Dr. Daeryong Kim

1
Enhancing Management Decision Making for the
Digital Firm
Chapter 12
2
Objectives

• How can information systems help individual
  managers make better decisions when the problems
  are nonroutine and constantly changing?
• How can information systems help people working
  in a group make decisions more efficiently?

3
Objectives

• Are there any special systems that can facilitate
  decision making among senior managers? Exactly
  what can these systems do to help high-level
  management?
• What value can systems to support management
  decision making provide for the organization as a
  whole?

4
Management Challenges

• Building information systems that can actually
  fulfill executive information requirements
• Create meaningful reporting and management
  decision-making processes

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DECISION-SUPPORT SYSTEMS (DSS)
How can information systems help individual
managers make better decisions when the problems
are non-routine and constantly changing?
6
Decision-Support Systems (DSS)

• Computer system at the management level of an
  organization
• Combines data, analytical tools, and models
• Supports semistructured and unstructured decision
  making

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Decision-Support Systems (DSS)
MIS and DSS

• MIS
• Provides reports based on routine flow of data
• Assists in general control of the organization

8
Decision-Support Systems (DSS)
MIS and DSS

• DSS
• Emphasizes change, flexibility, rapid response,
  models, assumptions, ad-hoc queries, and display
  graphics

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Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Model-Driven DSS
• Primarily stand-alone
• Uses model to perform what-if and other kinds
  of analysis

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Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Data-driven DSS
• Supports decision making by allowing users to
  extract and analyze useful information previously
  buried in large databases
• OLAP
• Multidimensional analysis, supports much more
  complex requests for info. than traditional
  queries
• Datamining
• Finds hidden patterns and relationships in large
  databases to infer rules from them and predict
  future behavior

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Decision-Support Systems (DSS)
Window on Organizations

• Data Drive Customer Care at Intrawest
• How does this customer care DSS help Intrawest
  make decisions?
• How has it provided value for the firm?

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Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Datamining
• Associations Occurrences linked to a single
  event Corn Chips Soda
• Sequences Events linked over time House Oven
• Classification Recognizing patterns that
  describe the group to which an item belongs
• Clustering Similar to classification when no
  groups have yet been defined. Discovers different
  groupings within data

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Decision-Support Systems (DSS)
Overview of a decision-support system (DSS)
Figure 12-2
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Decision-Support Systems (DSS)
Components of DSS

• DSS Database Collection of current or historical
  data from a number of applications or groups. Can
  be a small PC database or a massive data
  warehouse
• DSS Software System Collection of software tools
  used for data analysis, such as OLAP tools,
  datamining tools, model, or a collections of
  mathematical and analytical models

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Decision-Support Systems (DSS)
Components of DSS

• DSS Software System
• Model Abstract representation illustrating
  components or relationships of a phenomenon
• Sensitivity Analysis Models that ask what-if
  questions repeatedly to determine the impact of
  changes in one or more factors on the outcomes

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Decision-Support Systems (DSS)
Sensitivity analysis Example
Figure 12-3
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Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

• Examples of Decision-Support Systems
• General Accident Insurance Customer buying
  patterns and fraud detection
• Bank of America Customer profiles
• Frito-Lay, Inc. Price, advertising, and
  promotion selection

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Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

• Examples of Decision-Support Systems
• Southern Railway Train dispatching and routing
• Texas Oil and Gas Corporation Evaluation of
  potential drilling sites
• The Gap Inventory stocking and merchandising

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Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

• Examples of Decision-Support Systems
• United Airlines Flight scheduling, passenger
  demand forecasting
• U.S. Department of Defense Defense contract
  analysis

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Decision-Support Systems (DSS)
DSS for Pricing Decisions

• By analyzing several years of sales data for
  similar items, the software estimates a seasonal
  demand curve for each item and predicts how many
  units would sell each week at various prices.
• The software uses sales history to predict how
  sensitive customer demand will be to price changes

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Decision-Support Systems (DSS)
DSS for Supply Chain Management

• Can help firms model inventory stocking levels,
  production schedules, or transportation plans
• Can provide firms with information on key
  performance indicators such as lead time, cycle
  time, inventory turns, or total supply chain costs

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Decision-Support Systems (DSS)
Window on Technology

• A DSS Makes Subaru More Parts-Savvy
• How does the Servigistics system provide value
  for Subaru of New England?
• How did it change the way the company ran its
  business?

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Decision-Support Systems (DSS)
DSS for customer analysis and segmentation
Figure 12-4
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Decision-Support Systems (DSS)
DSS for Customer Relationship Management

• Predictive Analysis
• Use of datamining techniques, historical data,
  and assumptions about future conditions to
  predict outcomes of events

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Decision-Support Systems (DSS)
Data Visualization and Geographic Information
Systems (GIS)

• Data Visualization Technology for helping users
  see patterns and relationships in large amounts
  of data by presenting the data in graphical form
• Geographic Information System (GIS) System with
  software that can analyze and display data using
  digitized maps to enhance planning and decision
  making

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Decision-Support Systems (DSS)
Data Visualization and Geographic Information
Systems (GIS)
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Decision-Support Systems (DSS)
Web-Based Customer Decision-Support Systems

• Customer Decision-Support System (CDSS)
• System to support the decision-making process of
  an existing or potential customer

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Group Decision-Support Systems (GDSS)

• How can information systems help people working
  in a group make decisions more efficiently?

