Topic 3

Decision Making, Systems and

Support
Part 1: Decision Making
ISP642 – BUSINESS
INTELLIGENCE
Learning Objectives
 Understand the need for computerized support
of managerial decision making
 Understand an early framework for

managerial decision making

Reaching to Your Goals
 One step at a time
Business Pressures–Responses–Support Model
Organizational Responses

Be Reactive

Anticipative

Adaptive

Proactive
Organizational Responses …
 Managers may take actions
 Employ strategic planning
 Use new and innovative business models
 Restructure business processes
 Participate in business alliances
 Improve corporate information systems
 Improve partnership relationships
 Encourage innovation and creativity
Organizational Responses
 Managers may take actions
 Improve customer service and relationships
 Move to electronic commerce (e-commerce)
 Use new IT to improve communication, data access
(discovery of information), and collaboration
 Respond quickly to competitors' actions (e.g., in
pricing, promotions, new products and services)
 Automate many tasks of white-collar employees
 Automate certain decision processes
 Improve decision making by employing analytics
A scenario
Information Requirements by Management
Level

Strategic
Management
Strategic
Management

In
fo
ns

rm
io

Tactical

at
is

io
ec

Management

n
D

Operational
Management
Decision Making
the mental processes resulting in the selection of a
course of action among several alternatives

the process of making a choice between a numbers of

options and committing to a future course of action

Outpu • an action
• an opinion of choice
t
Decision Making
 For each decision you make, the decision can be :

Structured

Unstructured

Semi-structured
Decision Making

Structured Unstructured Semi-structured

• “programmed • often involve • have some
decisions” new or unique structured
• routine and problems components and
usually specific • the individual some
policies, unstructured
procedures, or
has little or no
programmatic components.
• actions that can
be identified to or routine
help make the procedure for
decision addressing the
• “This is how we problem or
usually solve this making a
type of problem” decision
Managerial Decision Making
 Management is a process by which organizational
goals are achieved by using resources
 Inputs: resources
 Output: attainment of goals
 Measure of success: outputs / inputs
 Decision making
 selecting the best solution from two or more
alternatives
Mintzberg's 10 Managerial Roles

Interpersonal Decisional
1. Figurehead 7. Entrepreneur
2. Leader 8. Disturbance handler
3. Liaison 9. Resource allocator
10. Negotiator
Informational
4. Monitor
5. Disseminator
6. Spokesperson
Decision-Making Style

• Relies on information systematically acquired

and evaluated to narrow alternatives
• Use methodical, step-by-step procedures
• Value quantitative information and the generated
Analytic models
• Use mathematics to model problems and
algorithms to solve them

• Makes decisions with the aid of guidelines not

necessarily applied consistently or systematically
Heuristic • Experienced-based
• Learn by acting, use trial and error to find
solutions, and rely on common sense to guide
them
Analytic and Heuristic Decision
Making
Analytic Decision Maker Heuristic Decision Maker

Learns by analyzing Learns by acting

Uses step-by-step procedure Uses trial and error

Values quantitative information Values experience

and models
Builds mathematical models and Relies on common sense
algorithms
Seeks optimal solution Seeks completely satisfying
solution
Decision making is difficult,
because
 Technology, information systems,
advanced search engines, and
globalization
 result in more and more alternatives from which
to choose
Decision making is difficult,
because
 Government regulations and the need
for compliance, political instability and
terrorism, competition, and changing
consumer demands
 produce more uncertainty, making it more
difficult to predict consequences and the future
Decision making is difficult,
because
 The need to make rapid decisions, the
frequent and unpredictable changes
 that make trial-and-error learning difficult, and
the potential costs of making mistakes
The Role of the Decision Maker
 Decision makers can be
 Individuals
 Teams
 Groups
 Organizations
 These decision makers
 differ in their knowledge and experience;
 Therefore, there will be differences in how they
will react to a given problem scenario
Strategies for Making Decisions

Optimization

Satisficing

Elimination by Aspects

Incrementalism

Mixed Scanning

Analytic Hierarchy Process

Knowledgeable Decision Maker
 The decision maker also needs Knowledge to
make decisions
 Types of knowledge:
 Descriptive Knowledge
 Procedural Knowledge
 Reasoning Knowledge
Decision Making Steps

