Reinforcement learning is a very useful (and currently popular) subtype of machine learning and artificial intelligence. It is based on the principle that agents, when placed in an interactive environment, can learn from their actions via rewards associated with the actions, and improve the time to achieve their goal.
In this article, we’ll explore the fundamental concepts of reinforcement learning and discuss its key components, types, and applications.
Definition of Reinforcement Learning
We can define reinforcement learning as a machine learning technique involving an agent who needs to decide which actions it needs to do to perform a task that has been assigned to it most effectively. For this, rewards are assigned to the different actions that the agent can take at different situations or states of the environment. Initially, the agent has no idea about the best or correct actions. Using reinforcement learning, it explores its action choices via trial and error and figures out the best set of actions for completing its assigned task.
The basic idea behind a reinforcement learning agent is to learn from experience. Just like humans learn lessons from their past successes and mistakes, reinforcement learning agents do the same – when they do something “good” they get a reward, but, if they do something “bad”, they get penalized. The reward reinforces the good actions while the penalty avoids the bad ones.
Reinforcement learning requires several key components:
- Agent – This is the “who” or the subject of the process, which performs different actions to perform a task that has been assigned to it.
- Environment – This is the “where” or a situation in which the agent is placed.
- Actions – This is the “what” or the steps an agent needs to take to reach the goal.
- Rewards – This is the feedback an agent receives after performing an action.
Before we dig deep into the technicalities, let’s warm up with a real-life example. Reinforcement isn’t new, and we’ve used it for different purposes for centuries. One of the most basic examples is dog training.
Let’s say you’re in a park, trying to teach your dog to fetch a ball. In this case, the dog is the agent, and the park is the environment. Once you throw the ball, the dog will run to catch it, and that’s the action part. When he brings the ball back to you and releases it, he’ll get a reward (a treat). Since he got a reward, the dog will understand that his actions were appropriate and will repeat them in the future. If the dog doesn’t bring the ball back, he may get some “punishment” – you may ignore him or say “No!” After a few attempts (or more than a few, depending on how stubborn your dog is), the dog will fetch the ball with ease.
We can say that the reinforcement learning process has three steps:
- Interaction
- Learning
- Decision-making
Types of Reinforcement Learning
There are two types of reinforcement learning: model-based and model-free.
Model-Based Reinforcement Learning
With model-based reinforcement learning (RL), there’s a model that an agent uses to create additional experiences. Think of this model as a mental image that the agent can analyze to assess whether particular strategies could work.
Some of the advantages of this RL type are:
- It doesn’t need a lot of samples.
- It can save time.
- It offers a safe environment for testing and exploration.
The potential drawbacks are:
- Its performance relies on the model. If the model isn’t good, the performance won’t be good either.
- It’s quite complex.
Model-Free Reinforcement Learning
In this case, an agent doesn’t rely on a model. Instead, the basis for its actions lies in direct interactions with the environment. An agent tries different scenarios and tests whether they’re successful. If yes, the agent will keep repeating them. If not, it will try another scenario until it finds the right one.
What are the advantages of model-free reinforcement learning?
- It doesn’t depend on a model’s accuracy.
- It’s not as computationally complex as model-based RL.
- It’s often better for real-life situations.
Some of the drawbacks are:
- It requires more exploration, so it can be more time-consuming.
- It can be dangerous because it relies on real-life interactions.
Model-Based vs. Model-Free Reinforcement Learning: Example
Understanding model-based and model-free RL can be challenging because they often seem too complex and abstract. We’ll try to make the concepts easier to understand through a real-life example.
Let’s say you have two soccer teams that have never played each other before. Therefore, neither of the teams knows what to expect. At the beginning of the match, Team A tries different strategies to see whether they can score a goal. When they find a strategy that works, they’ll keep using it to score more goals. This is model-free reinforcement learning.
On the other hand, Team B came prepared. They spent hours investigating strategies and examining the opponent. The players came up with tactics based on their interpretation of how Team A will play. This is model-based reinforcement learning.
Who will be more successful? There’s no way to tell. Team B may be more successful in the beginning because they have previous knowledge. But Team A can catch up quickly, especially if they use the right tactics from the start.
Reinforcement Learning Algorithms
A reinforcement learning algorithm specifies how an agent learns suitable actions from the rewards. RL algorithms are divided into two categories: value-based and policy gradient-based.
