Supporting

Decision Making
Management of Information Systems and Services InSy4102
BSC. Degree in Information Systems
2023

Source: Information Systems Management in Practice

7/8th Edition

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Introduction
 Most computer systems support decision making
because all software programs involve automating
decision steps that people would take

 Decision making is a process that involves a

variety of activities, most of which handle
information

 A wide variety of computer-based tools and

approaches can be used to confront the problem at
hand and work through its solution
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
MIS and Decision-Making
 One important role of MIS:

 support decision making by employees and managers

 MIS provides the right information to the right person in the right fashion
at the right time to all level of management of an organization for decision
making.
 Perform activity : planning, initiating, organizing, and controlling

 Decision making refers to the process of making the right choice

among alternatives, based upon factual and value premises with the
intention of moving towards a desired state of affairs.
MIS and Decision-Making
 Simon (1977) describes the process of decision making as comprising
four steps: intelligence, design, choice, and Implementation.
Four stages in decision making (Simon 1960)
 Intelligence
 Identifying , understanding and defining the problems occurring in the organization or need, or
opportunity that calls for a decision
 Design
 The design phase is where we develop alternatives . The decision maker designs alternative solutions to
the problems
 Choice
 choosing among alternative solutions
 Example of selection criteria could be speed, cost, and quality
 Implementation
 Putting the decision into effect

4
Classification of decision making by
organizational level
 Strategic decision
Determines the objectives, resources, and policies of the organization
 Management/ Tactical decision
Primarily concerned with how efficiently and effectively resources are used and how well
operational units are performing.
relate to the implementation of strategic decisions, directed towards developing divisional plans,
structuring workflows, establishing distribution channels, acquisition of resources such as
personnel, materials and money.
 Operational decision
Determines how to carry out the specific tasks set forth by strategic and middle management
decision makers.
relate to day-to-day operations of the enterprise having a short-term horizon and are always
repeated.
These decisions are based on facts regarding the events and do not require5 much of business
judgments.
 Knowledge-level decision
 Deals with new ideas for products and services, ways to communicate new

knowledge, and ways to distribute information through out the organization .

Types of decision structure:

Structured decision
Unstructured decision
Semi structured decision

6
 Types of Information in terms of
management hierarchy
Comparison
Relates to the immediate term; Is relevant
to the long term;
 Is highly detailed, being the processing
of raw data; summarized at a high level
 Is derived almost entirely from internal
sources; External Sources
• External sources of information may include :
• Intelligence gathering about competitors‘
activities;
• Information about population shifts;
• Economic and social factors;
• Government legislation.
Is Incapable of providing complete
certainty, given that the future cannot
be predicted.
 Is prepared constantly, or very
frequently; on an 'ad hoc' basis;

Figure Information characteristics for managerial decisions

 Characteristics of information systems used at
different levels
 Operational Information systems
 Repetitiveness: The information they produce is usually generated
repetitively at periodic intervals, such as daily, weekly, or monthly.
 Predictability: The information they produce usually does not contain
any surprises or unexpected results for the manager or other users of
the system.
 Emphasis on the past: The information produced usually describes past
activities of the organization.
 Detailed Nature: The information produced is very detailed.
 Internal Origin: the data for operational systems usually spring entirely
from internal sources.
 Structured Form: The form of the data used as input and the form of
the information produced by operational-level systems is usually very
structured.
 Great Accuracy: the accuracy of the data used as input to such systems
is usually very high.
 Tactical Information systems
 Periodic Nature: the information from a tactical system is
sometimes produced periodically.
 Unexpected Findings: the information produced by a tactical
information system may not be the information that was
expected to be produced.
 Comparative Nature: the information produced is usually
comparative in nature rather than merely descriptive. Tactical
information systems should provide managers with
information that alerts them to variances from accepted
standards or results that are not within the normal range, so
that remedial actions can be taken swiftly.
 Summary Form: the information produced is usually not
detailed but in summary form.
 Both Internal and External Sources: The data used for input
to the system may not be confined to sources internal to the
organization.
Strategic Information systems
 Ad Hoc Basis: strategic planning information is more often produced
when it is needed, on an ad hoc basis.
 Unexpected Information: The information produced by the system may
not be the information that was anticipated.
 Predictive Nature: The Information produced is usually predictive of
future events rather than descriptive of past events.
 Summary Form: The information produced is usually not detailed but in
summary form. Long-range planners are not usually interested in detailed
information. They are usually concerned with more global data.
 External Data: A large part of the data used for input to the system may
be acquired from sources external to the organization.
 Unstructured Format: The data used for input to the system may contain
data that are unstructured in format.
 Subjectivity: The data used for input may be highly subjective and
their accuracy may be suspected.
 Comparison between the three levels of
information systems
Characteristic Operational Tactical Strategic
Frequency Regular, repetitive Mostly regular Often ad hoc

