Decision Support and Business Intelligence SystemsChapter 1 Decision Support and Business Intelligence

o Organization works in a dynamic environmento change continuously & rapidly

o more & more complexo Forces in the external environment includes:o 1. Economic 2. Technology 3. culture 4. Social

5. customers 6. competitors 7. Government rules & regulations 8. suppliers

o These forces put the organization (public & private) under pressures to respond quickly and rapidly to these changes

Introduction

o The response…..o through frequent & quick (strategies,

tactical & operational decisions)…..o complex decisions …. o Requires Data, information &

Knowledge in order to make a decisiono The decisions must be done quickly &

frequently in real time o Some times…complex decisions

require computerized support

Cont.

o Globalization global companies

o environment (competitive market)

o move to computerized support

o The reasons … Business Pressures – Responses – Support model

Changing business environment & computerized decision support

o Pressures results from today’s business climate

o Responses actions taken by companies to (meet/counter/face) the pressures OR take advantages of opportunities available in the external environment

o Computerized Support facilitate the monitoring of the environment + enhances the response actions taken by the organization

The Business Pressures-Responses-Support Model

• Globalization• Customer demand

• Government regulations

• Market conditions

• CompetitionBusiness

Environmental Factors

• Strategy• Collaboration• Productivity• New vendors• Agility

Organization Responses • Analyses

• Predictions• Decisions

Decisions & Support

o Intensity of most of the environmental factors increases with time …

o Leading to more pressures, more competition

o Organizations & departments face decreased budgets … increase performance & profit

The Business environment

o Managers may take actions :o 1. Employ strategic planningo 2.Use new & innovation business modelso 3. Allianceso 4. Improve information systemso 5. Encourage innovation & creativityo 6. Move to electronic commerceo 7. Improve customer services & relationshipso 8. Move to make-to-order productiono 9. Use new IT to improve communication, data accesso 10. Respond quickly to competitors’ actionso 11.Improve decision making

Organizational Responses

o Closing the strategy GAP: One of the major objectives of computerized decision support (CDS) is to facilitate closing the gap between the current performance & the desired performance as expressed in mission, objectives and goals in addition to strategy to achieve them.

Decisions & Support

o Management is a process by which organizational goals are achieved by using resources.

o The degree of success of the organization and the manager is often measured by the ratio of output to input… PRODUCTIVITY – ORGNIZATIONAL & MANAGERIAL PERFORMANCE.

Managerial Decision Making

o The level of productivity depends on the performance of managerial functions, such as planning, organizing, directing and controlling….in order to perform their functions, managers are engaged in a continuous process of making decisions.

o Making a decision means selecting the best alternative from 2 or more solutions.

o Managers perform 10 major roles that can be classified into 3 major categories:o Interpersonal, Informational &

Decisional

Managerial Roles

o Figurehead

o Leader

o Liaison

Interpersonal Role

o Monitor

o Disseminator

o Spokesperson

Informational Role

o Entrepreneur

o Disturbance handler

o Resource allocator

o Negotiator

Decisional Role

o In order to perform these roles, managers need information…

Delivered by networks…Web technology

Use computers directly to support & improve decision making

o Management was considered an art because a variety of individual styles could be used in approaching and successfully solving the managerial problems.

o Styles based on … Creativity, Judgment, Intuition and experience rather than on quantitative methods.

The Decision-Making Process

o 1. Define the problemo 2. Construct a model that describe

the real-world problemo 3. Identify possible solutions to the

problem & Evaluate the solutiono 4. Compare, Choose and

recommend a potential solution to the problem

Steps

o - The sufficient alternative solutions must be consider.

o - The consequences of using these alternatives can be reasonably predicted.

o - The comparisons are done properly.

o 1. Payrollo 2. Bookkeepingo 3. Designo 4. Application of artificial

intelligenceo 5. Evaluation

Computerized support for decision making

o Computer applications have moved from transaction processing & monitoring activities to:

Problem analysis & Solution applications

Computerized support for decision making

o 1. Speedy computations.

o 2. Improved communication & collaboration.

o 3. Increased productivity of group members.

Why We Use Computerized Decision Support Systems

o 4. Improved data management

o 5. Managing giant data warehouses

o 6. Quality support

o 7. Agility support

o 8. Overcoming cognitive limits in processing and storing information.

o 9. Using the web

o 10. Anywhere, anytime support.

o The Gorry & Scott-Morton Classical Framework

o Framework: 3-by-3 matrix, includes two dimensions

o A. the degree of structured problems

o B. type of control

An early framework for computerized decision support

o Structured Decision (Programmed): Routine & Repetitive problems for which standard solution methods exist.

o Semi-structured : fall between structured & unstructured problems.

o Unstructured (non-programmed): Fuzzy, complex problem for which there are no clear solution.

