Page 173 - DCAP208_Management Support Systems

Management Support Systems

Notes The neural network is package up into a complete solution such as fraud prediction. This
allows the neural network to be carefully crafted for one particular application and once
it has been proven successful it can be used over and over again without requiring a deep
understanding of how it works.

The neural network is package up with expert consulting services. Here the neural network
is deployed by trusted experts who have a track record of success. Either the experts are
able to explain the models or they are trusted that the models do work.

The first tactic has seemed to work quite well because when the technique is used for a well
defined problem many of the difficulties in preprocessing the data can be automated (because
the data structures have been seen before) and interpretation of the model is less of an issue since
entire industries begin to use the technology successfully and a level of trust is created. There are
several vendors who have deployed this strategy (e.g. HNC’s Falcon system for credit card
fraud prediction and Advanced Software Applications ModelMAX package for direct marketing).
Packaging up neural networks with expert consultants is also a viable strategy that avoids many
of the pitfalls of using neural networks, but it can be quite expensive because it is human
intensive. One of the great promises of data mining is, after all, the automation of the predictive
modeling process. These neural network consulting teams are little different from the analytical
departments many companies already have in house. Since there is not a great difference in the
overall predictive accuracy of neural networks over standard statistical techniques the main
difference becomes the replacement of the statistical expert with the neural network expert.
Either with statistics or neural network experts the value of putting easy to use tools into the
hands of the business end user is still not achieved.

Where to Use Neural Networks

Neural networks are used in a wide variety of applications. They have been used in all facets of
business from detecting the fraudulent use of credit cards and credit risk prediction to increasing
the hit rate of targeted mailings. They also have a long history of application in other areas such
as the military for the automated driving of an unmanned vehicle at 30 miles per hour on paved
roads to biological simulations such as learning the correct pronunciation of English words
from written text.

Neural Networks for Clustering

Neural networks of various kinds can be used for clustering and prototype creation. The Kohonen
network described in this section is probably the most common network used for clustering and
segmentation of the database. Typically the networks are used in a unsupervised learning mode
to create the clusters. The clusters are created by forcing the system to compress the data by
creating prototypes or by algorithms that steer the system toward creating clusters that compete
against each other for the records that they contain, thus ensuring that the clusters overlap as
little as possible.

Neural Networks for Outlier Analysis

Sometimes clustering is performed not so much to keep records together as to make it easier to
see when one record sticks out from the rest. For instance:

Most wine distributors selling inexpensive wine in Missouri and that ship a certain volume of
product produce a certain level of profit. There is a cluster of stores that can be formed with these
characteristics. One store stands out, however, as producing significantly lower profit. On closer

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