Presentation on theme: "ENHANCING MANAGEMENT DECISION-MAKING FOR THE DIGITAL FIRM"— Presentation transcript:
1ENHANCING MANAGEMENT DECISION-MAKING FOR THE DIGITAL FIRM Chapter11ENHANCINGMANAGEMENTDECISION-MAKINGFOR THE DIGITAL FIRM
2OBJECTIVESHow 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?
3OBJECTIVESAre 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?
4MANAGEMENT CHALLENGES Building information systems that can actually fulfill executive information requirementsCreate meaningful reporting and management decision-making processes
5Decision-Making Level The four different decision-making constituenciesin 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 targetsOperational Management and project teams: monitors the performance of each subunit of the firm and manages individual employeesIndividual employees: try to fulfill the objectives of managers above them, following established rules and procedures for their routine activities
6Decision-Making Level Information Requirements of key Decision-Making Groups in a firmUnstructuredSemistructuredStructuredSenior ManagementMiddle ManagementOperational ManagementIndividual Employees and Teams
7Unstructured decisions DECISION-SUPPORT SYSTEMS (DSS)Types of Decision-Support SystemsUnstructured decisionsAre those in which the decision maker must provide judgment, evaluation, and insights into the problem definitionSemistructured decisionsOnly part of the problem has a clear-cut answer provided by an accepted procedureStructured decisionsAre repetitive and routine, and decision makers can follow a definite procedure for handling them to be efficient
8Types 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
9Types of Decision-Support Systems DECISION-SUPPORT SYSTEMS (DSS)Types of Decision-Support SystemsSenior 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 experienceFor 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
10Types of Decision-Support Systems DECISION-SUPPORT SYSTEMS (DSS)Types of Decision-Support SystemsMiddle management and operational management tend to face more structured decision scenarios, but their decisions may include unstructured componentsFor 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?
11Model-driven DSS Data-driven DSS Primarily stand-alone DECISION-SUPPORT SYSTEMS (DSS)Types of Decision-Support SystemsModel-driven DSSPrimarily stand-aloneUses model to perform “what-if” and other kinds of analysisEx: voyage-estimating system calculates financial (ship/time costs) and technical (ship cargo capacity, speed, port distances, etc…) voyage detailsData-driven DSSAllows users to extract and analyze useful information from large databasesEx: How many units of product number 403 were shipped in November 2004?
12Computer system at the management level of an organization DECISION-SUPPORT SYSTEMS (DSS)Computer system at the management level of an organizationCombines data, analytical tools, and modelsSupports semi-structured and unstructured decision-making
13DECISION-SUPPORT SYSTEMS (DSS) MIS and DSSMISProvide info on the firm’s performance to help managers monitor and control the businessProvides reports based on routine flow of dataAssists in general control of the organizationEx: A typical MIS report might show a summary of monthly sales
14DSS DSS support decisions in a different way. DECISION-SUPPORT SYSTEMS (DSS)MIS and DSSDSSDSS support decisions in a different way.Whereas MIS primarily address structuredproblems, DSS support semistructured andunstructured problem analysisEmphasizes change, flexibility, rapid response, models, assumptions, ad hoc queries, and display graphics
15Datamining Uses statistical analysis tools DECISION-SUPPORT SYSTEMS (DSS)Types of Decision-Support SystemsDataminingUses statistical analysis toolsFinds hidden patterns and relationships in large databases to infer rulesKnowledge discoveryevents that are linked over time are referred to as sequencesData mining can allow a firm to developspecific marketing campaigns for differentcustomer segments
17Overview of a Decision-Support System (DSS) DECISION-SUPPORT SYSTEMS (DSS)Overview of a Decision-Support System (DSS)Figure 11-2
18DSS database: collection of current or historical data DECISION-SUPPORT SYSTEMS (DSS)Components of Decision-Support SystemsDSS database: collection of current or historical dataDSS software system: collection of software tools/mathematical and analytical modelsUser interface: easy interaction
19DECISION-SUPPORT SYSTEMS (DSS) Components of Decision-Support SystemsModelAbstract representation illustrating components or relationships of a phenomenonA 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
20Asks “what-if” questions repeatedly to determine the impact of change DECISION-SUPPORT SYSTEMS (DSS)Sensitivity AnalysisSensitivity analysisAsks “what-if” questions repeatedly to determine the impact of changeEx: What happens if we raise the price by 5% or increase the advertising budget by $100,000?Figure 11-3
