Decision Support Systems

1
Chapter
8
Decision Support Systems
McGraw-Hill/Irwin Copyright © 2004, The McGraw-Hill Companies, Inc. All rights reserved.
2
Learning Objectives
Identify the changes taking place in the form

and use of decision support in e-business
enterprises.
Identify
the role and reporting alternatives of
management information systems.
3
Learning Objectives (continued)
Describe how online analytical processing can

meet key information needs of managers.
Explain the decision support system concept

and how it differs from traditional
management information systems.
4
Explain how the following information systems

can support the information needs of
executives, managers, and business
professionals:
Executive information systems
Enterprise information portals
Enterprise knowledge portals
5
Identify how neural networks, fuzzy logic,

genetic algorithms, virtual reality, and
intelligent agents can be used in business.
How can expert systems be used in business

decision-making situations?
6
Section I
Decision Support in Business
7
Business and Decision Support
To succeed, companies need information

systems that can support the diverse
information and decision-making needs of
their managers and business professionals.
8
Business and Decision Support (continued)
Information, Decisions, & Management
The type of information required by decision

makers is directly related to the level of
management and the amount of structure in
the decision situations.
9
10
Information Quality
Timeliness
Provided WHEN it is needed

Up-to-date when it is provided
Provided as often as needed
Provided about past, present, and future

time periods as necessary
11
Information Quality (continued)

Content
Free from errors

Should be related to the information needs of a
specific recipient for a specific situation
Provide all the information that is needed
Only the information that is needed should be

provided
Can have a broad or narrow scope, or an internal
or external focus
Can reveal performance
12
Information Quality (continued)

Form
Provided in a form that is easy to understand

Can be provided in detail or summary form
Can be arranged in a predetermined sequence
Can be presented in narrative, numeric, graphic,

or other forms
Can be provided in hard copy, video, or other
media.
13
14
Decision Structure
Structured decisions
Involve situations where the procedures to

be followed can be specified in advance
Unstructured decisions
Involve situations where it is not possible

to specify most of the decision procedures
in advance
15
Decision structure (continued)
Semistructured decisions
Some decision procedures can be specified
in advance, but not enough to lead to a
definite recommended decision
16
Amount of structure is typically tied to

management level
Operational – more structured
Tactical – more semistructured
Strategic – more unstructured
17
Decision Support Trends
The growth of corporate intranets, extranets

and the Web has accelerated the development
and use of “executive class” information
delivery & decision support software tools to
virtually every level of the organization.
18
Management Information Systems
The original type of information system

Produces many of the products that support
day-to-day decision-making
These information products typically take the
following forms:
Periodic scheduled reports
Exception reports
Demand reports and responses
Push reports
19
Management Information Systems (continued)
Management reporting alternatives

Periodic scheduled reports
Prespecified format
Provided on a scheduled basis
Exception reports
Produced only when exceptional

conditions occur
Reduces information overload
20
Management Information Systems (continued)
Management reporting alternatives

(continued)
Demand reports and responses
Available when demanded.
Ad hoc
Push reports
Information is sent to a networked PC

over the corporate intranet.
Not specifically requested by the recipient
21
Online Analytical Processing
Enables managers and analysts to interactively

examine & manipulate large amounts of
detailed and consolidated data from many
perspectives
Analyze complex relationships to discover
patterns, trends, and exception conditions
Real-time
22
Online Analytical Processing (continued)
Involves..
Consolidation
Theaggregation of data.
From simple roll-ups to complex
groupings of interrelated data
Drill-Down
Display detail data that comprise

consolidated data
23
Online Analytical Processing (continued)
Slicing and Dicing

The ability to look at the database from
different viewpoints.
When performed along a time axis, helps
analyze trends and find patterns
24
Decision Support Systems
Computer-based information systems that

provide interactive information support
during the decision-making process
DSS’s use
Analytical models
Specialized databases
The decision maker’s insights & judgments
An interactive, computer-based modeling

process to support making semistructured
and unstructured business decisions
25
Decision Support Systems (continued)
Designed to be ad hoc, quick-response systems

that are initiated and controlled by the
decision maker
DSS Models and Software

Rely on model bases as well as databases
Might include models and analytical

techniques used to express complex
relationships
26
DSS models and software (continued)

Can combine model components to create
integrated models in support of specific
types of business decisions
27
Geographic Information & Data Visualization

