Chapter 10

1. Chapter 10 Supporting Management & Decision Making

2. Managers & Decision Making • Managementis a process by which organizational goals are achieved through the use of resources (people, money, energy, materials, space, time). • These resources are considered to be inputs, and the attainment of the goals is viewed as the outputof the process. • Managers oversee this processin an attempt to optimize it.

3. Managerial Decisions & Computerized Support • The success of management depends on the skillful execution of managerial functions such as planning, organizing, directing, and controlling. • To carry out these functions, managers engage in the continuous process of making decisions. • Managers must learn how to use the new tools and techniques that can help them make decisions. • Computerized techniques support qualitative and quantitative decision making.

4. The Decision Making Process

5. Modeling & Models • A model (in decision making) is a simplified representation or abstraction of reality. • With modeling, one can perform virtual experiments and an analysis on a model of reality, rather than on reality itself. • Some Benefits of Modelling: • The cost of virtual experimentation is much lower than the cost of experimentation conducted with a real system. • Models allow for the simulated compression of time. • Manipulating the model (by changing variables) is much easier than manipulating the real system. • The cost of making mistakes during a real trial-and-error experiment is much lower.

6. Iconic (Scale) Models.An iconic model—the least abstract model—is a physical replica of a system, usually based on a different scale from the original. Analog Models.An analog model, in contrast to an iconic model, does not look like the real system but behaves like it. Mathematical (Quantitative) Models.The complexity of relationships in many systems cannot conveniently be represented. A more abstract model is possible with the aid of mathematics. Mental modelsprovide a subjective description of how a person thinks about a situation. 4 Types of Models

7. Why do Managers Need the Support of IT? Making decisions while processing information manually is growing increasingly difficult due to the following trends: • The number of alternatives to be considered is ever increasing. • Many decisions must be made under time pressure. • Due to increased fluctuations & uncertainty in the decision environment, it is frequently necessary to conduct a sophisticated analysis to make a good decision. • It is often necessary to access remote information, consult with experts, or have a group decision-making session, all quickly & in expensively.

8. Determining the Information Needs of Managers • Wetherbe approach (1991): Two-phase process. • Phase I: a structured interview is conducted to determine managers’ perceived information needs. • Phase I: a prototype of the information system is quickly constructed. • Critical success factor (CSF)approach • Watson and Frolick approach (1992): is based on the following strategies: • determining information requirements • asking (the interview approach) • deriving the needs from an existing information system • synthesizing from characteristics of the systems • and discovering via evolving systems (prototyping)

9. Management Support Systems (MSS] • Four major information technologies have been successfully used to support managers. • DSSs: provide support primarily to analytical, quantitative types of decisions. • Executive (enterprise) support systems:support the informational roles of executives. • Group decision support systems: support managers working in groups. • Intelligent systems: provide mulitfunctional support.

10. Framework for Computerized Decisions • Managerial problems fall under 3 categories (Source: Simon,1977): • Structured problems:all phases—intelligence, design, and choice—are structured & the procedures for obtaining the best solution are known. • Unstructured problems:none of the three phases—intelligence, design, or choice—is structured, and human intuition is frequently the basis for decision making. • Semistructured problems: requires a combination of standard solution procedures and individual judgment.

11. Framework for Computerized Decisions (cont.) • There are 3 broad categories that encompass all managerial activities (Part ii Source: Anthony,1965): • Strategic planning— the long-range goals & policies for resource allocation; • Management control— the acquisition & efficient utilization of resources in the accomplishment of organizational goals • Operational control— the efficient & effective execution of specific tasks.

12. Management Science • The Management Scienceapproach maintains that managers can follow a fairly systematic process for solving problems. • Definingthe problem (a decision situation that may deal with a setback or with an opportunity). • Classifying the problem into a standard category. • Constructinga standard mathematical model that describes the real-life problem. • Findingpotential solutions to the modeled problem and evaluating them. • Choosing & recommending a solution to the problem.

13. Decision Support Systems [DSS] • Decision Support System (DSS) = a computer-based information system that combines models and data in an attempt to solve semistructure problems with extensive user involvement. • The term decision support systems (DSS), like the terms MIS and MSS, means different things to different people. • DSS can be viewed as an approach or a philosophy rather than a precise methodology.

14. Characteristics of DSSs . • Provides support for decision makers at all management levels, whether individuals or groups, by bringing together human judgment and objective information. • Supports several interdependent and/or sequential decisions. • Supports all phases of the decision-making process— intelligence, design, choice, and implementation—as well as a variety of decision-making processes and styles. • Is adaptable by the user over time to deal with changing conditions.

