1. ENHANCING MANAGEMENT DECISION-MAKING FOR THE DIGITAL FIRM
Chapter 11
ENHANCING
MANAGEMENT
DECISION-MAKING
FOR THE DIGITAL FIRM

2. OBJECTIVES
How can information systems help individual managers make better decisions when the problems are non-routine and constantly changing?
How can information systems help people working in a group make decisions more efficiently?

3. OBJECTIVES
Are there any special systems that can facilitate decision-making among senior managers? Exactly what can these systems do to help high-level management?
What benefits can systems that support management decision-making provide for the organization as a whole?

4. MANAGEMENT CHALLENGES
Building information systems that can actually fulfill executive information requirements
Create meaningful reporting and management decision-making processes

5. Decision-Making Level
The four different decision-making constituencies
in a firm are the following:
Senior management: is concerned with general timely info on changes in the industry and society at large that may affect both long-term and near-term future of the firm.
Middle Management and project teams: is concerned with specific, timely info about firm performance, including revenue and cost reduction targets
Operational Management and project teams: monitors the performance of each subunit of the firm and manages individual employees
Individual employees: try to fulfill the objectives of managers above them, following established rules and procedures for their routine activities

6. Decision-Making Level
Information Requirements of key Decision-Making Groups in a firm
Unstructured
Semistructured
Structured
Senior Management
Middle Management
Operational Management
Individual Employees and Teams

7. Unstructured decisions
DECISION-SUPPORT SYSTEMS (DSS)
Types of Decision-Support Systems
Unstructured decisions
Are those in which the decision maker must provide judgment, evaluation, and insights into the problem definition
Semistructured decisions
Only part of the problem has a clear-cut answer provided by an accepted procedure
Structured decisions
Are repetitive and routine, and decision makers can follow a definite procedure for handling them to be efficient

8. Types of Decision-Support Systems
In general, structured decisions are made at lower organizational levels,
whereas unstructured decision making is more common at higher levels of the firm

9. Types of Decision-Support Systems
DECISION-SUPPORT SYSTEMS (DSS)
Types of Decision-Support Systems
Senior executives tend to be exposed to many unstructured decision situations that are open ended and evaluative and that require insight based on many sources of information and personal experience
For example, a CEO in today’s music industry might ask, “Whom should we choose as a distribution partner for our online music catalog”?
Answering this question would require access to WHAT … ? news, government reports, and industry views as well as high-level summaries of firm performance

10. Types of Decision-Support Systems
DECISION-SUPPORT SYSTEMS (DSS)
Types of Decision-Support Systems
Middle management and operational management tend to face more structured decision scenarios, but their decisions may include unstructured components
For example, A typical middle-level management decision might be “Why is the order fulfillement report showing a decline over the last six months at a distribution center in Minnealoplis?”
This middle manager could obtain a report from the firm’s enterprise system or distribution management system on order activity and operational efficiency at the Minneapolis distribution center. This is the structured part of the decision. WHERE IS THE UNSTRUCTURED PART OF THE DECISION HERE?

11. Model-driven DSS Data-driven DSS Primarily stand-alone
DECISION-SUPPORT SYSTEMS (DSS)
Types of Decision-Support Systems
Model-driven DSS
Primarily stand-alone
Uses model to perform “what-if” and other kinds of analysis
Ex: voyage-estimating system calculates financial (ship/time costs) and technical (ship cargo capacity, speed, port distances, etc…) voyage details
Data-driven DSS
Allows users to extract and analyze useful information from large databases
Ex: How many units of product number 403 were shipped in November 2004?

12. Computer system at the management level of an organization
DECISION-SUPPORT SYSTEMS (DSS)
Computer system at the management level of an organization
Combines data, analytical tools, and models
Supports semi-structured and unstructured decision-making

13. DECISION-SUPPORT SYSTEMS (DSS)
MIS and DSS
MIS
Provide info on the firm’s performance to help managers monitor and control the business
Provides reports based on routine flow of data
Assists in general control of the organization
Ex: A typical MIS report might show a summary of monthly sales

14. DSS DSS support decisions in a different way.
DECISION-SUPPORT SYSTEMS (DSS)
MIS and DSS
DSS
DSS support decisions in a different way.
Whereas MIS primarily address structured
problems, DSS support semistructured and
unstructured problem analysis
Emphasizes change, flexibility, rapid response, models, assumptions, ad hoc queries, and display graphics

