MIS MANAGEMENT SUPPORT SYSTEMS IDEO COKE vs.NEW COKE CHAPTER 12 This chapter begins by summarizing types of decisions and phases in the decision- making process. Next, you learn about a decision support system ( DSS), its components and its capabilities, and see how it can benefit an organization. In addition, you learn about other management support systems used in decision making: executive information systems ( EISs), group support systems ( GSSs), and geographic information systems ( GISs). This chapter concludes with an overview of guidelines for designing a management support system. LO1 Define types of decisions and phases of the decision-making process in a typical organization. LO2 Describe a decision support system. LO3 Explain an executive information system’s importance in decision making. LO4 Describe group support systems, including groupware and electronic meeting systems. LO5 Summarize uses for a geographic information system. LO6 Describe guidelines for designing a management support system. Fire your Customer Hossein BIDGOLI Google FIRE IDEO

What do Managers Do? They make decisions Fire your Customer What do Managers Do? They make decisions Better decisions = better managers The amount of information people must understand to make decisions, solve problems, and find opportunities is growing exponentially Use choice of spouse or school for an example of a decision that is unstructured How did you go about deciding to choose your spouse?

Types of Decisions in an Organization Structured decisions Well-defined standard operating procedure exists Also called programmable tasks Can be automated Semistructured decisions Not as well-defined by standard operating procedures Include a structured aspect that benefits from information retrieval, analytical models, and information systems technology • Structured decisions— Structured decisions, or programmable tasks, can be automated because a well- defi ned standard operating procedure exists for these types of decisions. Record keeping, payroll, and simple inventory problems are examples of structured tasks. Information technologies are a major support tool for making structured decisions Semistructured decisions include a structured aspect that benefi ts from information retrieval, analytical models, and information systems technology.

Types of Decisions in an Organization (cont’d.) Unstructured decisions Unique; typically one-time decisions Does not rely on standard operating procedure Decision maker’s intuition plays the most important role Information technology offers little support for these decisions Management support systems (MSSs) Different types of information systems have been developed to support certain aspects and types of decisions • Unstructured decisions— Unstructured decisions are typically one- time decisions, with no standard operating procedure pertaining to them. The decision maker’s intuition plays the most important role, as information technology offers little support for these decisions. Areas involving unstructured decisions include research and development, hiring and fi ring, and introducing a new product. Management support systems ( MSSs) are the diff erent types of information systems that have been developed to support certain aspects and types of decisions. Each type is designed with unique goals and objectives.

Types of decisions Structured Unstructured COKE vs.NEW COKE How many workers to staff line A What is the EOQ for raw material Z How many turbines to power Lethbridge? Unstructured What are the benefits of merging with XYZ How will consumer react if we lower the price by 10% What are the benefits of MacDonald's opening up Hotels Programmed Versus Nonprogrammed Decisions Programmed decisions are made using a rule, procedure, or quantitative method. These decisions are easy to computerize using traditional information systems. Some decisions, however, are difficult to quantify. These decisions, called nonprogrammed decisions, deal with unusual or exceptional situations.

Phases of the Decision-Making Process Herbert Simon Winner of the 1978 Nobel Prize in economics Defines three phases in the decision-making process: intelligence, design, choice Fourth phase, implementation, can be added Three parts First: determine what the reality is Second: get a better understanding of the problem by collecting data and information about it Third: gather data and information needed to define alternatives for solving the problem

The Intelligence Phase Decision maker examines the organization’s environment for conditions that need decisions Data is collected from a variety of sources and processed Decision maker can discover ways to approach the problem Ex Faculty enrollment has declined for two consecutive years For example, an organization has noticed a decrease in total sales over the past six months. To pinpoint the cause of the problem, the organization can collect data from customers, the marketplace, and the competition. After the data has been processed, analysis can suggest possible remedies. Information technologies, particu-larly database management systems, can help in this analysis. In addition, many third- party vendors, such as Nielsen and Dow Jones, specialize in collecting data about the marketplace, competition, and the general status of the economy. The information they collect can support the intelligence phase of decision making.

The Design Phase Objective Define criteria for the decision Generate alternatives for meeting the criteria Define associations between the criteria and the alternatives Defining associations between alternatives and criteria involves understanding how each alternative affects the criteria Information technology doesn’t support this phase of decision making much In the design phase, the objective is to define criteria for the decision, generate alternatives for meeting the criteria, and defi ne associations between the criteria and the alternatives.

