Class 11 Decision Making, Decision Support Systems, & Executive Information Systems

1. Class 11 Decision Making, Decision Support Systems, & Executive Information Systems Decision Making and Information Systems

2. Outline • Decision making concepts • Decision making and information systems • Decision Support Systems (DSS) – upper level management • Datamining – increasingly used data-driven DSS • Executive Support Systems (ESS) Decision Making and Information Systems

3. Decision Making* • Decision making = problem solving by making choices. • Stages in “Rational (Ideal, Scientific) Model” ** of decision making: • Problem Definition: Collect data, learn & analyze • Alternatives Solutions Creation: Figure out what courses of action could solve the problem • Selection of best alternative: Evaluate alternatives on certain criteria and choose the best; this the decision • Implementation: Put the decision into effect and evaluate effects • Other Models (“good enough”, “Gut Feeling”, “Garbage Can”, etc.)* Decision Making and Information Systems

4. Decisions and IS Types of problems to solve/decisions to make: • Structured (well understood) – managing accounts receivable • Unstructured (poorly understood, unknowns) – designing new product • Semi-structured (some familiarity with problem) – budget preparation • Information systems for decision making: • TPS, MIS – previous lecture • Decision Support Systems • Executive Support Systems Decision Making and Information Systems

5. Decision Support Systems • DSS is a type of IS that supports mid-level and higher management in semi-structured decision making. • Corporate financial planning (capital budgeting, scoring models) • Product planning, Information systems planning; other planning* • Supply chain management (production & shipping schedules) • Customer relationship management (cross-selling, market segmentation) Decision Making and Information Systems

6. Decision Support Systems • DSS does: • Support decision making steps (Problem, Alternatives) • Improve speed and quality of decision making (better alternatives, more methodical). Consequences on organizational efficiency and effectiveness. • MIS vs. DSS - Routine or exceptional reports - Semi Structured problems - Structured problems, general control - Focus: Change, rapid response Decision Making and Information Systems

7. Types of DSS • Model-driven DSS • Systems that use some model for transforming data coming from TPS/MIS and external sources (e.g., “what-if” analysis; optimization models like Solver in Excel, etc.) – your Excel assignment • Data-driven DSS • Analyze data from TPS and external sources by using special software -Datamining is the main kind of IT used in data-driven DSS today (see next slides) Decision Making and Information Systems

8. MIS vs. Data-Driven DSS • MIS: • Query: “How many units of product 420 were shipped last month?” • Data retrieved from databases (TPS) to answer specific business questions • Datamining : • Automated analysis of hidden patterns & relationships • TPS data are “cleaned” , integrated, and moved into Data Warehouse Data Warehouse TPSs (data organized in tables; SQL used for search) (data organized differently) Decision Making and Information Systems

9. Datamining • Used increasingly in marketing. Data analysis helps with identifying: • 1. Associations: co-occurrence of events (e.g., does a consumer buys a group of same products at the same time; leads for cross-selling) • 2. Sequences: identify events that are linked over time (e.g., after purchasing a new TV, within 3 months a DVD player is purchased 30% of the time; also cross-selling) • 3. Classifications: identify patterns in data (e.g., determine buyers’ behaviour – happy customer, runaway customer) • 4. Clusters: group related data to understand objects of interest (e.g., market segmentation on types of customers) Decision Making and Information Systems

10. Executive Support Systems (ESS) • ESS is an IS that supports top management in unstructured decision making. • Helps senior executives to • 1. Monitor and analyze organizational performance in order to identify opportunities and weaknesses relevant for improvement of the organization, and its efficiency and effectiveness • 2. Develop business intelligence on competitors, future opportunities, and trends in order to define organizational strategies - goals and the paths of reaching the goals Decision Making and Information Systems

11. ESS • Data from external sources used extensively in ESS • ESS has a drill-down capability, which helps an executive to understand what is behind aggregated performance figures • User interface is graphics-intensive (next slide) Decision Making and Information Systems

12. ESS Example • Performance Analysis by using the method of Balanced Scorecard for monitoring and analyzing organizational performance (mixed quantitative & qualitative data - financial figures, productivity measures, customer & employee satisfaction) • User interface is in the form of Executive Dashboard with scales/dials showing intensity of performance indicators. Decision Making and Information Systems