21Bank of America: Customer profiles DECISION-SUPPORT SYSTEMS (DSS)DSS Applications and the Digital FirmGeneral Accident Insurance: Customer buying patterns and fraud detectionBank of America: Customer profilesFrito-Lay, Inc.: Price, advertising, and promotion selection
22Burlington Coat Factory: Store location and inventory mix DECISION-SUPPORT SYSTEMS (DSS)DSS Applications and the Digital FirmBurlington Coat Factory: Store location and inventory mixKeycorp: Targeting direct mail marketing customersNational Gypsum: Corporate planning and forecasting
23Southern Railway: Train dispatching and routing DECISION-SUPPORT SYSTEMS (DSS)DSS Applications and the Digital FirmSouthern Railway: Train dispatching and routingTexas Oil and Gas Corporation: Evaluation of potential drilling sitesUnited Airlines: Flight scheduling, passenger demand forecasting
24U.S. Department of Defense: Defense contract analysis DECISION-SUPPORT SYSTEMS (DSS)DSS Applications and the Digital FirmU.S. Department of Defense: Defense contract analysis
25Comprehensive examination of supply management chain DECISION-SUPPORT SYSTEMS (DSS)DSS for Supply Chain ManagementComprehensive examination of supply management chainSearches for most efficient and cost-effective combinationReduces overall costsIncreases speed and accuracy of filling customer orders
26Uses data mining to guide decisions DECISION-SUPPORT SYSTEMS (DSS)DSS for Customer Relationship ManagementUses data mining to guide decisionsConsolidates customer information into massive data warehousesUses various analytical tools to slice information into small segments
27DSS for Customer Analysis and Segmentation DECISION-SUPPORT SYSTEMS (DSS)DSS for Customer Analysis and SegmentationFigure 11-4
28Geographic Information Systems (GIS) DECISION-SUPPORT SYSTEMS (DSS)DSS for Simulating Business ScenariosGeographic Information Systems (GIS)Software for analyzing and displaying data using digitized mapsEnhances planning and decision-makingUse data visualization technology
29DECISION-SUPPORT SYSTEMS (DSS) DSS for Simulating Business ScenariosData VisualizationHelps 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
30Customer Decision-Support Systems (CDSS) DECISION-SUPPORT SYSTEMS (DSS)Web-Based Customer Decision-Support SystemsCustomer Decision-Support Systems (CDSS)Support decision-making process of an existing or potential customer
31Interactive computer-based system GROUP DECISION-SUPPORT SYSTEMS (GDSS)What Is a GDSS?Interactive computer-based systemFacilitates solution to unstructured problemsSet of decision makers working together as a groupOne problem with understanding the value of GDSS is their complexity.
32Hardware: Conference facility, electronic hardware GROUP DECISION-SUPPORT SYSTEMS (GDSS)Characteristics of GDSSHardware: Conference facility, electronic hardwareSoftware tools: Tools for organizing ideas, gathering information, and ranking and seeking prioritiesPeople: Participants, trained facilitator, staff supporting hardware and software
33Electronic questionnaires Electronic brainstorming tools GROUP DECISION-SUPPORT SYSTEMS (GDSS)GDSS Software ToolsElectronic questionnairesElectronic brainstorming toolsIdea organizersQuestionnaire tools
34Tools for voting or setting priorities GROUP DECISION-SUPPORT SYSTEMS (GDSS)GDSS Software ToolsTools for voting or setting prioritiesStakeholder identification and analysis tools
35Figure 11-5 DECISION-SUPPORT SYSTEMS (DSS) Group Interaction BrainstormingIdeaTopic CommenterGenerationGroup OutlinerIdea OrganizerIdeaIssue AnalyzerOrganizationGroup WriterSessionPlanningVote SelectionAlternative Eval.PrioritizingQuestionnaireGroup MatrixSessionManagerPolicyPolicy FormationDevelopmentStakeholder ID.Enterprise AnalyzerGraphical BrowserGroup DictionaryOrganizational MemoryBrief Case•Access to information•Personal productivityFigure 11-5
36Increased participation Open, collaborative meeting atmosphere GROUP DECISION-SUPPORT SYSTEMS (GDSS)How GDSS can Enhance Group Decision-MakingImproved preplanningIncreased participationOpen, collaborative meeting atmosphereCriticism-free idea generationEvaluation objectivity
37Executive Support Systems (ESS): EXECUTIVE SUPPORT IN THE ENTERPRISEExecutive Support Systems (ESS):Information system at strategic level of an organizationAddresses unstructured decision-making through advanced graphics and communications
38Brings together data from the entire organization GROUP DECISION-SUPPORT SYSTEMS (GDSS)The Role of Executive Support Systems in the OrganizationBrings together data from the entire organizationAllows managers to select, access, and tailor dataEnables executive and any subordinates to look at the same data in the same way
39Facility for environmental scanning GROUP DECISION-SUPPORT SYSTEMS (GDSS)The Role of Executive Support Systems in the OrganizationDeveloping ESS:Ease of useFacility for environmental scanningExternal and internal sources of information to be used for environmental scanning
40Benefits of Executive Support Systems GROUP DECISION-SUPPORT SYSTEMS (GDSS)Benefits of Executive Support SystemsAnalyzes, compares, and highlights trendsProvides greater clarity and insight into dataSpeeds up decision-making
