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DECISION MAKING

• A process of selecting the best among the different


alternatives.
• The act of making a choice.
• Alternatives should be evaluated from which advantages
and disadvantages are known
• helps to make the best decisions.
• An important function of management
“Decision making is the selection
of a preferred course of action
from two or more alternatives.”
– Stephen Robbins
Source: https://notes.tyrocity.com/chapter-5-meaning-and-importance-of-decision-making/
DECISION MAKING

Before: Now

Decisions making used Decision making can


to be limited to be applied in lower
management level of the
organization
Why? Because Information
Systems make information
available to lower level of
the organization
IMPORTANCE OF DECISION MAKING

• Implementation of managerial function


• Decision making is an important element of managerial function.
• Pervasiveness of decision making
• Decision making is universal – can be taken by all.
• Evaluation of managerial performance
• Helpful in planning and policies
• Policy or plan is established through decision making
• Selecting the best alternatives
• Successful; operation of business
Source: https://notes.tyrocity.com/chapter-5-meaning-and-importance-of-decision-making/
MONETARY VALUE OF IMPROVED DECISION MAKING
(BASED FROM SMALL U.S. MANUFACTURING FIRMS)
INFORMATION REQUIREMENTS FOR DECISION MAKING
DECISION-MAKING

•Success of a firm depends on the quality of the


decisions managers makes
• When amount of information is large & processes are
complex
• CBIS can make the process effective and efficient in
decision making
• IS that supports decision making:
• DSS, BIS, EIS, GIS, & Expert System
TYPES OF PROBLEMS & DECISIONS

• Structured Problem. Optimal solution can be reached


through a single sets of steps.
• most physical & mathematical problems are structured. A
formula or sequence is followed
• Algorithm – sequence of steps
• Structured Decision. Are decisions that are
repetitive and routine – involving a definite procedure
for handling them.
TYPES OF PROBLEMS & DECISIONS

• Unstructured Problem. No algorithm to follow to reach


an optimal solution.
• not enough information about the factors that may affect the
solution
• Many potential factors that no algorithm can be formulated to
guarantee a unique optimal solution
• Unstructured Decision. Decision maker provide
judgment, evaluation and insight to solve the problem.
Decisions are novel, important, and non-routine and there is
no well-understood or agreed-on procedure for making
them
TYPES OF PROBLEMS & DECISIONS

• Semi-structured Problem. Neither fully structured


nor totally unstructured
• An unstructured problem can become semi-structured by
experts in the field
• Because experts may have enough knowledge to narrow down number of
possible solutions, but not enough to guarantee 100% certainty of
producing an optimal solution

• Semi-structured Decision. Part of the problem has


a clear-cut answer provided by an accepted procedure.
DECISION-MAKING PROCESS STAGES

• By Herbert Simon (researcher of management & decision


making)

• Intelligence. Collect facts, beliefs, &


ideas.
• Design. Design the method by which we
will consider data. Methods are sequences
of steps, formulas, models & other tools that
enable us to systematically reduce the
alternatives to a manageable number.
• Choice. Make a choice from alternatives
• Implementation. Implement the
choice
REAL WORLD DECISION MAKING

• IT and IS may not always be helpful for all managerial roles.


• IT and IS do not always produce positive results, these are the reasons:
• Information quality
• If the output of IS does not meet these quality criteria, decision making
suffers
• Management filters
• Managers make bad decisions because they absorb information through
a series of filters,
• Organizational Inertia and Politics
• Strong forces resist decision making when changes are made in the
organization
DECISION SUPPORT SYSTEM (DSS)

• A CBIS designed to help managers select one of


many alternative solutions to a problem & help the
corporations increase market share, reduce costs, increase
profitability, and enhance product quality.
DSS COMPONENTS

• These modules:
Data management module • Help the user enter a request
in a convenient manner
• Search vast amount of data to
Model management focus on the relevant facts
module
• Process the data through
desired models
• Present the results in one or
Dialog module several manners so the output
can be easily understood.
DATA MANAGEMENT MODULE

• Database or data warehouse


• Allows a decision maker to conduct the intelligence
phase of decision making
• Example:
• Investment consultant accesses to current stock prices,
Data management access the data and provides the DSS
to select the data according to type of stock, range of
years, etc.
MODEL MANAGEMENT MODULE

• Collection of models the DSS draws upon to assist in decision


making
• User must select a model in order to turn data into
information
• A sequence of events or a pattern of behavior may become a useful
model when the relationships among its inputs, outputs and conditions
can be established that they can be used to analyzed different
parameters
• Models are used to predict output on the basis of different input or
different conditions or to estimate what combination of conditions and
input might lead to a desired output. Models are often based on
mathematical research or on experience
DIALOG MODULE

