Chapter 12

Learning Objectives

1. What is Improved Decision Making? What are the

different types of decisions and how does the decision-
making process work?
2. What is Business Intelligence and who are the top
Business intelligence vendors? Give examples of
business intelligence pre defined production reports.
3. Describe Real-World Decision Making. What are the
three main reasons of Decision Making?
4. Describe Decision Challenges. Draw Decision Levels.
Explain Market Basket Analysis.
 Improved Decision Making
• Many business managers operate in an information fog
bank, never really having the right information at the
right time to make an informed decision.
• Instead, managers rely on forecasts, best guesses, and
luck. The result is over or underproduction of goods
and services, misallocation of resources, and poor
response times.
• These poor outcomes raise costs and lose customers.
• In the past decade, information systems and
Technologies have made it possible for managers to
use real-time data from the marketplace when making
decisions.
 Decision Levels

Strategic
Mgt.

Tactical
Models
Management

Business Operations
 What are the different types of decisions and how does
the decision-making process work?
• The different levels in an organization
(strategic, management, operational) have different decision-
making requirements. Decisions can be structured, semi
structured, or unstructured, with structured decisions
clustering at the operational level of the organization and
unstructured decisions at the strategic level.
• Decision making can be performed by individuals or groups
and includes employees as well as operational, middle, and
senior managers.
• There are four stages in decision making:
intelligence, design, choice, and implementation.
• Systems to support decision making do not always produce
better manager and employee decisions that improve firm
performance because of problems with information
quality, management filters, and organizational culture.
 Data Mining
• “For a long time people have been collecting data. In
fact, for years since the 1960s right when we invented
databases the whole idea was to collect data”
• People started to realize in the 80s or 90s having all
that data was a liability because it costs money to run
computers and to keep people maintaining the data.
• Having all that information and doing nothing about it
is not very helpful, so people decided to start doing
things with it.
• Data is collected in a variety of ways. Data can be
collected from transaction systems like ATMs, from
computer searches, Smartphone activity, social
media, formal surveys and school databases
— Data is basically collected all day, everyday.
 How do information systems support the activities of
managers and management decision making?
• Early classical models of managerial activities stress the
functions of planning, organizing, coordinating, deciding, and
controlling. Contemporary research looking at the actual
behavior of managers has found that managers’ real activities
are highly fragmented, and brief in duration and that managers
shy away from making grand, sweeping policy decisions.
• Information technology provides new tools for managers to
carry out both their traditional and newer roles, enabling them
to monitor, plan, and forecast with more precision and speed
than ever before and to respond more rapidly to the changing
business environment.
• However, information systems are less successful at supporting
unstructured decisions. Where information systems are
useful, information quality, management filters, and
organizational culture can degrade decision-making.
Florida

