One of the key parts of cutting edge AI technology, Artificial Neural Networks (ANNs) are becoming too important and commonplace to ignore.
However, Artificial Neural Networks and the role that they play can be a difficult concept to understand.
In this article, we’ll explain exactly what Artificial Neural Network is and how they work.
To illustrate their importance we’ll also show you some examples of how Artificial Neural Networks are already transforming businesses.
Table of Contents
What are Neural Networks?
Neural networks are a set of algorithms, they are designed to mimic the human brain, that is designed to recognize patterns. They interpret data through a form of machine perception by labeling or clustering raw input data.
Let’s take a moment to consider the human brain. Made up of a network of neurons, the brain is a very complex structure.
It’s capable of quickly assessing and understanding the context of numerous different situations. Computers struggle to react to situations in a similar way. Artificial Neural Networks are a way of overcoming this limitation.
First developed in the 1940s Artificial Neural Networks attempt to simulate the way the brain operates.
Sometimes called perceptrons, an Artificial Neural Network is a hardware or software system.
Some networks are a combination of the two.
Consisting of a network of layers this system is patterned to replicate the way the neurons in the brain operate.
The network comprises an input layer, where data is entered, and an output layer.
The output layer is where processed information is presented.
Connecting the two is a hidden layer or layers.
The hidden layers consist of units that transform input data into useful information for the output layer to present.
In addition to replicating the human decision making progress Artificial Neural Networks allow computers to learn.
Their structure also allows ANN’s to reliably and quickly identify patterns that are too complex for humans to identify.
Artificial Neural Networks also allow us to classify and cluster large amounts of data quickly.
Applications in Deep Learning and Artificial Intelligence
Artificial neural networks are a form of deep learning.
They are also one of the main tools used in machine learning.
Consequently ANN’s play an increasingly important role in the development of artificial intelligence.
The rise in importance of Artificial Neural Network’s is due to the development of “backpropagation”.
This technique allows the system’s hidden layers to become versatile.
Adapting to situations where the outcome doesn’t match the one originally intended.
The development of deep learning neural networks has also helped in the development of Artificial Neural Networks.
Deep learning neural networks are networks made up of multiple layers.
This allows the system to become more versatile.
Different layers are able to analyse and extract different features.
This process allows the system to identify new data or images.
It also allows for unsupervised learning and more complex tasks to be undertaken.
How do Artificial Neural Networks Work?
As we have seen Artificial Neural Networks are made up of a number of different layers.
Each layer houses artificial neurons called units.
These artificial neurons allow the layers to process, categorize, and sort information.
Alongside the layers are processing nodes.
Each node has its own specific piece of knowledge.
This knowledge includes the rules that the system was originally programmed with.
It also includes any rules the system has learned for itself.
This makeup allows the network to learn and react to both structured and unstructured information and data sets.
Almost all artificial neural networks are fully connected throughout these layers.
Each connection is weighted.
The heavier the weight, or the higher the number, the greater the influence that the unit has on another unit.
The first layer is the input layer.
This takes on the information in various forms.
This information then progresses through the hidden layers where it is analysed and processed.
By processing data in this way, the network learns more and more about the information.
Eventually, the data reaches the end of the network, the output layer.
Here the network works out how to respond to the input data.
This response is based on the information it has learned throughout the process.
Here the processing nodes allow the information to be presented in a useful way.
Educating Artificial Neural Networks
For artificial neural networks to learn they require a mass of information.
This information is known as a training set.
If you wanted to teach your ANN to learn how to recognise a cat your training set would consist of thousands of images of a cat.
These images would all be tagged “cat”.
Once this information has been inputted and analysed the network is considered trained.
From now on it will try to classify any future data based on what it thinks it is seeing.
So if you present it with a new image of a cat, it will identify the creature.
As a check, during the training period, the system’s output is matched against the description of the data it’s analysing.
If the information is the same, the learning process is validated.
If the information is different backpropagation is used to adjust the learning process.
Backpropagation involves working back through the layers, adjusting the set mathematical equations and parameters.
These adjustments are made until the output data presents the desired result.
This process, deep learning, is what makes the network adaptive.
The network is able to learn and adapt as more information is processed.
What are Artificial Neural Networks Used for?
Artificial Neural Networks can be used in a number of ways.
They can classify information, cluster data, or predict outcomes.