Value-Based Algorithms
Value-based algorithms learn the value at each state of the environment, where the value of a state is given by the expected rewards to complete the task while starting from that state.
Q-Learning
This model-free, off-policy RL algorithm focuses on providing guidelines to the agent on what actions to take and under what circumstances to win the reward. The algorithm uses Q-tables in which it calculates the potential rewards for different state-action pairs in the environment. The table contains Q-values that get updated after each action during the agent’s training. During execution, the agent goes back to this table to see which actions have the best value.
Deep Q-Networks (DQN)
Deep Q-networks, or deep q-learning, operate similarly to q-learning. The main difference is that the algorithm in this case is based on neural networks.
SARSA
The acronym stands for state-action-reward-state-action. SARSA is an on-policy RL algorithm that uses the current action from the current policy to learn the value.
Policy-Based Algorithms
These algorithms directly update the policy to maximize the reward. There are different policy gradient-based algorithms: REINFORCE, proximal policy optimization, trust region policy optimization, actor-critic algorithms, advantage actor-critic, deep deterministic policy gradient (DDPG), and twin-delayed DDPG.
Examples of Reinforcement Learning Applications
The advantages of reinforcement learning have been recognized in many spheres. Here are several concrete applications of RL.
Robotics and Automation
With RL, robotic arms can be trained to perform human-like tasks. Robotic arms can give you a hand in warehouse management, packaging, quality testing, defect inspection, and many other aspects.
Another notable role of RL lies in automation, and self-driving cars are an excellent example. They’re introduced to different situations through which they learn how to behave in specific circumstances and offer better performance.
Gaming and Entertainment
Gaming and entertainment industries certainly benefit from RL in many ways. From AlphaGo (the first program that has beaten a human in the board game Go) to video games AI, RL offers limitless possibilities.
Finance and Trading
RL can optimize and improve trading strategies, help with portfolio management, minimize risks that come with running a business, and maximize profit.
Healthcare and Medicine
RL can help healthcare workers customize the best treatment plan for their patients, focusing on personalization. It can also play a major role in drug discovery and testing, allowing the entire sector to get one step closer to curing patients quickly and efficiently.
Basics for Implementing Reinforcement Learning
The success of reinforcement learning in a specific area depends on many factors.
First, you need to analyze a specific situation and see which RL algorithm suits it. Your job doesn’t end there; now you need to define the environment and the agent and figure out the right reward system. Without them, RL doesn’t exist. Next, allow the agent to put its detective cap on and explore new features, but ensure it uses the existing knowledge adequately (strike the right balance between exploration and exploitation). Since RL changes rapidly, you want to keep your model updated. Examine it every now and then to see what you can tweak to keep your model in top shape.
Explore the World of Possibilities With Reinforcement Learning
Reinforcement learning goes hand-in-hand with the development and modernization of many industries. We’ve been witnesses to the incredible things RL can achieve when used correctly, and the future looks even better. Hop in on the RL train and immerse yourself in this fascinating world.
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From the same author
Read the articleReinforcement learning is a very useful (and currently popular) subtype of machine learning and artificial intelligence. It is based on the principle that agents, when placed in an interactive environment, can learn from their actions via rewards associated with the actions, and improve the time to achieve their goal.
In this article, we’ll explore the fundamental concepts of reinforcement learning and discuss its key components, types, and applications.
Definition of Reinforcement Learning
We can define reinforcement learning as a machine learning technique involving an agent who needs to decide which actions it needs to do to perform a task that has been assigned to it most effectively. For this, rewards are assigned to the different actions that the agent can take at different situations or states of the environment. Initially, the agent has no idea about the best or correct actions. Using reinforcement learning, it explores its action choices via trial and error and figures out the best set of actions for completing its assigned task.
The basic idea behind a reinforcement learning agent is to learn from experience. Just like humans learn lessons from their past successes and mistakes, reinforcement learning agents do the same – when they do something “good” they get a reward, but, if they do something “bad”, they get penalized. The reward reinforces the good actions while the penalty avoids the bad ones.
Reinforcement learning requires several key components:
- Agent – This is the “who” or the subject of the process, which performs different actions to perform a task that has been assigned to it.
- Environment – This is the “where” or a situation in which the agent is placed.
