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ITS 583 Business
Intelligence
Decision Making,Systems andSupport
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Learning ObjectivesO Understand the need for comuteri!ed suort ofmanagerial decision ma"ing
O Understand an earl# frame$or" for managerialdecision ma"ing
O Learn the concetual foundations of the decisionsuort s#stems %&SS'
O &escribe the concet of $or" s#stems and itsrelationshi to decision suort
O List the major tools of comuteri!ed decisionsuort
O Understand the major issues in imlementingcomuteri!ed suort s#stems
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Business (ressures
)esonsesSuort *odel
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Organi!ational
)esonsesO Be )eactive+ ,nticiative+ ,dative+ and
(roactive
O *anagers ma# ta"e actions+ such asO -mlo# strategic lanning
O Use ne$ and innovative business models
O )estructure business rocesses
O (articiate in business alliances
O Imrove cororate information s#stems
O Imrove artnershi relationshis
O -ncourage innovation and creativit# .cont./
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*anagers actions+
continuedO Imrove customer service and relationshisO *ove to electronic commerce %e0commerce'
O *ove to ma"e0to0order roduction and on0demandmanufacturing and services
O Use ne$ IT to imrove communication+ dataaccess %discover# of information'+ andcollaboration
O )esond 1uic"l# to cometitors2 actions %eg+ in
ricing+ romotions+ ne$ roducts and services'O ,utomate man# tas"s of $hite0collar emlo#ees
O ,utomate certain decision rocesses
O Imrove decision ma"ing b# emlo#ing anal#tics
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4losing the Strateg#
aO One of the major objectives of
comuteri!ed decision suort is to
facilitate closing the ga bet$eenthe current erformance of anorgani!ation and its desirederformance+ as e6ressed in itsmission+ objectives+ and goals+ and
the strateg# to achieve them
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*anagerial &ecision
*a"ingO *anagement is a rocess b# $hichorgani!ational goals are achieved b# usingresources
O Inuts7 resources
O Outut7 attainment of goals
O *easure of success7 oututs inuts
O *anagement &ecision *a"ing
O &ecision ma"ing7 selecting the best solutionfrom t$o or more alternatives
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*int!berg2s 9:
*anagerial )olesInterpersonalInterpersonal1. Figurehead
2. Leader
3. Liaison
InformationalInformational
4. Monitor5. Disseminator
6. Spokesperson
DecisionalDecisional7. Entrepreneur8. Disturan!e hand"er
#. $esour!e a""o!ator
1%. &egotiator
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&ecision0*a"ing St#leO &ecision0ma"ing st#les of users are
categori!ed as either
O ,nal#tic orO ;euristic
b# (rentice
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,nal#tic &ecision
*a"ingO )elies on information that is s#stematicall# ac1uired and
s#stematicall# evaluated to narro$ alternatives and ma"e achoice
O Use methodical+ ste0b#0ste rocedures to ma"e decisions
O ?alue 1uantitative information and the models thatgenerate and use it
O Use mathematics to model roblems and algorithms tosolve them
OThe# see" otimal rather than comletel# satisf#ingsolutions
OThe# use decision techni1ues such as grahing+ robabilit#models+ and mathematical techni1ues to ensure a sounddecision0ma"ing rocess
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;euristic &ecision
*a"ingO , heuristic decision ma"er ma"es
decisions $ith the aid of guidelines
$hich are not necessaril# aliedconsistentl# or s#stematicall#
O It is e6erienced0based
O Learn b# acting+ use trial and error to
@nd solutions+ and rel# on commonsense to guide them
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,nal#tic and ;euristic
&ecision *a"ing
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&ecision *a"ing
(rocessO *anagers usuall# ma"e decisions b# follo$inga four0ste rocess %a"a the scienti@caroach'
9 &e@ne the roblem %or oortunit#'
> 4onstruct a model that describes the real0$orld roblem
3 Identif# ossible solutions to the modeledroblem and evaluate the solutions
A 4omare+ choose+ and recommend a otentialsolution to the roblem
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&ecision ma"ing is
dicult+ becauseOTechnolog#+ information s#stems+ advancedsearch engines+ and globali!ation result in moreand more alternatives from $hich to choose
O overnment regulations and the need for
comliance+ olitical instabilit# and terrorism+cometition+ and changing consumer demandsroduce more uncertaint#+ ma"ing it more dicultto redict conse1uences and the future
O Other factors are the need to ma"e raiddecisions+ the fre1uent and unredictable changesthat ma"e trial0and0error learning dicult+ and theotential costs of ma"ing mista"es
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Ch# Use 4omuteri!ed
&SSO 4omuteri!ed &SS can facilitate decision
via7
O Seed# comutations
O Imroved communication andcollaboration
O Increased roductivit# of grou members
O Imroved data management