ANN’s can be used for a range of tasks.
These include analyzing data, transcribing speech into text, powering facial recognition software, or predicting the weather.
There are many types of Artificial Neural Network.
Each has its own specific use.
Depending on the task it is required to process the ANN can be simple or very complex.
The most basic type of Artificial Neural Network is a feedforward neural network.
This is a basic system where information can travel in only one direction, from input to output.
Different Types of Neural Networks
The most commonly used type of Artificial Neural Network is the recurrent neural network.
In this system, data can flow in multiple directions.
As a result, these networks have greater learning ability.
Consequently, they are used to carry out complex tasks such as language recognition.
Each network is capable of carrying out a specific task.
The data you want to enter, and the application you have in mind, affect which system you use.
Complex tasks such as voice recognition may require more than one type of ANN.
Now that we’ve established what Artificial Neural Networks are here are 10 examples of how they are currently being applied.
Artificial Neural Networks are Improving Marketing Strategies
By adopting Artificial Neural Networks businesses are able to optimise their marketing strategy.
Systems powered by Artificial Neural Networks all capable of processing masses of information.
This includes customers personal details, shopping patterns as well as any other information relevant to your business.
Once processed this information can be sorted and presented in a useful and accessible way. This is generally known as market segmentation.
To put it another way segmentation of customers allows businesses to target their marketing strategies.
Businesses can identify and target customers most likely to purchase a specific service or produce.
This focusing of marketing campaigns means that time and expense isn’t wasted advertising to customers who are unlikely to engage.
This application of Artificial Neural Networks can save businesses both time and money.
It can also help to increase profits.
The flexibility of Artificial Neural Networks means that their marketing applications can be implemented by most businesses.
Artificial Neural Networks can segment customers on multiple characteristics.
These characteristics can be as diverse as location, age, economic status, purchasing patterns and anything else relevant to your business.
One company making the most of this flexibility is cosmetics brand Sephora.
The email marketing campaign is tailored to the interests of each customer on the mailing list.
This allows them to offer a seamless, targeted marketing campaign.
This approach means that at a time when many companies are struggling Sephora is flourishing.
Developing Targeted Marketing Campaigns
Through unsupervised learning, Artificial Neural Networks are able to identify customers with a similar characteristic.
This allows businesses to group together customers with similarities, such as economic status or preferring vinyl records to downloaded music.
Supervised learning systems allow Artificial Neural Networks to set out a clear aim for your marketing strategy.
Like unsupervised systems, they can also segment customers into similar groupings.
However supervised learning systems are also able to match customer groupings to the products they are most likely to buy.
This application of technology can increase profits by driving sales.
Starbucks has used Artificial Neural Networks and targeted marketing to keep customers engaged with their app.
The company has integrated its rewards system location and purchase history on their app.
This allows them to offer an incredibly personalised experience, helping to increase revenue by $2.56 billion.
Reducing Email Fatigue and Improving Conversion Rates
By only advertising relevant products to interested customers, you also reduce the chances of customers developing email fatigue.
In short, if your advertisements are relevant and interesting customers are more likely to interact.
This drives visits to your website, potentially increasing sales, and helps you to build a strong client-business relationship.
Applying Artificial Neural Networks in your marketing strategy can save your company both time and money.
By streamlining your marketing approach in this way you will only be targeting the customers most likely to purchase your product.
This streamlined approach of targeting the people most likely to engage can help to increase sales and profits.
Many companies who have adopted targeted or personalised marketing strategies have noticed clear, positive results.
For example, stationery retailers Paperstyle segmented their subscribers into two different groups.
Each group then received targeted emails.
Consequently, the business reported an open rate increase of 244%.
The traffic driven from emails to the website also increased by 161%.
These statistics show that personalised marketing campaigns can deliver real results, benefiting businesses.
Improving Search Engine Functionality
During 2015 Google I/O keynote address in San Francisco, Google revealed they were working on improving their search engine.
These improvements are powered by a 30 layer deep Artificial Neural Network.
This depth of layers, Google believes, allows the search engine to process complicated searches such as shapes and colours.
Using an Artificial Neural Network allows the system to constantly learn and improve.
This allows Google to constantly improve its search engine.
Within a few months, Google was already noticing improvements in search results.
The company reported that its error rate had dropped from 23% down to just 8%.