- Actions – This is the “what” or the steps an agent needs to take to reach the goal.
- Rewards – This is the feedback an agent receives after performing an action.
Before we dig deep into the technicalities, let’s warm up with a real-life example. Reinforcement isn’t new, and we’ve used it for different purposes for centuries. One of the most basic examples is dog training.
Let’s say you’re in a park, trying to teach your dog to fetch a ball. In this case, the dog is the agent, and the park is the environment. Once you throw the ball, the dog will run to catch it, and that’s the action part. When he brings the ball back to you and releases it, he’ll get a reward (a treat). Since he got a reward, the dog will understand that his actions were appropriate and will repeat them in the future. If the dog doesn’t bring the ball back, he may get some “punishment” – you may ignore him or say “No!” After a few attempts (or more than a few, depending on how stubborn your dog is), the dog will fetch the ball with ease.
We can say that the reinforcement learning process has three steps:
- Interaction
- Learning
- Decision-making
Types of Reinforcement Learning
There are two types of reinforcement learning: model-based and model-free.
Model-Based Reinforcement Learning
With model-based reinforcement learning (RL), there’s a model that an agent uses to create additional experiences. Think of this model as a mental image that the agent can analyze to assess whether particular strategies could work.
Some of the advantages of this RL type are:
- It doesn’t need a lot of samples.
- It can save time.
- It offers a safe environment for testing and exploration.
The potential drawbacks are:
- Its performance relies on the model. If the model isn’t good, the performance won’t be good either.
- It’s quite complex.
Model-Free Reinforcement Learning
In this case, an agent doesn’t rely on a model. Instead, the basis for its actions lies in direct interactions with the environment. An agent tries different scenarios and tests whether they’re successful. If yes, the agent will keep repeating them. If not, it will try another scenario until it finds the right one.
What are the advantages of model-free reinforcement learning?
- It doesn’t depend on a model’s accuracy.
- It’s not as computationally complex as model-based RL.
- It’s often better for real-life situations.
Some of the drawbacks are:
- It requires more exploration, so it can be more time-consuming.
- It can be dangerous because it relies on real-life interactions.
Model-Based vs. Model-Free Reinforcement Learning: Example
Understanding model-based and model-free RL can be challenging because they often seem too complex and abstract. We’ll try to make the concepts easier to understand through a real-life example.
Let’s say you have two soccer teams that have never played each other before. Therefore, neither of the teams knows what to expect. At the beginning of the match, Team A tries different strategies to see whether they can score a goal. When they find a strategy that works, they’ll keep using it to score more goals. This is model-free reinforcement learning.
On the other hand, Team B came prepared. They spent hours investigating strategies and examining the opponent. The players came up with tactics based on their interpretation of how Team A will play. This is model-based reinforcement learning.
Who will be more successful? There’s no way to tell. Team B may be more successful in the beginning because they have previous knowledge. But Team A can catch up quickly, especially if they use the right tactics from the start.
Reinforcement Learning Algorithms
A reinforcement learning algorithm specifies how an agent learns suitable actions from the rewards. RL algorithms are divided into two categories: value-based and policy gradient-based.
Value-Based Algorithms
Value-based algorithms learn the value at each state of the environment, where the value of a state is given by the expected rewards to complete the task while starting from that state.
Q-Learning
This model-free, off-policy RL algorithm focuses on providing guidelines to the agent on what actions to take and under what circumstances to win the reward. The algorithm uses Q-tables in which it calculates the potential rewards for different state-action pairs in the environment. The table contains Q-values that get updated after each action during the agent’s training. During execution, the agent goes back to this table to see which actions have the best value.
Deep Q-Networks (DQN)
Deep Q-networks, or deep q-learning, operate similarly to q-learning. The main difference is that the algorithm in this case is based on neural networks.
SARSA
The acronym stands for state-action-reward-state-action. SARSA is an on-policy RL algorithm that uses the current action from the current policy to learn the value.
Policy-Based Algorithms
These algorithms directly update the policy to maximize the reward. There are different policy gradient-based algorithms: REINFORCE, proximal policy optimization, trust region policy optimization, actor-critic algorithms, advantage actor-critic, deep deterministic policy gradient (DDPG), and twin-delayed DDPG.