Identify Compare
Construc
t possible choose
solution and
Define a model
to the recommen
that
the model da
describes
problem and potential
the real
evaluate solution to
world
the the
problem
solution problem
Step 1: Identify the problem
 Identify a situation that may deal with some
difficulty or with an opportunity
 Make sure it’s a problem and not just a symptom of a
problem
 Should ask the following questions
 What exactly is the problem?
 Why the problem should be solved?
 Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?
Step 2: Construct a model

Models in Decision Making

• linear programming and production
Deterministic planning

• queuing theory and regression

Stochastic analysis

• transportation analysis and

Simulation production modeling

Domain- • meteorological models, geologic

specific models, economic models
Step 3: Identify possible solution
 Understand the causes of the problem and
prioritization of causes
 List down all the best option of ideas
 Generate all possible solution(alternatives) for the
problem at hand
 Experience of the judgment principles comes into
play to evaluate each alternatives
Step 4: Compare, choose,
recommend potential solution
 Compare each alternative for their positives and
negatives
 The selection of the best alternatives is an informed
decision
 Convert the decision into a plan or a sequence of
activities.
 Execute the plan with helps from subordinates
 Evaluate the outcome of your decision
Closing the Strategy Gap
 The GAP
 between the current performance of an
organization and its desired performance,
 as expressed in its
 Mission
 Objectives
 Goals
 Strategy to achieve them
A Decision Support Framework
(by Gory and Scott-Morten, 1971)
A Decision Support Framework – cont.
 Degree of Structuredness (Simon, 1977)
 Decision are classified as
 Highly structured (a.k.a. programmed)
 Semi-structured
 Highly unstructured (i.e., non-programmed)

 Types of Control (Anthony, 1965)

 Strategic planning (top-level, long-range)
 Management control (tactical planning)
 Operational control
Structured vs. Unstructured Problems
Well-structured Problems
Definition Can be described with a high degree of
completeness
Can be solved with a high degree of
certainty
Experts usually agree on the correction
solution
Educational goal LEARN TO REASON TO CORRECT
SOLUTIONS
Complexity Ranges from very simple to very
complex
Examples Reconciling a company’s bank account
Calculating the capital gain on the sale
of a building
Relatively simple - Compute straight-line depreciation
Relatively complex - Classify a lease as capital or operating
once all necessary facts are assembled
Unstructured Problems
Cannot be described with a high degree
of completeness
Cannot be resolved with a high degree
of certainty
Experts often disagree about the best
solution
LEARN TO CONSTRUCT AND
DEFEND REASONABLE
SOLUTIONS
Ranges from very simple to very
complex
Estimating the sum of future cash
flows from the use of long-lived assets
Judging the adequacy of an argument
promoting a reduction in the capital
gains tax rate
Interpret a company’s current ratio
Prepare operating budget for next 5
years
Simon’s Decision-Making Process
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
 Simon’s 6-Steps Decision-Making
 (Simon, 1997)

Asefeh Asemi, Ali Safari, Adeleh Asemi Zavareh (2011),The Role of Management Information System (MIS) and Decision Support System (DSS)
for Manager’s Decision Making Process, International Journal of Business and Management Vol. 6, No 7
Why we need DSS?
 The entire decision-making process, from problem
recognition to action, has become so accelerated it
is simply impossible to rely on human response
alone.
 That's why you need Business Intelligence to help
you react and adapt to the constantly changing
business environment.
Benefits of DSS
 So, how does a DSS benefit decision makers
 Supplements the decision maker
 Allows improved intelligence, decision, and choice
activities
 Facilitates problem solving
 Provides assistance with non-structures decisions
 Assists with knowledge management
 END OF TOPIC
42

 THANK YOU FOR YOUR ATTENTION

 References
43

1. RN Prasad & Seema Acharya(2011), Fundamentals of Business

Analytics, Wiley India Pvt. Ltd
2. Ramesh Sharda, Dursun Delen & Efraim Turban (2014), Business
Intelligence and Analytics, 10th ed., Pearson Education Ltd.
3. Nathan Yau, (2013), Data Points: Visualization That Means
Something, Wiley.
4. http://faculty.ist.psu.edu/jessieli/Site/research.html
5. http://www.laits.utexas.edu/~anorman/BUS.FOR/course.mat/Alex/
6. Image search from Google search engine
7. http://timmanns.blogspot.com/