Type of Decision (Simon 1977)

o 1. Intelligence : this phase involves searching for conditions that call for decisions.

o 2. Design: This phase involves inventing, developing and analyzing possible alternative solution

Decision making process ACCORDING to Simon

o 3. Choice : this phase involves selecting a course of action (solution) from among the alternatives

o 4. Implementation: this phase involves adapting the selected course of action to the decision situation

Intelligence

Design

Choice

Implementation

The Relationships among the four phases

o Intelligence : Environmental scanning, Benchmarks

o Design: Creativity, Finding alternatives, Analyzing solutions

o Choice: Compare and select the best solution

o Implementation: Put solution into action

o Strategic Planning; which involves defining long-rang goals & policies for resource allocation.

o Management Control; the acquisition and efficient use of resources.

o Operational Control; the efficient

and effective execution of specific tasks.

Types of Control

Type of Decision

Type of Control Operational Control Managerial Control Strategic Planning

Structured Accounts receivable

Accounts payable

Order entry

Budget analysis

Short-term forecasting

Make-or-buy

Financial management

Investment portfolio

Semi-structured

Inventory Control

Reward system

Project scheduling

Building new plant

HR policies New product

planning Unstructured Buying

software Approving

loans

Buying hardware

Negotiating

R&D planning SR planning

o Computers have supported structured & some semi-structured decisions, especially those that involve operational & managerial control.

o Structured problems: Abstract, analyze and classify problems into specific categories.

Computer support for structured decisions

o The management science approach (operations research (OR) approach)

o According to this approach, managers should follow 5 step in solving problems

1. Define the problem2. Classify the problem into a standard category .3. Construct a model that describes the real-world problem

Management Science (MS)

o 4. Identify possible solutions to the modeled problem & evaluate the solutions.

o 5. Compare, choose and recommend a potential solution to the problem

o MS is based on mathematical modeling.

o Modeling involves transforming a real-world problem into model.

o Computerized methodologies can find solutions to the standard category models quickly & efficiently

o A New approach to supporting decision making (Automated Decision Systems (ADS)).

o ADS is a Rule-based system, provides a solution, usually in one functional area (finance) to a specific repetitive managerial problem, usually in one industry.

Automated Decision making

o Example : how to price products / service. Page 14 “case study”

o Unstructured problems can be supported by standard computerized quantitative methods by develop customized solutions.

o Such solutions may benefit from:1. Data & information generated from corporate & external data sources.

Computer Support for Unstructured Decisions

2. Intuition and Judgment

3. Computerized communication and collaboration technologies

4. Knowledge management

o Solving semi-structured problems may involve a combination of standard solution procedures & human judgment.

o DSS can improve the quality of the information by providing a range of alternative solutions with their potential impacts.

Computer Support for Semi-structured Problems

o An interactive computer-based systems, which help decision makers utilize data & models to solve unstructured problems.

o The term DSS can be used as an umbrella term to describe any computerized system that support decision making in an organization.

The concept of DSS

o In DSS, the problem is unstructured, but the initial analysis will based on the decision maker’s structured definition of the situation, using MS approach.

o DSS use data available from corporate data sources.

o DSS provide a quick what-if analysis.

o The DSS is flexible & responsive enough to allow managerial intuition & judgment to be incorporated into the analysis

o DSS used: o 1. To build customized applications

for unstructured or semi-structured problems

o 2. According to DSS application itself

o 1. Data:o - Every problem that has to be

solved & every opportunity or strategy to be analyzed requires some data.

o - Data are the first component of the DSS architecture.

o - These data can come from many sources such as the Web

The Architecture of DSS

o 2. Modelso - Data related to a specific situation

are manipulated by using models.o - These models can be: Standard

( Excel function), or Customized.

o 3. Knowledge (intelligence):

o 4. Users:

o A. Model-Oriented DSS; using quantitative models to generate a recommended solution to a problem.

o B. Data-Oriented DSS; which support ad hoc reporting and queries.

Types of DSS

o Managers let their staff do some supportive analysis by using DSS tools.

o OLAPo Data warehousingo Data miningo Intelligent systemso delivered via Web technology,

added promised capabilities & easy access to tools, models and data

Evolution of DSS into Business Intelligence

o Definitions of BIo A Brief History of BIo The Architecture of BIo Styles of BIo The Benefits of BIo The Origins & Drivers of BI

Business Intelligence (BI)

o Business intelligence (BI): is an umbrella term that combines architectures, tools, data-base, analytical tools, applications and methodologies.

Definitions of BI

o MIS reporting systems (1970s).

o Executive information system (EIS) (1980s).

o Business intelligence (1990s).

o Artificial intelligence (AI)

A Brief History of BI

o BI system has 4 major components:

o 1. Data Warehouse (source data).

o 2. Business analytics (collection of tools for manipulating, mining, and analyzing the data in the data warehouse).

The Architecture of BI

o 3. Business Performance Management (BPM): (for monitoring & analyzing performance).

o 4. User interface (dashboard).

o Data Warehouse Environmento Data warehousing environment is

mainly the responsibility of technical staff

o Analytical Environment o Is the realm of business users.

o Any user can connect to the system via the user interface, such as a browser & top managers may use the BPM component and dashboard.

o Are the cornerstone of any medium-to-large BI system.

o Data warehouse included historical data that were organized and summarized, which lets the end user easily view or / & manipulate data & information.

o Today, data warehouses include current data, which provides real-time decision support.