Examples of Reinforcement Learning Applications
The advantages of reinforcement learning have been recognized in many spheres. Here are several concrete applications of RL.
Robotics and Automation
With RL, robotic arms can be trained to perform human-like tasks. Robotic arms can give you a hand in warehouse management, packaging, quality testing, defect inspection, and many other aspects.
Another notable role of RL lies in automation, and self-driving cars are an excellent example. They’re introduced to different situations through which they learn how to behave in specific circumstances and offer better performance.
Gaming and Entertainment
Gaming and entertainment industries certainly benefit from RL in many ways. From AlphaGo (the first program that has beaten a human in the board game Go) to video games AI, RL offers limitless possibilities.
Finance and Trading
RL can optimize and improve trading strategies, help with portfolio management, minimize risks that come with running a business, and maximize profit.
Healthcare and Medicine
RL can help healthcare workers customize the best treatment plan for their patients, focusing on personalization. It can also play a major role in drug discovery and testing, allowing the entire sector to get one step closer to curing patients quickly and efficiently.
Basics for Implementing Reinforcement Learning
The success of reinforcement learning in a specific area depends on many factors.
First, you need to analyze a specific situation and see which RL algorithm suits it. Your job doesn’t end there; now you need to define the environment and the agent and figure out the right reward system. Without them, RL doesn’t exist. Next, allow the agent to put its detective cap on and explore new features, but ensure it uses the existing knowledge adequately (strike the right balance between exploration and exploitation). Since RL changes rapidly, you want to keep your model updated. Examine it every now and then to see what you can tweak to keep your model in top shape.
Explore the World of Possibilities With Reinforcement Learning
Reinforcement learning goes hand-in-hand with the development and modernization of many industries. We’ve been witnesses to the incredible things RL can achieve when used correctly, and the future looks even better. Hop in on the RL train and immerse yourself in this fascinating world.
Read the articleAlgorithms are the backbone behind technology that have helped establish some of the world’s most famous companies. Software giants like Google, beverage giants Coca Cola and many other organizations utilize proprietary algorithms to improve their services and enhance customer experience. Algorithms are an inseparable part of the technology behind organization as they help improve security, product or service recommendations, and increase sales.
Knowing the benefits of algorithms is useful, but you might also be interested to know what makes them so advantageous. As such, you’re probably asking: “What is an algorithm?” Here’s the most common algorithm definition: an algorithm is a set of procedures and rules a computer follows to solve a problem.
In addition to the meaning of the word “algorithm,” this article will also cover the key types and characteristics of algorithms, as well as their applications.
Types of Algorithms and Design Techniques
One of the main reasons people rely on algorithms is that they offer a principled and structured means to represent a problem on a computer.
Recursive Algorithms
Recursive algorithms are critical for solving many problems. The core idea behind recursive algorithms is to use functions that call themselves on smaller chunks of the problem.
Divide and Conquer Algorithms
Divide and conquer algorithms are similar to recursive algorithms. They divide a large problem into smaller units. Algorithms solve each smaller component before combining them to tackle the original, large problem.
Greedy Algorithms
A greedy algorithm looks for solutions based on benefits. More specifically, it resolves problems in sections by determining how many benefits it can extract by analyzing a certain section. The more benefits it has, the more likely it is to solve a problem, hence the term greedy.
Dynamic Programming Algorithms
Dynamic programming algorithms follow a similar approach to recursive and divide and conquer algorithms. First, they break down a complex problem into smaller pieces. Next, it solves each smaller piece once and saves the solution for later use instead of computing it.
Backtracking Algorithms
After dividing a problem, an algorithm may have trouble moving forward to find a solution. If that’s the case, a backtracking algorithm can return to parts of the problem it has already solved until it determines a way forward that can overcome the setback.
Brute Force Algorithms
Brute force algorithms try every possible solution until they determine the best one. Brute force algorithms are simpler, but the solution they find might not be as good or elegant as those found by the other types of algorithms.
Algorithm Analysis and Optimization
Digital transformation remains one of the biggest challenges for businesses in 2023. Algorithms can facilitate the transition through careful analysis and optimization.
Time Complexity
The time complexity of an algorithm refers to how long you need to execute a certain algorithm. A number of factors determine time complexity, but the algorithm’s input length is the most important consideration.
