1. Welcome to CPIS-320 Decision Support Systems - Theory
Instructor : Dr. Nahla Aljojo

2. Decision Support Systems and Business Intelligence
Chapter 1
Decision Support Systems and Business Intelligence

3. Changing Business Environment
Companies are moving aggressively to computerized support of their operations => Business Intelligence (BI)
Business Pressures–Responses–Support Model
Business pressures: the actions done in the business environment, which require us to take some actions are called business pressures. There are result of today's competitive business climate
Responses to counter the pressures
Support to better facilitate the process

4. Business Pressures–Responses–Support Model

5. The Business Environment
The environment in which organizations operate today is becoming more and more complex, creating:
Opportunities, and
problems/threat
Example: globalization: Today, you can easily find suppliers and customers in many countries which mean you can buy cheaper materials and sell more of your products and services: great opportunities exist. However, globalization also means more and stronger competitors

6. Main Factors Affecting a Business Environment
FACTOR DESCRIPTION
Markets Strong competition
Expanding global markets
Blooming electronic markets on the Internet
Innovative marketing methods
Opportunities for outsourcing with IT support
Need for real-time, on-demand transactions
Consumer Desire for customization
demand Desire for quality, diversity of products, and speed of delivery Customers getting powerful and less loyal
Technology More innovations, new products, and new services
Increasing obsolescence rate
Increasing information overload
Social networking, Web 2.0 and beyond
Societal Growing government regulations and deregulation
Workforce more diversified, older, and composed of more women
Prime concerns of homeland security and terrorist attacks
Necessity of Sarbanes-Oxley Act and other reporting-related legislation
Increasing social responsibility of companies
Greater emphasis on sustainability
Main Factors Affecting a Business Environment

7. Organizational Responses
Be Reactive, Anticipative, Adaptive, and Proactive (practical)
Managers may take actions, such as
Employ strategic planning
Use new and innovative business models
Restructure business processes
Participate in business alliances
Improve corporate information systems
Improve partnership relationships
Encourage innovation and creativity …cont…>

8. Managers actions, continued
Improve customer service and relationships
Move to electronic commerce (e-commerce)
Move to make-to-order production and on-demand manufacturing and services
Use new IT to improve communication, data access (discovery of information), and collaboration
Respond quickly to competitors' actions (e.g., in pricing, promotions, new products and services)
Automate many tasks of white-collar employees
Automate certain decision processes
Improve decision making by employing analytics

9. Main Objective of DSS: Closing the Strategy Gap
One of the major objectives of computerized decision support is to facilitate closing the gap between the current performance of an organization and its desired performance, as expressed in its mission, objectives, and goals, and the strategy to achieve them.

10. Review questions
1. List the components of and explain the Business Pressures–Responses–Support Model
2. What are some of the major factors in today`s business environment?
3. What are some of the major Response activities that organizations take?

11. Managerial Decision Making
Management is a process by which organizational goals are achieved by using resources
Inputs: resources
Output: attainment of goals
The degree of success of the organization and the manager is often measured by the ratio of outputs to inputs. : outputs / inputs
Management  Decision Making
Management Functions: Planning, organizing, leading and controlling
Many managerial activities in all roles revolve around decision making. Managers especially those at high level are primarily decision makers.
Decision making: selecting the best solution from two or more alternatives

12. Managerial Decision Making
Many managerial activities in all roles revolve around decision making. Managers especially those at high level are primarily decision makers.
For years, managers considered decision making an art. (What is the difference between science and art?)
This art was purely based on creativity, judgment, intuition and experience, rather than on systematic quantitative method – that is science.
However, systematic, methodical thoughtful, analytic decision making outperforms the flashiness of interpersonal skills.