15. Datamining Uses statistical analysis tools
DECISION-SUPPORT SYSTEMS (DSS)
Types of Decision-Support Systems
Datamining
Uses statistical analysis tools
Finds hidden patterns and relationships in large databases to infer rules
Knowledge discovery
events that are linked over time are referred to as sequences
Data mining can allow a firm to develop
specific marketing campaigns for different
customer segments

16. Figure 11-1 DECISION-SUPPORT SYSTEMS (DSS) Cargo Booking Request Agent
Cargo Size,
Rate Data
Availability
Forecast
Passenger
Forecast Data
Confirm/
Reject 1
CARGO
RESERVATION
SYSTEM 2
FLIGHT
SCHEDULE
SERVER 5
PASSENGER 4
xxx
Availability/
Minimum Price
CARGOPROF
REVENUE
MANAGEMENT SYSTEM 3
Figure 11-1

17. Overview of a Decision-Support System (DSS)
DECISION-SUPPORT SYSTEMS (DSS)
Overview of a Decision-Support System (DSS)
Figure 11-2

18. DSS database: collection of current or historical data
DECISION-SUPPORT SYSTEMS (DSS)
Components of Decision-Support Systems
DSS database: collection of current or historical data
DSS software system: collection of software tools/mathematical and analytical models
User interface: easy interaction

19. DECISION-SUPPORT SYSTEMS (DSS)
Components of Decision-Support Systems
Model
Abstract representation illustrating components or relationships of a phenomenon
A model can be a physical model (airplane model), a mathematical model (equation), or a verbal model (description of a procedure for writing an order)
Optimization models, often using linear programming, determine optimal resource allocation to maximize or minimize specified variables such as cost or time

20. Asks “what-if” questions repeatedly to determine the impact of change
DECISION-SUPPORT SYSTEMS (DSS)
Sensitivity Analysis
Sensitivity analysis
Asks “what-if” questions repeatedly to determine the impact of change
Ex: What happens if we raise the price by 5% or increase the advertising budget by $100,000?
Figure 11-3

21. Bank of America: Customer profiles
DECISION-SUPPORT SYSTEMS (DSS)
DSS Applications and the Digital Firm
General Accident Insurance: Customer buying patterns and fraud detection
Bank of America: Customer profiles
Frito-Lay, Inc.: Price, advertising, and promotion selection

22. Burlington Coat Factory: Store location and inventory mix
DECISION-SUPPORT SYSTEMS (DSS)
DSS Applications and the Digital Firm
Burlington Coat Factory: Store location and inventory mix
Keycorp: Targeting direct mail marketing customers
National Gypsum: Corporate planning and forecasting

23. Southern Railway: Train dispatching and routing
DECISION-SUPPORT SYSTEMS (DSS)
DSS Applications and the Digital Firm
Southern Railway: Train dispatching and routing
Texas Oil and Gas Corporation: Evaluation of potential drilling sites
United Airlines: Flight scheduling, passenger demand forecasting

24. U.S. Department of Defense: Defense contract analysis
DECISION-SUPPORT SYSTEMS (DSS)
DSS Applications and the Digital Firm
U.S. Department of Defense: Defense contract analysis

25. Comprehensive examination of supply management chain
DECISION-SUPPORT SYSTEMS (DSS)
DSS for Supply Chain Management
Comprehensive examination of supply management chain
Searches for most efficient and cost-effective combination
Reduces overall costs
Increases speed and accuracy of filling customer orders

26. Uses data mining to guide decisions
DECISION-SUPPORT SYSTEMS (DSS)
DSS for Customer Relationship Management
Uses data mining to guide decisions
Consolidates customer information into massive data warehouses
Uses various analytical tools to slice information into small segments

27. DSS for Customer Analysis and Segmentation
DECISION-SUPPORT SYSTEMS (DSS)
DSS for Customer Analysis and Segmentation
Figure 11-4

28. Geographic Information Systems (GIS)
DECISION-SUPPORT SYSTEMS (DSS)
DSS for Simulating Business Scenarios
Geographic Information Systems (GIS)
Software for analyzing and displaying data using digitized maps
Enhances planning and decision-making
Use data visualization technology

29. DECISION-SUPPORT SYSTEMS (DSS)
DSS for Simulating Business Scenarios
Data Visualization
Helps users see patterns and relationships in large amounts of data that would be difficult to discern if the data were presented as traditional lists of text

30. Customer Decision-Support Systems (CDSS)
DECISION-SUPPORT SYSTEMS (DSS)
Web-Based Customer Decision-Support Systems
Customer Decision-Support Systems (CDSS)
Support decision-making process of an existing or potential customer

31. Interactive computer-based system
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
What Is a GDSS?
Interactive computer-based system
Facilitates solution to unstructured problems
Set of decision makers working together as a group
One problem with understanding the value of GDSS is their complexity.

