Chapter 7

INTELLIGENT
(SMART) E-
COMMERCE
Learning Objectives
1. Understand the reasons for intelligent e-commerce systems.
2. Become familiar with the essentials of artificial intelligence.
3. Cite the major AI applications in e-commerce.
4. Understand knowledge systems and their management.
5. Understand intelligent computerized personal assistants and
their availability.
6. Gain knowledge about IoT.
7. Describe self-driving cars, smart homes and appliances, and
smart cities.
INTRODUCTION TO
INTELLIGENT E-COMMERCE
• An Overview of Intelligent E-Commerce
o There is an increasing trend to make e-commerce “smarter”. For example, Web 3.0
supposes to enable systems to exhibit more intelligence. Several applications are
already based on artificial intelligence (AI). For example, the area of machine
translation of languages is already helping people buy online products that are
advertised in languages they do not speak. Similarly, machine translation can help
people that know only their own language to converse, in real time, with people
speaking other languages
o Other smart or intelligent applications include those that can help with machines
answering customers’ questions asked in natural languages. Another area is that of
knowledge-based systems (also known as expert systems). These systems can
provide advice, assist people to make decisions, and even make decisions on their
own. For example, such systems can approve or reject buyers’ requests to purchase
online (if they are not preapproved or do not have a line of credit).
o Other examples include the automatic generating of online purchasing orders and
arranging fulfillment of orders placed online. Both Google and Facebook are
experimenting with projects that attempt to teach machines how to learn (machine
learning) and make decisions. Other companies are doing the same (e.g., Toyota; see
Markoff 2015). For more smart applications in the enterprise, see Dodge (2016).
Intelligent; self-learning Autonomous driving

Autonomous warehousing Smart houses / appliances

Intelligent shopping Intelligent customer service

Personal Assistants
Applications

Smart cities

Robo advisors Smart countries

Auto-auctions Smart schools

Intelligent selling / pricing

Voice recognition Natural language processing

Logic
Foundations

M2M Robotics
Intelligent agents

Expert system Scene recognition

Data / text mining Machine learning

Linguistics
IoT

Figure 7.1 The foundations and applications of smart E-commerce

THE ESSENTIALS OF ARTIFICIAL
INTELLIGENCE
• Artificial Intelligence (AI): Definitions and Characteristics : has
several definitions; however, many experts agree that AI is concerned with
two basic ideas: (1) the study of human thought processes (to understand
what intelligence is) and (2) the representation and duplication of those
thought processes in machines (e.g., computers, robots). One well-
publicized definition of AI is “behavior by a machine that, if performed by a
human being, would be called intelligent.”
• A well-known application of artificial intelligence is the chess program
hosted at a supercomputer. (Deep Blue was developed by a research team
at IBM.) The system beat the famous world champion, Grand Master Garry
Kasparov.
• Abilities that are considered signs of intelligence.
o Learning or understanding from experience
o Making sense out of ambiguous, incomplete or even contradictory messages and
information
o Responding quickly and successfully to a new situation (i.e., the most correct
responses)
o Understanding and inferring in a rational way, solving problems, and directing
conduct effectively
o Applying knowledge to manipulate the environment and situations
o Recognizing and judging the relative importance of different elements in a situation
THE ESSENTIALS OF ARTIFICIAL
INTELLIGENCE
• How Intelligent is AI?
o AI machines demonstrated superiority over human in playing games such as chess (beating the
world champion), Jeopardy (beating the best players), and Go (a complex Chinese game), whose top
players were beaten by a computer. A well-known program is Google’s DeepMind (see Hughes
2016). Despite these remarkable demonstrations (that cost extremely large amounts of money),
many AI applications are still showing significantly less intelligence than humans. To define what we
consider intelligent machines, let us look at the Turing Test
• The Content of the AI Field
o Intelligent Agents : An intelligent agent (IA) is an autonomous, relatively small, computer program
that observes and acts upon a changing environment and directs its activities toward achieving
specific goals, related to the above changes, by running specific tasks, autonomously. Intelligent
agents may have the ability to learn by using and expanding the knowledge embedded in them.
Intelligent agents are powerful tools for overcoming the most critical burden of the Internet—
information overload—and making e-commerce a more viable organizational tool. Example: Virus
Detection Program
o Machine Learning : AI systems do not have the same learning capabilities that humans have; rather,
they have simplistic (but improving) learning capabilities (modeled after human learning methods)
called machine learning
o Robotics Systems : Sensory systems, such as scene recognition systems, and signal-processing
systems, when combined with AI, define a broad category of complex systems generally called
robots. There are several definitions of robots and they are changing over time. A classical definition
is that a robot is an electromechanical device that can be programmed to perform manual and/or
Turing Test :
Alan Turing designed an interesting test to determine whether a computer exhibits
intelligent behavior; the test is called the Turing test. According to this test, a computer
can be considered smart only when a human interviewer posing the same questions to
both an unseen human being and an unseen computer (see Fig. 7.2) cannot determine
which is which.