O Overcoming cognitive limitsO Dualit# suortE agilit# suort
O Using CebE an#$here+ an#time suort
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, &ecision Suort
Frame$or" %b# or# and Scott0*orten+ 9GH9'
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, &ecision SuortFrame$or" cont
O &egree of Structuredness %Simon+ 9GHH'
O &ecision are classi@ed as
O ;ighl# structured %a"a rogrammed'
O Semi0structured
O ;ighl# unstructured %ie+ non0rogrammed'
OT#es of 4ontrol %,nthon#+ 9G5'
O Strategic lanning %to0level+ long0range'
O *anagement control %tactical lanning'
O Oerational control
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Structured vs
Unstructured (roblemsWell-structured Problems Unstructured Problems
Definition 'an e des!ried (ith a high degree o)completeness
'annot e des!ried (ith a high degree o)completeness
'an e so"*ed (ith a high degree o)certainty
'annot e reso"*ed (ith a high degree o)certainty
E+perts usua"", agree on the !orre!tionso"ution
E+perts o)ten disagree aout the estso"ution
Educational goal LE-$& / $E-S/& / CORRECTS/L0/&S
LE-$& / '/&S$0' -&DDEFE&DREASONABLES/L0/&S
Complexity $anges )rom *er, simp"e to *er, !omp"e+ $anges )rom *er, simp"e to *er, !omp"e+
Examples $e!on!i"ing a !ompan,s ank a!!ount Estimating the sum o) )uture !ash )"o(s)rom the use o) "ong"i*ed assets
'a"!u"ating the !apita" gain on the sa"e o) aui"ding
udging the adeua!, o) an argumentpromoting a redu!tion in the !apita" gainsta+ rate
Relatively simple - 'ompute straight"ine depre!iation nterpret a !ompan,s !urrent ratio
Relatively complex - '"assi), a "ease as !apita" or operating on!ea"" ne!essar, )a!ts are assem"ed
repare operating udget )or ne+t 5 ,ears
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SimonJs &ecision0
*a"ing (rocess
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4omuter Suort for
Structured &ecisionsO Structured roblems7 encountered reeatedl#+have a high level of structure
O It is ossible to abstract+ anal#!e+ and classif#them into seci@c categories
O eg+ ma"e0or0bu# decisions+ caital budgeting+resource allocation+ distribution+ rocurement+ andinventor# control
O For each categor# a solution aroach is
develoed K/ *anagement Science
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*anagement Science
,roachO ,lso referred to as Oeration )esearchO In solving roblems+ managers should follo$ the
@ve0ste *S aroach
9 &e@ne the roblem
> 4lassif# the roblem into a standard categor#%'
3 4onstruct a model that describes the real0$orldroblem
A Identif# ossible solutions to the modeledroblem and evaluate the solutions
5 4omare+ choose+ and recommend a otentialsolution to the roblem
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,utomated &ecision
*a"ingO , relativel# ne$ aroach to suortingdecision ma"ingO ,lies to highl# structures decisions
O ,utomated decision s#stems %,&S'
%or decision automation s#stems'
O ,n ,&S is a rule0based s#stem that rovides asolution to a reetitive managerial roblem in aseci@c area
O eg+ simle0loan aroval s#stem
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,utomated &ecision
*a"ingO ,&S initiall# aeared in the airline industr#called revenue %or #ield' management %orrevenue otimi!ation' s#stems
O d#namicall# rice tic"ets based on actual
demandOToda#+ man# service industries use similar
ricing models
O ,&S are driven b# business rulesM
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,utomated &ecision0*a"ing Frame$or"
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4omuter Suort for
Unstructured &ecisionsO Unstructured roblems can be onl# artiall#suorted b# standard comuteri!ed1uantitative methods
OThe# often re1uire customi!ed solutions
OThe# bene@t from data and informationO Intuition and judgment ma# la# a role
O 4omuteri!ed communication and collaborationtechnologies along $ith "no$ledge
management is often used
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4omuter Suort for
Semi0structured(roblemsO Solving semi0structured roblems ma# involve a
combination of standard solution roceduresand human judgment
O *S handles the structured arts $hile &SS deals
$ith the unstructured artsO Cith roer data and information+ a range of
alternative solutions+ along $ith their otentialimacts
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4oncet of &ecision
Suort S#stems4lassical &e@nitions of &SS4lassical &e@nitions of &SS
Interactive comuter0based s#stems+ $hich heldecision ma"ers utili!e data and models to solve
unstructured roblemsN - Gorry and Scott-Morton,1971
&ecision suort s#stems coule the intellectualresources of individuals $ith the caabilities of thecomuter to imrove the 1ualit# of decisions It is a
comuter0based suort s#stem for managementdecision ma"ers $ho deal $ith semistructuredroblems - Keen and Scott-Morton, 1978
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&SS as an Umbrella
TermOThe term &SS can be used as an umbrella termto describe an# comuteri!ed s#stem thatsuorts decision ma"ing in an organi!ation
O -g+ an organi!ation $ide "no$ledge
management s#stemE a decision suort s#stemseci@c to an organi!ational function %mar"eting+@nance+ accounting+ manufacturing+ lanning+S4*+ etc'