32. Hardware: Conference facility, electronic hardware
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Characteristics of GDSS
Hardware: Conference facility, electronic hardware
Software tools: Tools for organizing ideas, gathering information, and ranking and seeking priorities
People: Participants, trained facilitator, staff supporting hardware and software

33. Electronic questionnaires Electronic brainstorming tools
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
GDSS Software Tools
Electronic questionnaires
Electronic brainstorming tools
Idea organizers
Questionnaire tools

34. Tools for voting or setting priorities
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
GDSS Software Tools
Tools for voting or setting priorities
Stakeholder identification and analysis tools

35. Figure 11-5 DECISION-SUPPORT SYSTEMS (DSS) Group Interaction
Brainstorming
Idea
Topic Commenter
Generation
Group Outliner
Idea Organizer
Idea
Issue Analyzer
Organization
Group Writer
Session
Planning
Vote Selection
Alternative Eval.
Prioritizing
Questionnaire
Group Matrix
Session
Manager
Policy
Policy Formation
Development
Stakeholder ID.
Enterprise Analyzer
Graphical Browser
Group Dictionary
Organizational Memory
Brief Case •
Access to information •
Personal productivity
Figure 11-5

36. Increased participation Open, collaborative meeting atmosphere
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
How GDSS can Enhance Group Decision-Making
Improved preplanning
Increased participation
Open, collaborative meeting atmosphere
Criticism-free idea generation
Evaluation objectivity

37. Executive Support Systems (ESS):
EXECUTIVE SUPPORT IN THE ENTERPRISE
Executive Support Systems (ESS):
Information system at strategic level of an organization
Addresses unstructured decision-making through advanced graphics and communications

38. Brings together data from the entire organization
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
The Role of Executive Support Systems in the Organization
Brings together data from the entire organization
Allows managers to select, access, and tailor data
Enables executive and any subordinates to look at the same data in the same way

39. Facility for environmental scanning
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
The Role of Executive Support Systems in the Organization
Developing ESS:
Ease of use
Facility for environmental scanning
External and internal sources of information to be used for environmental scanning

40. Benefits of Executive Support Systems
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Benefits of Executive Support Systems
Analyzes, compares, and highlights trends
Provides greater clarity and insight into data
Speeds up decision-making

41. Benefits of Executive Support Systems
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Benefits of Executive Support Systems
Improves management performance
Increases management’s span of control
Better monitoring of activities

42. ESS for business intelligence: Identifies changing market conditions
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Executive Support Systems and the Digital Firm
ESS for business intelligence:
Identifies changing market conditions
Formulates responses
Tracks implementation efforts
Learns from feedback

43. Monitoring corporate performance: balanced scorecard systems
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Executive Support Systems and the Digital Firm
Monitoring corporate performance:
balanced scorecard systems
Model for analyzing firm performance
Supplements traditional financial measures with measurements from additional business perspectives

44. Strategic performance management tools for enterprise systems
GROUP DECISION-SUPPORT SYSTEMS (GDSS)
Enterprise Wide Reporting and Analysis
Strategic performance management tools
for enterprise systems
SAP: Web-enabled mySAP.com™, Management Cockpit
PeopleSoft: Web-enabled Enterprise Performance Management (EPM)
Oracle: Strategic Enterprise Management

45. ENHANCING MANAGEMENT DECISION-MAKING FOR THE DIGITAL FIRM
Chapter 11
ENHANCING
MANAGEMENT
DECISION-MAKING
FOR THE DIGITAL FIRM

46. Multiple Choice Questions ( 12 Questions)
Changes in the industry and society at large that may affect the long-term and near-term future of the firm is mainly concentrated at this management level:
Senior
Middle
Operational
Knowledge