13. Managerial Decision Making Simple Decision Making Process
Managers usually make decisions by following a four- step process (a.k.a. the scientific approach)
1. Realize and define the problem (or opportunity)
2. Construct a model that describes the real-world problem
Understand the components of the problem and the related environment
3. Identify possible solutions to the modeled problem and evaluate the solutions
4. Compare, choose, and recommend a potential solution to the problem

14. Managerial Decision Making Decision making is difficult, because
Technology, information systems, advanced search engines, and globalization result in more and more alternatives from which to choose
Government regulations and the need for compliance, political instability, competition, and changing consumer demands produce more uncertainty, making it more difficult to predict consequences and the future
Some factors require to make rapid decisions, the frequent and unpredictable changes that make trial-and-error learning difficult, and the potential costs of making mistakes
The business environment is getting more and more complex.

15. How to solve this difficulty?
Computerized DSS can facilitate decision making
From automated factories to Artificial intelligence (AI) methods to the evaluation of proposed mergers and acquisitions.
BI tools such as
Data warehousing, data mining, online analytical processing(OLAP), dashboards are corners of today’s management

16. Review Questions
1. Why have some argued that management is the same as decision making?
2. Describe the four steps managers take in making a decision?
3. Why the Decision making is difficult?
4. What is the difference between science or art?
5. Is decision making science or art?

17. Computerized Support for DM Why Use Computerized DSS?
Computerized DSS can facilitate decision via:
Speedy computations
Improved communication and collaboration
Increased productivity of group members
Improved data management
Overcoming cognitive limits
Quality support; agility support
Using Web; anywhere, anytime support
cognitive : Having a basis in of empirical factual knowledge.
Agility : quickness

18. Computerized Decision Making
Managerial decision making
Computerized support
Computerized decision making

19. Systematic Decision-Making Process

20. Decision-Making Process
Intelligence. This phase involves searching for condition; that call for decisions.
Design. This phase involves Inventing, developing, and analyzing possible alternative courses of action (solutions).
Choice. This phase involves selecting 3 course of action from among those available.
Implementation". This phase involves adapting the selected course of action to the decision situation (i.e., problem solving of opportunity exploiting).

21. A Decision Support Framework (by Gory and Scott-Morten, 1971)

22. A Decision Support Framework – cont.
Types of Control
Strategic planning (top-level, long-range)
Management control (middle-level tactical planning)
Operational control (low-level)
Strategic planning
Management control
Operational control
Green area represents the volume of the decision making

23. Types of Control
Strategic planning, which involves defining long range goals and policies for resource allocation
Management control, the acquisition and efficient use of resources in the accomplishment of organizational goals
Operational control, the efficient and effective execution of specific tasks

24. Types of Decisions Degree of Structuredness (Simon, 1977)
Decision are classified as
Highly structured (a.k.a. programmed)
Semi-structured
Highly unstructured (i.e., non-programmed)
Structured decisions may be programmed directly; semi-structured and unstructured may not be programmed. There can be a supportive system for them called DSS.

25. Computer Support for Structured Decisions
Structured decisions are for structured problems
Properties of structured problems
Problem for which the existing state and desired state are clearly identified, and the methods to reach the desired state are fairly obvious.
structured problems can usually be broken down into a series of well- defined steps
Structured problems are encountered repeatedly, have a high level of structure
It is possible to abstract, analyze, and classify them into specific categories
e.g., make-or-buy decisions, capital budgeting, resource allocation, distribution, procurement, and inventory control
For each category a solution approach is developed, generally a quantitative formula => Management Science (MS)

26. Example from daily life
Food preparation at Al-Baik etc. is a structured problem
Food preparation at home is unstructured problem (USUALLY)
Why?
Can make it structure if you follow the same steps, time, and amount of ingredients
Can you give some examples from your daily life?

27. Computer Support for Structured Decisions Management Science Approach
Also referred to as Operation Research
In solving problems, managers should follow the five- step MS approach
1. Define the problem / opportunity
2. Classify the problem into a standard category (*)
3. Construct a model that describes the real-world problem
4. Identify possible solutions to the modeled problem and evaluate the solutions
5. Compare, choose, and recommend a potential solution to the problem

28. Computer Support for Structured Decisions Management Science Approach cont.
Management Science is based on mathematical modeling (i.e. algebraic expressions that describe problems).
Modeling involves transforming a real-world problem into an appropriate prototype structure (model).