Dependability of results Expected results Some surprises may Results often contain
occur surprises
Time period covered The past Comparative Predictive of the future

Level of detail Very detailed Summaries of data Summaries of data

Source of data Internal Internal and external Mostly external

Nature of data Highly structured Some unstructured Highly unstructured

data
Accuracy Highly accurate data Some subjective data Highly subjective data

Typical user First-line supervisors Middle managers Top management

Level of decision Task-oriented Control and resource Goal oriented

allocation oriented
Technologies that Support Decision Making
 The purpose of tractors, engines, machines etc. =
to enhance humans’ physical capabilities
 The purpose of computers has been to enhance our
mental capabilities
 Hence, a major use of IT is to relieve humans of
some decision making or help us make more
informed decisions

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Technologies that Support Decision Making
Decision Support Systems ---DSS
 Systems that support, not replace, managers in their
decision-making activities
 Decision modeling, decision theory, and decision analysis,
attempt to make models from which the ‘best decision’ can
be derived, by computation
 DSS are defined as: Computer-based systems
 That help decision makers
 Confront ill-structured problems
 Through direct interaction
 With data and analysis models

 Wide range of technologies can be used to assist decision

makers and problem solvers
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
 Decision Support Systems
The Architecture for DSSs
 The Figure below shows the relationship between
the three components of the DSS model
 Software system in the middle of the figure
consists of:
 The database management system (DBMS)
 The model base management system (MBMS)
 The dialog generation and management system
(DGMS)
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
By Mr. Zelalem S. Mizan Tepi university, Department
of Information systems
 Decision Support Systems
The Architecture for DSSs cont.
The Dialog Component
 The DSS contains a dialog component to link the user to the system
 browser interface

The Data Component

 Data sources – as the importance of DSS has grown, it has become
increasingly critical for the DSS to use all the important data sources
within and outside the organization
 Data warehousing
 Data mining
 Much of the work on the data component of DSS has taken the form of
activities in this area
The Model Component
 Models provide the analysis capabilities for a DSS
 Using a mathematical representation of the problem, algorithmic processes
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
are employed to generate information to support decision making
Decision Support Systems
Types of DSS
 The size and complexity of DSS range from large complex
systems that have many of the attributes of major applications
down to simple ad hoc analyses that might be called end user
computing tasks
 Institutional DSSs tend to be fairly well defined
 They are based on pre=defined data sources
 Heavily internal with perhaps some external data
 Use well established models in a prescheduled way
 Quick-hit DSSs are developed quickly to help a manager
make either a one-time decision or a recurring one
 Can be every bit as useful for a small or large company
 Most today = Excel spreadsheets (and not ‘called’ DSS)
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
 ORE-IDA FOODS
Case Example – Institutional DSS
 Frozen food division of H.J. Heinz
 Marketing DSS must support 3 main tasks in the decision
making process:
1. Data retrieval – helps managers find answers to the question, “what has
happened?”
2. Market analysis – addresses the question, “Why did it happen?”
3. Modeling – helps managers get answers to, “What will happen if…?”
 Modeling for projection purposes, offers the greatest potential
value of marketing management
 For successful use – line managers must take over the ownership
of the models and be responsible for keeping them up-to-date

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

A MAJOR SERVICES COMPANY
Case Example – “Quick Hit” DSS – Short Analysis Programs

 Considering – new employee benefit program: an

employee stock ownership plan (ESOP).
 Wanted a study made to determine the possible
impact of the ESOP on the company and to answer
such questions as:
 How many shares of company stock will be needed in 10,20
and 30yrs to support the ESOP?
 What level of growth will be needed to meet these stock
requirements?
 The information systems manager wrote a program to
perform the calculations & printed the results
 Results = showed the impact of the ESOP over a 30yr
period
 Surprising results
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
Technologies that Support Decision Making
Data Mining
A promising use of data warehouses is to let the
computer uncover unknown correlations by
searching for interesting patterns, anomalies, or
clusters of data that people are unaware exist

 Called data mining, its purpose is to give people

new insights into data
 Most frequent type of data mined = customer
data

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

HARRAH’S ENTERTAINMENT
Case Example – Data Mining (Customer)