Cox bazar
 Artificial intelligence in
healthcare
is the use of artificial intelligence
(AI) to emulate human thinking
process in the analysis and
understanding of complicated
medical and healthcare data.
 How do information systems support the activities of
managers and management decision making?
• Information technology provides new tools for managers to
carry out both their traditional and newer roles, enabling
them to monitor, plan, and forecast with more precision
and speed than ever before and to respond more rapidly to
the changing business environment.
• Information systems have been most helpful to managers
by providing support for their roles in disseminating
Information, providing liaisons between organizational
levels, and allocating resources.
• However, information systems are less successful at
supporting unstructured decisions. Where information
systems are useful, information quality, management
filters, and organizational culture can degrade decision-
making.
https://www.youtube.com/watch?v=xiIlZV0Reck
Portable emissions measurement system (PEMS) like the one
used to uncover the Volkswagen scandal were developed by
EPA researchers at the Vehicle Lab.
Volkswagen utilized computer code that sensed when
someone was testing the diesel vehicle for air emissions and
engaged the car’s full emissions system, thereby reducing
pollution emissions.
During normal use, however, the software turns the equipment
down, increasing pollution substantially above the legal level.
Because of the flawed ignition, key rings holding more than
one key could cause the ignition to suddenly switch to the
accessory or off position. That can lead to a loss of power --
disabling power braking and steering and interrupting
airbags from deploying in an accident.
 AI Questions
• What is intelligence?
– Creativity?
– Learning?
– Memory?
– Ability to handle unexpected events?
– More?
• Can machines ever think like humans?
• How do humans think?
• Do we really want them to think like us?
 BUSINESS INTELLIGENCE
• When we think of humans as intelligent beings we often refer to their
ability to take in data from their environment, understand the meaning
and significance of the information, and then act appropriately.
• Can the same be said of business firms? The answer appears to be a
qualified “yes.”
• “Business intelligence” is a term used by hardware and software vendors
and information technology consultants to describe the infrastructure
for warehousing, integrating, reporting, and analyzing data that comes
from the business environment. The foundation infrastructure
collects, stores, cleans, and makes relevant information available to
managers
• business intelligence is about integrating all the information streams
produced by a firm into a single enterprise-wide set of data, and
then, using modeling, statistical analysis tools 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.
 Business Intelligence Vendors
• It is important to remember that business intelligence and analytics
are products defined by technology vendors and consulting firms.
They consist of hardware and software suites sold primarily by large
system vendors to very large Fortune 500 firms.
• The largest five providers of these products are
SAP, Oracle, IBM, SAS Institute, and Microsoft.
• Microsoft’s products are aimed at small to medium size firms, and
they are based on desktop tools familiar to employees (such as Excel
spreadsheet software), Microsoft Sharepoint collaboration
tools, and Microsoft SQL Server database software.
• The size of the American BI and BA marketplace in 2010 is estimated
to be $10.5 billion and growing at over 20% annually. This makes
business intelligence and business analytics one of the fastest-
growing and largest segments in the U.S. software market.
Example: Course
Grade
Same Data in Different Format
Cluster analysis is the task of grouping a set of objects in such a
way that objects in the same group are more similar to each other
than to those in other groups.
 Marketing Research Data
Internal Purchase Government
1. Sales 1. Scanner data  Census
2. Warranty cards 2. Competitive market analysis • Income
3. Customer service 3. Mailing and phone lists • Demographics
lines 4. Subscriber lists • Drivers license
4. Coupons 5. Shipping • Marriage
5. Surveys 6. Web site tracking, social • Housing
networks
7. Location
 Data Mining
• Automatic analysis of data
• Statistics
– Correlation
– Regression (multiple correlation)
– Clustering
– Classification
– Nonlinear relationships
• More automated methods
– Market basket analysis
– Patterns: neural networks
 Common Data Mining Goal
Independent Variables
Dimensions/Attributes

Location

Age Dependent Variable

Fact
Indirect effects Income

Sales
Time

Month

Direct effects
Category
 Market Basket Analysis
What items do customers buy together?

