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Chapter 12 Business Intelligence and Decision Support Systems Information Technology for Management Improving Performance in the Digital Economy 7 th edition.

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Presentation on theme: "Chapter 12 Business Intelligence and Decision Support Systems Information Technology for Management Improving Performance in the Digital Economy 7 th edition."— Presentation transcript:

1 Chapter 12 Business Intelligence and Decision Support Systems Information Technology for Management Improving Performance in the Digital Economy 7 th edition John Wiley & Sons, Inc. Slides contributed by Dr. Sandra Reid Chair, Graduate School of Business & Professor, Technology Dallas Baptist University Turban and Volonino 12-1Copyright 2010 John Wiley & Sons, Inc.

2 Chapter Outline 12.1 The Need for Business Intelligence (BI) 12.2 BI Architecture, Reporting and Performance Management 12.3 Data, Text, and Web Mining and BI Search 12.4 Managers and Decision Making Processes 12-2Copyright 2010 John Wiley & Sons, Inc.

3 Chapter Outline (cont’d) 12.5 Decision Support Systems 12.6 Automated Decision Support (ADS) 12.7 Managerial Issues Copyright 2010 John Wiley & Sons, Inc.12-3

4 Learning Objectives 1.Identify factors influencing adoption of business intelligence (BI) and business performance management (BPM). 2.Describe data mining, predictive analytics, digital dashboards, scorecards, and multidimensional data analysis. 3.Identify key considerations for IT-support of managerial decision-making. 4.Understand managerial decision making processes, the decision process, and types of decisions. 12-4Copyright 2010 John Wiley & Sons, Inc.

5 Learning Objectives – cont’d 5. Describe decision support systems (DSSs), benefits, and structure. 6.Recognize the importance of real-time BI and decision support for various levels of information workers. 7.Be familiar with automated decision support, its advantages, and areas of application. Copyright 2010 John Wiley & Sons, Inc.12-5

6 Copyright 2010 John Wiley & Sons, Inc.12-6 Figure IT7eU

7 Problems – declining market. Saturation of existing market. Solution – wireless capabilities to provide managers with data that are analyzed immediately to provide actionable feedback to maximize sales. Results –gained decisive edge & outsmarted its rivals. Data used as strategic weapon. Copyright 2010 John Wiley & Sons, Inc.12-7

8 Table 12.1 Copyright 2010 John Wiley & Sons, Inc.12-8

9 Copyright 2010 John Wiley & Sons, Inc The Need for Business Intelligence (BI)

10 (E)xtract (T)ransform (L)oad Tools E – involves tools for extracting the data from source systems (silos). T – involves converting (transforming) the data into standardized formats. L – involves loading & integrating data into a system (such as a data warehouse). Copyright 2010 John Wiley & Sons, Inc Check out this great article for much, much more about the topic – ETL: Extract - Transform - Load (and data management and integration)

11 Table 12.2 Copyright 2010 John Wiley & Sons, Inc Sources: Adapted from Oracle (2007) and Imhoff (2006).

12 Risks with Disparate Data Responsiveness requires intelligence which requires trusted data & reporting systems. Silos arise creating decisions based upon inaccurate, incomplete, possibly outdated data. Copyright 2010 John Wiley & Sons, Inc * Data that are too late * Data that are wrong level of detail-too much or too little * Directionless data * Unable to coordinate with departments across enterprise * Unable to share data in a timely manner

13 Table 12.3 Copyright 2010 John Wiley & Sons, Inc.12-13

14 Business Intelligence Technologies 1990s primarily associated with back office workers & operations such as accounting, finance & human resources. 2000s expanded to enterprise data to include needs of managers & executives. Vendors offered advanced analytic, decision support, easy-to-use interfaces, & improved data visualization tools. Web-based delivery became common-place. Evolved from reporting to predicting. Copyright 2010 John Wiley & Sons, Inc.12-14

15 BI Vendors Copyright 2010 John Wiley & Sons, Inc Business intelligence – BIG business

16 Power of Predictive Analytics, Alerts & DSS Real-time view of the data Reactive to proactive with respect to future Improved data quality Shared, common vision of business activity benefitting key decision makers across enterprise Simple to view KPIs Informed, fast decision making Complete, comprehensive audit trails Copyright 2010 John Wiley & Sons, Inc.12-16

17 Figure 12.1 Copyright 2010 John Wiley & Sons, Inc Top five business pressure driving the adoption of predictive analytics. (Data from Aberdeen Group.)

