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Chapter 12

Enhancing Decision Making

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© 2007 by Prentice Hall

Management Information Systems
Chapter 12 Enhancing Decision Making LEARNING OBJECTIVES

• Describe different types of decisions and the decision-making process. • Assess how information systems support the activities of managers and management decision making. • Demonstrate how decision-support systems (DSS) differ from MIS and how they provide value to the business.

12.2

© 2007 by Prentice Hall

Management Information Systems
Chapter 12 Enhancing Decision Making LEARNING OBJECTIVES (cont’d)

• Demonstrate how executive support systems (ESS) help senior managers make better decisions. • Evaluate the role of information systems in helping people working in a group make decisions more efficiently.

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© 2007 by Prentice Hall

• Modeling software fueled with data from Oracle data warehouse improved efficiency and reduced costs. • Solutions: Deploy modeling and optimization software to maximize return on investment and predict the most successful supply chain. complex supply chain. • Demonstrates IT’s role in restructuring a supply chain.Management Information Systems Chapter 12 Enhancing Decision Making Procter & Gamble Restructures Its Supply Chain • Problem: Cost pressures.4 © 2007 by Prentice Hall . 12. • Illustrates digital technology improving decision making through information systems.

Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Business Decision Making and the Decision-Making Process Decision-Making Levels: • Senior management • Middle management and project teams • Operational management and project teams • Individual employees 12.5 © 2007 by Prentice Hall .

Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Information Requirements of Key Decision-Making Groups in a Firm 12.6 Figure 12-1 © 2007 by Prentice Hall .

7 © 2007 by Prentice Hall . decide corporate objectives 12.Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions Unstructured decisions: • Novel. non-routine decisions requiring judgment and insights • Examples: Approve capital budget.

determine special offers to customers Semistructured decisions: • Only part of decision has clear-cut answers provided by accepted procedures • Examples: Allocate resources to managers.8 © 2007 by Prentice Hall . develop a marketing plan 12.Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions (Continued) Structured decisions: • Routine decisions with definite procedures • Examples: Restock inventory.

Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Systems for Decision Support There are four kinds of systems that support the different levels and types of decisions: • Management Information Systems (MIS) • Decision-Support Systems (DSS) • Executive Support Systems (ESS) • Group Decision-Support Systems (GDSS) 12.9 © 2007 by Prentice Hall .

10 Figure 12-2 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making DECISION MAKING AND DECISION-SUPPORT SYSTEMS Stages in Decision Making 12.

Management Information Systems Chapter 12 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Decision Making in the Real World In the real world. accessibility 12. integrity. timeliness. consistency. completeness.11 © 2007 by Prentice Hall . investments in decision-support systems do not always work because of • Information quality: Accuracy. validity.

12 © 2007 by Prentice Hall .Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm DECISION MAKING AND DECISION-SUPPORT SYSTEMS Decision Making in the Real World (Continued) • Management filters: Biases and bad decisions of managers • Organizational inertia: Strong forces within organization that resist change 12.

Management Information Systems Chapter 12Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT The Difference between MIS and DSS Management Information Systems: • Primarily address structured problems • Provides typically fixed.13 © 2007 by Prentice Hall . scheduled reports based on routine flows of data and assists in the general control of the business 12.

ad-hoc queries.14 © 2007 by Prentice Hall . assumptions. and a rapid response 12. flexibility. display graphics • Emphasizes change.Management Information Systems Chapter 12 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Decision Support Systems: • Support semistructured and unstructured problems • Greater emphasis on models.

Management Information Systems Chapter 13 Enhancing Decision Making for the Digital Firm SYSTEMS FOR DECISION SUPPORT Types of Decision-Support Systems Model-driven DSS: • Primarily stand-alone systems • Use a strong theory or model to perform “what-if” and similar analyses 12.15 © 2007 by Prentice Hall .

Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Data-driven DSS: • Integrated with large pools of data in major enterprise systems and Web sites • Support decision making by enabling user to extract useful information • Data mining: Can obtain types of information such as associations. sequences. and forecasts 12.16 © 2007 by Prentice Hall . classifications. clusters.

17 © 2007 by Prentice Hall . with models. and other analytical tools • DSS user interface: Graphical. flexible interaction between users of the system and the DSS software tools 12.Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Components of DSS • DSS database: A collection of current or historical data from a number of applications or groups • DSS software system: Contains the software tools for data analysis. data mining.

18 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Model: An abstract representation that illustrates the components or relationships of a phenomenon • Statistical models • Optimization models • Forecasting models • Sensitivity analysis (“what-if” models) 12.

19 Figure 12-3 © 2007 by Prentice Hall .Management Information Systems Chapter 12Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Overview of a Decision-Support System 12.

Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Business Value of DSS • Data Visualization: Presentation of data in graphical forms. to help users see patterns and relationships • Geographic Information Systems (GIS): Special category of DSS that display geographically referenced data in digitized maps 12.20 © 2007 by Prentice Hall .

21 © 2007 by Prentice Hall . 12.Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Web-Based Customer Decision-Support Systems • DSS based on the Web and the Internet can support decision making by providing online access to various databases and information pools along with software for data analysis • Some of these DSS are targeted toward management. but many have been developed to attract customers.

Web directories. 12. and other tools used to help make purchasing decisions. • Customer decision-support systems (CDSS) support the decision-making process of an existing or potential customer.Management Information Systems Chapter 12 Enhancing Decision Making SYSTEMS FOR DECISION SUPPORT Web-based Customer Decision-Support Systems (Continued) • Customer decision making has become increasingly information intensive.22 © 2007 by Prentice Hall . intelligent agents. online catalogs. with Internet search engines. e- mail.

12.23 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS What Is a GDSS? • Group Decision-Support System (GDSS) is an interactive computer-based system used to facilitate the solution of unstructured problems by a set of decision makers working together as a group.

brainstorming tools. etc. audiovisual equipment. etc. support staff) 12.) • People (Participants. trained facilitator.Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Three Main Components of GDSS: • Hardware (conference facility.24 © 2007 by Prentice Hall .) • Software tools (Electronic questionnaires. voting tools.

each attendee has a workstation. 12. and to the meeting’s file server. • The workstations are networked and are connected to the facilitator’s console. which serves as the facilitator’s workstation and control panel. • All data that the attendees forward from their workstations to the group are collected and saved on the file server.25 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Overview of a GDSS Meeting • In a GDSS electronic meeting.

26 © 2007 by Prentice Hall . 12.Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Overview of a GDSS Meeting (Continued) • The facilitator is able to project computer images onto the projection screen at the front of the room. • Many electronic meeting rooms have seating arrangements in semicircles and are tiered in legislative style to accommodate a large number of attendees. • The facilitator controls the use of tools during the meeting.

Reprinted by permission. Source: From Nunamaker et al.. Figure 12-9 © 2007 by Prentice Hall 12. “Electronic Meeting Systems to Support Group Work.27 .Management Information Systems Chapter 12 Enhancing Decision Making Group Decision-Support Systems (GDSS) Group System Tools The sequence of activities and collaborative support tools used in an electronic meeting system facilitate communication among attendees and generate a full record of the meeting.” Communications of the ACM. July 1991.

28 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS • Traditional decision-making meetings support an optimal size of three to five attendees. • Enable nonattendees to locate organized information after the meeting. • Enable collaborative atmosphere by guaranteeing contributor’s anonymity. 12. GDSS allows a greater number of attendees.

29 © 2007 by Prentice Hall .Management Information Systems Chapter 12 Enhancing Decision Making GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS (Continued) • Can increase the number of ideas generated and the quality of decisions while producing the desired results in fewer meetings • Can lead to more participative and democratic decision making 12.

and tailor them as needed.Management Information Systems Chapter 12 Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE The Role of Executive Support Systems in the Firm • ESS can bring together data from all parts of the firm and enable managers to select. • It tries to avoid the problem of data overload so common in paper reports. access.30 © 2007 by Prentice Hall . 12.

• Can integrate comprehensive firmwide information and external data in timely manner • Inclusion of modeling and analysis tools usable with a minimum of training 12.Management Information Systems Chapter 12Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE The Role of Executive Support Systems in the Firm (Continued) • The ability to drill down is useful not only to senior executives but also to employees at lower levels of the firm who need to analyze data.31 © 2007 by Prentice Hall .

compare. 12. • Timeliness and availability of data enables more timely decision making.32 © 2007 by Prentice Hall . helping businesses move toward a “sense-and-respond” strategy. speeding decision making. and highlight trends • Graphical interface enables users to review data more quickly and with more insight.Management Information Systems Chapter 12 Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems • Ability to analyze.

12.33 © 2007 by Prentice Hall . better monitoring • ESS based on enterprise-wide data can be used for decentralization of decision making or increase management centralization.Management Information Systems Chapter 12Enhancing Decision Making EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems (Continued) • Increases upper management span of control.

Management Information Systems Chapter 12 Enhancing Decision Making MANAGEMENT OPPORTUNITIES. accuracy.34 © 2007 by Prentice Hall . CHALLENGES AND DECISIONS Management Opportunities: • Decision-support systems provide opportunities for increasing precision. and rapidity of decisions and thereby contributing directly to profitability 12.