1. Information Systems: the Foundation of E-Business (CIS 108)
Decision and Decision Making and its Implications for the Design of IT/IS
Lecture SEVEN (7th March 2005)
Amare Michael Desta

2. Objectives To explain the nature of decision-making
To identify different models of the decision-making process
To examine the implications of theory and research on decision-making for the development of IS/IT systems
To explain the role of DSS in supporting decision-making

3. Decision and Decision making defined
Decision is the ability to decide quickly and without pausing because of uncertainty:
Decision making: the processes involved in making a selection between alternative courses of action

4. Decision-Making Has Become More Difficult
Increasing complexity of problems and bewildering array of alternatives
Decisions often have to be made under tight time constraints
Increased environmental uncertainty has made sophisticated analysis more important
Remote working has increased the difficulties of accessing information and reaching consensual decisions

5. Decision-Making By Level
Strategic Decisions
What products and services to offer, how and where to obtain resources, market strategies and position, pricing policies
Tactical Decisions
Obtaining and using resources, allocating duties, hiring personnel, selecting suppliers
Operational Decisions
Scheduling production, allocating work, training, dealing with employee problems and grievances

6. Key IT Decisions
What new systems do we need to acquire to help the company remain competitive?
Should we outsource any of our IT?
Who should we appoint to manage our IT/IS systems?
If we merge with another company, should we install new systems compatible with our own?
Should we invest in expensive new software to make our systems more secure?

7. Decision-Making Models
Rational Model
Decision-making by individuals is the outcome of logical, rational processes
Bounded Rationality
Various factors conspire to undermine rational decision-making processes; in reality, people satisfy rather than optimise

8. Rational Model
People try to maximise outputs in an orderly, logical way
Identify problem
Examine alternatives
Compare and evaluate alternatives
Select best one

9. Bounded Rationality People do not always behave in rational ways:
“ .. . The individual is limited by his unconscious skills, habits and reflexes; he is limited by his values and conceptions of purpose, which may diverge from organizational goals; he is limited by the extent of his knowledge and information”
(Simon, 1976, p.76)

10. Bounded Rationality (Contd….)
Factors undermining rationality
Lack of environmental surveillance
People tend to deal with problems that require immediate attention rather than focus on the future; people select the most obvious rather than the best alternatives
Satisfying behaviour
People choose the solution that will do rather than is necessarily the best, I.e. don’t look for optimal solutions

11. Bounded Rationality (Contd….)
Identify problem
Determine minimum criteria all alternatives must meet
Choose the alternative that best deals with the problem
If acceptable, implement it
Evaluate ease of discovering alternatives and use this to determine acceptable standards for similar problems in future

12. Bounded rationality (Contd…)
Other factors that limit rational behaviour
People are strongly influenced by the outcomes of past decisions
People will discount information that conflicts with their beliefs or values
People tend to construct general decision-making rules and follow them, even if they are inappropriate in a particular situation
People rationalise their choices

13. Organisational Decision-Making
In theory, decision-making at the organisational level is more rational since there are likely to be organisation-wide procedures for identify, evaluating and selecting alternatives
Research indicates, however, that organisational decision-making is strongly influenced by past events, the full range of alternatives is rarely considered and decisions are taken on a piecemeal basis

14. Computers can help
Computer-based IS have the capacity can gather vast amounts of data and present it in easy-to-understand formats, thus increasing the likely hood that more and better quality information will be taken into account in decision-making
Computer-based IS have the capacity to model alternatives and indicate the outcomes of likely courses of action. In this way they are able to simplify what, in reality, is a highly complex process and help people envisage different decision scenarios

15. Defining Decision Support System
The concept of a (DSS) is extremely broad and its
definitions vary:
It is "a computer-based system that aids the process of decision making, (Finlay, 1994)
It is "an interactive, flexible, and adaptable computer-based IS - especially developed for supporting the solution of a non-structured management problem for improved decision making, (Turban, 1995)

16. Defining DSS ….. (Contd…)
“DSS couple the intellectual resources of individuals with the capabilities of the computer to improve the quality of decisions”, (Keen & Scott, 1978)
DSS are "interactive computer-based systems that help decision makers utilize data and models to solve unstructured problems", (Sprague & Carlson, 1982),

17. Defining DSS ….. (Contd…)
A“ …a computer-based information system that combines models and data in an attempt to solve semi-structured problems with extensive user involvement.”
(Turban et al, 2002)