29. Computer Support for Structured Decisions Automated Decision Making
A relatively new approach to supporting decision making
Applies to highly structured decisions
Automated decision systems (ADS) (or decision automation systems)
An ADS is a rule-based system that provides a solution to a repetitive managerial problem in a specific area
e.g., simple-loan approval system
Determine the price of a product (e.g. airline ticket)

30. Computer Support for Structured Decisions Automated Decision Making
ADS initially appeared in the airline industry called revenue (or yield) management (or revenue optimization) systems
dynamically price tickets based on actual demand
Today, many service industries use similar pricing models
ADS are driven by business rules!

31. Computer Support for Structured Decisions Automated Decision-Making Framework

32. Application case
Giant Food Stores Prices the entire store automatically

33. Unstructured Decisions
Situation in which its existing state and the desired state are UNCLEAR and, hence, methods of reaching the desired state CANNOT be found.
Properties of unstructured problems
have unclear goals and incomplete information
require the use of intuition, judgment, reasoning, and memory.
require customized solutions
They are complex and ill-defined.
They have many possible answers.
They do not have one best answer.
Unstructured problems can be only partially supported by standard computerized quantitative methods
They benefit from data and information

34. Unstructured Decisions
Here is an example of an unstructured problem: The population of your community is growing. Your water supply will not support many new people.   What do you do?
This is a complex problem. It affects the people, the environment, and the quality of life itself. To arrive at a good solution, you would need to use math, science, political science and psychology, and probably more!
This problem actually occurs frequently in areas with a growing population.   In one community facing this problem, 14 possible solutions were presented to the public. A solution was then chosen that the majority of the public agreed upon. It wasn't the "best" solution because all of the 14 possible solutions had strengths and weaknesses.
The lesson here is that unstructured problems usually have several workable solutions.   Each solution has advantages and disadvantages that depend on who is affected by the solution.

35. Computer Support for Semi-structured Problems
Solving semi-structured problems may involve a combination of standard solution procedures and human judgment
MS handles the structured parts while DSS deals with the unstructured parts
With proper data and information, a range of alternative solutions, along with their potential impacts

36. Review Questions
1. What are structured, Unstructured, and semistructured decisions?
Provide two examples of each.
2. Define operational control, managerial control, and strategic planning? Provide two examples of each.
3. What are the nine cells of the decision framework? Explain what each is for.
4. How can computers provide support for making structured decisions?
5. Define automated decision systems (ADS)?
6. How can computers provide support to semistructured and unstructured decisions?

37. High-Level Architecture of a DSS
Components of the DSS Architecture
Data,
Model,
Knowledge/Intelligence
User, Interface (API and/or user interface)

38. Business Intelligence (BI)
BI is an umbrella term that combines architectures, tools, databases, analytical tools, applications, and methodologies
Like DSS, BI a content-free expression, so it means different things to different people
BI's major objective is to enable easy access to data (and models) to provide business managers with the ability to conduct analysis
BI helps transform data, to information (and knowledge), to decisions and finally to action

39. The Evolution of BI Capabilities
EIS : expert intelligent systems
ESS : expert support systems

40. A High-Level Architecture of BI

41. Components in a BI Architecture
The data warehouse is a large repository of well-organized historical data
Business analytics are the tools that allow transformation of data into information and knowledge
Business performance management (BPM) allows monitoring, measuring, and comparing key performance indicators
User interface (e.g., dashboards) allows access and easy manipulation of other BI components

42. The Benefits of BI
The ability to provide accurate information when needed, including a real-time view of the corporate performance and its parts
A survey by Thompson (2004)
Faster, more accurate reporting (81%)
Improved decision making (78%)
Improved customer service (56%)
Increased revenue (49%)

43. Review Questions 1. Describe the Architecture of DSS? 2. Define BI?
3. List and describe the major components of BI?
4. What are the major similarities and differences of DSS and BI?