13.1 © 2006 by Prentice Hall 13 Chapter Enhancing Decision Making for the Digital Firm

13.2 © 2006 by Prentice Hall Describe different types of decisions and the decision-making process Evaluate the role of information systems in helping people working individually and in a group make decisions more efficiently Demonstrate how executive support systems can help senior managers make better decisions Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm OBJECTIVES

13.3 © 2006 by Prentice Hall Assess how systems that support decision making can provide value for the firm Identify the challenges posed by decision-support systems, group decision-support systems, and executive support systems and management solutions OBJECTIVES (Continued) Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.4 © 2006 by Prentice Hall Challenge: Coordinate the daily arrival of 70 rail cars and 500 trucks to ensure just-in-time delivery of car parts Solutions: Adopt Transportation Efficiency Support System (TESYS) to synchronize the deliveries with available loading docks and production schedules Develop new business processes for coordinating logistics with production needs Illustrates the how IT enhances decision making and increases business process efficiency in a manufacturing environment Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DaimlerChrysler Bremen Plant Case

13.5 © 2006 by Prentice Hall DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business intelligence enables firms to: Business Intelligence and Decision Support Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Amass information Develop knowledge about operations Change decision-making behavior to achieve profitability and other business goals

13.6 © 2006 by Prentice Hall Systems and Technologies for Business Intelligence DECISION MAKING AND DECISION-SUPPORT SYSTEMS Figure 13-1 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.7 © 2006 by Prentice Hall Business Decision Making and the Decision-Making Process Senior management Middle management and project teams Operational management and project teams Individual employees Decision-Making Levels: DECISION MAKING AND DECISION-SUPPORT SYSTEMS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.8 © 2006 by Prentice Hall DECISION MAKING AND DECISION-SUPPORT SYSTEMS Information Requirements of Key Decision-Making Groups in a Firm Figure 13-2 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.9 © 2006 by Prentice Hall Unstructured decisions: Types of Decisions DECISION MAKING AND DECISION-SUPPORT SYSTEMS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Novel, non-routine decisions requiring judgment and insights Examples: Approve capital budget; decide corporate objectives

13.10 © 2006 by Prentice Hall Structured decisions: DECISION MAKING AND DECISION-SUPPORT SYSTEMS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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 Types of Decisions (Continued)

13.11 © 2006 by Prentice Hall Management Information Systems (MIS) Decision-Support Systems (DSS) Executive Support Systems (ESS) Group Decision-Support Systems (GDSS) Systems for Decision Support There are four kinds of systems that support the different levels and types of decisions: Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS

13.12 © 2006 by Prentice Hall Stages in Decision Making Figure 13-3 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS

13.13 © 2006 by Prentice Hall Information quality: Accuracy, integrity, consistency, completeness, validity, timeliness, accessibility Decision Making in the Real World In the real world, investments in decision-support systems do not always work because of Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS

13.14 © 2006 by Prentice Hall Management filters: Biases and bad decisions of managers Organizational inertia: Strong forces within organization that resist change 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)

13.15 © 2006 by Prentice Hall Six Major Trends: Detailed enterprise-wide data Broadening decision rights and responsibilities Trends in Decision Support and Business Intelligence The rise of client/server computing, the Internet, and Web technologies made a major impact on systems that support decision making. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS

13.16 © 2006 by Prentice Hall Intranets and portals Personalization and customization of information Extranets and collaborative commerce Team support tools Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Trends in Decision Support and Business Intelligence (Continued)

13.17 © 2006 by Prentice Hall Primarily address structured problems Provides typically fixed, scheduled reports based on routine flows of data and assists in the general control of the business SYSTEMS FOR DECISION SUPPORT The Difference between MIS and DSS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Management Information Systems:

13.18 © 2006 by Prentice Hall Support semistructured and unstructured problems Greater emphasis on models, assumptions, ad-hoc queries, display graphics Emphasizes change, flexibility, and a rapid response SYSTEMS FOR DECISION SUPPORT Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Decision Support Systems:

13.19 © 2006 by Prentice Hall Model-driven DSS: SYSTEMS FOR DECISION SUPPORT Types of Decision-Support Systems Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Primarily stand-alone systems Use a strong theory or model to perform “what-if” and similar analyses

13.20 © 2006 by Prentice Hall Data-driven DSS: SYSTEMS FOR DECISION SUPPORT Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