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Group Decision-Support Systems (GDSS)
What is a GDSS?

• Group Decision-Support System (GDSS) An
  interactive computer-based system to facilitate
  the solution to unstructured problems by a set of
  decision makers working together as a group

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Group Decision-Support Systems (GDSS)
What is a GDSS?
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Group Decision-Support Systems (GDSS)
Components of GDSS

• Hardware Conference facility, electronic
  hardware
• Software tools Tools for organizing ideas,
  gathering information, and ranking and seeking
  priorities
• People Participants, trained facilitator, staff
  supporting hardware and software

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Group Decision-Support Systems (GDSS)
Components of GDSS

• Electronic questionnaires
• Electronic brainstorming tools
• Idea organizers
• Questionnaire tools
• Tools for voting or setting priorities
• Stakeholder identification and analysis tools
• Policy formation tools
• Group dictionaries

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Group Decision-Support Systems (GDSS)
Group system tools
Figure 12-5
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Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making

• Number of attendees can increase while
  productivity increases
• More collaborative atmosphere
• Software tools follow structured methods for
  organizing and evaluating ideas and preserving
  the results of meetings

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Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making

• Increase the number of ideas generated
• Can lead to more participative and democratic
  decision making

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Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making

• Organizational Memory
• Store learning from an organizations history
  that can be used for decision making and other
  purposes

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Executive Support in the Enterprise

• Are there any special systems that can facilitate
  decision-making among senior managers?
• Exactly what can these systems do to help
  high-level management?

38
Executive Support in the Enterprise
Executive Support Systems (ESS)

• Focus on the information needs of senior
  management
• Combine data from internal and external sources
• Create a generalized computing and communications
  environment that can be focused and applied to a
  changing array of problems

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Executive Support in the Enterprise
Executive Support Systems (ESS)

• Monitor organizational performance
• Track activities of competitors
• Spot problems
• Identify opportunities
• Forecast trends

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Executive Support in the Enterprise
The Role of Executive Support Systems in the
Organization

• Bring together data from the entire organization
• Allow managers to select, access, and tailor data
  
• Enable executive and any subordinates to look at
  the same data in the same way

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Executive Support in the Enterprise
The Role of Executive Support Systems in the
Organization

• Drill Down
• The ability to move from summary data to lower
  and lower levels of detail

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Executive Support in the Enterprise
The Role of Executive Support Systems in the
Organization

• Developing ESS
• Ease of use
• Facility for environmental scanning
• External and internal sources of information to
  be used for environmental scanning

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Executive Support in the Enterprise
Benefits of Executive Support Systems

• Analyze, compare, and highlight trends
• Provide greater clarity and insight into data
• Speed up decision making

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Executive Support in the Enterprise
Benefits of Executive Support Systems

• Improve management performance
• Increase managements span of control
• Better monitoring of activities

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Executive Support in the Enterprise
Executive Support Systems and the Digital Firm

• ESS for Competitive Intelligence
• Identify changing market conditions
• Formulate responses
• Track implementation efforts
• Learn from feedback

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Executive Support in the Enterprise
Executive Support Systems and the Digital Firm

• Balanced Scorecard
• Model for analyzing firm performance that
  supplements traditional financial measures with
  measurements from additional business
  perspectives, such as customers, internal
  business processes, and learning and growth

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Executive Support in the Enterprise
Enterprise-Wide Reporting and Analysis

• Strategic performance management tools
• for enterprise systems
• SAP Web-enabled mySAP.com, Management Cockpit
• PeopleSoft Web-enabled Enterprise Performance
  Management (EPM)

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Executive Support in the Enterprise
Enterprise-Wide Reporting and Analysis

• Activity-Based Costing
• Model for identifying all the company activities
  that cause costs to occur while producing a
  specific product or service so that managers can
  see which products or services are profitable or
  losing money and make changes to maximize firm
  profitability

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Chapter 12 Case Study
Harrahs and Mohegan Sun A Tale of Two Casino DSS

• Analyze Harrahs and Mohegan Sun using the
  competitive forces and value chain models.
• Compare the business strategies of Harrahs and
  Mohegan sun. What role do customer reward systems
  play in these strategies? How are they similar?
  How are they different?

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Chapter 12 Case Study
Harrahs and Mohegan Sun A Tale of Two Casino DSS

• What kind of decision-support systems did
  Harrahs and Mohegan Sun develop? How are they
  related to their business strategy?
• Are Harrahs and Mohegan Sun successful? Which
  casino is more successful? Why? Can its
  competitive advantage be sustained? Why or why
  not?
• Are there any ethical problems raised by these
  casinos use of customer data? Explain your
  response.