6/9/2015 5:41 AM6/9/2015 5:41 AM6/9/2015 5:41 AM Laudon & Laudon 1 Enhancing Decision Making Chapter 12 (10E)

04/18/2304/18/23 20:2220:22 Laudon & LaudonLaudon & Laudon 11

Enhancing Decision MakingEnhancing Decision Making

Chapter 12 (10E)Chapter 12 (10E)


Business Value of Improved Decision Business Value of Improved Decision MakingMaking

The Decision-Making ProcessThe Decision-Making Process

Simon’s four stagesSimon’s four stages Mintzberg’s managerial rolesMintzberg’s managerial roles Real-world decision makingReal-world decision making

– Relationship between roles and decision Relationship between roles and decision supportsupport

– Information quality dimensions Information quality dimensions – Management filtersManagement filters– Organizational inertia and politicsOrganizational inertia and politics



Types of Decisions (Simon)Types of Decisions (Simon)

Structured decisionsStructured decisions are repetitive, routine, and are repetitive, routine, and involve a definite procedure for handling (e.g., involve a definite procedure for handling (e.g., restock inventory)restock inventory)

Unstructured decisionsUnstructured decisions are nonroutine decisions in are nonroutine decisions in which the decision maker must provide judgment, which the decision maker must provide judgment, evaluation, and insights; there is no agreed-upon evaluation, and insights; there is no agreed-upon procedure for making the decision (e.g., decide on procedure for making the decision (e.g., decide on corporate objectives).corporate objectives).

Semistructured decisionsSemistructured decisions are ones where only part are ones where only part of the problem has a clear-cut answer provided by of the problem has a clear-cut answer provided by an acceptable procedure (e.g., develop a marketing an acceptable procedure (e.g., develop a marketing plan)plan)


Semi-Structured Decisions Related to Semi-Structured Decisions Related to SCM and CRMSCM and CRM

SCMSCM– Can we make decisions that match Can we make decisions that match

inventory with customer demand?inventory with customer demand?– Can we generate optimal production Can we generate optimal production

allocation decisions that minimize cost or allocation decisions that minimize cost or maximize profit?maximize profit?

– Can we identify points in the SC that Can we identify points in the SC that generate excessive costs?generate excessive costs?

CRMCRM– Who are our most frequent customers? Who are our most frequent customers?

What determines a repeat customer?What determines a repeat customer?– Who are our most profitable customers?Who are our most profitable customers?– Can we predict and intervene to prevent Can we predict and intervene to prevent

losing a customer?losing a customer?


Simon’s Decision Making ProcessSimon’s Decision Making Process

Intelligence

Design

Choice

Implementation

Is there a problem?

What are the alternatives?

Which should you choose?

Is the choice working?

Mintzberg’s Managerial RolesMintzberg’s Managerial Roles

RoleRole FigureheadFigurehead LeaderLeader LiaisonLiaison Nerve CenterNerve Center DisseminatorDisseminator SpokespersonSpokesperson EntrepreneurEntrepreneur Disturbance handlerDisturbance handler Recourse allocatorRecourse allocator NegotiatorNegotiator

Support SystemSupport System NoneNone NoneNone E-mailE-mail MIS, ESSMIS, ESS Mail, office systemsMail, office systems Office systemsOffice systems NoneNone NoneNone DSSDSS NoneNone


Information Quality DimensionsInformation Quality Dimensions

Accuracy (representation of reality)Accuracy (representation of reality) IntegrityIntegrity ConsistencyConsistency CompletenessCompleteness ValidityValidity TimelinessTimeliness

AccessibilitAccessibilityy



Real World Decision MakingReal World Decision Making

Often decision support do not work because Often decision support do not work because – One or more dimensions of information One or more dimensions of information

quality are poor (e.g., accuracy, quality are poor (e.g., accuracy, completeness, timeliness, etc.)completeness, timeliness, etc.)

– Managerial filters or bias (only see the Managerial filters or bias (only see the good news and ignore the bad)good news and ignore the bad)

– Organizational inertia (e.g., Britannica, Organizational inertia (e.g., Britannica, Kodak) Kodak)

Systems for Decision SupportSystems for Decision Support

MIS (covered in chapter 2)MIS (covered in chapter 2)

DSSDSS

GISGIS

CDSSCDSS

ESSESS

GDSS (not covered)GDSS (not covered)



A Definition of a DSSA Definition of a DSS

A DSS is a computer system at the A DSS is a computer system at the management level of an organization that management level of an organization that combines data, sophisticated analytical combines data, sophisticated analytical models, and user-friendly software to models, and user-friendly software to support semistructured and unstructured support semistructured and unstructured decision making.decision making.


