Class 5 Systems Support Decision Making

1. Asper School of Business - MBA Program MIS 6150 Management of Information Systems & Technology April-June 2009 Instructor: Bob Travica Class 5 Systems Support Decision Making Updated May 2009 6150 Management of Information Systems and Technology

2. Outline • How We Usually Think about Decision Making/Problem Solving • (Rational, scientific model; our analytical model) • How Decision Making Usually Happens (3 models) • IT/IS Change and Decision Making • Decision Making Systems (problem types, system types, • capabilities & limitations) • Messages for change leadership 6150 Management of Information Systems and Technology 1 of 13

3. 1. Identify problem ? 5. Evaluate/Adjust solution 4. Implement solution % 2. Create optional solutions P 0 1 3 3. Select best solution How We Usually Think about Decision Making: Rational Model i 1 % (Simon, 1950s) 6150 Management of Information Systems and Technology

4. How Decision Making Usually Happens Satisfycing decision making • Assumption: Decisional making made under significant constraints ? • Making a choice that is good enough • Simon supplanted Rational Model; necessary evil due to • human & organizational limitations ): ? • Define the problem the best you can in the circumstances • Consider some alternative solutions • Select the first alternative that meets some important • evaluation criteria (“good enough”) More 6150 Management of Information Systems and Technology

5. Zig-Zag Decision Making (“Muddling Through”) • Assumption: Politics key factor in decision making. • Lindblom; public organizations – different agendas, competition • for budgets, political coalitions) • What is the problem? Different things for different groups! • Problem defining is a political process, result of maneuvering • Alternative solutions defined tentatively • Implement some part of one solution. If blocked, turn to • alternative solution; later might be back to the first one. A B A’ C More 6150 Management of Information Systems and Technology 4 of 13

6. Garbage Can Decision Making • Assumption: Organizations as soap boxes of limitations • and opportunities. Problems (new & old) Decision Makers Resources Opportunities Decisions Solutions (old & new) Limitations Blockages 6150 Management of Information Systems and Technology

7. IT/IS Change and Decision Making IT/IS Obstructs existing decision makers and promote new ones (e.g., defeat of divisional accountants by centralized accounting with a new system) Breaks against establishment (e.g., EMR system in Quebec hospitals) IT/IS IT/IS Reinforces existing decision making power (e.g., computerization of American city administration) 6150 Management of Information Systems and Technology

8. Decision Making Systems and Two Types of Problems Ill-structured Problems: Unstable context Atypical, Discrete issues Incomplete information Ambiguous decision procedure Management Hierarchy Well-structured Problems : Stable context Common, Repeatable issues Most information accessible Known decision procedure Controlling inventory New product Planning R+D projects Low Uncertainty High 6150 Management of Information Systems and Technology 7 of 13

9. Types of Systems for Decision Making Executive Management - Executive Support Systems Management Hierarchy Mid-Level Management – Decision Support Systems Supervisory Level – Transactions Processing Systems & Reporting Systems (old name: MIS) Western Digital mini case – diagram of systems hierarchy

10. Transaction Processing Systems (TPS) • Information foundation in organizations. Source for Reporting systems and others up the hierarchy. • TPS records data on daily, routine activities (transactions, single events) – data management via Database Systems (Ch. 7) • Examples: time at/out of work, purchases, sales, inventory payroll, customer call… • TPS is indispensable for monitoring operations Sales Inventory Purchases 6150 Management of Information Systems and Technology

11. Reporting Systems (old name: Management Information Systems) • Extends TPS, querying and reporting modules in databases systems (information management) • RS delivers scheduled, summary reports or exception reports (deviations from routine operations) • Examples: master case, Western Digital • RS focuses on what happened in organization • RS improves control, operational efficiency, and operational planning Sales Inventory Purchases 6150 Management of Information Systems and Technology

12. Decision Support Systems • Supports higher Mgmt levels, ill-structured problems; Fig. 12-1 • DSS uses data from RS, and external systems • ModelComponent: Processes data using different • transformationmethods (optimization, simulation, data mining – • Major Services Co., Harrah’s, Real-time CRM); • DSS focus: Mid-range future, organization & environment modeling Sales Inventory • DSS contributes to mid-range forecasting and planning and effectiveness in • decision making ENVIRON- MENT 6150 Management of Information Systems and Technology

13. Executive Support Systems • Non-routine decision-making (strategic, long-range, • entrepreneurial decisions, disturbance handling) • Use visual information of key summary information (e.g., finance ratios) • Must be easy to use • Uses data from within organizations (RS, DSS) and outside (more than DSS) • ESS has drill-down capability to find what is behind summary information • Organization’s status reports (“dashboards” – Western Digital), environment scans • ESS Contributes to executives’ effectiveness, right strategic moves 6150 Management of Information Systems and Technology

14. 1. Identify problem (collect information via RS & via DSS, ESS for strategic decisions; GDSS for locating/framing problem) ? 5. Evaluate/Adjust solution 4. Implement solution % 2. Create optional solutions (DSS, ESS) P 0 1 3 3. Select best solution (DSS, ESS) Decision Making Cycle and Systems Support i 1 % • Decision making always requires human intelligence. 6150 Management of Information Systems and Technology

15. Messages for Change Leadership • Manage Obsolescence – do not let it manage you/your company. • Make a change while you can manage the transition – not when you reach a crisis. • If a company pretends to be branded a technology innovator, it needs to stay continually on the technology edge. • Sometimes when a big technology change is due, one can’t manage by consensus and must keep decisions at executive level. • For transaction processing/reporting systems, consider broader options – buy, buy/build/customize, outsource. 6150 Management of Information Systems and Technology