Google’s application shows that neural networks can help to improve search engine functionality.
Similar Artificial Neural Networks can be applied to the search feature on many e-commerce websites.
This means that many companies can improve their website search engine functionality.
This allows customers with only a vague idea of what they want to easily find the perfect item.
Amazon has reported sales increases of 29% following improvements to its recommendation systems.
Applications of neural networks in the pharmaceutical industry
Artificial Neural Networks are being used by the pharmaceutical industry in a number of ways.
The most obvious application is in the field of disease identification and diagnosis.
It was reported in 2015 that in America 800 possible cancer treatments were in the trial.
With so much data being produced, Artificial Neural Networks are being used to help scientists efficiently analyse and interpret it.
The IBM Watson Genomics is one example of smart solutions being used to process large amounts of data.
IBM Watson Genomics is improving precision medicine by integrating genomic tumour sequencing with cognitive computing.
With a similar aim in mind, Google has developed DeepMind Health.
Working alongside a number of medical specialists such as Moorfields Eye Hospital, the company is looking to develop a cure for macular degeneration.
Developing Personalised Treatment Plans
A personalised treatment plan can be more effective than adopting a standardised approach.
Artificial Neural Networks and supervised learning tools are allowing healthcare professionals to predict how patients may react to treatments based on genetic information.
The IBM Watson Oncology is leading this approach.
It is able to analyse the medical history of a patient as well as their current state of health.
This information is processed and compared to treatment options, allowing physicians to select the most effective.
MIT’s Clinical Machine Learning Group is advancing precision medicine research with the use of neural networks and algorithms.
The aim is to allow medical professionals to get a better understanding of how disease forms and operates.
This information can help to design an effective treatment.
The team at MIT are currently working on possible treatment plans for sufferers of Type 2 Diabetes.
Meanwhile, the Knight Cancer Institute and Microsoft’s Project Hanover is using networks and machine learning tools to develop precision treatments.
In particular, they are focusing on treatments for Acute Myeloid Leukemia.
Vast amounts of information and data are required to progress precision medicine and personalised treatments.
Artificial Neural Networks and machine learning tools are able to quickly and accurately analyse and present data in a useful way.
This ability makes it the perfect tool for this form of research and development.
Neural Networks in the Retail Sector
As we have noted, Artificial Neural Networks are versatile systems, capable of dealing reliably with a number of different factors.
This ability to handle a number of variables makes Artificial Neural Networks an ideal choice for the retail sector.
For instance, Artificial Neural Networks are, when given the right information, able to make accurate forecasts.
These forecasts are often more accurate than those made in the traditional manner, by analysing statistics.
This can allow accurate sales forecasts to be generated.
In turn, this information allows your businesses to purchase the right amount of stock.
This reduces the chances of selling out of certain items.
It also reduces the risk of valuable warehouse space being taken up by products you are unable to sell.
Online grocers Ocado are making the most of this technology.
Their smart warehouses rely on robots to do everything from stock management to fulfilling customer orders.
This information is used to power the trend of dynamic pricing.
Many companies, such as Amazon, use dynamic pricing to reproduced and increase revenue.
This application has spread beyond retail, service providers, such as Uber, even use this information to adjust prices depending on the customer.
Many retail organisations, such as Walmart, use Artificial Neural Networks to predict future product demand.
The network models analyse location, historical data sets, as well as weather forecasts, models and other pieces of relevant information.
This is used to predict an increase in sales of umbrellas or snow clearing products.
By predicting a potential rise in demand the company is able to increase stock in store.
This means that customers won’t leave empty-handed and also allows Walmart to offer product-related offers and incentives.
Applications to Encourage Repeat Custom
As well as monitoring and suggesting purchases, Artificial Neural Network systems also allow you to analyse the time between purchases.
This application is most useful when monitoring individual customer habits.
For example, a customer may buy new ink cartridges every 2 months.
Systems powered by Artificial Neural Networks can identify and monitor this repeat custom.
You can then contact your customer and remind them to buy when the time to purchase the product approaches.
This friendly reminder increases the chances of the customer returning to your store to make their purchase.
Retailers that offer loyalty schemes are already taking advantage of this.
Beauty brand Sephora’s Beauty Insider program records every purchase a customer makes.
It also records how frequently these purchases are made.
This information allows the company to predict when a customer’s products may be running low.