Components of a DSSComponents of a DSS DSS database DSS database

– collection of current or historical data and possibly collection of current or historical data and possibly some external datasome external data

– may be small dataset downloaded from corporate may be small dataset downloaded from corporate mainframes to a PCmainframes to a PC

– may be a massive data warehousemay be a massive data warehouse DSS software system contains the software tools for data DSS software system contains the software tools for data

analysis, with models, data mining, and other analytical analysis, with models, data mining, and other analytical tools tools – collection of mathematical models (statistical models, collection of mathematical models (statistical models,

linear programming, forecasting, sensitivity analysis linear programming, forecasting, sensitivity analysis models)models)

– OLAP or datamining toolsOLAP or datamining tools DSS user interface controls the interaction between the DSS user interface controls the interaction between the

user and the toolsuser and the tools– graphical, flexible, and easy to use (e.g., Wizards)graphical, flexible, and easy to use (e.g., Wizards)

Overview of a Decision Support SystemOverview of a Decision Support System



Characteristics of a DSSCharacteristics of a DSS

DSS offer users flexibility, adaptability, and a quick DSS offer users flexibility, adaptability, and a quick response (usually interactive)response (usually interactive)

DSS allow users to initiate and control the input and DSS allow users to initiate and control the input and outputoutput

DSS operate with little or no assistance from DSS operate with little or no assistance from professional programmersprofessional programmers

DSS provide support for decisions and problems DSS provide support for decisions and problems whose solutions cannot be specified in advancewhose solutions cannot be specified in advance

DSS use sophisticated analysis and modeling toolsDSS use sophisticated analysis and modeling tools


Some Specifics About How a DSS Can Some Specifics About How a DSS Can

Improve Managerial Decision MakingImprove Managerial Decision Making In the intelligence phaseIn the intelligence phase

– produce more timely dataproduce more timely data– increase the use of quantitative dataincrease the use of quantitative data– make more data availablemake more data available

In the design phaseIn the design phase– generate more alternativesgenerate more alternatives– generate more accurate alternativesgenerate more accurate alternatives

In the choice phaseIn the choice phase– make faster decisionsmake faster decisions– sometimes rank the choicessometimes rank the choices


Types of DSSTypes of DSS Model-driven DSSModel-driven DSS are primarily standalone systems that are primarily standalone systems that

use some type of quantitative model to perform “what-if” use some type of quantitative model to perform “what-if” and other types of analysis.and other types of analysis.

Data-driven DSSData-driven DSS are systems that analyze large pools of are systems that analyze large pools of data collected stored in a data warehouse; these data collected stored in a data warehouse; these systems permit managers to extract useful relationships systems permit managers to extract useful relationships that are hidden in the data. Two techniques are usedthat are hidden in the data. Two techniques are used– On-line analytical processing (OLAP)On-line analytical processing (OLAP)– Datamining as knowledge discovery (search for Datamining as knowledge discovery (search for

hidden patterns)hidden patterns) Web-based DSS exist for both types (customer decision Web-based DSS exist for both types (customer decision

support systems)support systems)


The Electronic Spreadsheet: A DSS The Electronic Spreadsheet: A DSS ToolTool

Most widely used tool for decision support Most widely used tool for decision support because it is widely accessible to both because it is widely accessible to both experienced and inexperienced usersexperienced and inexperienced users

Features of spreadsheets that support DSS Features of spreadsheets that support DSS constructionconstruction– Pivot tables for OLAP Pivot tables for OLAP – Data tables for sensitivity analysis (what-if)Data tables for sensitivity analysis (what-if)– Preprogrammed functions enable the use Preprogrammed functions enable the use

of many mathematical modelsof many mathematical models– Built in IF-THEN functionBuilt in IF-THEN function– Ability to use Visual Basic for ApplicationsAbility to use Visual Basic for Applications– Charts, Charts,


Customer DSS (CDSS)Customer DSS (CDSS) A CDSS is a special type of DSS designed to support A CDSS is a special type of DSS designed to support

the buying decisions of an existing or potential the buying decisions of an existing or potential customer. Most current CDSS are Web based customer. Most current CDSS are Web based

Support exists for both the individual consumer Support exists for both the individual consumer (B2C) and businesses (B2B)(B2C) and businesses (B2B)

Complexity of products and sophistication of the Complexity of products and sophistication of the buyer often determine the nature of a CDSSbuyer often determine the nature of a CDSS

Examples of model driven CDSSsExamples of model driven CDSSs– Bankrate (Bankrate (www.bankrate.com ) )– Vanguard (Vanguard (www.vanguard.com); see planning and ); see planning and

educationeducation Examples of data driven CDSSsExamples of data driven CDSSs

– PriceGrabber ( PriceGrabber ( www.pricegrabber.com)– Buying tires (Buying tires (www.tirerack.com))


Geographic Information Systems (GIS)Geographic Information Systems (GIS) A GIS is a DSS for decision aid for map-A GIS is a DSS for decision aid for map-

related decisionsrelated decisions Typical GIS containsTypical GIS contains

– Database of quantitative and qualitative Database of quantitative and qualitative datadata

