Enhancing Management Decision Making for the Digital Firm

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

5
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

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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
• 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)
Cargo revenue optimization of Continental Airlines
Figure 12-1
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Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Associations Occurrences linked to a single
  event
• Sequences Events linked over time

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

• 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

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Decision-Support Systems (DSS)
Components of DSS

• DSS Software System Collection of software tools
  used for data analysis, such as OLAP tools,
  datamining tools, or a collections of
  mathematical and analytical models

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Decision-Support Systems (DSS)
Components of DSS

• 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
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)
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)
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)
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

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Group Decision-Support Systems (GDSS)
Components of GDSS

• 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)
Overview of a GDSS Meeting

• Each attendee has a workstation
• Workstations are networked and connected to the
  facilitators console
• Data the attendees forward to the group are
  collected and saved on a file server
• Facilitator projects computer images onto the
  projection screen

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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
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

1. Analyze Harrahs and Mohegan Sun using the
   competitive forces and value chain models.
2. 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

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