Chapter

1. 13 Chapter Enhancing Decision Making for the Digital Firm

2. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm OBJECTIVES • 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

3. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm OBJECTIVES (Continued) • 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

4. 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

5. As a manager, you will want to know how you can us information systems to improve our decision making, whether you are working alone, or in a group. Just as important, you will bee responsible for the decisions made by the people who work under you, and you’ll want systems to help them make better decisions as well.

6. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Intelligence and Decision Support • It consist of technologies and applications designed to help users make better business decisions. • It provides firms with the capability to amass information, develop knowledge about operations, and change decision-making behavior to achieve profitability and other business goals.

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

8. Figure 13-1 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Systems and Technologies for Business Intelligence

9. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business value of Improve Decision Making

10. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

11. Figure 13-2 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Information Requirements of Key Decision-Making Groups in a Firm

12. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process Senior management • Its concerned with general yet timely information on changes in the industry and society at large that may affect both the long-term and near-term future of the firm, the firm’s strategic goals, short-term and future performance, specific bottlenecks and trouble affecting operational capabilities, and the overall ability of the firm to achieve its objectives.

13. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process • Middle management and project teams. Middle management is concerned with specific, timely information about firm performance, including revenue and cost reduction targets, and with developing plans and budgets to meet strategic goals established by senior management. This group needs to make important decisions about allocating resources, developing short-range plans, and monitoring the performance of departments, task forces, teams, and special project groups. Often the work of middle managers is accomplished in teams or small groups of managers working on a task.

14. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process • Operational management and project teams. Operational management monitors the performance of each subunit of the firm and manages individual employees. Operational managers are in charge of specific projects and allocate resources within the project budget, establish schedules, and make personnel decisions. Operational work may also be accomplished through teams.

15. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process • Individual employees. Employees try to fulfill the objectives of managers above them, following established rules and procedures for their routine activities, Increasingly, however, employees are granted much broader responsibilities and decision –making authority based on their own best judgment and information in corporate systems. Employees may be making decisions about specific vendors, customers, and other employees. Because employees interact directly with the public, how well they make their decisions can directly impact the firm’s revenue streams.

16. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

17. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

18. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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)

19. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Systems for Decision Support

20. Figure 13-3 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Stages in Decision Making

21. Management Information Systems Chapter 13 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

22. 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 .

23. 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 The rise of client/server computing, the Internet, and Web technologies made a major impact on systems that support decision making. • Six Major Trends: • Detailed enterprise-wide data • Broadening decision rights and responsibilities

24. 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) • Intranets and portals • Personalization and customization of information • Extranets and collaborative commerce • Team support tools

25. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

26. Management Information Systems Chapter 13 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

27. 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

29. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

30. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT • types of information that can be yielded from datamining : • Associations are occurrences linked to a single event. For instance, a study of supermarket purchasing patterns might reveal that when corn chips are purchased, a cola drink is purchased 65 percent of the time, but when there is a promotion, cola is purchased 85 percent of the time. With this information, managers can make better decisions because they have learned the profitability of a promotion. • In sequences, events are linked over time. One might find, for example, that if a house is purchased, then a new refrigerator will be purchased within two weeks 65 percent of the time, and an oven will be bought within one month of the home purchase 45 percent of the time.

31. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT • types of information that can be yielded from datamining : • Classificationrecognizes patterns that describe the group to which an item belongs by examining existing items that have been classified and by inferring a set of rules. For example, businesses such as credit card or telephone companies worry about the loss of steady customers. Classification can help discover the characteristics of customers who are likely to leave and can provide a model to help managers predict who they are so that they can devise special campaigns to retain such customers.Clusteringworks in a manner similar to classification when no groups have yet been defined. A datamining tool will discover different groupings within data, such as finding affinity groups for bank cards or partitioning a database into groups of customers based on demographics and types of personal investments.

32. Datamining uses statistical analysis tools as well as neural networks, fuzzy logic, genetic algorithms, or rule-based and other intelligent techniques. It is an important aspect of knowledge discovery, which includes selection, preparation, and interpretation of the contents of large databases to identify novel and valuable patterns in the data.

33. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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

34. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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)

35. Figure 13-4 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Overview of a Decision-Support System

36. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Sensitivity Analysis • Asks “what-if” questions repeatedly to determine the impact of change

37. Figure 13-5 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Sensitivity Analysis

38. There are many ways in which DSS can be used to support decision making. Table 13-4 lists examples of DSS in well-known organizations. Some of these DSS are helping companies improve supply chain management or customer relationship management. Some take advantage of the company-wide data provided by enterprise systems. DSS today can also harness the interactive capabilities of the Web to provide decision-support tools to both employees and customers.

40. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Business Value of DSS • 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 • Supply chain management • Customer relationship management

41. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Business Value of DSS (Continued) • 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

42. Supply chain decisions involve determining “who, what, when, and where” from purchasing and transporting materials and parts through manufacturing products and distributing and delivering those products to customers. Supply chain management systems contain data about inventory, supplier performance, and logistics of materials and finished goods. DSS can draw on such data to help managers examine this complex chain comprehensively and search among a huge number of alternatives for the combinations that are most efficient and cost-effective. The prime management goal might be to reduce overall costs while creasing the speed and accuracy of filling customer orders. DSS for Supply Chain Management

43. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT DSS for Customer Relationship Management • DSS for customer relationship management use datamining to guide decisions about pricing, customer retention, market share, and new revenue streams. These systems typically consolidate customer information from a variety of systems into massive data warehouses and use various analytical tools to slice it into tiny segments for one-to-one marketing

44. Figure 13-6 Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT A DSS for Customer Analysis and Segmentation

45. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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.

46. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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.

47. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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.

48. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm 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)

49. Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm GROUP DECISION-SUPPORT SYSTEMS (GDSS) GDSS Software Tools • Electronic questionnaires aid the organizers in premeeting planning by identifying issues of concern and by helping to ensure that key planning information is not overlooked.Electronic brainstorming tools allow individuals, simultaneously and anonymously, to contribute ideas on the topics of the meeting • Idea organizers facilitate the organized integration and synthesis of ideas generated during brainstorming.Questionnaire tools support the facilitators and group leaders as they gather information before and during the process of setting priorities.

50. Tools for voting or setting priorities make available a range of methods from simple voting, to ranking in order, to a range of weighted techniques for setting priorities or voting.Stakeholder identification and analysis tools use structured approaches to evaluate the impact of an emerging proposal on the organization and to identify stakeholders and evaluate the potential impact of those stakeholders on the proposed project.Policy formation tools provide structured support for developing agreement on the wording of policy statements.Group dictionaries document group agreement on definitions of words and terms central to the project.People refers not only to the participants but also to a trained facilitator and often to a staff that supports the hardware and software Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm