeofproblemissometimesdescribedas“prediction,”particularlywhenitisappliedtotimeseriesdata.Oneexampleofcontinuousestimationisforecastingthesalesdemandforaproduct,basedonasetofinputdatasuchasprevioussalesfigures,consumersentiment,andweather.Anotherexampleispredictingthepriceofrealestate,suchasabuilding,usingdatadescribingthepropertycombinedwithphotosofit.
Clustering.Theseproblemsrequireasystemtocreateasetofcategories,forwhichindividualdatainstanceshaveasetofcommonorsimilarcharacteristics.Anexampleofclusteringiscreatingasetofconsumersegmentsbasedondataaboutindividualconsumers,includingdemographics,preferences,andbuyerbehavior.
Allotheroptimization.Theseproblemsrequireasystemtogenerateasetofoutputsthatoptimizeoutcomesforaspecificobjectivefunction(someoftheotherproblemtypescanbeconsideredtypesofoptimization,sowedescribetheseas“allother”optimization).Generatingarouteforavehiclethatcreatestheoptimumcombinationoftimeandfueluseisanexampleofoptimization.
Anomalydetection.Givenatrainingsetofdata,determinewhetherspecificinputsareoutoftheordinary.Forinstance,asystemcouldbetrainedonasetofhistoricalvibrationdataassociatedwiththeperformanceofanoperatingpieceofmachinery,andthendeterminewhetheranewvibrationreadingsuggeststhatthemachineisnotoperatingnormally.Notethatanomalydetectioncanbeconsideredasubcategoryofclassification.
Ranking.Rankingalgorithmsareusedmostoftenininformationretrievalproblemsinwhichtheresultsofaqueryorrequestneedstobeorderedbysomecriterion.
Recommendationsystemssuggestingnextproducttobuyusethesetypesofalgorithmsasafinalstep,sortingsuggestionsbyrelevance,beforepresentingtheresultstotheuser.
Recommendations.Thesesystemsproviderecommendations,basedonasetoftrainingdata.Acommonexampleofrecommendationsaresystemsthatsuggestthe“nextproducttobuy”foracustomer,basedonthebuyingpatternsofsimilarindividuals,andtheobservedbehaviorofthespecificperson.
Datageneration.Theseproblemsrequireasystemtogenerateappropriatelynoveldatabasedontrainingdata.Forinstance,amusiccompositionsystemmightbeusedtogeneratenewpiecesofmusicinaparticularstyle,afterhavingbeentrainedonpiecesofmusicinthatstyle.
Exhibit2illustratestherelativetotalvalueoftheseproblemtypesacrossourdatabaseofusecases,alongwithsomeofthesampleanalyticstechniquesthatcanbeusedtosolveeachproblemtype.Themostprevalentproblemtypesareclassification,continuousestimation,andclustering,sugge
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