Questions

A Screen

Answers Answers

Human AI

Figure 7.2 A pictorial representation of Turing Test

THE ESSENTIALS OF ARTIFICIAL
INTELLIGENCE
• Natural Language Processing : Technology that allowed people to communicate
with a computer in their native language. This technology allows for a conversational
type of interface, in contrast to using a programming language that consists of
computer jargon, syntax, and commands. It includes two subfields:
1. Natural language understanding that investigates methods of enabling computers to
comprehend instructions or queries provided in ordinary English or other languages and
(
2. Natural language generation that strives to have computers produce ordinary spoken
language so that people can understand the computers more easily
• Speech (Voice) Understanding : Computer system that understands natural language
spoken by people
• Language Translation : Machine translation uses computer programs to translate
words and sentences from one language to another. For example, you can use Babel
Fish translation, available at babelfish.com, to try more than 25 different
combinations of language translation. Similarly, you can also use Google’s free
Translate to translate dozens of different languages (translate.google.com). Finally,
users can post their status in Facebook in any language. Then translation can be
made (per Keating 2016). Another AI technology related to NLP and robots is
Mobile Commerce: Concepts, Landscape, Attributes,
Drivers, Applications, and Benefits
Basic Concepts, Magnitude, and the Landscape
• *Mobile commerce (m-commerce) : also known as m-business, refers to
conducting e-commerce by using mobile devices and wireless networks. Activities
include B2C, B2B, m-government, CRM and m-learning transactions, as well as the
transfer of information and money. Like regular EC applications, m-commerce
involves electronic transaction conducted by using mobile devices via the Internet,
corporate intranets, private communication lines, or over other wireless networks.
• The Magnitude of M-Commerce : According to a 2013 eMarketer study, by 2017,
approximately 25% of all online retail transactions in the United States will take
place on mobile devices (reported by mashable.com/2013/04/24/mcommerce-
sales-forecast). A 2014 InMobi reportfound that 83% of customers plan to
conduct mobile commerce in 2014, 15% increase from the previous year.
• The Landscape of M-Commerce : The overall landscape of m-commerce is
summarized in Fig. 6.1.
• Mobile and Social: A Powerful EC Combination : M-commerce is a very powerful
platform, but it can be even more powerful when combined with social
commerce, as we will describe in Chaps. 7 and 8. This combination will shape the
future of e-commerce and could be its major facilitator in the future
Figure 6.1 The Landscape of Mobile Computing and M-Commerce

1-10
Mobile Commerce: Concepts, Landscape, Attributes,
Drivers, Applications, and Benefits
• The Attributes of M-Commerce : Many of the EC applications
described in this book also apply to m-commerce. For example, online
shopping, e-travel, e-learning, e-entertainment, and online gaming are all
gaining popularity in mobile B2C. Auction sites use m-commerce to send
messages to bidders during the auction process; governments encourage
m-government (Chap. 5); and wireless collaborative commerce in B2B EC
is on the rise. Some key attributes that enable new applications are
possible only in the mobile environment. The major attributes include:
RECENT AI APPLICATIONS IN
E-COMMERCE
The AI Contribution to E-Commerce : As described earlier, AI enhanced EC
since its inception. However, it is only now that we see a wave of powerful
applications. Here is what the major technology companies do with AI:
RECENT AI APPLICATIONS IN E-COMMERCE
AI in E-Commerce: Some Illustrative Examples
• Marketing and Advertising : AI is being used in many marketing and advertising online tasks such
as:
o Predictive analytics and AI are used to customize and automate e-mail marketing campaigns (Insightly Blog 2015).
o ClickZ Intelligence (2013) lists the following areas: new customer experience, new product launching, programmatic advertising,
content creation, and designing websites.
o Rossi (2016) describes three ways AI helps customers: improve search, help buyers to understand their preferences, and serve as a
personal assistant to shoppers.
o Chatbots are used extensively in marketing (Mah 2016).
o For using AI in e-auctions, watch the video at youtube.com/watch?v=O65XJd7j2BE.
o Blog (2016) provides a list of 13 companies that use AI in marketing, advertising, and sales.
• Customer Service and Advice : Related to marketing is customer service. Chatbots (section “The
Essentials of Artificial Intelligence”) are used extensively to answer customers’ questions (Friedman
2016).

