Chapter 12Enhancing Decision Making

◦ Unstructured: Decision maker must provide judgment, evaluation, and insight to solve problem

◦ Structured: Repetitive and routine; involve definite procedure for handling so they do not have to be treated each time as new

◦ Semistructured: Only part of problem has clear-cut answer provided by accepted procedure

Types of decisions

Senior managers:◦ Make many unstructured decisions◦ E.g. Should we enter a new market?

Middle managers:◦ Make more structured decisions but these may include unstructured

components◦ E.g. Why is order fulfillment report showing decline in Minneapolis?

Operational managers, rank and file employees◦ Make more structured decisions◦ E.g. Does customer meet criteria for credit?

Types of Decisions by Level

Decision Making Process

The decision-making process is broken down into four stages.

Three main reasons why investments in information technology do not always produce positive results1. Information quality (see table 12-3 page 460)2. Management filters3. Organizational inertia and politics

High velocity automated decision making◦ Automate those structured, routine decision

making

Decision Making and Information

Business intelligence◦ Infrastructure for collecting, storing, analyzing data produced

by business◦ Databases, data warehouses, data marts

Business analytics◦ Tools and techniques for analyzing data◦ OLAP, statistics, models, data mining

Business intelligence vendors◦ Top five vendors SAP, Oracle, IBM, SAS Institute, and Microsoft

(manage big data)

Business Intelligence

Business Intelligence Environment

Main functionalities of BI systems1. Production reports2. Parameterized reports3. Dashboards/scorecards4. Ad hoc query/search/report creation5. Drill down6. Forecasts, scenarios, models

Pre-defined/prepackaged production reports most widely used (see table 12-5)

Business Intelligence and Analytics Capabilities

Examples of BI applications◦ Predictive analytics

Use patterns in data to predict future behavior E.g. Credit card companies use predictive analytics to determine

customers at risk for leaving◦ Data visualization

Help users see patterns and relationships that would be difficult to see in text lists (dashboards help)

◦ Geographic information systems (GIS) Ties location-related data to maps

Business Intelligence and Analytics Capabilities (cont)

Use mathematical or analytical models◦Allow varied types of analysis “What-if” analysis Sensitivity analysis (see page 472) Backward sensitivity analysis Multidimensional analysis / OLAP

E. g. pivot tables (see page 473) Use Management Information Systems (MIS)

Structured and semistructured decisions; data flow reports; routine production reports; exception reports

Decision Support Systems(Operational and Middle Mgmt)

Use Executive Support Systems (ESS)◦ Help executives focus on important performance information;

allow them to drill down to detailed views of data

Methodology◦ Balanced scorecard method:

Measures outcomes on four dimensions: 1. Financial2. Business process3. Customer4. Learning & growth

Key performance indicators (KPIs) measure each dimension◦ Business Performance Management (BPM)

Decision Support Systems (Senior Management)

Decision Support Systems(Groups)

Group Decision Support Systems (GDSS)◦ Used for tasks involving idea generation, complex

problems, large groups

◦ Example