U of L faculty of Management Problem ( intelligence) – How to cut $12 milliion or 7% from budget Criteria or objectives (design) 1 2 Alternatives (design) 1 raise tuitiion 2 fees 3 cut wages 4 fund raise 5 increase classes

The Choice Phase Best and most effective course of action is chosen Analyze each alternative and its relationship Decision support system (DSS) can be particularly useful in this phase Best and most effective course of action is chosen From the practical alternatives Analyze each alternative and its relationship To the criteria to determine whether it’s feasible Decision support system (DSS) can be particularly useful in this phase

The Implementation Phase Organization devises a plan for carrying out the alternative selected in the choice phase Obtains the resources to implement the plan DSS can do a follow-up assessment on how well a solution is performing

Decision Support Systems Decision support system (DSS) Interactive information system Consisting of hardware, software, data, and models (mathematical and statistical) Designed to assist decision makers in an organization

Decision Support Systems (cont’d.) Requirements: Be interactive Incorporate the human element as well as hardware and software Use both internal and external data Include mathematical and statistical models Support decision makers at all organizational levels Emphasize semistructured and unstructured tasks

DSS Capabilities What-if analysis Goal-seeking Sensitivity analysis “ If the advertising budget increases by 2 percent, what’s the effect on total sales?” Goal-seeking how much to advertise a product to increase total sales to $ 50,000,000. Sensitivity analysis how much the interest rate has to go down for you to be able to afford a $ 100,000 house with a monthly payment of $ 700. Exception reporting analysis such as pinpointing the region that generated the highest total sales More capabilities, such as: Graphical analysis, forecasting, simulation, statistical analysis, and modeling analysis What- if analysis— This shows the effect of a change in one variable, answering questions such as “ If labor costs increase by 4 percent, how is the fi nal cost of a product affected • Goal seeking— This is the reverse of what- if analysis. It asks what has to be done to achieve a p articular goal— for example, how much to charge for a product in order to generate $ 200,000 profi t, Sensitivity analysis— This enables you to apply different variables, such as determining the maximum price you could pay for raw materials and still make a profi t or determining

Costs and Benefits of Decision Support Systems Benefits of a DSS: Increase in the number of alternatives examined Fast response to unexpected situations Ability to make one-of-a-kind decisions Cost savings Better decisions More effective teamwork Time savings Making better use of data resources Increase in the number of alternatives examined Fast response to unexpected situations Ability to make one-of-a-kind decisions New insights and learning Improved communication Improved control over operations Cost savings from being able to make better decisions and analyze several scenarios (what-ifs) in a short period Better decisions More effective teamwork Time savings Making better use of data resources

Executive Information Systems Interactive information systems that give executives easy access to internal and external data Typically include: “Drill-down” features Digital dashboard Ease of use EIS designers should focus on simplicity when developing a user interface Executive information systems ( EISs), branches of DSSs, are interactive information systems that give executives easy access to internal and external data and typically include “ drill- down” features and a digital dashboard for examining and analyzing information. A digital dashboard integrates information from multiple sources and presents it in a unifi ed, understandable format, often charts and graphs. It off ers up- to- the minute snapshots of information and assists decision makers in identifying trends and potential problems.

Executive Information Systems (cont’d.) Require access to both internal and external data So that executives can spot trends, make forecasts, and conduct different types of analyses Should also collect data related to an organization’s “critical success factors”

Reasons for Using EISs EIS increases managers’ productivity EIS can convert information into other formats EIS can spot trends and report exceptions Factors that can lead to a failed EIS: Corporate culture isn’t ready Organizational resistance to the project Project is viewed as unimportant Management loses interest or isn’t committed Objectives and information requirements can’t be defined clearly System doesn’t meet its objectives System’s objectives aren’t linked to factors critical to the organization’s success Project’s costs can’t be justified

Group Support Systems (cont’d.) Assist groups in: Communicating, collaborating, and coordinating their activities Intended more for teamwork than for decision support Use computer and communication technologies to formulate, process, and implement a decision-making task Useful for: Committees Review panels Board meetings Task forces Decision-making sessions that require input from several decision makers Use computer and communication technologies to formulate, process, and implement a decision-making task Considered a kind of intervention technology that helps overcome the limitations of group interactions Reduce communication barriers Introduce order and efficiency into situations that are inherently unsystematic and inefficient Assist groups in: Communicating, collaborating, and coordinating their activities Intended more for teamwork than for decision support

Groupware (cont’d.) Some capabilities of groupware include: Audio and video conferencing Automated appointment books Brainstorming Database access E-mail Online chat Scheduling To-do lists Workflow automation Enable decision makers in different locations to participate in a group decision-making process Include: Real-time computer conferencing Video teleconferencing Desktop conferencing

Advantages and Disadvantages of GSSs Costs as well as stress are reduced due to decreased travel More time to talk with each other and solve problems Shyness isn’t as much of an issue in GSS sessions Increasing collaboration improves the effectiveness of decision makers

Advantages and Disadvantages of GSSs (cont’d.) Lack of the human touch Unnecessary meetings Security problems Costs of GSS implementation are high

Geographic Information Systems Captures, stores, processes, and displays geographic information Uses spatial and nonspatial data Common example of a GIS: Getting driving directions from Google Maps User-friendly interface that helps you visualize the route After you make a decision, you can print driving directions and a map Education planning Urban planning Government Insurance Marketing Real estate Transportation and logistics Google FIRE

Summary IDEO Different types of decisions Phases of decision making in a typical organization DSS: Components, capabilities, key players, and costs and benefits Executive information systems Group support systems Geographic information systems