• AI in B2B : AI applications in B2B are mostly in e-procurement (Clinton 2016), supply chain management
KNOWLEDGE (EXPERT) SYSTEMS
• An Overview of Knowledge Management : Organizational
knowledge is embedded in the following key resources. (1)
human capital, which includes employee knowledge,
competencies, intelligence, and creativity; (2) organizational
capital, which includes stored organizational experiences (e.g.,
best practices, patents, manuals, teaching materials); (3)
knowledge generated by AI systems; (4) customer and partner
knowledge, which includes the experience of working with
customers and business partners.
• Knowledge Management Types and Activities, Major tasks:
• Create knowledge.
• Capture knowledge.
• Refine knowledge.
• Store knowledge.
• Update knowledge.
KNOWLEDGE (EXPERT) SYSTEMS

Figure 7.3 The knowledge management system cycle

KNOWLEDGE (EXPERT) SYSTEMS
How Is Knowledge Management Related to E-Commerce? Organizations need
knowledge, which is provided by KM, in order to better perform their tasks. In the
past, KM and EC initiatives were dealt with independently; however, now they are
used together for mutual benefits.
Examples, According to Britt (2013), “E-commerce retailers are using knowledge
management solutions to pull together purchasing orders, inventory, sales, and
other transaction information, as well as to improve customer feedback and to
enhance the overall e-commerce experience.” Britt provides the following examples :
•
KNOWLEDGE (EXPERT) SYSTEMS
KM and Social Networks : A major venue of knowledge creation is in online communities,
including social networks. This is done by crowdsourcing and customer and employee
discussions and feedbacks. This area has several variations. One variety is limited within asingle
company. Knowledge can also be created by user-generated content (see Chap. 8) and in the
“answer” function ofsome social networks. Web 2.0 applications help aggregate corporate
knowledge, facilitate communication and collaboration, and simplify the building of
repositories of best practices, as demonstrated by the following example. Example: IBM Jam
Events. Since 2001, IBM has been using communities for online brainstorming sessions, idea
generation, and problem solving. These sessions are called “Jam Events.”
• Expert Systems : An expert system, also referred to as knowledge-based system, is a computer
system that uses knowledge to solve problems that require expertise and provide advice to
nonexperts, usually in specific domains. Thus, it emulates the decisionmaking of human
experts. It is considered a derivative of artificial intelligence. Knowledge required for this
capability is stored in a knowledge base and organized there such that it can be disseminated
to nonexpert users upon request. Expert systems (ES) are used extensively in many AI
applications in EC (e.g., in product recommenders and in advisory systems).
• Major Components of an Expert System
• Users – who need the expertise
• Human experts
• System builders
• Knowledge base
• Inference engine
• User interface
• Explanation mechanism
KNOWLEDGE (EXPERT) SYSTEMS
Com
pute
r
Knowledge
Base
Human Knowledge
Expert acquirer
(System
Builder)
Documented Inference
information Engine
and knowledge
Problem

Input
User
Solution Interface

Output

Figure 7.4 The component of expert systems

INTELLIGENT PERSONAL ASSISTANTS
AND ROBOT ADVISERS

• Amazon’s Alexa
o Alexa Skills
o Voice Interface and Speakers in Alexa
o Amazon Echo
o Amazon Echo Dot
o Amazon Echo Tap
• Apple’s Siri
• IBM Watson
• Alfie
• Personal Robots
• Robo Advisers
INTELLIGENT PERSONAL ASSISTANTS
AND ROBOT ADVISERS