18 Figure 12.2 Copyright 2010 John Wiley & Sons, Inc Real-time alerts triggered by customer-driven events.

19 Figure 12.3 Copyright 2010 John Wiley & Sons, Inc Click here for a plethora of dashboard examples!hereSample performance dashboard.

20 Table 12.2 Copyright 2010 John Wiley & Sons, Inc.12-20

21 Figure 12.4 Copyright 2010 John Wiley & Sons, Inc Basic BI components.

22 Figure 12.5 Copyright 2010 John Wiley & Sons, Inc How a BI system works.

23 Business Intelligence Solutions Must be able to access enterprise data sources such as TPS, e-business & e- commerce processes, operational platforms & databases. Needed for real-time decision making. Enhanced operational understanding capabilities. Improved cost control & customer relationship management. Copyright 2010 John Wiley & Sons, Inc.12-23

24 Copyright 2010 John Wiley & Sons, Inc BI Architecture, Reporting, and Performance Management

25 Data Extraction & Integration Many sources such as OLAP, ERP, CRM, SCM, legacy & local data stores, the Web all lacking standardization & consistency. ETL tools provide data for analyses to support business processes. Central data repository with data security & administrative tools for information infrastructure. Copyright 2010 John Wiley & Sons, Inc.12-25

26 Enterprise Reporting Systems Provide standard, ad hoc, or custom reports. 95% of Fortune 500 rely on BI to access information & reports they need. Reduces data latency. Decreases time users must spend collecting the data; increases time spent on analyzing data for better decision-making. Copyright 2010 John Wiley & Sons, Inc.12-26

27 Dashboards & Scorecards Dashboards are typically operation & tactical in application & use. Scorecard users are executive, manager, staff strategic level in application & use. Copyright 2010 John Wiley & Sons, Inc.12-27

28 Table 12.4 Copyright 2010 John Wiley & Sons, Inc.12-28

29 Copyright 2010 John Wiley & Sons, Inc Check out this great example of a marketing dashboard used at BMW!example

30 Figure 12.6 Copyright 2010 John Wiley & Sons, Inc Multidimensional view of sales revenue data.

31 Business Performance Management Requires methods to quickly & easily determine performance versus goals, objectives & alignment strategies. Relies on BI analysis reporting, queries, dashboards & scorecards. Objective is strategic – to optimize overall performance of an organization. Copyright 2010 John Wiley & Sons, Inc.12-31

32 Figure 12.7 Copyright 2010 John Wiley & Sons, Inc Business performance management (BPM) for monitoring and assessing performance.

33 Table 12.5 Copyright 2010 John Wiley & Sons, Inc.12-33

34 Copyright 2010 John Wiley & Sons, Inc Data, Text, and Web Mining and BI Search

35 Text-Mining Content that is mined include unstructured data from documents, text from messages & log data from Internet browsing. May be major source of competitive advantage. Needs to be codified with XML & extracted to apply predictive data mining tools to generate real value. Comprises up to 80% of all information collected. Copyright 2010 John Wiley & Sons, Inc Click link for an informative article in cio.com – Text Analytics: Your Customers are Talking About YouText Analytics: Your Customers are Talking About You

36 Advantages & Disadvantages of Data Mining Tools that are interactive, visual, understandable, & work directly on data warehouse of organization. Simpler tools used by front line workers for immediate & long-term business benefits. Techniques may be too sophisticated or require extensive knowledge & training. May require expert statistician to utilize effectively, if at all. Copyright 2010 John Wiley & Sons, Inc.12-36