Data Warehousing

o End user can work with the data & information in a data warehouse by using a variety of tools & techniques.

o These tools & techniques fit into 2 major categories:

o 1. Reports and Queries.o 2. Data, text, Web mining, and

other mathematical & statistical tools.

Business Analytics

Data Mining: is a process of searching for unknown relationships or information in large databases or data warehouses, using intelligence tools such as neural computing, predictive analytics techniques or advance statistical methods.

Mining can be done on Web data.

o National Australia Bank page 21

Example

o Corporate Performance Management CPM: Portfolio of applications & methodology that contains evolving BI architecture and tools in its core.

o BPM provides monitoring, measuring, comparing of sales, profit, cost, profitability and other performance indicators and introducing the concept of management and feedback.

o BPM provides a top-down enforcement of corporate-wide strategy.

Business Performance Management

o Dashboards provides a comprehensive visual view of corporate performance measures (key performance indicators), trends, and exceptions.

o Dashboards integrate information from multiple business areas.

The User Interface: Dashboards & other information Broadcasting Tools

o Dashboards present graphs that show actual performance compared to desired metrics.

o Technologies such as geographical information systems (GIS) play an increasing role in decision support.

o 1. Report delivery & alerting.o 2. Enterprise reporting (using

dashboards & scorecards)o 3. Cube analysis (slice-and-dice

analysis)o 4. ad-hoc querieso 5. Statistics and data mining.

Styles of BI

o To enable interactive access to datao To enable manipulation of datao To give business managers and

analysts the ability to conduct appropriate analysis

o Enable decision maker to make more informed and better decisions.

The Objective of BI

o The process of BI is based on the transformation of data to information, then to decision, and finally to actions.

o 1. Provide accurate information when needed, including a real-time view of the corporate performance and its parts.

o 2. Faster and more accurate reporting

o 3. Improved decision makingo 4. Improved customer serviceo 5. Increased revenue

The Benefits of BI

o Many of the benefits of BI are intangible, so many executives do not insist on a rigorous cost-justification for BI projects.

o Managers need the right information, at the right time and in the right place

o 1. Their architectures are very similar

o A. BI evolved from DSSo B. BI implies the use of a data

warehouse, whereas DSS may or may not have such a feature.

o C. BI is appropriate for large organization, but DSS can be appropriate to any type of organization.

The DSS-BI connection

o 2. DSS are constructed to directly support specific decision making, while DSS provide accurate and timely information and they support decision support indirectly.

o 3. BI has an executive and strategy orientation, while DSS is oriented toward analysts.

o 4. BI systems are constructed with commercially available tools and components that are fitted to the needs of organizations, while in DSS the interest may be in constructing solutions to very unstructured problem

o 5. DSS methodologies and even some tools were developed mostly in the academic world, while BI methodologies and tools were developed mostly by software companies.

o 6. Many of the tools that BI uses are also considered DSS tools

o A technology that supports managerial tasks in general, and decision making in particular.

Management Support Systems (MSS)

o A system in which human participants and/or machines perform a business process, using information, technology, and other resources, to produce product and/or services for internal or external customers.

A Work System view of decision support

o Work system usually has nine elements, each of these elements can be varied or modified in order to provide better organizational performance, decision quality, or business process efficiency.

o 1.Business Process : Variations in the process rationale, sequence of steps, or methods used for performing particular steps.

o 2. Participants: Better training, better skills, higher levels of commitment, or better real-time or delayed feedback.

o 3. Information: Better information quality, information availability, or information presentation.

o 4. Technology: Better data storage and retrieval, models, algorithms, statistical or graphical capabilities, or computer interaction.

o 5. Product and services: Better ways to evaluate potential decisions.

o 6. Customers: Better ways to involve customers in the decision process and to obtain greater clarity about their needs.

o 7. Infrastructure: More effective use of shared infrastructure, which might lead to improvements.

o 8. Environment: Better methods for incorporating concerns from the surrounding environment.

o 9. Strategy: A fundamentally different operational strategy for the work system

o A large number of tools and techniques have been developed over the years to support managerial decision making.

o 1. Data management: databases and database management system

o 2. Reporting status tracking: online analytical processing (OLAP) & executive information systems (EIS)

The Major tools and techniques of managerial decision support

o 3. Visualization: Geographical information system (GIS) & Dashboards

o 4. Business analytics: Optimization, data mining, Web mining, and text mining

o 5. Strategy and performance management: Business performance management, business activity management, dashboards and scorecards.

o 6. communication and collaboration: Group decision support systems, group support systems and collaborative information systems

o 7. Social networking: Web 2.0

o 8. Knowledge management: Knowledge management systems and expert locating systems

o 9. Intelligent systems: expert systems, Artificial neural networks, and automated decision systems.

o Using several of the tools and techniques of managerial decision support, in order to assist management in solving managerial or organizational problems (opportunities and strategies) faster and better than before without computers

Hybrid Support Systems