47. Multiple Choice Questions
Information density refers to the
A) richnesscomplexity and contentof a message.
B) total amount and quantity of information delivered to consumers by merchants.
C) total amount and quantity of information available to all market participants.
D) amount of information available to reduce price transparency.
Answer: C

48. Multiple Choice Questions
Once knowledge taxonomy is developed, documents are all ________ with the proper classification.
A) tagged
B) linked
C) tupled
D) referenced
Answer: A

49. Multiple Choice Questions
Backward chaining is
A) a strategy for searching the rule base in an expert system that begins with information entered by the user.
B) the programming environment of an expert system.
C) a method of organizing expert system knowledge into chunks.
D) a strategy for searching the rule base in an expert system that begins with a hypothesis.
Answer: D

50. Multiple Choice Questions
Which of the following systems is NOT used to capture tacit knowledge?
A) expert system
B) case-based reasoning
C) fuzzy logic
D) neural network
Answer: D

51. Multiple Choice Questions
Decisions in which the decision maker must provide judgment, evaluation, and insights into the problem definition would be characterized as:
structured.
semistructured.
unstructured.
overt.

52. Multiple Choice Questions
In data mining, events that are linked over time are referred to as:
associations.
sequences.
classifications.
clusters.

53. Multiple Choice Questions
Data mining can allow a firm to develop:
 specific marketing campaigns for different customer segments.
intuitive user interfaces.
DSS based on the Web.
multiple distributed systems.

54. Multiple Choice Questions
To make sure the system provides the information managers need, building successful DSSs requires:
data mining.
abstract decision processing.
data co-integration
a high-level of user participation.

55. Multiple Choice Questions
Using a DSS involves several basic types of analytical models. If you wanted to cut advertising by $100 repeatedly so that you could see its relationship on sales, you would be using this model:
Sensitivity
Optimization
data visualization
"what-if"

56. Multiple Choice Questions
GDSS consist of three basic elements:
software, conference rooms, and facilitators.
hardware, telecommunications, and facilitators.
hardware, software tools, and people.
software, telecommunications, and people.

57. Multiple Choice Questions
One problem with understanding the value of GDSS is their:
availability and cost.
complexity.
need for organizational memory.
need for a facilitator.

58. True-False Questions (6 Questions)
Operational management monitors the performance of each subunit of the firm and manages individual employees.
 True
False

59. True-False Questions
Structured decisions require the decision maker to use judgment to analyze the problem. 
True
 False

60. True-False Questions
The four phases of decision making are linear and once one phase is complete it is never returned to. 
True
 False

61. True-False Questions
Data mining is more discovery-driven than traditional database queries. 
True
 False

62. True-False Questions
Sequencing finds patterns in data to help managers estimate future value of continuous variables such as sales figures. 
True
False

63. Answer: TRUE True-False Questions
An online syndicator aggregates content or applications from multiple sources, packaging them for distribution, and reselling them to third-party Web sites.
Answer: TRUE

64. True-False Questions
Companies rarely use Web pages to analyze customer information.
Answer: FALSE

65. True-False Questions
Some Net marketplaces support contractual purchasing based on long-term relationships with designated suppliers.
Answer: TRUE

66. True-False Questions
Knowledge is universally applicable and easily moved.
Answer: FALSE

67. True-False Questions
A collection of current or historical data from a number of applications or groups forms a DSS database.
 True
 False

68. Fill-in the blanks Questions
A(n) ________ decision is repetitive and routine, for which known algorithms provide solutions.
Answer: structured

69. Fill-in the blanks Questions
________-driven DSS have analysis capabilities based on strong theories and used to perform "what-if" and similar kinds of analyses.
Answer: Model

70. Fill-in the blanks Questions
Of the three main DSS components, the ________ system comprises the tools used for data analysis.
Answer: software

71. Fill-in the blanks Questions
A(n) ________ is an abstract representation illustrating the components or relationships of a phenomenon.
Answer: model

72. Fill-in the blanks Questions
A(n) ________ model determines the best resource allocation to maximize or minimize specified variables.
Answer: optimization

73. Fill-in the blanks Questions
A(n) ________ supports the decision-making processes of an existing or potential customer.
Answer: customer decision-support system, CDSS

74. Essay Questions
What are the major capabilities of DSS? What is the main problem with DSS?
How do the various decision-making systems support decision making within the company structure?
How is data visualization used in GIS?
What are the advantages and disadvantages of the use of a GDSS for group decision making?