Market Basket Analysis

What is it?
Market Basket Analysis is a modeling technique based upon
the theory that if you buy a certain group of items, you are
more (or less) likely to buy another group of items
 Data Mining: Market Basket Analysis
• Goal: Measure association between two items
– What items do customers buy together?
– What Web pages or sites are visited in pairs?
• Classic examples
– Convenience store found that on weekends, people often
buy both beer and diapers.
– Amazon.com: shows related purchases
• Interpretation and Use
– Decide if you want to put those items together to increase
cross-selling
– Or, put items at opposite ends of the aisle and make
people walk past the high-impulse items
https://fortune.com/fo
rtune500/2020/search/
 Delivery platform
• Delivery platform—MIS, DSS, ESS. The results from
business intelligence and analytics are delivered to
managers and employees in a variety of ways, depending
on what they need to know to perform their jobs.
MIS, DSS, and ESS
• User interface: Business people are no longer tied to their
desks and desktops. They often learn quicker from a
visual representation of data than from a dry report with
columns and rows of information.
• Today’s business analytics software suites emphasize
visual techniques such as dashboards and scorecards.
• They also are able to deliver reports on
Blackberrys, iPhones, and other mobile handhelds as well
as on the firm’s Web portal
 How do business intelligence and business
analytics support decision making?
• Business intelligence and analytics promise to deliver
correct, nearly real-time information to decision makers, and
the analytic tools help them quickly understand the
information and take action.
• A business intelligence environment consists of data from the
business environment, the BI infrastructure, a BA
toolset, managerial users and methods, a BI delivery platform
(MIS, DSS, or ESS), and the user interface.
• There are six analytic functionalities that BI systems deliver
to achieve these ends: pre-defined production
reports, parameterized reports, dashboards and
scorecards, ad hoc queries and searches, the ability to drill
down to detailed views of data, and the ability to model
scenarios and create forecasts.
How do different decision-making constituencies
in an organization use business intelligence?
• Operational and middle management are generally charged with
monitoring the performance of their firm. Most of the decisions they
make are fairly structured. Management information systems (MIS)
producing routine production reports are typically used to support
this type of decision making.
• For making unstructured decisions, middle managers and analysts
will use decision-support systems (DSS) with powerful analytics and
modeling tools, including spreadsheets and pivot tables.
• Senior executives making unstructured decisions use dashboards and
visual interfaces displaying key performance information affecting
the overall profitability, success, and strategy of the firm.
• The balanced scorecard and business performance management are
two methodologies used in designing executive support systems
(ESS).
Shipment forecast worldwide
 Information & Projection
• When you base your decisions on data available from management
information systems, they reflect information that comes from the operations
of your company.
• Management information systems take data generated by the working level
and organize it into useful formats.
• Management information systems typically contain sales
figures, expenses, investments and workforce data.
• If you need to know how much profit your company has made each year for
the past five years to make a decision, management information systems can
provide accurate reports giving you that information.
• Projections
• Any decisions you make result in changes in the projected company results
and may require modifications to your business strategy and overall goals.
• Management information systems either have trend analysis built in or can
provide information that lets you carry out such an analysis.
• Typical business strategies include projections for all fundamental operating
results. A trend analysis allows you to show what these results would be in
the current situation and how they will change once you have implemented
the decisions you have taken.
 Forecasting Method
https://corporatefinanceinstitute.com/resources/knowledge/modeling/forecasting-methods/
 WHAT TO SELL? WHAT PRICE TO
CHARGE? ASK THE DATA
• What’s the best way to get a discount on your morning coffee
at Starbucks? Well, if you live in Manhattan, you could get up
an hour early and take the subway downtown to Brooklyn.
• A single expresso is 10 cents cheaper than in your
neighborhood, as are a caffee latte and slice of lemon pound
cake. But a muffin runs 10 cents more uptown in Marble
Hill, and a tall Pike’s Place Roast costs $1.70 no matter where
you live.
• Starbucks is one of many retailers using sophisticated software
to analyze, store by store and item by item, how demand
responds to changes in price. What customers are willing to