– Database of mapsDatabase of maps– Program to display information on mapsProgram to display information on maps

Applications of GISApplications of GIS– Identifying the best site to locate a branch Identifying the best site to locate a branch

officeoffice– Targeting pockets of potential customersTargeting pockets of potential customers– Repositioning promotions and advertisingRepositioning promotions and advertising– Tracking the spread of disease or crime Tracking the spread of disease or crime


Web Sites for GISWeb Sites for GIS

HUD environmental maps HUD environmental maps http://198.102.62.140/emaps/SearchFrame.asp

A major GIS vendorA major GIS vendor– http://maps.esri.com http://maps.esri.com

An example of how a state can use a GIS An example of how a state can use a GIS – http://www.state.ma.us/mgis/muniapps.htm http://www.state.ma.us/mgis/muniapps.htm

An example of how Groton, MA uses a GISAn example of how Groton, MA uses a GIS– http://host.appgeo.com/groton/Search.asp http://host.appgeo.com/groton/Search.asp

An example from San Francisco, CAAn example from San Francisco, CA– http://www.sfprospector.com/site/http://www.sfprospector.com/site/

sfprospector_index.asp sfprospector_index.asp – Use APN #8719003 in SFprospector; Use APN #8719003 in SFprospector;

demographic and business report for Mission demographic and business report for Mission Bay South locationBay South location

An example from Mecklenburg County, NCAn example from Mecklenburg County, NC– http://gischamber.co.mecklenburg.nc.us/http://gischamber.co.mecklenburg.nc.us/

website/chamber/Default.aspx website/chamber/Default.aspx


Executive Support Systems (ESS)Executive Support Systems (ESS)

Systems specifically designed to support Systems specifically designed to support unstructured and semi-structured decisions of unstructured and semi-structured decisions of senior management senior management

Major featuresMajor features– Drill downDrill down– Integration of data from multiple internal sourcesIntegration of data from multiple internal sources– Integration of data from external sourcesIntegration of data from external sources– Availability of modeling tools with little required Availability of modeling tools with little required

trainingtraining– Environmental scanning toolsEnvironmental scanning tools– Often used at lower levels of managementOften used at lower levels of management


Business Value of ESSBusiness Value of ESS Ability to analyze, compare, and highlight trendsAbility to analyze, compare, and highlight trends Graphical interface enables users to review data Graphical interface enables users to review data

more quickly and with more insight, speeding more quickly and with more insight, speeding decision making. decision making.

Timeliness and availability of data enables more Timeliness and availability of data enables more timely decision making, helping businesses move timely decision making, helping businesses move toward a “sense-and-respond” strategy.toward a “sense-and-respond” strategy.

Increases upper management span of control, Increases upper management span of control, better monitoringbetter monitoring

ESS based on enterprise-wide data can be used ESS based on enterprise-wide data can be used for decentralization of decision making or for decentralization of decision making or increase management centralization. increase management centralization.


Web Sites With DSS or ESS ProductsWeb Sites With DSS or ESS Products Examples of DSS softwareExamples of DSS software

http://cdss.state.co.us/ http://cdss.state.co.us/

http://www.vanguardsw.comhttp://www.vanguardsw.com

DecisionScript enables you to build Web-based DSS DecisionScript enables you to build Web-based DSS or CDSSor CDSS

DecisionPro can be used for free 15-day trialDecisionPro can be used for free 15-day trial

http://www.outlooksoft.comhttp://www.outlooksoft.com

Has a live demo of a product OutlookSoft CPMHas a live demo of a product OutlookSoft CPM

Look at product functionality (corporate perf. Look at product functionality (corporate perf. Mgmt)Mgmt)

Examples of ESSExamples of ESS– http://www.camsys.com/ontar03.htmhttp://www.camsys.com/ontar03.htm

What-if tools; some OLAPWhat-if tools; some OLAP– http://www.meditech.com/productbriefs/pages/http://www.meditech.com/productbriefs/pages/

ProductBriefsCSESS.htm ProductBriefsCSESS.htm Drill down, customized views, individualized Drill down, customized views, individualized

reporting reporting


Differences Between a DSS and MISDifferences Between a DSS and MIS

DSS PhilosophyDSS Philosophy– provide integrated provide integrated

tools, data, models tools, data, models and language to and language to usersusers

DSS Systems AnalysisDSS Systems Analysis– establish what tools establish what tools

are needed in the are needed in the decision processdecision process

DesignDesign– iterative processiterative process

MIS PhilosophyMIS Philosophy– provide structured provide structured

information to end information to end usersusers

MIS Systems AnalysisMIS Systems Analysis– identify information identify information

requirements up requirements up frontfront

DesignDesign– deliver system based deliver system based

on frozen on frozen requirementsrequirements

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