Enhancing Decision Making for the Digital Firm

1
13
Chapter
Enhancing Decision Making for the Digital Firm
2

Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

3
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

4
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

5
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

6
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
Systems and Technologies for Business
Intelligence
7
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
Information Requirements of Key Decision-Making
Groups in a Firm
9
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

10
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
Types of Decisions (Continued)
Structured decisions

• 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

11
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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)

12
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
Stages in Decision Making
13
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
Decision Making in the Real World
In the real world, investments in
decision-support systems do not always work
because of

• Information quality Accuracy, integrity,
  consistency, completeness, validity, timeliness,
  accessibility

14
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

15
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
DECISION MAKING AND DECISION-SUPPORT SYSTEMS
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
• Detailed enterprise-wide data
• Broadening decision rights and responsibilities

16
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

17
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

18
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

19
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Types of Decision-Support Systems
Model-driven DSS

• Primarily stand-alone systems
• Use a strong theory or model to perform what-if
  and similar analyses

20
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

21
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

22
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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)

23
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Overview of a Decision-Support System
24
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Sensitivity Analysis
25
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Business Value of DSS

• 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

• Supply chain management
• Customer relationship management

26
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Business Value of DSS (Continued)

• Pricing Decisions
• Asset Utilization
• 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

27
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
A DSS for Customer Analysis and Segmentation
28
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
SYSTEMS FOR DECISION SUPPORT
Web-Based Customer Decision-Support Systems

• 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
• Some of these DSS are targeted toward management,
  but many have been developed to attract
  customers.

29
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

30
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

31
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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)

32
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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 facilitators console, which serves as the
  facilitators workstation and control panel, and
  to the meetings file server.
• All data that the attendees forward from their
  workstations to the group are collected and saved
  on the file server.

33
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

34
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.
35
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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
  contributors anonymity.
• Enable nonattendees to locate organized
  information after the meeting.

36
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

37
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

38
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

39
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

40
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

41
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

42
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

43
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

44
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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

45
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.

46
Management Information Systems Chapter 13
Enhancing Decision Making for the Digital Firm
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.