pay for certain items depends very much on the neighborhood
or even the region of the country where they live. Shoppers in
certain locations are willing to pay more.
• The experiences of Starbucks is powerful
illustrations of how information systems improve
decision making.
• Managers at this retail chains were unable to make
good decisions about what prices to charge to
improve profitability and what items to sell in stores
to maximize sales at different locations and different
time periods.
• They had access to customer purchase data, but
they were unable to analyze millions of pieces of
data on their own.
• Bad decisions about how much to charge and how
to stock stores lowered sales revenue and prevented
these companies from responding quickly to
customer needs.
 El Nino La Nina
• Meaning: “little boy” • Meaning: ‘little girl’.
• It makes warmer and • It is Cooler and Winters
drier are wetter
• Heavy rains in Ecuador • Causes drought in
and Peru Ecuador and Peru,
• Drought in eastern • Heavy floods in
Australia Australia
• Warm winter in the • Cold winter in the
northern half of the northern half of the
United States United States
 Real-World Decision Making
• We now see that information systems are not helpful for all managerial
roles. In those managerial roles where information systems might
improve decisions, investments in information technology do not always
produce positive results. There are three main reasons: information
quality, management filters, and organizational culture
1. Information Quality. High-quality decisions require high-quality
information. If the output of information systems does not meet these
quality criteria, decision-making will suffer.
2. Management Filters. Even with timely, accurate information, some
managers make bad decisions. Managers (like all human beings) absorb
information through a series of filters to make sense of the world
around them. Managers have selective attention, focus on certain kinds
of problems and solutions, and have a variety of biases that reject
information that does not conform to their prior conceptions.
3. Organizational inactivity and Politics. Organizations are bureaucracies
with limited capabilities and competencies for acting positively.
Decisions taken by a firm often represent a balancing of the firm’s
various interest groups rather than the best solution to the problem.
 Geographic information systems
• Geographic information systems (GIS) help decision
makers visualize problems requiring knowledge about the
geographic distribution of people or other resources. Their
software ties location data to points, lines, and areas on a
map. Some GIS have modeling capabilities for changing the
data and automatically revising business scenarios.
• GIS might be used to help state and local governments
calculate response times to natural disasters and other
emergencies or to help banks identify the best location for
installing new branches or ATM terminals.
• For example, Columbia, South Carolina-based First Citizens
Bank uses GIS software from MapInfo to determine which
markets to focus on for retaining customers and which to
focus on for acquiring new customers.
• টে঴঱া ববশ্বের অন্যতম একটি ইশ্ব঱কবিক গাবির বন্মমাতা প্রবতষ্ঠান্। প্রবতষ্ঠান্টির
মূ঱ ঱ক্ষ্য ঵শ্ব঱া গ্রা঵কশ্বের ঵াশ্বতর ন্াগাশ্ব঱র মশ্বযয োম ঴ীমাবদ্ধ টরশ্বে ঴বার জন্য
ইশ্ব঱কবিক গাবির বযবস্থা কশ্বর পবরশ্ববল েূ঳ণ টরায করা।
• টে঴঱া টকাম্পাবন্র ফাউন্ডার এ঱ন্ মাস্ক ন্ন্, ফাউন্ডার ব঵঴াশ্বব বিশ্ব঱ন্ মাটিমন্
এবার঵ার্ম, মাকম োরশ্বপবন্িং।তশ্বব, এ঱ন্ মাস্ক টকাম্পাবন্শ্বত বন্শ্বজর অবস্থান্ পাকা
কশ্বর টন্ন্ তার উচ্চমাশ্বন্র আইবর্য়ার কারশ্বণ। এ঱ন্ মাশ্বস্কর আইবর্য়া অন্ু঴রণ
কশ্বরই টে঴঱া টকাম্পাবন্ আজ মাবি ববব঱য়বন্য়ার টকাম্পাবন্শ্বত পবরণত ঵শ্বয়শ্বি।
• এ঱ন্ মাস্ক যেন্ টে঴঱া টকাম্পাবন্শ্বত আশ্ব঴ন্ তেন্ টকাম্পাবন্ ভরার্ু বব অবস্থায়
বিশ্ব঱া, বতবন্ টকাম্পাবন্র বাশ্বজ প্ল্যান্ টথশ্বক তেন্কার ব঴ইও’টক বব঵ষ্কার কশ্বর টেন্
এবিং বন্শ্বজই ব঴ইও পশ্বে চশ্ব঱ আশ্ব঴ন্।তার আইবর্য়া অন্ু঴রণ কশ্বরই টে঴঱া
টকাম্পাবন্টি ঵াজারপবত টকাম্পাবন্ টথশ্বক টকাটিপবত টকাম্পাবন্শ্বত এশ্ব঴ োাঁবিশ্বয়শ্বি
আজ।
• ২০১৩ ঴াশ্ব঱র লুরু বেশ্বক টে঴঱া টকাম্পাবন্টি প্রায় টেউব঱য়া ঵শ্বয় বগশ্বয়বি঱। তেন্
এ঱ন্ মাস্ক গুগশ্ব঱র কাশ্বি প্রায় অশ্বের জন্য বববি কশ্বর বেশ্বত টচশ্বয়বিশ্ব঱ন্। বকন্তু
পশ্বর বতবন্ টকাম্পাবন্শ্বত ঴বমশ্বল঳ প্রশ্বচষ্টা চাব঱শ্বয় প্রায় চমকপ্রে ঱াভজন্ক অবস্থায়
বন্শ্বয় আশ্ব঴ন্।
• A new report paints the Tesla-Panasonic
relationship as hitting some hard times and it
happens just as Tesla is moving to manufacture its
own battery cells.
• Over the last few years, Tesla has become the
world’s largest consumer of li-ion battery cells and
Panasonic has been its main supplier since the days
of the original Tesla Roadster.
• In preparation for the Model 3, the two companies
partnered on Gigafactory 1 in Nevada where
Panasonic produces battery cells that Tesla then
assembles into battery packs at the same location.
• The factory quickly became the largest li-ion battery
factory in the world, but earlier this year, Tesla said
that Panasonic’s battery cell production was limiting
Model 3 production.
 Choose a Stock
Stock Price
130