Space Complexity
Before you can run an algorithm, you need to make sure your device has enough memory. The amount of memory required for executing an algorithm is known as space complexity.
Trade-Offs
Solving a problem with an algorithm in C or any other programming language is about making compromises. In other words, the system often makes trade-offs between the time and space available.
For example, an algorithm can use less space, but this extends the time it takes to solve a problem. Alternatively, it can take up a lot of space to address an issue faster.
Optimization Techniques
Algorithms generally work great out of the box, but they sometimes fail to deliver the desired results. In these cases, you can implement a slew of optimization techniques to make them more effective.
Memorization
You generally use memorization if you wish to elevate the efficacy of a recursive algorithm. The technique rewrites algorithms and stores them in arrays. The main reason memorization is so powerful is that it eliminates the need to calculate results multiple times.
Parallelization
As the name suggests, parallelization is the ability of algorithms to perform operations simultaneously. This accelerates task completion and is normally utilized when you have a lot of memory on your device.
Heuristics
Heuristic algorithms (a.k.a. heuristics) are algorithms used to speed up problem-solving. They generally target non-deterministic polynomial-time (NP) problems.
Approximation Algorithms
Another way to solve a problem if you’re short on time is to incorporate an approximation algorithm. Rather than provide a 100% optimal solution and risk taking longer, you use this algorithm to get approximate solutions. From there, you can calculate how far away they are from the optimal solution.
Pruning
Algorithms sometimes analyze unnecessary data, slowing down your task completion. A great way to expedite the process is to utilize pruning. This compression method removes unwanted information by shrinking algorithm decision trees.
Algorithm Applications and Challenges
Thanks to this introduction to algorithm, you’ll no longer wonder: “What is an algorithm, and what are the different types?” Now it’s time to go through the most significant applications and challenges of algorithms.
Sorting Algorithms
Sorting algorithms arrange elements in a series to help solve complex issues faster. There are different types of sorting, including linear, insertion, and bubble sorting. They’re generally used for exploring databases and virtual search spaces.
Searching Algorithms
An algorithm in C or other programming languages can be used as a searching algorithm. They allow you to identify a small item in a large group of related elements.
Graph Algorithms
Graph algorithms are just as practical, if not more practical, than other types. Graphs consist of nodes and edges, where each edge connects two nodes.
There are numerous real-life applications of graph algorithms. For instance, you might have wondered how engineers solve problems regarding wireless networks or city traffic. The answer lies in using graph algorithms.
The same goes for social media sites, such as Facebook. Algorithms on such platforms contain nodes, which represent key information, like names and genders and edges that represent the relationships or dependencies between them.
Cryptography Algorithms
When creating an account on some websites, the platform can generate a random password for you. It’s usually stronger than custom-made codes, thanks to cryptography algorithms. They can scramble digital text and turn it into an unreadable string. Many organizations use this method to protect their data and prevent unauthorized access.
Machine Learning Algorithms
Over 70% of enterprises prioritize machine learning applications. To implement their ideas, they rely on machine learning algorithms. They’re particularly useful for financial institutions because they can predict future trends.
Famous Algorithm Challenges
Many organizations struggle to adopt algorithms, be it an algorithm in data structure or computer science. The reason being, algorithms present several challenges:
- Opacity – You can’t take a closer look at the inside of an algorithm. Only the end result is visible, which is why it’s difficult to understand an algorithm.
- Heterogeneity – Most algorithms are heterogeneous, behaving differently from one another. This makes them even more complex.
- Dependency – Each algorithm comes with the abovementioned time and space restrictions.
Algorithm Ethics, Fairness, and Social Impact
When discussing critical characteristics of algorithms, it’s important to highlight the main concerns surrounding this technology.
Bias in Algorithms
Algorithms aren’t intrinsically biased unless the developer injects their personal biases into the design. If so, getting impartial results from an algorithm is highly unlikely.
Transparency and Explainability
Knowing only the consequences of algorithms prevents us from explaining them in detail. A transparent algorithm enables a user to view and understand its different operations. In contrast, explainability of an algorithm relates to its ability to provide reasons for the decisions it makes.
Privacy and Security
Some algorithms require end users to share private information. If cyber criminals hack the system, they can easily steal the data.
Algorithm Accessibility and Inclusivity
Limited explainability hinders access to algorithms. Likewise, it’s hard to include different viewpoints and characteristics in an algorithm, especially if it is biased.
