Class 10 Decision Making Processes, System Support & Decision Support System

1. MIS 2000 Instructor: Bob Travica Class 10 Decision Making Processes, System Support & Decision Support System Updated Oct. 2014

2. Outline • Decision making and problem solving process - rational (scientific) model • MIS & DSS support to rational decision making • Decision Support System • Decision making under constraints (realistic) • Summary • Exercise 615 Management Information Systems 2 of 13

3. 1. Identify (define) problem ? 5. Evaluate/Adjust solution 2. Define optional solutions P 0 1 3 3. Evaluate optional solutions exhaustively and select best Decision making and problem solving process: Rational (Scientific) Model (H. Simon, 1950s) 1 4. Implement solution % • Steps 1-3 are decision making; with steps 4-5 the whole process • is problem solving. Read the case of sales drop in the chapter. • Desirable model in business and generally but its assumptions limit real applications.

4. Rational Decisional Making Process and Information Systems IDENTIFY PROBLEM DEFINE OPTIONS SELECT OPTION Manager (Business Analyst assisting) Evaluate options and define decision Define problem (may include negotiations) Create optional solutions Create reports & queries MIS TPS Create organization performance indicators & environment scan DSS Process & evaluate options/ rank options Store options and evaluation criteria • The role of MIS is to inform the user so that a potential problem in operations can be identified. Also in Creating optional solutions. TPS may help. • Model-driven DSS can support the entire DM process. Best option can be proposed by DSS, but the user should still make the ultimate choice. 615 Management Information Systems

5. Decision Support System (DSS) • Executive managers’ decision making is supported by DSS. MIS • Outputs: • Models • Scenarios and outcomes • Results of tests • Relationships & patterns Data modeling & Data mining DSS • DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work. Sales… Inventory ENVIRON- MENT • DSS uses outputs from MIS and data from sources outside the company. • Time horizon of DSS: Future – from close (day, week) to far (one+ years). More 615 Management Information Systems

6. 615 Management Information Systems • Management tasks: Planning and forecasting • Visually represent key performance indicators (e.g., financial ratios); dashboards. • May have a “drill-down capability” to find what is behind aggregated figures

7. DSS Types Data transformation models TPS MIS environment MIS environment - Simulation - Scenario - Result of stats tests New relationships in sequence, New relationships per transaction, Groupings *** • Data-driven: Looking for patterns in large data sets. • Data mining and Big Data Data Warehouse Data Mining software 615 Management Information Systems • Model–driven: Processes data using different transformationmethods (optimization, if-then analysis, statistical tests); cited in chapter’s case

8. Other Models of Decision Making Satisfycing (Good Enough) Go for perfect fruit? • Rational decision making not always possible • Organizational & human limitations (time pressure, resources, difficulties in understanding a situation) • Alternative: Making a choice that is good enough Go for low-hanging fruit? 3 Focus on key evaluation criterion 4 Select first solution that fits the criterion 2 Define some optional solutions 1 Define problem under constraints More 615 Management Information Systems

9. Other Models: Zig-Zag Problem Solving (“Muddling Through”) • How decision making typically runs in public organizations: - different interests that counter each other - nobody to “cut the knot” in struggles over budget - “endless” decision processes, like walking through mud. • Issues: What is the problem? Different things for different people! Negotiations and maneuvering in defining problem. • Optional decisions defined tentatively. • Decision maker implements just a part of a chosen option; If blocked, switches to optional solution… and over again… 615 Management Information Systems

10. Zig-Zag Problem Solving – Process Diagram Administrator Internal Stakeholder External Stakeholder Define problem Define problem Define problem Make a compromise definition Blocked? Implement an option partly Evaluate situation Y Implement another part React React N Evaluate situation React React Switch to another option Only without blocking to any part of a decision, it is completely realized. But there is usually some blocking and the loop may seem infinite. 615 Management Information Systems

11. Summary 615 Management Information Systems In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) process includes 2 more steps: (4) implement solution, and (5) evaluate effect & adjust. DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. Role of MIS in decision making processes is to inform the user at the problem identification step of rational DM. DSS can support whole DM process. People still make the final choice. Satisficing and Zig-Zag DM acknowledge real constraints in problem solving.