• Part of DSS that allow the user to interact with DSS


• Prompts the user to select a model.
• Allows the user to access the database and select data for
the decision process, or set criteria for selecting such data.
• Lets user enter parameters and change them to see how
the change affects the result of the analysis
• Maybe in the form of commands, menus, dialog boxes, or
any other approach. Simply, it is the interface.
TYPES OF DSS

• Differ in degree of sophistication and the manner in which


they are used
• Personal DSS. Built for the use of the individual
knowledge worker in his/her daily work
• Group DSS. Usually installed in conference room
settings or through a group of networked computers.
Designed to take input from multiple users interacting
with the program at the same time and converging on
decision as a group
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 1: Data Analysis System


• DSS manipulate data by means of either analysis operations
tailored to the task or setting or general analysis operations
• Example: Budget Analysis system and a financial system for
analyzing alternative investment opportunities
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 2: Optimization Models


• DSS provides guidelines for action by generating the optimal
solution consistent with a series of constraints. They are used
for repetitive decisions that can be described mathematically
and where a specific objective, such as minimizing cost, is the
goal.
• Examples: system for scheduling training classes under a
complex set of constraints and a material usage optimization
system.
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 3: Accounting Models


• Accounting models calculate the consequences of planned
actions on the basis of accounting definitions.
• DSS typically generate estimates of income, balance sheets
etc., based on variations in input values to the definitional
formulas.
• Examples: monthly budgeting systems for operational
decision making and short term financial planning.
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 4: File Drawer System


• File drawer system allow immediate access to data items.
They are basically on line mechanized versions of manual
filing systems.
• Examples: status inquiries for inventory information. Airline
reservations requests and shop floor monitoring.
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 5: Suggestion Models


• Suggestion models compute a specific suggested for a fairly
structured and repetitive decision. Their purpose is to
bypass other (less efficient) procedures for generating the
suggestion.
• Examples are an insurance renewal rate calculation system
and a model to price card board boxes based on a
standard set of dimensions and decision rules.
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 6: Analysis Information System


• These provide access to a series of data bases and small
model.
• Example: 1) marketing decision support system containing
internal sales data, promotion and pricing data plus access
to external data bases.
2) sales analysis system containing detailed sales
data, customer information, forecast data and models
CLASSES OF DSS: BUSINESS MANAGEMENT
Article by: Priyali Sharma

Class 7: Representational Models


• These estimate the consequences of actions on the basis
of models that represent some non- definitional
characteristics of the system such as probabilities of
occurrence. DSS include all simulation models that
contains element beyond accounting definitions.
• Example: risk analysis model using estimated probability
distributions of each of the key factors.
BUSINESS INTELLIGENCE

• tools, technologies, applications, and practices used to


collect, integrate, analyze, and present an organization’s
raw data in order to create insightful and actionable
business information. (https://financesonline.com/purpose-business-
intelligence-business/)
• technologies, applications and practices for the collection,
integration, analysis, and presentation of business
information. (http://olap.com/learn-bi-olap/olap-bi-definitions/business-
intelligence/)
• Primary Purpose: to support better business decision
making.
BUSINESS INTELLIGENCE (BI)

• BI as a discipline and as a technology-driven process is


made up of several related activities, including:
• Data mining
• Online analytical processing (OLAP)
• Querying
• Reporting
(https://financesonline.com/purpose-business-intelligence-business/)
BUSINESS INTELLIGENCE SYSTEM

• are data-driven Decision Support Systems (DSS).


• Business Intelligence is sometimes used interchangeably with
briefing books, report and query tools and executive information
systems.
• With these tools, business people can start analyzing the data
themselves, rather than wait for IT to run complex reports.
• This information access helps users back up business decisions
with hard numbers, rather than only gut feelings and anecdotes.
IMPORTANCE OF BIS

• provide historical, current, and predictive views of business


operations, most often using data that has been gathered into a data
warehouse or a data mart and occasionally working from operational data.
• Software elements support reporting, interactive “slice-and-
dice” pivot-table analyses, visualization, and statistical data
mining.
• Applications tackle sales, production, financial, and many
other sources of business data for purposes that
include business performance management. Information is often
gathered about other companies in the same industry which is known as
benchmarking.
BENEFITS OF BUSINESS INTELLIGENCE PROGRAMS

• Accelerating and improving decision making


• Optimizing internal business processes
• Increasing operational efficiency
• Driving new revenues
• Gaining competitive advantages over business rivals.
• Identifying market trends
• Spotting business problems that need to be addressed
(https://financesonline.com/purpose-business-intelligence-business/)
OTHER TERMS

• Business Analytics - a vendor- defined term that focuses


more on tools and techniques for analyzing and
understanding data.
• OLAP (Online Analytical Processing) - the technology
behind many Business Intelligence (BI) applications. It is a
powerful technology for data discovery, including
capabilities for limitless report viewing, complex
analytical calculations, and predictive “what if” scenario
(budget, forecast) planning.
BI SOFTWARE SOLUTIONS

• Sisense. lets users join, analyze, and picture out information they require to make
better and more intelligent business decisions and craft out workable plans and
strategies.