Algorithm Trust and Confidence
No algorithm is omnipotent. Claiming otherwise makes it untrustworthy – the best way to prevent this is for the algorithm to state its limitations.
Algorithm Social Impact
Algorithms impact almost every area of life including politics, economic and healthcare decisions, marketing, transportation, social media and Internet, and society and culture in general.
Algorithm Sustainability and Environmental Impact
Contrary to popular belief, algorithms aren’t very sustainable. The extraction of materials to make computers that power algorithms is a major polluter.
Future of Algorithms
Algorithms are already advanced, but what does the future hold for this technology? Here are a few potential applications and types of future algorithms:
- Quantum Algorithms – Quantum algorithms are expected to run on quantum computers to achieve unprecedented speeds and efficiency.
- Artificial Intelligence and Machine Learning – AI and machine learning algorithms can help a computer develop human-like cognitive qualities via learning from its environment and experiences.
- Algorithmic Fairness and Ethics – Considering the aforementioned challenges of algorithms, developers are expected to improve the technology. It may become more ethical with fewer privacy violations and accessibility issues.
Smart, Ethical Implementation Is the Difference-Maker
Understanding algorithms is crucial if you want to implement them correctly and ethically. They’re powerful, but can also have unpleasant consequences if you’re not careful during the development stage. Responsible use is paramount because it can improve many areas, including healthcare, economics, social media, and communication.
If you wish to learn more about algorithms, accredited courses might be your best option. AI and machine learning-based modules cover some of the most widely-used algorithms to help expand your knowledge about this topic.
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The world is rapidly changing. New technologies such as artificial intelligence (AI) are transforming our lives and work, redefining the definition of “essential office skills.”
So what essential skills do today’s workers need to thrive in a business world undergoing a major digital transformation? It’s a question that Alan Lerner, director at Toptal and lecturer at the Open Institute of Technology (OPIT), addressed in his recent online masterclass.
In a broad overview of the new office landscape, Lerner shares the essential skills leaders need to manage – including artificial intelligence – to keep abreast of trends.
Here are eight essential capabilities business leaders in the AI era need, according to Lerner, which he also detailed in OPIT’s recent Master’s in Digital Business and Innovation webinar.
An Adapting Professional Environment
Lerner started his discussion by quoting naturalist Charles Darwin.
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
The quote serves to highlight the level of change that we are currently seeing in the professional world, said Lerner.
According to the World Economic Forum’s The Future of Jobs Report 2025, over the next five years 22% of the labor market will be affected by structural change – including job creation and destruction – and much of that change will be enabled by new technologies such as AI and robotics. They expect the displacement of 92 million existing jobs and the creation of 170 million new jobs by 2030.
While there will be significant growth in frontline jobs – such as delivery drivers, construction workers, and care workers – the fastest-growing jobs will be tech-related roles, including big data specialists, FinTech engineers, and AI and machine learning specialists, while the greatest decline will be in clerical and secretarial roles. The report also predicts that most workers can anticipate that 39% of their existing skill set will be transformed or outdated in five years.
Lerner also highlighted key findings in the Accenture Life Trends 2025 Report, which explores behaviors and attitudes related to business, technology, and social shifts. The report noted five key trends:
- Cost of Hesitation – People are becoming more wary of the information they receive online.
- The Parent Trap – Parents and governments are increasingly concerned with helping the younger generation shape a safe relationship with digital technology.
- Impatience Economy – People are looking for quick solutions over traditional methods to achieve their health and financial goals.
- The Dignity of Work – Employees desire to feel inspired, to be entrusted with agency, and to achieve a work-life balance.
- Social Rewilding – People seek to disconnect and focus on satisfying activities and meaningful interactions.
These are consumer and employee demands representing opportunities for change in the modern business landscape.
Key Capabilities for the AI Era
Businesses are using a variety of strategies to adapt, though not always strategically. According to McClean & Company’s HR Trends Report 2025, 42% of respondents said they are currently implementing AI solutions, but only 7% have a documented AI implementation strategy.
This approach reflects the newness of the technology, with many still unsure of the best way to leverage AI, but also feeling the pressure to adopt and adapt, experiment, and fail forward.