18. Uses of DSS – Some Examples
Forecast passenger demand and schedule aircraft
Evaluate bids from various contractors for major projects
Discern customer buying patterns
Corporate forecasting and planning
Risk evaluation on major projects

19. Characteristics of DSSs
Turban et al (2002) identify the following key characteristics of DSSs
Can be used by individual managers and groups of managers at all levels of the organisation to solve semi and unstructured problems
Supports several interdependent and sequential decisions
Supports all stages of the decision-making process and different styles of decision-making
Can be adapted over time to meet changing circumstances
Easy to construct and use
Promotes learning which creates demands for improvements
Uses quantitative models
Allows the easy execution of sensitivity analyses

20. Characteristics of DSSs (Contd…..)
Curtis (1998) identifies the following key characteristics of DSSs
Supports rather than usurps the role of the decision-maker
Give flexible and interactive access to data
Fragmented – DSS tend to be developed in an ad hoc way to support the needs of particular individuals or groups

21. Components of a DSS Data Management Component
Contains data that is extracted from various sources and then entered into DSS database or entered into DSS as required
Model Management Component
Contains standard and customised models used to develop decision support applications
Contains Model Base Management System that can create DSS models easily and quickly, stores and manages different models, allows users to manipulate models thus enabling them to conduct sensitivity analyses

22. Components of a DSS (Contd…)
User Interface and Users
Every aspect of the communications between the system and the user
Most modern user interfaces are Web based.
Users are viewed as part of the system. Typically comprise managers and specialists
Knowledge Management Component
For very complex problem situations requiring expert knowledge, DSS may include special various expert or intelligent decision

23. Group Decision Support Systems (GDSS)
“ … an interactive computer-based system to facilitate the solution of unstructured problems by a set of decision-makers working together as a group”
(Laudon and Laudon, 2001)

24. Aims of GDSS Aim is to improve the effectiveness of group meetings
Supports the exchange of ideas, opinions, information etc within the group
Early systems were designed to support face-to-face meetings; more recent systems cater for networked meetings of participants in different locations
How Can GDSS Help?

25. How Can GDSS Help?
Providing group with rapid access to external and internal sources of data
Permit non-sequential discussion of issues
Create instant, anonymous voting results
Structure the planning process
Record proceedings of meetings for future analysis

26. GDSS Components People Hardware Software
The conference facility, i.e. room which will include electronic display boards, audiovisual and networking equipment or GDSS facility specifically designed for electronic meetings, e.e. group-to-group video or teleconferencing
Software
Usually includes ten or more tools and packages integrated into a comprehensive system. Software includes electronic questionnaires, electronic brainstorming tools, ideas organisers, tools for voting, policy formation tools, stakeholder analysis tools
People
Usually consists of group members and a facilitator
Enterprise Decision Support Systems

27. Enterprise Decision Support Systems
Organisational Decision Support Systems
Used mainly by specialists such as planners, analysts and researchers
Used for an organisational task that involves a sequence of operations and decision-makers, e.g constructing a marketing plan
DSS cut across organisational levels and units because it addresses corporate wide problems
Enterprise Decision Support Systems

28. Enterprise Decision Support Systems (Contd…)
Executive Information System
Serves the information needs of top executives
Provides access to management reports, provides exception reporting and drill down facilities, graphics and is very user-friendly
Executive Support Systems offer enhanced capabilities, including analysis, office automation, business intelligence

29. Common Features of EIS Drill down Critical Success Factors (CSFs)
Trend analysis
Ad hoc analysis
Exception reporting

30. Web-Based DSS
Many DSS are now available on the Web, making them available to anyone in the organisation who needs them
Web-based DSS can be accessed remotely, thus making them more flexible and easy to use
Facilitates development and maintenance of DSS

31. Summary Decision-making is a key part of the role of management
Evidence suggests that people have limited information processing capabilities. IT has an important role to play in providing access to information, helping decision-makers analyse information and evaluate alternatives in problem situations
DSS exist for specialists and managers at every level of the organisation
Development of Web-based DSS is making DSS an enterprise-wide facility

32. Reading
Cooke, S. and Slack, N. (1991) Making Management Decisions, Prentice-Hall.
Laudon, K. C. and Laudon, J. P. (2002) Management Information Systems: Managing the Digital Firm, Prentice Hall.
Simon, H. A. (1967) Administrative Behavior, The Free Press.
Turban, E. and Aronson, J. (2001) Decision Support Systems and Intelligent Systems, Prentice-Hall