125

120

115

110
Company A
105 Company B

100

95

90
1 2 3 4 5 6 7 8 9 10 11 12
Month

Company A’s share price increased by 2% per month.

Company B’s share price was flat for 5 months and then increased by
3% per month.
Which company would you invest in?
 Decision Challenges
• By guessing, people make bad decisions.
• You need to develop a process
– Obtain data
– Build a model
– Analyze the data
• Which means you need tools
– Some tools require background and experience
– Some can be automated to various points
• Beware of decisions after-the-fact: Someone can have
“amazing” results that are random.
– If you look at a sample of 1,000 people and one does
substantially better than the others is it random?
– Stock-picking competitions/results
 Decision tree
• Decision tree learning is one of the predictive
modeling approaches used in data mining and
machine learning.
• The goal is to create a model that predicts the
value of a target variable based on several input
variables.
• Decision trees can be described also as the
combination of mathematical and
computational techniques to aid the
description, categorization and generalization of
a given set of data.
List of Indian CEOs in top MNCs

1. Sundar Pichai- Google

2. Satya Nadella- Microsoft
3. Shantanu Narayen- Adobe Systems.
4. Anshuman Jain- CEO Deutsche Bank
5. Indra Nooyi- Pepsi Co.
6. Ajaypal Singh Banga- Mastercard
7. Ivan Manuel Menezes- Diageo
8. Sanjay Jha- Global Foundries
9. Rakesh Kapoor- Reckitt Benckiser
10. Dinesh Paliwal- Harman International
Industries
Decision Tree (bank loan)
Payments
< 10%
monthly income? No
Yes
Other loans
Yes total < 30%
Credit monthly income?
History
Good Bad
No
So-so

Job
Approve Stability
Deny
the loan the loan
Good Poor
 Chapter 12
• Balanced scorecard • Informational role, 459
method, 474 • Intelligence, 458
• Business performance • Interpersonal role, 459
management (BPM), 475
• Key performance indicators
• Classical model of (KPIs), 474
management, 458
• Managerial roles, 454
• Data visualization, 467
• Sensitivity analysis, 472
• Decisional role, 459
• Semistructured
• Geographic information decisions, 456
systems (GIS), 467
• Structured decisions, 456
• Group decision-support
systems (GDSS), 475 • Unstructured decisions, 456