So, what skills do leaders need to lead in an environment with both transformation and uncertainty? Lerner highlighted eight essential capabilities, independent of technology.
Capability 1: Manage Complexity
Leaders need to be able to solve problems and make decisions under fast-changing conditions. This requires:
- Being able to look at and understand organizations as complex social-technical systems
- Keeping a continuous eye on change and adopting an “outside-in” vision of their organization
- Moving fast and fixing things faster
- Embracing digital literacy and technological capabilities
Capability 2: Leverage Networks
Leaders need to develop networks systematically to achieve organizational goals because it is no longer possible to work within silos. Leaders should:
- Use networks to gain insights into complex problems
- Create networks to enhance influence
- Treat networks as mutually rewarding relationships
- Develop a robust profile that can be adapted for different networks
Capability 3: Think and Act “Global”
Leaders should benchmark using global best practices but adapt them to local challenges and the needs of their organization. This requires:
- Identifying what great companies are achieving and seeking data to understand underlying patterns
- Developing perspectives to craft global strategies that incorporate regional and local tactics
- Learning how to navigate culturally complex and nuanced business solutions
Capability 4: Inspire Engagement
Leaders must foster a culture that creates meaningful connections between employees and organizational values. This means:
- Understanding individual values and needs
- Shaping projects and assignments to meet different values and needs
- Fostering an inclusive work environment with plenty of psychological safety
- Developing meaningful conversations and both providing and receiving feedback
- Sharing advice and asking for help when needed
Capability 5: Communicate Strategically
Leaders should develop crisp, clear messaging adaptable to various audiences and focus on active listening. Achieving this involves:
- Creating their communication style and finding their unique voice
- Developing storytelling skills
- Utilizing a data-centric and fact-based approach to communication
- Continual practice and asking for feedback
Capability 6: Foster Innovation
Leaders should collaborate with experts to build a reliable innovation process and a creative environment where new ideas thrive. Essential steps include:
- Developing or enhancing structures that best support innovation
- Documenting and refreshing innovation systems, processes, and practices
- Encouraging people to discover new ways of working
- Aiming to think outside the box and develop a growth mindset
- Trying to be as “tech-savvy” as possible
Capability 7: Cultivate Learning Agility
Leaders should always seek out and learn new things and not be afraid to ask questions. This involves:
- Adopting a lifelong learning mindset
- Seeking opportunities to discover new approaches and skills
- Enhancing problem-solving skills
- Reviewing both successful and unsuccessful case studies
Capability 8: Develop Personal Adaptability
Leaders should be focused on being effective when facing uncertainty and adapting to change with vigor. Therefore, leaders should:
- Be flexible about their approach to facing challenging situations
- Build resilience by effectively managing stress, time, and energy
- Recognize when past approaches do not work in current situations
- Learn from and capitalize on mistakes
Curiosity and Adaptability
With the eight key capabilities in mind, Lerner suggests that curiosity and adaptability are the key skills that everyone needs to thrive in the current environment.
He also advocates for lifelong learning and teaches several key courses at OPIT which can lead to a Bachelor’s Degree in Digital Business.
Many people treat cyber threats and digital fraud as a new phenomenon that only appeared with the development of the internet. But fraud – intentional deceit to manipulate a victim – has always existed; it is just the tools that have changed.
In a recent online course for the Open Institute of Technology (OPIT), AI & Cybersecurity Strategist Tom Vazdar, chair of OPIT’s Master’s Degree in Enterprise Cybersecurity, demonstrated the striking parallels between some of the famous fraud cases of the 18th century and modern cyber fraud.
Why does the history of fraud matter?
Primarily because the psychology and fraud tactics have remained consistent over the centuries. While cybersecurity is a tool that can combat modern digital fraud threats, no defense strategy will be successful without addressing the underlying psychology and tactics.
These historical fraud cases Vazdar addresses offer valuable lessons for current and future cybersecurity approaches.
The South Sea Bubble (1720)
The South Sea Bubble was one of the first stock market crashes in history. While it may not have had the same far-reaching consequences as the Black Thursday crash of 1929 or the 2008 crash, it shows how fraud can lead to stock market bubbles and advantages for insider traders.
The South Sea Company was a British company that emerged to monopolize trade with the Spanish colonies in South America. The company promised investors significant returns but provided no evidence of its activities. This saw the stock prices grow from £100 to £1,000 in a matter of months, then crash when the company’s weakness was revealed.