At this point the company sends a “restock your stash” email, prompting the customer to make a repeat purchase.
This information can also be used to develop a personalised marketing approach offering incentives or discounts.
Keeping Customers Loyal to Your Company
Artificial Neural Networks can also identify customers likely to switch to a competitor.
By knowing which customers are most likely to defect you are able to target them with tailored marketing campaigns.
Offering incentives, or friendly reminders about your company, will encourage customers to stick around.
This predictive use of Artificial Neural Networks is already benefiting FedEx.
Forbes reports that FedEx can predict which customers are likely to leave with an accuracy of 60-90%.
By applying Artificial Neural Networks in this way we can enhance and personalise the consumer’s experience.
Encouraging repeat custom and helping to build a relationship between your business and your customers.
Artificial Neural Networks in Financial Services
When it comes to AI banking and finance, Artificial Neural Networks are well suited to forecasting.
This suitability largely comes from their ability to quickly and accurately analyse large amounts of data.
Artificial Neural Networks are capable of processing and interpreting both structured and unstructured data.
After processing this information Artificial Neural Networks are also able to make accurate predictions.
The more information we can give the system, the more accurate the prediction will be.
Forecasting Market Movements
Over a 2 year period, MJ Futures reported a 199.2% returns due to their use of neural network prediction methods.
LBS Capital Management has also reported positive results with a simplified neural network.
Their model uses 6 financial indicator inputs such as the average directional movement over the previous 18 days.
As networks become more advanced and are fed more detailed information, their predictions will only become more accurate.
READ MORE – 10 Applications of Machine Learning in Finance
Improving the way Banks Operate
The forecasting ability of Artificial Neural Networks is not just confined to the stock market and exchange rate situations.
This ability also has applications in other areas of the financial sector.
Mortgages, overdrafts and bank loans are all calculated after analysing an individual account holders statistical information.
Traditionally the software that analysed this information was driven by statistics.
Increasingly banks and financial providers are switching to software powered by Artificial Neural Networks.
This allows for a wider analysis of the applicant and their behaviour to be made.
Consequently, this means that the information presented to the bank or financial provider is more accurate and useful.
This allows the bank to make a better-informed decision that is more appropriate to both themselves and the applicant.
Forbes revealed that many mortgage lenders expect this application of systems powered by Artificial Neural Networks will boom in the next few years.
Neural networks systems to Identify Credit Risks
HSBC is just one bank using Artificial Neural Networks to transform how loan and mortgage applications are processed.
The company uses neural networks to analyse customers with previous behaviour patterns.
This information can highlight personality traits that mark an applicant out as a credit risk.
Cora, currently, is only able to deal with simple requests.
However, as the technology develops it’s hoped that Cora will be able to help process mortgage and loan applications.
By applying Artificial Neural Networks, companies are able to provide a better service.
As well as reducing expense it means companies make fewer risky decisions, such as lending to credit risks.
This reduces potential losses and prevents people from running up debts they can’t afford.
READ MORE – AI Revolution Disrupts Investment Banking
The Effects on Insurance Provision
Artificial Neural Networks have a number of different applications in the insurance industry.
Firstly, as in marketing applications, Artificial Neural Networks allow for segmentation of policyholders.
This grouping allows companies to determine and offer appropriate pricing plans.
Consequently applying Artificial Neural Networks allows for the correct level of provision to be offered.
It also allows for special offers to be made to encourage customers to renew policies.
Recently Allianz Travel Insurance adopted a system powered by Artificial Neural Networks.
Their systems analyse a number of factors such as trip length, cost, the traveller’s age if you are paying with air miles and reason for travel.
Allianz uses this information to identify the best product for the customer.
This not only ensures that the customer gets the most relevant coverage but it also reduces the time spent searching and researching.
This helpful application of Artificial Neural Networks takes away the worry and concern of planning a holiday.
Instead, it allows customers to focus on enjoying their trip.
READ MORE – How Banks Can Start Using Machine Learning?
Fraud Detection Applications
As technology advances, and more importance is placed on online transactions, fraudsters are also becoming more sophisticated.
Luckily Artificial Neural Networks can help to keep us, and our finances, safe.
Deep learning and Artificial Neural Networks applications are powering systems capable of detecting all forms of financial fraud.
For example, this application can identify unusual activity, such as transactions occurring outside the established time frame.