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&SS as a Seci@c
,licationO In a narro$ sense &SS refers to a rocess forbuilding customi!ed alications forunstructured or semi0structured roblems
O 4omonents of the &SS ,rchitecture
O &ata+ *odel+
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;igh0Level ,rchitecture
of a &SS
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T#es of &SSOT$o major t#es7O *odel0oriented &SS
O &ata0oriented &SS
O-volution of &SS into Business IntelligenceO Use of &SS moved from secialist to managers+
and then $homever+ $henever+ $herever
O -nabling tools li"e OL,(+ data $arehousing+ data
mining+ intelligent s#stems+ delivered via Cebtechnolog# have collectivel# led to the termbusiness intelligenceP %BI' and business anal#ticsP
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The &SSBI 4onnectionOFirst+ their architectures are ver# similar
because BI evolved from &SS
OSecond+ &SS directl# suort seci@cdecision ma"ing+ $hile BI rovidesaccurate and timel# information+ andindirectl# suort decision ma"ing
OThird+ BI has an e6ecutive and strateg#
orientation+ eseciall# in its B(* anddashboard comonents+ $hile &SS+ incontrast+ is oriented to$ard anal#sts
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The &SSBI 4onnection
contOFourth+ most BI s#stems are constructed $ithcommerciall# available tools and comonents+$hile &SS is often built from scratch
OFifth+ &SS methodologies and even some tools
$ere develoed mostl# in the academic $orld+$hile BI methodologies and tools $eredeveloed mostl# b# soft$are comanies
OSi6th+ man# of the tools that BI uses are alsoconsidered &SS tools %eg+ data mining andredictive anal#sis are core tools in both'
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The &SSBI 4onnection
contO,lthough some eole e1uate &SS $ithBI+ these s#stems are not+ at resent+ thesameO some eole believe that &SS is a art of BIQone
of its anal#tical tools
O others thin" that BI is a secial case of &SS thatdeals mostl# $ith reorting+ communication+ andcollaboration %a form of data0oriented &SS'
O BI is a result of a continuous revolution and+ assuch+ &SS is one of BI2s original elements
O *SS K BI andor &SS
or #s em e$ o
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or #s em e$ o&ecision Suort %,lter+
>::A'O dro the $ord s#stemsP from &SS
O focus on decision suortP
use of an# lausible comuteri!ed or
noncomuteri!ed means for imroving decisionma"ing in a articular reetitive or nonreetitivebusiness situation in a articular organi!ationP
O Cor" s#stem7 a s#stem in $hich humanarticiants andor machines erform a business
rocess+ using information+ technolog#+ andother resources+ to roduce roducts andorservices for internal or e6ternal customers
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-lements of a Cor"
S#stem9 Business rocess ?ariations in the rocess
rationale+ se1uence of stes+ or methods used forerforming articular stes
> (articiants Better training+ better s"ills+ higherlevels of commitment+ or better real0time ordela#ed feedbac"
3 InformationBetter information 1ualit#+ informationavailabilit#+ or information resentation
A Technolog# Better data storage and retrieval+
models+ algorithms+ statistical or grahicalcaabilities+ or comuter interaction
00/
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-lements of a Cor"
S#stem cont5 (roduct and services Better $a#s to evaluate
otential decisions
4ustomersBetter $a#s to involve customers in
the decision rocess and to obtain greater clarit#about their needs
H Infrastructure *ore eRective use of sharedinfrastructure+ $hich might lead to imrovements
8 -nvironment Better methods for incororatingconcerns from the surrounding environment
G Strateg# , fundamentall# diRerent oerationalstrateg# for the $or" s#stem
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*ajor Tool 4ategories
for *SS
Source7 Table 9ASource7 Table 9A
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;#brid %Integrated'
Suort S#stemsOThe objective of comuteri!ed decision suort+regardless of its name or nature+ is to assistmanagement in solving managerial ororgani!ational roblems %and assess oortunities
and strategies' faster and better than ossible$ithout comuters
O -ver# t#e of tool has certain caabilities andlimitations B# integrating several tools+ $e canimrove decision suort because one tool can
rovide advantages $here another is $ea"
OThe trend is therefore to$ards develoing
h#brid %integrated' suort s#stem
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;#brid %Integrated'
Suort S#stemsOT#e of integrationO Use each tool indeendentl# to solve diRerent
asects of the roblem
O Use several loosel# integrated tools This mainl#
involves transferring data from one tool to anotherfor further rocessing
O Use several tightl# integrated tools From theuser2s standoint+ the tool aears as a uni@ed
s#stemO In addition to erforming diRerent tas"s
in the roblem0solving rocess+ tools cansuort each other
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