Many people lost a significant amount of money, including Sir Isaac Newton, prompting the statement, “I can calculate the movement of the stars, but not the madness of men.“
Investors often have no way to verify a company’s claim, making stock markets a fertile ground for manipulation and fraud since their inception. When one party has more information than another, it creates the opportunity for fraud. This can be seen today in Ponzi schemes, tech stock bubbles driven by manipulative media coverage, and initial cryptocurrency offerings.
The Diamond Necklace Affair (1784-1785)
The Diamond Necklace Affair is an infamous incident of fraud linked to the French Revolution. An early example of identity theft, it also demonstrates that the harm caused by such a crime can go far beyond financial.
A French aristocrat named Jeanne de la Mont convinced Cardinal Louis-René-Édouard, Prince de Rohan into thinking that he was buying a valuable diamond necklace on behalf of Queen Marie Antoinette. De la Mont forged letters from the queen and even had someone impersonate her for a meeting, all while convincing the cardinal of the need for secrecy. The cardinal overlooked several questionable issues because he believed he would gain political benefit from the transaction.
When the scheme finally exposed, it damaged Marie Antoinette’s reputation, despite her lack of involvement in the deception. The story reinforced the public perception of her as a frivolous aristocrat living off the labor of the people. This contributed to the overall resentment of the aristocracy that erupted in the French Revolution and likely played a role in Marie Antoinette’s death. Had she not been seen as frivolous, she might have been allowed to live after her husband’s death.
Today, impersonation scams work in similar ways. For example, a fraudster might forge communication from a CEO to convince employees to release funds or take some other action. The risk of this is only increasing with improved technology such as deepfakes.
Spanish Prisoner Scam (Late 1700s)
The Spanish Prisoner Scam will probably sound very familiar to anyone who received a “Nigerian prince” email in the early 2000s.
Victims received letters from a “wealthy Spanish prisoner” who needed their help to access his fortune. If they sent money to facilitate his escape and travel, he would reward them with greater riches when he regained his fortune. This was only one of many similar scams in the 1700s, often involving follow-up requests for additional payments before the scammer disappeared.
While the “Nigerian prince” scam received enough publicity that it became almost unbelievable that people could fall for it, if done well, these can be psychologically sophisticated scams. The stories play on people’s emotions, get them invested in the person, and enamor them with the idea of being someone helpful and important. A compelling narrative can diminish someone’s critical thinking and cause them to ignore red flags.
Today, these scams are more likely to take the form of inheritance fraud or a lottery scam, where, again, a person has to pay an advance fee to unlock a much bigger reward, playing on the common desire for easy money.
Evolution of Fraud
These examples make it clear that fraud is nothing new and that effective tactics have thrived over the centuries. Technology simply opens up new opportunities for fraud.
While 18th-century scammers had to rely on face-to-face contact and fraudulent letters, in the 19th century they could leverage the telegraph for “urgent” communication and newspaper ads to reach broader audiences. In the 20th century, there were telephones and television ads. Today, there are email, social media, and deepfakes, with new technologies emerging daily.
Rather than quack doctors offering miracle cures, we see online health scams selling diet pills and antiaging products. Rather than impersonating real people, we see fake social media accounts and catfishing. Fraudulent sites convince people to enter their bank details rather than asking them to send money. The anonymity of the digital world protects perpetrators.
But despite the technology changing, the underlying psychology that makes scams successful remains the same:
- Greed and the desire for easy money
- Fear of missing out and the belief that a response is urgent
- Social pressure to “keep up with the Joneses” and the “Bandwagon Effect”
- Trust in authority without verification
Therefore, the best protection against scams remains the same: critical thinking and skepticism, not technology.
Responding to Fraud
In conclusion, Vazdar shared a series of steps that people should take to protect themselves against fraud:
- Think before you click.
- Beware of secrecy and urgency.
- Verify identities.
- If it seems too good to be true, be skeptical.
- Use available security tools.
Those security tools have changed over time and will continue to change, but the underlying steps for identifying and preventing fraud remain the same.
For more insights from Vazdar and other experts in the field, consider enrolling in highly specialized and comprehensive programs like OPIT’s Enterprise Security Master’s program.
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