algorithm
What It Means
An algorithm is a specific set of instructions that tells a computer exactly how to solve a problem or complete a task, step by step. Think of it as a detailed recipe that a computer follows to transform input data into the desired output. Every AI system, from simple chatbots to complex machine learning models, runs on algorithms that define how it processes information and makes decisions.
Why Chief AI Officers Care
Algorithms are the core intellectual property of your AI systems and directly determine their performance, fairness, and business outcomes. Poor algorithm choices can lead to biased hiring decisions, inaccurate financial predictions, or regulatory violations that expose your company to legal and reputational risks. Understanding and governing your algorithms is essential for ensuring AI systems deliver reliable business value while meeting compliance requirements.
Real-World Example
A credit card company uses an algorithm to automatically approve or deny loan applications by analyzing factors like credit score, income, and payment history. The algorithm follows specific rules like 'if credit score > 700 AND debt-to-income < 30%, then approve loan' but with hundreds of such rules working together to make the final decision in milliseconds.
Common Confusion
People often think algorithms and AI models are the same thing, but an algorithm is the method or process, while the AI model is the specific implementation trained on data. It's like confusing a recipe (algorithm) with the actual cake you bake using that recipe (the model).
Industry-Specific Applications
See how this term applies to healthcare, finance, manufacturing, government, tech, and insurance.
Healthcare: In healthcare, algorithms power clinical decision support systems, diagnostic tools, and treatment recommendation engine...
Finance: In finance, algorithms power critical functions from high-frequency trading and risk assessment to fraud detection and r...
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- 6 industry-specific applications
- Relevant regulations by sector
- Real compliance scenarios
- Implementation guidance
Technical Definitions
NISTNational Institute of Standards and Technology
"A set of computational rules to be followed to solve a mathematical problem. More recently, the term has been adopted to refer to a process to be followed, often by a computer."Source: Comptroller_Office
"precise rules for transforming specified inputs into specified outputs in a finite number of steps"Source: knuth_art_1981
"algorithms are step-by-step procedures for solving problems. For concreteness, we can think of them simply as being computed programs, written in some precise computer languages"Source: garey_computers_1979
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