Chapter 8 Enhancing Decision Making for the Digital Firm 8.1 2006 by Prentice Hall
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 8.2 2006 by Prentice Hall
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 8.3 2006 by Prentice Hall
DaimlerChrysler Bremen Plant Case 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 8.4 2006 by Prentice Hall
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 8.5 2006 by Prentice Hall
DECISION MAKING AND DECISION-SUPPORT SYSTEMS Systems and Technologies for Business Intelligence Figure 8-1 8.6 2006 by Prentice Hall
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 8.7 2006 by Prentice Hall
DECISION MAKING AND DECISION-SUPPORT SYSTEMS Information Requirements of Key Decision-Making Groups in a Firm Figure 8-2 8.8 2006 by Prentice Hall
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 8.9 2006 by Prentice Hall
DECISION MAKING AND DECISION-SUPPORT SYSTEMS Structured decisions: Types of Decisions (Continued) 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 8.10 2006 by Prentice Hall
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) 8.11 2006 by Prentice Hall
DECISION MAKING AND DECISION-SUPPORT SYSTEMS Stages in Decision Making Figure 8-3 8.12 2006 by Prentice Hall
DECISION MAKING AND DECISION-SUPPORT SYSTEMS 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 8.13 2006 by Prentice Hall
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 8.14 2006 by Prentice Hall
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: DECISION MAKING AND DECISION-SUPPORT SYSTEMS Detailed enterprise-wide data Broadening decision rights and responsibilities 8.15 2006 by Prentice Hall
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 8.16 2006 by Prentice Hall
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 8.17 2006 by Prentice Hall
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 8.18 2006 by Prentice Hall
SYSTEMS FOR DECISION SUPPORT Model-driven DSS: Types of Decision-Support Systems Primarily stand-alone systems Use a strong theory or model to perform what-if and similar analyses 8.19 2006 by Prentice Hall
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 8.20 2006 by Prentice Hall
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 8.21 2006 by Prentice Hall
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) 8.22 2006 by Prentice Hall
SYSTEMS FOR DECISION SUPPORT Overview of a Decision-Support System Figure 8-4 8.23 2006 by Prentice Hall
SYSTEMS FOR DECISION SUPPORT Sensitivity Analysis Figure 8-5 8.24 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 Supply chain management Customer relationship management 8.25 2006 by Prentice Hall
Pricing Decisions Asset Utilization SYSTEMS FOR DECISION SUPPORT Business Value of DSS (Continued) 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 8.26 2006 by Prentice Hall
SYSTEMS FOR DECISION SUPPORT A DSS for Customer Analysis and Segmentation Figure 8-6 8.27 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 SYSTEMS FOR DECISION SUPPORT Web-Based Customer Decision-Support Systems Some of these DSS are targeted toward management, but many have been developed to attract customers. 8.28 2006 by Prentice Hall
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. 8.29 2006 by Prentice Hall
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. 8.30 2006 by Prentice Hall
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) 8.31 2006 by Prentice Hall
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. 8.32 2006 by Prentice Hall
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. 8.33 2006 by Prentice Hall
GROUP DECISION-SUPPORT SYSTEMS Group System Tools Source: From Nunamaker et al., Electronic Meeting Systems to Support Group Work, Communication of the ACM, July 1991. Reprinted with permission. Figure 8-7 8.34 2006 by Prentice Hall
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. 8.35 2006 by Prentice Hall
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 8.36 2006 by Prentice Hall
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. 8.37 2006 by Prentice Hall
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 8.38 2006 by Prentice Hall
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. 8.39 2006 by Prentice Hall
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. 8.40 2006 by Prentice Hall
EXECUTIVE SUPPORT IN THE ENTERPRISE Executive Support Systems and the Digital Firm 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 8.41 2006 by Prentice Hall
EXECUTIVE SUPPORT IN THE ENTERPRISE Executive Support Systems and the Digital Firm (Continued) Verizon Communications and Pharmacia Corporation: Monitoring corporate performance with Digital Dashboards and Balanced Scorecard Systems Roadway Express: Enterprise-Wide Reporting and Analysis 8.42 2006 by Prentice Hall
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 8.43 2006 by Prentice Hall
MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Management Challenges: Building systems that can actually fulfill Executive Information Requirements Changing management thinking to make better use of systems for decision support Organizational resistance 8.44 2006 by Prentice Hall
MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Solution Guidelines: Flexible Design and Development: 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. 8.45 2006 by Prentice Hall
MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Solution Guidelines (Continued) Training and Management Support: User training, involvement, and experience; top management support; and length of use are the most important factors in the success of management support systems. 8.46 2006 by Prentice Hall