Systems
Special categories of DSS that integrate
computer graphics with other DSS features
GIS
A DSS that uses geographic databases to

construct and display maps and other
graphics displays
28
Geographic information and data visualization

systems (continued)
Data visualization systems

Represent complex data using interactive
three-dimensional graphic forms
Helps discover patterns, links, and
anomalies
29
Using Decision Support Systems
An interactive modeling process

Four types of analytical modeling
What-if analysis
Sensitivity analysis
Goal-seeking analysis
Optimization analysis
30
Using Decision Support Systems (continued)
What-If Analysis
End user makes changes to variables, or
relationships among variables, and observes
the resulting changes in the values of other
variables
31
Sensitivity Analysis
A special case of what-if analysis
The value of only one variable is changed

repeatedly, and the resulting changes on
other variables are observed
Typically used when there is uncertainty
about the assumptions made in estimating
the value of certain key variables
32
Goal-Seeking Analysis
Instead of observing how changes in a
variable affect other variables, goal-seeking
sets a target value (a goal) for a variable,
then repeatedly changes other variables until
the target value is achieved
33
Optimization Analysis
A more complex extension of goal-seeking
The goal is to find the optimum value for one

or more target variables, given certain
constraints
34
Data Mining for Decision Support

Software analyzes vast amounts of data
Attempts to discover patterns, trends, &

correlations
May perform regression, decision tree,
neural network, cluster detection, or market
basket analysis
35
Executive Information Systems
EIS’s combine many of the features of MIS

and DSS
Originally intended to provide top executives
with immediate, easy access to information
about the firm’s “critical success factors”
Alternative names
Enterprise information systems
Executive support systems
36
Executive Information Systems (continued)
Features of an EIS
Information presented in forms tailored to
the preferences of the users
Most stress use of graphical user interface
and graphics displays
May also include exception reporting and
trend analysis
37
Enterprise Portals and Decision Support
A Web-based interface and integration of

intranet and other technologies that gives all
intranet users and selected extranet users
access to a variety of internal & external
business applications and services
38
Enterprise Portals and Decision Support (continued)
Business benefits
More specific and selective information
Easy access to key corporate intranet

website resources
Industry and business news
Access to company data for stakeholders
Less time spent on unproductive surfing
39
Knowledge Management Systems
IT that helps gather, organize, and share

business knowledge within an organization
Hypermedia databases that store and
disseminate business knowledge. May also be
called knowledge bases
Best practices, policies, business solutions
Entered through the enterprise knowledge

portal
40
Section II
Artificial Intelligence Technologies in Business
41
Business and AI
“Designed to leverage the capabilities of

humans rather than replace them,…AI
technology enables an extraordinary array of
applications that forge new connections among
people, computers, knowledge, and the
physical world.”
42
Artificial Intelligence
A field of science and technology based on

disciplines such as computer science, biology,
psychology, linguistics, mathematics, &
engineering
Goal is to develop computers that can think,
see, hear, walk, talk, and feel
Major thrust – development of computer
functions normally associated with human
intelligence – reasoning, learning, problem
solving
43
Artificial Intelligence (continued)
Domains of AI
Three major areas
Cognitive science
Robotics
Natural interfaces
44
Cognitive science
Focuses on researching how the human
brain works & how humans think and learn
Applications
Expert systems
Adaptive learning systems
Fuzzy logic systems
Neural networks
Intelligent agents
45
Robotics
Produces robot machines with computer

intelligence and computer controlled,
humanlike physical capabilities
Natural interfaces
Natural language and speech recognition
Talking to a computer and having it

understand
Virtual reality
46
Neural Networks
Computing systems modeled after the brain’s

meshlike network of interconnected processing
elements, called neurons
Goal – the neural network learns from data it
processes
47
Fuzzy Logic Systems
A method of reasoning that resembles human

reasoning
Allows for approximate values and inferences
Allows for incomplete or ambiguous data
Allows “fuzzy” systems to process incomplete

data and provide approximate, but acceptable,
solutions to problems
48
Genetic Algorithms
Uses Darwinian, randomizing, & other

mathematical functions to simulate an
evolutionary process that can yield
increasingly better solutions
Especially useful for situations in which
thousands of solutions are possible & must be
evaluated
49
Virtual Reality
Computer-simulated reality
Relies on multisensory input/output devices
Allows interaction with computer-simulated