37 Copyright 2010 John Wiley & Sons, Inc Managers and Decision Making Processes

38 Figure 12.8 Copyright 2010 John Wiley & Sons, Inc Manager’s decision role.

39 Managers Need IT Support from DSS Tools Scenarios, alternatives & risks are many. Time is always critical consideration & stress level is high. Requires sophisticated analysis. Geographically dispersed decision makers with collaboration required. Often requires reliable forecasting. Copyright 2010 John Wiley & Sons, Inc.12-39

40 Automating Manager’s Job Routine decisions by mid-level managers (frontline employees) may be automated fairly easily & frequently. Automation of routine decisions leaves more time for supervising, training & motivating nonmanagers. Top level managerial decision making is seldom routine & very difficult to automate. Copyright 2010 John Wiley & Sons, Inc.12-40

41 IT Available to Support Managers (MSS) DSS - indirect support – discovery, communication & collaboration with web facilitation. DSS – provide support primarily to analytical, quantitative types of decisions. ESS – early BI – supports informational roles of executives. GDSS – supports managers & staff working in groups, remotely or closely. Common devices – PDAs, Blackberrys, iPhones. Copyright 2010 John Wiley & Sons, Inc.12-41

42 Figure 12.9 Copyright 2010 John Wiley & Sons, Inc IT support for decision making.

43 Figure Copyright 2010 John Wiley & Sons, Inc Phases in the decision-making process.

44 Decision Modeling & Models Decision model – simplified representation, or abstraction of reality. Simplicity is key. Based upon set of assumptions. Requires monitoring & adjustment periodically as assumptions change. Modeling – virtual experiments reduce cost, compress time, manipulate variables, reduces risk. Copyright 2010 John Wiley & Sons, Inc.12-44

45 Framework for Computerized Decision Analysis Structured – routine & repetitive problems. Unstructured – lots of uncertainty, no definitive or clear-cut solutions. Semistructured – between the extremes. Most true DSS are focused here. Copyright 2010 John Wiley & Sons, Inc.12-45

46 Copyright 2010 John Wiley & Sons, Inc Decision Support Systems

47 DSS & Managers Need new & accurate information. Time is critical. Complex organization for tracking. Unstable environment. Increasing competition. Existing systems could not support operational requirements. Copyright 2010 John Wiley & Sons, Inc.12-47

48 Table 12.6 Copyright 2010 John Wiley & Sons, Inc.12-48

49 Characteristics & Capabilities - DSS Sensitivity analysis for “what if” & goal- seeking strategy setting. Increases system flexibility & usefulness. Basic components – database, model base, user interface, users & knowledge base. Copyright 2010 John Wiley & Sons, Inc.12-49

50 Figure Copyright 2010 John Wiley & Sons, Inc Conceptual model of DSS and its components.

51 Copyright 2010 John Wiley & Sons, Inc Automated Decision Support (ADS)

52 ADS Rule-based systems with automatic solutions to repetitive managerial problems. Closely related to business analytics. Automating the decision-making process is usually achieved by capturing manager’s expertise. Rules may be part of expert systems or other intelligent systems. Copyright 2010 John Wiley & Sons, Inc.12-52

53 Characteristics & Benefits of ADS Rapidly builds business rules to automate or guide decision makers, & deploys them into almost any operating environment. Injects predictive analytics into rule-based applications, increasing their power & value. Combines business rules, predictive models & optimization strategies flexibly into enterprise applications. Copyright 2010 John Wiley & Sons, Inc.12-53

54 ADS Applications - Examples Copyright 2010 John Wiley & Sons, Inc Customizing products & services for customers Revenue yield management Uses filtering for handling & prioritizing claims effectively

55 Copyright 2010 John Wiley & Sons, Inc Managerial Issues

56 Why BI Projects Fail Failure to recognize as enterprise-wide business initiatives. Lack of sponsorship. Lack of cooperation. Lack of qualified & available staff. No appreciation of negative impact on business profitability. Too much reliance on vendors. Copyright 2010 John Wiley & Sons, Inc.12-56

57 Copyright 2010 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the Information herein. Copyright 2010 John Wiley & Sons, Inc.12-57


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