Visa has used smart solutions to cut credit card fraud by two thirds.
Their sophisticated anti-fraud detection systems are working towards biometric solutions.
However the company also analyses information such as payment method, time, location, item purchased, and the amount spent.
Even a small deviation from the norm in any of these categories can highlight a potential fraud case.
Within seconds smart solutions allow Visa to look at over 500 data elements to determine if a transaction is suspicious.
Similarly, it can be embarrassing when our card is declined by a retailer.
Especially if our account is in credit.
MasterCard is employing solutions powered by Artificial Neural Networks to reduce the chances of this happening.
Currently, MasterCard has halved the chances of these errors from occurring.
Optimizing Store Layout
Artificial Neural Networks can also improve physical store layouts.
Their ability to quickly analyse and monitor stock levels allows companies to see which products are selling well and which aren’t.
Poorly performing products can then be placed on offer or moved to a more eye-catching position in the store.
These systems also allow companies to see which products are frequently purchased together.
Placing commonly purchased products close together encourages people buying one item to purchase the other.
You can then surround these products with other possible purchases.
Not only does this cut the waste of perishable products but it can also help to prevent a backlog building in the warehouse.
Fashion giants H&M are looking to these applications to transform their business model.
It’s been reported that the retailer is using Artificial Neural Networks to do everything from warehouse management to store layout.
The application in regards to store layout is particularly interesting.
H&M are Abandoning the Generic Store Layout
Abandoning the traditional, one size fits all approach, H&M are using smart applications to tailor the product mix in their stores.
For example, the company’s store in the residential Östermalm area of Stockholm originally stocked basic products for men and children as well as women.
After analysing customer purchasing habits the company identified that the majority of the store’s clients were women.
Consequently, higher-priced items, as well as fashion items, sold far better than children’s or men’s products.
This information helped H&M to change the range of products on offer in the store.
As well as reducing the menswear range, they brought in crockery ranges, a flower stall and a coffee shop.
The Wall Street Journal reports that by going for a more high-end look the store has improved its appeal and sales.
While H&M say that this optimization has helped to increase profit margins they are yet to reveal any figures.
Facial Recognition Software
Technology companies have long been working toward developing reliable facial recognition software.
One company leading the way is Facebook.
For a number of years now they have been using the facial recognition technology to auto-tag uploaded photographs.
They have also developed DeepFace.
DeepFace is a form of facial recognition software-driven by Artificial Neural Networks.
It is capable of mapping 3D facial features.
Once the mapping is complete the software turns the information into a flat model.
The information is then filtered, highlighting distinctive facial elements.
To be able to do this DeepFace implements 120 million parameters.
This technology hasn’t just emerged overnight.
DeepFace has been trained with a pool of 4.4 million tagged faces.
These images were taken from 4,000 different Facebook accounts.
During the training process, tests were carried out presenting the system with side-by-side images.
The system was then asked to identify if the images are of the same person.
In these tests, DeepFace returned an accuracy rating of 97.25%.
Human participants taking the same test scored, on average, 97.5%.
Facebook has also taken its software to computing and technology conferences.
This is done with the purpose of allowing academics and researchers to assess and inspect the technology.
With all this work it’s little wonder that DeepFace may be the most accurate facial technology software yet developed.
Paying With Your Face
Recently, the Macau district in China has introduced ATM’s that are capable of reading the user’s face.
This negates the need for cards and pin numbers.
If proved to be successful it could lead to the end of paying with plastic.
Meanwhile, companies such as Facefirst are developing software capable of identifying shoplifters.
When implemented this can cut loss to crime, saving money, and making stores safer.
The company is also looking to roll out its systems at airports and other public areas.
Microsoft and Nvidia are just two of the companies working with Facefirst technology.
Finally at the 2019 CES Proctor and Gamble revealed their idea of the store of the future.
Here cameras driven by Artificial Neural Networks recognize customer’s face.
The system then makes product suggestions based on the customer’s past history and information.
Artificial Neural Networks are Revolutionising Business Practises
Artificial Neural Networks may be a complex concept to fully understand.
However, by using them in conjunction with deep learning tools allows computer-driven technology to make gigantic leaps forward.
From streamlining manufacturing to product suggestions and facial scanning, Artificial Neural Networks are transforming the way businesses operate.
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