objects, entities, and environments in three
dimensions
50
Intelligent Agents
A “software surrogate” for an end user or a

process that fulfills a stated need or activity
Uses built-in and learned knowledge base
about a person or process to make decisions
and accomplish tasks
51
Expert Systems
A knowledge-based information system that

uses its knowledge about a specific, complex
application area to act as an expert consultant
Provides answers to questions in a very

specific problem area
Must be able to explain reasoning process and

conclusions to the user
52
Expert Systems (continued)
Components
Knowledge base
Software resources
53
Knowledge base
Contains
Factsabout a specific subject area

Heuristics that express the reasoning
procedures of an expert on the subject
54
Software Resources
Contains an inference engine and other
programs for refining knowledge and
communicating
Inference engine processes the
knowledge, and makes associations
and inferences
User interface programs, including an
explanation program, allows
communication with user
55
Developing Expert Systems
Begin with an expert system shell

Add the knowledge base
Built by a “knowledge engineer”

Works with experts to capture their
knowledge
Works with domain experts to build the
expert system
56
The Value of Expert Systems
57
The Value of Expert Systems (continued)
Benefits
Can outperform a single human expert in

many problem situations
Helps preserve and reproduce knowledge of
experts
Limitations
Limited focus, inability to learn,

maintenance problems, developmental costs
58
Discussion Questions
Is the form and use of information and

decision support in e-business changing and
expanding?
Has the growth of self-directed teams to

manage work in organizations changed the
need for strategic, tactical, and operational
decision making in business?
59
Discussion Questions (continued)
What is the difference between the ability of a

manager to retrieve information instantly on
demand using an MIS and the capabilities
provided by a DSS?
In what ways does using an electronic

spreadsheet package provide you with the
capabilities of a decision support system?
60
Are enterprise information portals making

executive information systems unnecessary?
Can computers think? Will they EVER be

able to?
61
What are some of the most important

applications of AI in business?
What are some of the limitations or dangers

you see in the use of AI technologies such as
expert systems, virtual reality, and intelligent
agents? What could be done to minimize such
effects?
62
Real World Case 1 – AmeriKing & Others

AmeriKing’s old system
Relied on an antiquated corporate information
system.
Involved mailing or faxing paper reports to
managers.
AmeriKing’s new system
An intranet-based enterprise information portal
Enables employees to use Web browsers to

instantly access financial, marketing, human
resource, and other reports.
63
Real World Case 1 (continued)
What is the business value to a company of an

enterprise portal like AmeriKing’s?
What are several ways AmeriKing could

improve the business value of its portal?
64
How might an enterprise portal help you as a

business professional or manager in your work
activities?
Is it becoming necessary for all companies to

provide an enterprise information portal to
their employees?
65
Real World Case 2 – BAE Systems
Problems
Wasted time trying to find information to do

the job.
Duplication of effort
Information overload
Inadequate search capability
Solution
An intranet-based knowledge management

system
66
What problems was BAE having in knowledge

sharing? Are such problems common to many
companies?
How does BAE’s knowledge management

system help solve such problems?
67
What are some of the business benefits and

potential limitations of BAE’s knowledge
management system?
What is the difference between a corporate

intranet and a knowledge management
system? What is the difference in their
business value?
68
Real World Case 3 – Cisco Systems, NetFlix, & Office Depot
What are the business benefits and limitations

of Cisco’s Web-based system for its channel
managers?
Do you agree that NetFlix’s real-time

personalization system is critical to their
success?
69
Do you think salespeople will appreciate and

benefit from the real-time alert system
envisioned for Office Depot?
70
Real World Case 4 – Producers Assistance, Kinko’s, &

Champion Printing
Using Spatial Information Systems to…

Find workers
Find services
Find customers
71
What is the business value of spatial

information systems?
How else could spatial information systems be

used in business?
72
How helpful is Kinko’s location finder service?

What else can they do to improve this spatial
information management application?
73
Real World Case 5 – Schneider National
The business value of business intelligence (BI)
“We were drowning in data but starving for

information.”
74
What problem was Schneider National having

with their business data?
How did business intelligence solve the

problem?
75
What are the benefits and limitations of

business intelligence software as demonstrated
by Schneider National?
What is the business value of business

intelligence as defined by Cognos?

