Enhancing Decision Making Chapter 12 Enhancing Decision Making

Management Information Systems Chapter 12 Enhancing Decision Making LEARNING OBJECTIVES Describe different types of decisions and the decision-making process. Assess how information systems support the activities of managers and management decision making. Demonstrate how decision-support systems (DSS) differ from MIS and how they provide value to the business.

Management Information Systems Chapter 12 Enhancing Decision Making LEARNING OBJECTIVES (cont’d) Demonstrate how executive support systems (ESS) help senior managers make better decisions. Evaluate the role of information systems in helping people working in a group make decisions more efficiently.

Demonstrates IT’s role in restructuring a supply chain. Management Information Systems Chapter 12 Enhancing Decision Making Procter & Gamble Restructures Its Supply Chain Problem: Cost pressures, complex supply chain. Solutions: Deploy modeling and optimization software to maximize return on investment and predict the most successful supply chain. Modeling software fueled with data from Oracle data warehouse improved efficiency and reduced costs. Demonstrates IT’s role in restructuring a supply chain. Illustrates digital technology improving decision making through information systems.

Business Decision Making and the Decision-Making Process Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process Decision-Making Levels: Senior management Middle management and project teams Operational management and project teams Individual employees

Information Requirements of Key Decision-Making Groups in a Firm Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Information Requirements of Key Decision-Making Groups in a Firm Figure 12-1

Unstructured decisions: Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions Unstructured decisions: Novel, non-routine decisions requiring judgment and insights Examples: Approve capital budget; decide corporate objectives

Types of Decisions (Continued) Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions (Continued) Structured decisions: Routine decisions with definite procedures Examples: Restock inventory; determine special offers to customers Semistructured decisions: Only part of decision has clear-cut answers provided by accepted procedures Examples: Allocate resources to managers; develop a marketing plan

Systems for Decision Support Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Systems for Decision Support There are four kinds of systems that support the different levels and types of decisions: Management Information Systems (MIS) Decision-Support Systems (DSS) Executive Support Systems (ESS) Group Decision-Support Systems (GDSS)

Stages in Decision Making Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Stages in Decision Making Figure 12-2

Decision Making in the Real World Management Information Systems Chapter 12 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Decision Making in the Real World In the real world, investments in decision-support systems do not always work because of Information quality: Accuracy, integrity, consistency, completeness, validity, timeliness, accessibility

Decision Making in the Real World (Continued) Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Decision Making in the Real World (Continued) Management filters: Biases and bad decisions of managers Organizational inertia: Strong forces within organization that resist change

The Difference between MIS and DSS Management Information Systems Chapter 12Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT The Difference between MIS and DSS Management Information Systems: Primarily address structured problems Provides typically fixed, scheduled reports based on routine flows of data and assists in the general control of the business

Decision Support Systems: Management Information Systems Chapter 12 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Decision Support Systems: Support semistructured and unstructured problems Greater emphasis on models, assumptions, ad-hoc queries, display graphics Emphasizes change, flexibility, and a rapid response

Types of Decision-Support Systems Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Types of Decision-Support Systems Model-driven DSS: Primarily stand-alone systems Use a strong theory or model to perform “what-if” and similar analyses

Support decision making by enabling user to extract useful information Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Data-driven DSS: Integrated with large pools of data in major enterprise systems and Web sites Support decision making by enabling user to extract useful information Data mining: Can obtain types of information such as associations, sequences, classifications, clusters, and forecasts

Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Components of DSS DSS database: A collection of current or historical data from a number of applications or groups DSS software system: Contains the software tools for data analysis, with models, data mining, and other analytical tools DSS user interface: Graphical, flexible interaction between users of the system and the DSS software tools

Sensitivity analysis (“what-if” models) Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Model: An abstract representation that illustrates the components or relationships of a phenomenon Statistical models Optimization models Forecasting models Sensitivity analysis (“what-if” models)

Overview of a Decision-Support System Management Information Systems Chapter 12Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Overview of a Decision-Support System Figure 12-3

Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Business Value of DSS Data Visualization: Presentation of data in graphical forms, to help users see patterns and relationships Geographic Information Systems (GIS): Special category of DSS that display geographically referenced data in digitized maps

Web-Based Customer Decision-Support Systems Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Web-Based Customer Decision-Support Systems DSS based on the Web and the Internet can support decision making by providing online access to various databases and information pools along with software for data analysis Some of these DSS are targeted toward management, but many have been developed to attract customers.

