Decision Support Systems INF421 & IS341

Course Textbook Title: Decision Behavior, Analysis and Support Authors: Simon French John Maule Nadia Papamichail Publisher: Cambridge University Press2009

Course Contents Introduction Decision analysis and support Mathematical Models Information and knowledge management Data Mining Tools Artificial intelligence and expert systems Operational research and optimization Mathematical Methods Decision support systems

Course Schedule and Assessment INF Lectures Final Written Exam 70% Class Activities 30% – Midterm Exam 15 – Project 10 – Absence 5 IS Lectures Final Written Exam 50% Class Activities 50% – Midterm Exam 35 – Project 10 – Absence 5

Decision Support Systems

Outline Decisions, decisions, decisions! The strategy pyramid Rationalistic versus evolutionary strategic decision making Players in a decision Representation of decision problems Some other terminology

Decisions Some decisions have so little impact on our live – We take them without much thought Other decisions have much greater potential impacts. Questions to be addressed. – How do we make decisions? – How should we make them? – Are we naturally good decision makers (DMs)? – Can we develop computer programs – decision support systems (DSSs) – that embody such techniques?

Decision Changes No two situations that call a decision are ever identical There are many ways in which decisions differ: – Problem context: e.g. what are the external characteristics of the problem? Is it well structured? is uncertainty present? How many options need be considered? – Cognitive factors of the decision maker (DM) or decision makers (DMs): how intelligent, imaginative, knowledgeable is she? Can the DM live with risk and uncertainty? – Social Context: what are the characteristics of the social organization in which the decision has to be made? Who are the DMs? What are their responsibilities and accountabilities? Who are the stakeholders?

The Strategy Pyramid The most commonly discussed distinction between strategic, tactical and operational decisions – The so-called Strategy Pyramid

The Strategy Pyramid Strategic Decisions: To set the goals for an organization or an individual. Mintzberg (1992) suggests that a strategy provides five P’s: – a plan for future action; – a ploy to achieve some end; – a pattern of behavior; – a position defined by goals and values; – and a perspective on how to view the world. A strategy sets the direction and a broad framework in which more detailed decisions can be taken.

The Strategy Pyramid Tactical and operational decisions fill in the details of strategic decisions. Example: – A personal strategic decision might concern a career direction – Followed by operational and tactical decisions on where and for which company to work, how hard to strive for promotion.

Instinctive Decisions The original ‘three-level’ strategy pyramid misses an important type of decision; Instinctive Decisions. Instinctive decision making based upon recognizing that the current situation is familiar and that the action proven to be successful in the past

The Strategy Pyramid and AI Within the discipline of artificial intelligence (AI) much effort has been expended on developing knowledge-based decision support systems – seek to ‘automate’ decision making. These tools operate at the lower levels of the strategy pyramid precisely because they need training; – they need to be provided either with a set of rules that tells them how to recognize and react to different types of situations – or they need data on how experienced DMs reacted in the past.

Jacques’ Theory Jacques (1989) argues that the tasks and decision making undertaken by staff at different levels within an organization may be characterized by the longest time span of discretion required by their roles.

Jacques’ Theory Jacques distinguishes four domains of activity: – The strategic domain, which sets the guiding values and vision and develops strategy to take the organization towards these; – the general domain, which develops an implementation plan for strategy; – the operational domain, which organizes the detailed delivery of the strategy; and – the hands-on work domain, which delivers the work. Note how these domains map onto the four levels (strategic, tactical, operational and instinctive) of the extended strategy pyramid.

The Cynefin Model In the context of knowledge management, Snowden (2002) has argued for a further typology of decisions: the cynefin model.

The Cynefin Model

Decisions in Cynefin Model Snowden suggests that decision making in the known space tends to consist of recognizing patterns in the situation and responding with well-rehearsed actions: recognition-primed decision making. In the knowable space, there is more analysis than recognition, as the DMs learn from the available data about the precise circumstances faced.

Decisions in Cynefin Model In the complex space the DMs’ knowledge is poor: there is much less perceived structure. – Analysis is still possible, but its style will be broader, with less emphasis on details Decision making in the chaotic space cannot be analytical because there is no concept of how to break things down into an analysis. – The DMs will simply need to take some action and see what happens, probing until they can make some sort of sense of the situation, gradually drawing the context back into one of the other spaces.

Decisions in Cynefin Model The structured/unstructured dimension of decision making curves around from the known to chaotic spaces in the cynefin model

Players in a decision The decision makers (DMs) are responsible for making the decision: they ‘own the problem’. To be able to take and implement a decision, DMs need hold the appropriate responsibility, authority and accountability

Players in a decision Responsibility. An individual or group is responsible for a decision – their task to see that the choice is made and implemented. Authority. An individual or group has the authority to take a decision – they have power over the resources needed to analyse and implement the choice.

Players in a decision Accountability. An individual or group is accountable for a decision – they are the ones to take the credit or blame for the decision process and the choice that is made and implemented.

Inference, Prediction, Decision and Choice Inference, also known as induction, is the process of learning from data: thus we have statistical or scientific inference. Prediction, or forecasting, is the process of building upon this learning to forecast (the likelihood of) future events and the consequences of possible actions. Inference and prediction should proceed decision.

Decision and Choice Some writers make a distinction between decision and choice, requiring that decisions are preceded by rational deliberation, while choices are unthinking acts of selection. There is certainly reason for her choice: but is there deliberation?

Data, Information and Knowledge

Decision Problems Decisions under certainty – DM either knows or learns the true state before making the decision. Decisions with risks – DM does not know the true state but based on some knowledge it is likely to make some possible state. Decisions under strict certainty – Can say nothing at all about the true state. – Identify only what states may be possible.

Summary Decisions, decisions, decisions! The strategy pyramid Rationalistic versus evolutionary strategic decision making Players in a decision Some other terminology

Questions?