 To better know its customers, Harrah’s encourages

them to sign up for its frequent-gambler card, Total
Rewards
 Harrah’s mined its Total Rewards database to
uncover patterns and clusters of customers

 It has created 90 demographic clusters, each of

which is sent different direct mail offers –
encouraging them to visit other Harrah’s casinos
 Profit and loss for each customer calculating the likely
‘return’ for every ‘investment’ it makes in that customer

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Technologies that Support Decision Making
Executive Information Systems (EIS)

 As the name implies EISs are for use by executives

 They have been used for the following purposes:

1. Gauge company performance: sales, production,

earnings, budgets, and forecasts
2. Scan the environmental: for news on government
regulations, competition, financial and economics
developments, and scientific subjects

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Technologies that Support Decision Making
Executive Information Systems (EIS) cont.
 EIS can be viewed as a DSS that:
1. Provides access to summary performance data
2. Uses graphics to display and visualize the data in
an easy-to-use fashion, and
3. Has a minimum of analysis for modeling beyond the
capability to “drill down” in summary data to
examine components

 In many companies, the EIS is called a

dashboard and may look like a dashboard of a
car
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
XEROX CORPORATION
Case Example – Executive Information System

 The EIS at Xerox began small and evolved to the point where even
skeptical users became avid supporters
 Its objective was to improve communications and planning, such as
giving executives pre-meeting documents
 It was also used in strategic planning and resulted in better plans,
especially across divisions

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Executive Information Systems (EIS)
Why Install an EIS?

 Attack a critical business need: EIS can be viewed as an

aid to dealing with important needs that involve the
future health of the organization
 A strong personal desire by the executive: The executive
sponsoring the project may
 Want to get information faster than he/she is now getting it, or
 Have a quicker access to a broader range of information, or
 Have the ability to select and display only desired information
and to probe for supporting detail, or
 To see information in graphical form

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Executive Information Systems (EIS)
What Should the EIS Do?

 A Status Access System: Filter, extract, and compress a broad range of

up-to-date internal and external information

 It should call attention to variances from plan.

 It should also monitor and highlight the critical
success factors of the individual executive user
 EIS is a structured reporting system for executive
management, providing the executive with the
data and information of choice and desired form

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems

Technologies that Support Decision Making
Expert Systems

 A real-world use of artificial intelligence (AI)

 AI is a group of technologies that attempts to mimic our senses
and emulate certain aspects of human behavior such as
reasoning and communication
 Promising for 40 years +. Now = finally living up to promise

 An expert system is an automated type of analysis or

problem-solving model that deals with a problem the
way an “expert” does
 Note: Expert Systems are not new
 LISP
 Prolog
 Languages in the ’70s
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
Technologies that Support Decision Making
Expert Systems cont.
 The process involves consulting a base of
knowledge or expertise to reason out an answer
based on the characteristics of the problem
 Like DSSs, they have:
 A user interface
 An inference engine, and
 Stored expertise (in the form of a knowledge base)
 The inference engine is that portion of the
software that contains the reasoning methods
used to search the knowledge base and solve
the problem
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
Expert Systems
Knowledge Representation
 Knowledge can be represented in a number of ways:
1. One is as cases; case-based reasoning expert systems using
this approach draw inferences by comparing a current
problem (or case) to hundreds or thousands of similar past
cases

2. A second form is neural networks, which store knowledge as

nodes in a network and are more intelligent than the other
forms of knowledge representation because they can learn

3. Third, knowledge can be stored as rules (the most common

form of knowledge representation), which are obtained from
experts drawing on their own expertise, experience, common
sense, ways of doing business, regulations, and laws
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
Expert Systems
Degree of Expertise
1. As an assistant, the lowest level of expertise, the
expert system can help a person perform routine
analysis and point out those portions of the work
where the expertise of the human is required

2. As a colleague, the second level of expertise, the

system and the human can “talk over” the problem
until a “joint decision” has been reached

3. As an expert, the highest level of expertise, the

system gives answers that the user accepts,
perhaps without question
By Mr. Zelalem S. Mizan Tepi university, Department of Information systems
Home study(5+%)
 Investigate Information systems toward Real-time Enterprise as the
following and write not more than 5 pages report to your instructor
1. Enterprise nervous systems
2. Straight-through processing
3. Real-time CRM
4. Communicating objects
5. Agent Based modeling

By Mr. Zelalem S. Mizan Tepi university, Department of Information systems