Web-based Customer Decision-Support Systems (Continued) Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Web-based Customer Decision-Support Systems (Continued) Customer decision making has become increasingly information intensive, with Internet search engines, intelligent agents, online catalogs, Web directories, e-mail, and other tools used to help make purchasing decisions. Customer decision-support systems (CDSS) support the decision-making process of an existing or potential customer.

Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS What Is a GDSS? Group Decision-Support System (GDSS) is an interactive computer-based system used to facilitate the solution of unstructured problems by a set of decision makers working together as a group.

Three Main Components of GDSS: Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Three Main Components of GDSS: Hardware (conference facility, audiovisual equipment, etc.) Software tools (Electronic questionnaires, brainstorming tools, voting tools, etc.) People (Participants, trained facilitator, support staff)

Overview of a GDSS Meeting Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Overview of a GDSS Meeting In a GDSS electronic meeting, each attendee has a workstation. The workstations are networked and are connected to the facilitator’s console, which serves as the facilitator’s workstation and control panel, and to the meeting’s file server. All data that the attendees forward from their workstations to the group are collected and saved on the file server.

Overview of a GDSS Meeting (Continued) Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Overview of a GDSS Meeting (Continued) The facilitator is able to project computer images onto the projection screen at the front of the room. Many electronic meeting rooms have seating arrangements in semicircles and are tiered in legislative style to accommodate a large number of attendees. The facilitator controls the use of tools during the meeting.

Group System Tools Management Information Systems Figure 12-9 Chapter 12 Enhancing Decision Making Group Decision-Support Systems (GDSS) Group System Tools The sequence of activities and collaborative support tools used in an electronic meeting system facilitate communication among attendees and generate a full record of the meeting. Source: From Nunamaker et al., “Electronic Meeting Systems to Support Group Work,” Communications of the ACM, July 1991. Reprinted by permission. Figure 12-9

Enable nonattendees to locate organized information after the meeting. Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS Traditional decision-making meetings support an optimal size of three to five attendees. GDSS allows a greater number of attendees. Enable collaborative atmosphere by guaranteeing contributor’s anonymity. Enable nonattendees to locate organized information after the meeting.

Business Value of GDSS (Continued) Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS (Continued) Can increase the number of ideas generated and the quality of decisions while producing the desired results in fewer meetings Can lead to more participative and democratic decision making

The Role of Executive Support Systems in the Firm Management Information Systems Chapter 12 Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE The Role of Executive Support Systems in the Firm ESS can bring together data from all parts of the firm and enable managers to select, access, and tailor them as needed. It tries to avoid the problem of data overload so common in paper reports.

The Role of Executive Support Systems in the Firm (Continued) Management Information Systems Chapter 12Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE The Role of Executive Support Systems in the Firm (Continued) The ability to drill down is useful not only to senior executives but also to employees at lower levels of the firm who need to analyze data. Can integrate comprehensive firmwide information and external data in timely manner Inclusion of modeling and analysis tools usable with a minimum of training

Business Value of Executive Support Systems Management Information Systems Chapter 12 Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems Ability to analyze, compare, and highlight trends Graphical interface enables users to review data more quickly and with more insight, speeding decision making. Timeliness and availability of data enables more timely decision making, helping businesses move toward a “sense-and-respond” strategy.

Business Value of Executive Support Systems (Continued) Management Information Systems Chapter 12Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems (Continued) Increases upper management span of control, better monitoring ESS based on enterprise-wide data can be used for decentralization of decision making or increase management centralization.

Management Opportunities: Management Information Systems Chapter 12 Enhancing Decision Making MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Management Opportunities: Decision-support systems provide opportunities for increasing precision, accuracy, and rapidity of decisions and thereby contributing directly to profitability