15. Characteristics of DSSs (cont.) • Is easy to construct and use in many cases. • Promotes learning, which leads to new demands & refinement of the application, which leads to additional learning, and so forth. • Utilizes quantitative models (standard and/or custom made). • Advanced DSSs are equipped with a knowledge management component that allows the efficient and effective solution of very complex problems. • Can be disseminated for use via the Web. • Allows the easy execution of sensitivity analyses.

16. Staff Assistant.This person has specialized knowledge about management problems and some experience with decision support technology. Expert Tool User.This person is skilled in the application of one or more types of specialized problem-solving tools. This user performs tasks for which the manager does not have the necessary skills or training. Business (System) Analyst.This person has a general knowledge of the application area, formal business administration education, and considerable skill in DSS construction tools. Group Facilitator.When group decisions are supported by IT, it is frequently beneficial to use a process facilitator. DSS Users

17. The DSS Model

18. Group Decision Support Systems • Group decision support system (GDSS) = an interactive computer-based system that facilitates the solution of semistructured and unstructured problems by a group of decision makers. • The goal of GDSS is to improve the productivity of decision-making meetings, either by speeding up the decision-making process or by improving the quality of the resulting decisions, or both. • The first generation of GDSS was designed to support face-to-face meetings in what is called a decision room. • Such a GDSS is composed of hardware, software, people and procedures.

19. GDSS Components People. The group members and a facilitator. Hardware.A group can use two types of hardware configurations. • a GDSS facility designed for electronic meetings. • a collection of PCs, equipped with keypads for voting and other groupware activities. Software.  Typical GDSS software is a collection of about a dozen tools or packages, which are integrated into a comprehensive system. Procedures. The procedures that allow for ease of operation and effective use of the technology by group members.

20. Enterprise Decision Support There are two main types of enterprise decision support system: • Organizational decision support systems (ODSS)which focus on an organizational task or activity involving a sequence of operations and decision makers • Computer-based systems can be developed to provide decision support at the individual group or organization levels (Hackathorn and Keen, 1981). • Executive information system (EIS), also known as an Executive support system (ESS),is a technology designed in response to managers’ specific needs.

21. Benefits of DSS for the User • Users can access DSS from anywhere. • Many DSSs are now deployed on the corporate Intranet, making them accessible to all employees. • The Web supports interactive DSS-related queries and ad hoc report generation. • Users can select a list of variables from a pull-down menu when executing a predefined query or report. • Web-based application servers can download Java applets that execute functions on desktop DSS programs. • This gives users the capabilities of advanced DSS applications without requiring client software to be loaded.

22. Benefits of DSS for the Builder • A DSS developer (builder) can access Web pages with data related to the project, the software used, the users etc., thus cutting development time. • A DSS developer can collaborate with end-users for quicker prototyping of DSS applications. • A DSS developer can collaborate with vendors over the Web. • DSS software and applications are available from ASPs over the Web. In such a case there is no need to program the DSS, but the developer must work with the vendor.

23. Able to reach rich resources of data with simple data entry & analysis procedure. Can easily retrieve data in sophisticated ways. Is easy to use. Reduces paperwork Contributes to better decision making. Enables easier use of ready-made DSS. Cuts development costs. Benefits Web-Based DSSs

24. Requirements for Web-Based DSS • A study by Business Objects Corporation (businessobjects.com) identified five key requirements for the successful delivery of Web-based DSS. • Self-service data access • High availability & performance • Zero-administration clients • Security • Unified meta data

25. Simulation for Decision Makers • In DSS, simulation refers to a technique for conducting experiments with a computer on a model of a management system. • Characteristics of Simulation; • While models in general represent reality, simulation usually imitates it closely. • It is a technique for conducting experiments. • It can describe and/or predict the characteristics of a given system under different circumstances. • It can be used for complex decision making

26. 1.Allows for inclusion of the real-life complexities of problems. 2.Is descriptive, enabling managers to ask what-if type questions. 3.Can handle an extremely wide variation in problem types, such as inventory & staffing, as well as higher managerial-level tasks like long-range planning. 4.Can show the effect of compressing time, giving the manager in a matter of minutes the long-term effects of various policies. 5. Can be conducted from anywhere using Web tools on the corporate portal or extranet. Advantages of Simulation

27. Examples of DSSs • PriceWaterhouseCoopers (pcwglobal.com) offers online DSSs in retailing, financial services, etc. Of special interest are the risk management and self insurance decisions. • Microsoft’s Office Small Business edition (microsoft.com)contains “what-if”wizards that can be used to view the financial impacts of decisions, such as price and inventory decisions. • IBM (software.ibm.com) offers many tools ranging from market-basket analysis to financial & manufacturing decision support • Brio’s (brio.com) “revenue optimization application” helps companies to identify & capture the full potential of revenue across product lines & market segments.