• Looker. with insights for every department. It’s a data-discovery app that provides
an intuitive approach to data exploration

• Datapine. gives BI and data visualization to help makes sense of organization’s


data. With its capabilities, it enables to unravel actionable so smart business decisions
are made, craft and implement effective strategies, and realize corporate goals in the
most efficient manner.

• Zoho Analytics. designed to process big data, track KPIs, identify trends, and
discover insights. It provides tools and capabilities to give you a complete picture of
your business’ health and performance across the various units in your organizations
BI SOFTWARE SOLUTIONS

• Yellowfin. built to speed up the process of providing you actionable insights and
data-driven forecasts on your business’ performance
• AnswerDock. goes beyond basic analytics by utilizing natural language
programming and artificial intelligence to instantly give you answers to your business
questions.
• HotJar. cloud-hosted analysis and feedback solution designed to give you a deeper
understanding into the behavior of your users, visitors, and customers. Purpose: give
total visibility on user interaction and engagement so it can leverage users
experiences to increase conversion rates.
• ReportPlus. data visualization software built for enterprises and can be deployed
on-premise or via a private cloud. A self-service BIS designed with accessibility and
ease of use, allowing users to create, edit, and share their dashboards within a few
clicks without IT assistance.
• Note: MS Excel and Office 365 can be used, too.
HOW TO EFFICIENTLY ROLL OUT BIS?

• Make sure your data is clean.


• Train users effectively.
• Deploy quickly, then adjust as you go. Don’t spend a huge amount of time up front developing
the “perfect” reports because needs will evolve as the business evolves. Deliver reports that
provide the most value quickly, and then tweak them.
• Take an integrated approach to building your data warehouse from the beginning. Make sure
you’re not locking yourself into an unworkable data strategy further down the road.
• Define ROI clearly before you start. Outline the specific benefits you expect to achieve, then
do a reality check every quarter or six months.
• Focus on business objectives.
• Don’t buy business intelligence software because you think you need it. Deploy BI with the
idea that there are numbers out there that you need to find, and know roughly where they
might be.
BI IN THE ENTERPRISE

• BI and BA are about integrating all the information


streams produced by a firm into a single, coherent
enterprise-wide set of data, and then, using modeling,
statistical analysis tools (like normal distributions,
correlation and regression analysis, Chi square analysis,
forecasting, and cluster analysis), and data mining tools
(pattern discovery and machine learning), to make sense
out of all these data so managers can make better
decisions and better plans, or at least know quickly
when their firms are failing to meet planned targets
BI IN THE ENTERPRISE

• Hallmark Cards:
• uses SAS Analytics software to improve understanding of
buying patterns leading to increased sales at more than 3,000
stores.
• Hallmark wanted to strengthen its relationship with frequent
buyers. Using data mining and predictive modeling, the
company determined how to market to various consumer
segments during holidays and special occasions as well as
adjust promotions on the fly.
EMERGING TRENDS IN BUSINESS INTELLIGENCE

• Integration of Data and Content. Data and content should


not be considered as separate aspect of information management
but should be managed in an integrated enterprise management
• Operational Business Intelligence. Instead of targeting only
top the pyramid, the paradigm shift is moving toward taking
Business Intelligence to the bottom of the pyramid with a focus of
self-service business intelligence (SSBI).
• SSBI involves the business systems and data analytics that give business end-users access to an
organization’s information without direct IT involvement.
• SSBI gives end-users the ability to do more with their data without necessarily having technical skills.

• Embedded and Conversational Business Intelligence. This


is not just ordinary reporting BI software, but advanced integrated
reporting and analytics.
• Main Reference:
• Laudon & Laudon (2013), Management Information System, 13th Edition
• Other References:
• http://olap.com/learn-bi-olap/olap-bi-definitions/business-intelligence/
• https://financesonline.com/purpose-business-intelligence-business/
• https://www.academia.edu/9824575/Decision_Support_Systems_DSS_An_Overview_of_Decision_Support_Syste
ms_Capabilities_of_a_Decision_Support_System_A_Comparison_of_DSS_and_MIS