Decision Support Systems

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1

Decision Support Systems

Identify the changes taking place in the form

Learning Objectives (continued)

Describe how online analytical processing can

Explain the decision support system concept

Learning Objectives (continued)

Explain how the following information systems

Enterprise information portals

Enterprise knowledge portals

Learning Objectives (continued)

Identify how neural networks, fuzzy logic,

How can expert systems be used in business

Decision Support in Business

Business and Decision Support

To succeed, companies need information

Business and Decision Support (continued)

Information, Decisions, & Management

The type of information required by decision

Business and Decision Support (continued)

Business and Decision Support (continued)

Provided WHEN it is needed

Provided as often as needed

Provided about past, present, and future

Business and Decision Support (continued)

 Information Quality (continued)

 Free from errors

 Only the information that is needed should be

Business and Decision Support (continued)

 Information Quality (continued)

 Provided in a form that is easy to understand

 Can be arranged in a predetermined sequence

 Can be presented in narrative, numeric, graphic,

Business and Decision Support (continued)

Business and Decision Support (continued)

Involve situations where the procedures to

Involve situations where it is not possible

Business and Decision Support (continued)

Decision structure (continued)

Business and Decision Support (continued)

Amount of structure is typically tied to

Tactical – more semistructured

Strategic – more unstructured

Decision Support Trends

The growth of corporate intranets, extranets

Management Information Systems

The original type of information system

Demand reports and responses

Management Information Systems (continued)

Management reporting alternatives

Provided on a scheduled basis

Produced only when exceptional

Management Information Systems (continued)

Management reporting alternatives

Available when demanded.

Information is sent to a networked PC

Online Analytical Processing

Enables managers and analysts to interactively

Online Analytical Processing (continued)

Display detail data that comprise

Online Analytical Processing (continued)

Slicing and Dicing

Decision Support Systems

Identify the changes taking place in the form

Describe how online analytical processing can

Explain the decision support system concept

Explain how the following information systems

Enterprise information portals

Enterprise knowledge portals

Identify how neural networks, fuzzy logic,

How can expert systems be used in business

Decision Support in Business

To succeed, companies need information

Information, Decisions, & Management

The type of information required by decision

Provided WHEN it is needed

Provided as often as needed

Provided about past, present, and future

Information Quality (continued)

Free from errors

Only the information that is needed should be

Information Quality (continued)

Provided in a form that is easy to understand

Can be arranged in a predetermined sequence

Can be presented in narrative, numeric, graphic,

Involve situations where the procedures to

Involve situations where it is not possible

Decision structure (continued)

Amount of structure is typically tied to

Tactical – more semistructured

Strategic – more unstructured

The growth of corporate intranets, extranets

The original type of information system

Demand reports and responses

Management reporting alternatives

Provided on a scheduled basis

Produced only when exceptional

Management reporting alternatives

Available when demanded.

Information is sent to a networked PC

Enables managers and analysts to interactively

Display detail data that comprise

Slicing and Dicing

Computer-based information systems that

The decision maker’s insights & judgments

An interactive, computer-based modeling

Designed to be ad hoc, quick-response systems

DSS Models and Software

Might include models and analytical

DSS models and software (continued)

Geographic Information & Data Visualization

A DSS that uses geographic databases to

Geographic information and data visualization

Data visualization systems

An interactive modeling process

The value of only one variable is changed

The goal is to find the optimum value for one

Data Mining for Decision Support

Attempts to discover patterns, trends, &

EIS’s combine many of the features of MIS

Enterprise information systems

Executive support systems

A Web-based interface and integration of

Easy access to key corporate intranet

Access to company data for stakeholders

Less time spent on unproductive surfing

IT that helps gather, organize, and share

Entered through the enterprise knowledge

Artificial Intelligence Technologies in Business

“Designed to leverage the capabilities of

A field of science and technology based on

Adaptive learning systems

Fuzzy logic systems

Produces robot machines with computer

Natural language and speech recognition

Talking to a computer and having it

Computing systems modeled after the brain’s

A method of reasoning that resembles human

Allows for incomplete or ambiguous data

Allows “fuzzy” systems to process incomplete

Uses Darwinian, randomizing, & other

Allows interaction with computer-simulated

A “software surrogate” for an end user or a