13.21 © 2006 by Prentice Hall 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 SYSTEMS FOR DECISION SUPPORT Components of DSS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.22 © 2006 by Prentice Hall SYSTEMS FOR DECISION SUPPORT Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Statistical models Optimization models Forecasting models Sensitivity analysis (“what-if” models) Model: An abstract representation that illustrates the components or relationships of a phenomenon

13.23 © 2006 by Prentice Hall Overview of a Decision-Support System Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Figure 13-4 SYSTEMS FOR DECISION SUPPORT

13.24 © 2006 by Prentice Hall Sensitivity Analysis Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Figure 13-5

13.25 © 2006 by Prentice Hall Providing fine-grained information for decisions that enable the firm to coordinate both internal and external business processes much more precisely Helping with decisions in SYSTEMS FOR DECISION SUPPORT Business Value of DSS Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Supply chain management Customer relationship management

13.26 © 2006 by Prentice Hall Pricing Decisions Asset Utilization 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 SYSTEMS FOR DECISION SUPPORT Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Business Value of DSS (Continued)

13.27 © 2006 by Prentice Hall A DSS for Customer Analysis and Segmentation Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Figure 13-6

13.28 © 2006 by Prentice Hall 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. SYSTEMS FOR DECISION SUPPORT Web-Based Customer Decision-Support Systems Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.29 © 2006 by Prentice Hall Customer decision making has become increasingly information intensive, with Internet search engines, intelligent agents, online catalogs, Web directories, , 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. SYSTEMS FOR DECISION SUPPORT Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Web-based Customer Decision-Support Systems (Continued)

13.30 © 2006 by Prentice Hall 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. GROUP DECISION-SUPPORT SYSTEMS What Is a GDSS? Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm

13.31 © 2006 by Prentice Hall Hardware (conference facility, audiovisual equipment, etc.) Software tools (Electronic questionnaires, brainstorming tools, voting tools, etc.) People (Participants, trained facilitator, support staff) Three Main Components of GDSS: Three Main Components of GDSS: Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS

13.32 © 2006 by Prentice Hall 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 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS

13.33 © 2006 by Prentice Hall 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. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS Overview of a GDSS Meeting (Continued)

13.34 © 2006 by Prentice Hall Group System Tools Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Figure 13-7 GROUP DECISION-SUPPORT SYSTEMS Source: From Nunamaker et al., “Electronic Meeting Systems to Support Group Work,” Communication of the ACM, July Reprinted with permission.

13.35 © 2006 by Prentice Hall 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 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS

13.36 © 2006 by Prentice Hall 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 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS (Continued)

13.37 © 2006 by Prentice Hall 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. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm The Role of Executive Support Systems in the Firm EXECUTIVE SUPPORT IN THE ENTERPRISE

13.38 © 2006 by Prentice Hall 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 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm EXECUTIVE SUPPORT IN THE ENTERPRISE The Role of Executive Support Systems in the Firm (Continued)

13.39 © 2006 by Prentice Hall 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. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Business Value of Executive Support Systems EXECUTIVE SUPPORT IN THE ENTERPRISE

13.40 © 2006 by Prentice Hall 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 Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems (Continued)

13.41 © 2006 by Prentice Hall Four Star Distribution: Uses ESS for competitive intelligence; global buying trends can be shared with manufacturers, distributors, sales representatives to get latest products to customer before selling season begins Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Executive Support Systems and the Digital Firm EXECUTIVE SUPPORT IN THE ENTERPRISE

13.42 © 2006 by Prentice Hall Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm EXECUTIVE SUPPORT IN THE ENTERPRISE Verizon Communications and Pharmacia Corporation: Monitoring corporate performance with Digital Dashboards and Balanced Scorecard Systems Roadway Express: Enterprise-Wide Reporting and Analysis Executive Support Systems and the Digital Firm (Continued)

13.43 © 2006 by Prentice Hall Decision-support systems provide opportunities for increasing precision, accuracy, and rapidity of decisions and thereby contributing directly to profitability Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Management Opportunities: MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS

13.44 © 2006 by Prentice Hall Building systems that can actually fulfill Executive Information Requirements Changing management thinking to make better use of systems for decision support Organizational resistance Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Management Challenges: MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS

13.45 © 2006 by Prentice Hall Users must work with IS specialists to identify a problem and a specific set of capabilities that will help them arrive at decisions about the problem. The system must be flexible, easy to use, and capable of supporting alternative decision options. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm Solution Guidelines: MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Flexible Design and Development:

13.46 © 2006 by Prentice Hall User training, involvement, and experience; top management support; and length of use are the most important factors in the success of management support systems. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Training and Management Support: Solution Guidelines (Continued)