See video:
https://www.youtube.com/watch?v=KkOCeAtKHIc

Figure 7.5 Amazon Echo and Alexa

THE INTERNET OF THINGS AND
E-COMMERCE
The Essentials of IoT : The Internet of things (IoT) is an evolving term with several definitions. In general, the IoT refers to a
situation where many objects (people, animals, items) with embedded microprocessors are connected mostly wirelessly to the
Internet. That is, it uses ubiquitous computing. Analysts predict that by the year 2020, there will be more than 50 billion devices
connected to the Internet, creating the backbone of the IoT
• There are many definitions of IoT. Wikipedia provides this definition: “The Internet of Things (IoT) is the network of physical
objects-devices, vehicles, buildings, and other items embedded with electronics, software, sensors, and network connectivity--
that enables these objects to collect and exchange data. The Internet of things allows objects to be sensed and controlled
remotely across existing network infrastructure, creating opportunities for more direct integration of the physical world into
computer-based systems, and resulting in improved efficiency, accuracy, and economic benefit; when IoT is augmented with
sensors and actuators, the technology becomes an instance of the more general class of cyber-physical systems, which also
encompasses technologies such as smart grids, smart homes, intelligent transportation, and smart cities. Each thing is uniquely
identifiable through its embedded computing system but is able to interoperate within the existing Internet infrastructure.”.
• According to Miller (2015), these are the major characteristics of the Internet: IoT is a connected ecosystem in which:

The Structure of IoT Applications :

• Things in IoT refers to a variety of objects and devices ranging from cars and home appliances to medical devices, computers, fitness tracers,
hardware, software, data, sensors, and much more. Connecting “things” and allowing them to communicateis a necessary capability of an IoT
application; but for more sophisticated applications,
• we need additional components: a control system and a business model. The IoT enables the “things” to sense or be sensed wirelessly across the
network. A non-Internet example will be a temperature control system in a room. Another non-Internet
• Example is a traffic light at intersections of roads where cameras photograph the number of cars coming from each direction and a control system
adjusts the time for changing the lights according to programmed rules. Later on, we will introduce some Internet-based applications.
THE INTERNET OF THINGS AND
E-COMMERCE
• The Major Benefits of IoT, According to Basu and Didyala
(2014) and Miller (2015) :
o Creates new revenue stream
o Optimizes asset utilization
o Improves sustainability
o Improves workers’ productivity
o The Internet of Things is changing and improving everything (McCafferty 2015)
o Systems will anticipate our needs
o People will make smarter decisions/purchases
o Greater accuracy
o Identify problems quickly (even before they occur)
o Reduces cost by automating processes
o Instant information availability
o Quick and inexpensive tracking
o Expedites problem resolution and recovery
o Supports facility integration
THE INTERNET OF THINGS AND
E-COMMERCE

Figure 7.6 The process of the IoT

THE INTERNET OF THINGS AND
E-COMMERCE
• The Drivers of IoT
o 50 to75 billion ‘things’- may be connected (by 2020 - 2025)
o Connected autonomous ‘things’/systems (e.g., cars) are all over the
IoT
o Broadband Internet is more widely available an increasing with time
o Cost of connecting devices is decreasing
o More devices are created (via innovation) and they are inter-
connected (e.g., see Fenwick 2016)
o More sensors are built into devices
o Smartphones' penetration is sky-rocketing
o Wearable devices are all over
o Speed of moving data is increasing; to 60HTz
o Protocols are developing for IoT (e.g., WiGig)
o Customer expectations are on the rise
THE INTERNET OF THINGS AND
E-COMMERCE
Example == How the IoT works

Figure 7.7 Google’s self-driving cars

THE INTERNET OF THINGS AND
E-COMMERCE
Example == How the IoT works
Managerial Issues
1. How can one justify the investment in AI systems?
2. Chatbots are all over. Should we follow?
3. Our employees contribute their wisdom to the
company’s knowledge base. Should we give them extra
compensation?
4. Robots and other AI innovations will result in some
people losing their jobs in our business. What to do?
5. Our company considers the introduction of robo
assistant. How to approach the issue?
6. Internet-of-Things’ applications have lots of promises
and potential benefits. Is it for us?
Summary
1. The reasons for intelligent EC systems.
2. The essentials of AI.
3. The major AI applications.
4. Knowledge systems and management.
5. Intelligent personal assistants.
6. The essentials of the Internet of Things
(IoT).
7. Example IOT : Self-driving cars, smart
homes and appliances, and smart cities.