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13. Chapter. Enhancing Decision Making for the Digital Firm. Business Intelligence and Decision Support . Business intelligence enables firms to:. Amass information Develop knowledge about operations Change decision-making behavior to achieve profitability and other business goals .

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  1. 13 Chapter Enhancing Decision Making for the Digital Firm

  2. Business Intelligence and Decision Support Business intelligence enables firms to: • Amass information • Develop knowledge about operations • Change decision-making behavior to achieve profitability and other business goals

  3. Systems and Technologies for Business Intelligence

  4. DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions Unstructured decisions: • Novel, non-routine decisions requiring judgment and insights • Examples: Approve capital budget; decide corporate objectives

  5. DECISION MAKING AND DECISION-SUPPORT SYSTEMS Types of Decisions (Continued) Structured decisions: • Routine decisions with definite procedures • Examples:Restock inventory; determine special offers to customers Semistructured decisions: • Only part of decision has clear-cut answers provided by accepted procedures • Examples:Allocate resources to managers; develop a marketing plan

  6. 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)

  7. Decision Making in the Real World In the real world, investments in decision-support systems do not always work because of • Information quality: Accuracy, integrity, consistency, completeness, validity, timeliness, accessibility

  8. Decision Making in the Real World (Continued) • Management filters: Biases and bad decisions of managers • Organizational inertia: Strong forces within organization that resist change

  9. Trends in Decision Support and Business Intelligence The rise of client/server computing, the Internet, and Web technologies made a major impact on systems that support decision making. • Six Major Trends: • Detailed enterprise-wide data • Broadening decision rights and responsibilities

  10. Trends in Decision Support and Business Intelligence (Continued) • Intranets and portals • Personalization and customization of information • Extranets and collaborative commerce • Team support tools

  11. Decision Support Systems: • Support semistructured and unstructured problems • Greater emphasis on models, assumptions, ad-hoc queries, display graphics • Emphasizes change, flexibility, and a rapid response

  12. 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

  13. 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, classifications, clusters, and forecasts

  14. 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, with models, data mining, and other analytical tools • DSS user interface: Graphical, flexible interaction between users of the system and the DSS software tools

  15. 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)

  16. SYSTEMS FOR DECISION SUPPORT Overview of a Decision-Support System

  17. SYSTEMS FOR DECISION SUPPORT Sensitivity Analysis

  18. SYSTEMS FOR DECISION SUPPORT Business Value of DSS • Providing fine-grained information for decisions that enable the firm to coordinate both internal and external business processes much more precisely • Helping with decisions in • Supply chain management • Customer relationship management

  19. SYSTEMS FOR DECISION SUPPORT Business Value of DSS (Continued) • Pricing Decisions • Asset Utilization • 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

  20. SYSTEMS FOR DECISION SUPPORT A DSS for Customer Analysis and Segmentation

  21. 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.

  22. SYSTEMS FOR DECISION SUPPORT Web-based Customer Decision-Support Systems (Continued) • Customer decision making has become increasingly information intensive, with Internet search engines, intelligent agents, online catalogs, Web directories, e-mail, 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.

  23. 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.

  24. GROUP DECISION-SUPPORT SYSTEMS Three Main Components of GDSS: • Hardware (conference facility, audiovisual equipment, etc.) • Software tools (Electronic questionnaires, brainstorming tools, voting tools, etc.) • People (Participants, trained facilitator, support staff)

  25. GROUP DECISION-SUPPORT SYSTEMS Group System Tools Source: From Nunamaker et al., “Electronic Meeting Systems to Support Group Work,” Communication of the ACM, July 1991. Reprinted with permission.

  26. GROUP DECISION-SUPPORT SYSTEMS Business Value of GDSS • Traditional decision-making meetings support an optimal size of three to five attendees. GDSS allows a greater number of attendees. • Enable collaborative atmosphere by guaranteeing contributor’s anonymity. • Enable nonattendees to locate organized information after the meeting.

  27. 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

  28. 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, access, and tailor them as needed. • It tries to avoid the problem of data overload so common in paper reports.

  29. 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. • Can integrate comprehensive firmwide information and external data in timely manner • Inclusion of modeling and analysis tools usable with a minimum of training

  30. EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems • Ability to analyze, compare, and highlight trends • Graphical interface enables users to review data more quickly and with more insight, speeding decision making. • Timeliness and availability of data enables more timely decision making, helping businesses move toward a “sense-and-respond” strategy.

  31. EXECUTIVE SUPPORT IN THE ENTERPRISE Business Value of Executive Support Systems (Continued) • Increases upper management span of control, better monitoring • ESS based on enterprise-wide data canbe used for decentralization of decision making or increase management centralization.

  32. MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Management Opportunities: • Decision-support systems provide opportunities for increasing precision, accuracy, and rapidity of decisions and thereby contributing directly to profitability

  33. MANAGEMENT OPPORTUNITIES, CHALLENGES AND DECISIONS Management Challenges: • Building systems that can actually fulfill Executive Information Requirements • Changing management thinking to make better use of systems for decision support • Organizational resistance

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