41Benefits of Executive Support Systems GROUP DECISION-SUPPORT SYSTEMS (GDSS)Benefits of Executive Support SystemsImproves management performanceIncreases management’s span of controlBetter monitoring of activities
42ESS for business intelligence: Identifies changing market conditions GROUP DECISION-SUPPORT SYSTEMS (GDSS)Executive Support Systems and the Digital FirmESS for business intelligence:Identifies changing market conditionsFormulates responsesTracks implementation effortsLearns from feedback
43Monitoring corporate performance: balanced scorecard systems GROUP DECISION-SUPPORT SYSTEMS (GDSS)Executive Support Systems and the Digital FirmMonitoring corporate performance:balanced scorecard systemsModel for analyzing firm performanceSupplements traditional financial measures with measurements from additional business perspectives
44Strategic performance management tools for enterprise systems GROUP DECISION-SUPPORT SYSTEMS (GDSS)Enterprise Wide Reporting and AnalysisStrategic performance management toolsfor enterprise systemsSAP: Web-enabled mySAP.com™, Management CockpitPeopleSoft: Web-enabled Enterprise Performance Management (EPM)Oracle: Strategic Enterprise Management
45ENHANCING MANAGEMENT DECISION-MAKING FOR THE DIGITAL FIRM Chapter11ENHANCINGMANAGEMENTDECISION-MAKINGFOR THE DIGITAL FIRM
46Multiple 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:SeniorMiddleOperationalKnowledge
47Multiple Choice Questions Information density refers to theA) richnesscomplexity and contentof 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
48Multiple Choice Questions Once knowledge taxonomy is developed, documents are all ________ with the proper classification.A) taggedB) linkedC) tupledD) referencedAnswer: A
49Multiple Choice Questions Backward chaining isA) 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
50Multiple Choice Questions Which of the following systems is NOT used to capture tacit knowledge?A) expert systemB) case-based reasoningC) fuzzy logicD) neural networkAnswer: D
51Multiple 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.
52Multiple Choice Questions In data mining, events that are linked over time are referred to as:associations.sequences.classifications.clusters.
53Multiple 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.
54Multiple Choice Questions To make sure the system provides the information managers need, building successful DSSs requires:data mining.abstract decision processing.data co-integrationa high-level of user participation.
55Multiple 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:SensitivityOptimizationdata visualization"what-if"
56Multiple 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.
57Multiple Choice Questions One problem with understanding the value of GDSS is their:availability and cost.complexity.need for organizational memory.need for a facilitator.
58True-False Questions (6 Questions) Operational management monitors the performance of each subunit of the firm and manages individual employees. TrueFalse
59True-False QuestionsStructured decisions require the decision maker to use judgment to analyze the problem. True False
60True-False QuestionsThe four phases of decision making are linear and once one phase is complete it is never returned to. True False
61True-False QuestionsData mining is more discovery-driven than traditional database queries. True False
62True-False QuestionsSequencing finds patterns in data to help managers estimate future value of continuous variables such as sales figures. TrueFalse
63Answer: 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
64True-False QuestionsCompanies rarely use Web pages to analyze customer information.Answer: FALSE
65True-False QuestionsSome Net marketplaces support contractual purchasing based on long-term relationships with designated suppliers.Answer: TRUE
66True-False QuestionsKnowledge is universally applicable and easily moved.Answer: FALSE
67True-False QuestionsA collection of current or historical data from a number of applications or groups forms a DSS database. True False
68Fill-in the blanks Questions A(n) ________ decision is repetitive and routine, for which known algorithms provide solutions.Answer: structured
69Fill-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
70Fill-in the blanks Questions Of the three main DSS components, the ________ system comprises the tools used for data analysis.Answer: software
71Fill-in the blanks Questions A(n) ________ is an abstract representation illustrating the components or relationships of a phenomenon.Answer: model
72Fill-in the blanks Questions A(n) ________ model determines the best resource allocation to maximize or minimize specified variables.Answer: optimization
73Fill-in the blanks Questions A(n) ________ supports the decision-making processes of an existing or potential customer.Answer: customer decision-support system, CDSS
74Essay QuestionsWhat 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?