Business Driven Information Systems 2e CHAPTER 2 STRATEGIC DECISION MAKING

Chapter Two Overview SECTION 2.1 - DECISION-MAKING SYSTEMS Transaction Processing Systems Decision Support Systems Executive Information Systems SECTION 2.2 – BUSINESS PROCESSES Understanding the Importance of Business Processes Business Process Improvement Business Process Reengineering Business Process Modeling Business Process Management

Chapter Two Overview Decision-enabling, problem-solving, and opportunity-seizing systems

DECISION-MAKING SYSTEMS SECTION 2.1 DECISION-MAKING SYSTEMS

LEARNING OUTCOMES Explain the difference between transactional information and analytical information. Be sure to provide an example of each Define TPS, DSS, and EIS and explain how an organization can use these systems to make decisions and gain competitive advantages Describe the three quantitative models typically used by decision support systems

LEARNING OUTCOMES Describe the relationship between digital dashboards and executive information systems Identify the four types of artificial intelligence systems

DECISION MAKING Reasons for the growth of decision-making information systems: People must: Analyze large amounts of information Make decisions quickly Apply sophisticated analysis techniques Protect the corporate asset of organizational information

DECISION MAKING Model – a simplified representation or abstraction of reality IT systems in an enterprise

TRANSACTION PROCESSING SYSTEMS Moving up users move from requiring transactional information to analytical information

TRANSACTION PROCESSING SYSTEMS Transaction processing system (TPS) - basic business system that serves the operational level Online transaction processing (OLTP) – capturing of transaction and event information using technology Online analytical processing (OLAP) – manipulation of information to create business intelligence in support of strategic decision making

DECISION SUPPORT SYSTEMS Decision support system (DSS) – models information to support managers and business professionals during the decision-making process Three quantitative models used by DSSs include: Sensitivity analysis What-if analysis Goal-seeking analysis

DECISION SUPPORT SYSTEMS What-if analysis

DECISION SUPPORT SYSTEMS Goal-seeking analysis

DECISION SUPPORT SYSTEMS Interaction between a TPS and a DSS

EXECUTIVE INFORMATION SYSTEMS Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization Most EISs offering the following capabilities: Consolidation Drill-down Slice-and-dice

EXECUTIVE INFORMATION SYSTEMS Interaction between a TPS and an EIS

Digital Dashboards Digital dashboard – integrates information from multiple components

ARTIFICIAL INTELLIGENCE (AI) Intelligent system – various commercial applications of artificial intelligence Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

ARTIFICIAL INTELLIGENCE (AI) Four most common categories of AI include: Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems Neural Network – attempts to emulate the way the human brain works Fuzzy logic – a mathematical method of handling imprecise or subjective information

Artificial Intelligence (AI) Four most common categories of AI include: Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

Data Mining Data-mining systems sift instantly through information to uncover patterns and relationships Data-mining systems include many forms of AI such as neural networks and expert systems

OPENING CASE QUESTIONS Second Life: Succeeding in Virtual Times How could companies use Second Life for new product or service decision making? How could financial companies use neural networks in Second Life to help their businesses?

OPENING CASE QUESTIONS Second Life: Succeeding in Virtual Times How could a company such as Nike use decision support systems on Second Life to help its business? How could an apparel company use Second Life to build a digital dashboard to monitor virtual operations?

SECTION 2.2 BUSINESS PROCESSES

LEARNING OUTCOMES Describe business processes and their importance to an organization Differentiate between customer facing processes and business facing processes Compare business process improvement and business process reengineering

LEARNING OUTCOMES Describe the importance of business process modeling (or mapping) and business process models Explain business process management along with the reason for its importance to an organization

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS Businesses gain a competitive edge when they minimize costs and streamline business processes Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS Customer facing process - results in a product or service that is received by an organization’s external customer Business facing process - invisible to the external customer but essential to the effective management of the business

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS

UNDERSTANDING THE IMPORTANCE OF BUSINESS PROCESS

BUSINESS PROCESS IMPROVEMENT Companies are forced to improve their business processes because customers are demanding better products and services Business process improvement – attempts to understand and measure the current process and make performance improvements accordingly

BUSINESS PROCESS IMPROVEMENT Business process improvement model

BUSINESS PROCESS REENGINEERING Business process reengineering (BPR) - analysis and redesign of workflow within and between enterprises

Finding Opportunity Using BPR A company can improve the way it travels the road by moving from foot to horse and then horse to car BPR looks at taking a different path, such as an airplane which ignore the road completely

Finding Opportunity Using BPR Progressive Insurance mobile claims process

Finding Opportunity Using BPR Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

Selecting a Process to Reengineer Criteria to determine the importance of the process Is the process broken? Will reengineering of this process succeed? Does it have a high impact on the strategic direction? Does it significantly impact customer satisfaction? Is it antiquated? Does it fall far below best-in-class? Is it crucial for productivity improvement? Will savings from automation be clearly visible? Is the return on investment high?

BUSINESS PROCESS MODELING Business process modeling (or mapping) - the activity of creating a detailed flow chart or process map of a work process showing its inputs, tasks, and activities, in a structured sequence Business process model - a graphic description of a process, showing the sequence of process tasks, which is developed for a specific As-Is process model To-Be process model

BUSINESS PROCESS MODELING

BUSINESS PROCESS MODELING

BUSINESS PROCESS MANAGEMENT Business process management (BPM) - integrates all of an organization’s business process to make individual processes more efficient

BPM Examples

BPM Examples

BPM Examples

BPM Examples

BPM Examples

BPM Examples

BPM Examples

OPENING CASE QUESTIONS Second Life: Succeeding in Virtual Times How could a company use Second life to revamp its customer service process? How could a company use second Life to revamp its order entry process? How could a company use Second Life to reinvent relationships with customers, partners, and employees?

CLOSING CASE ONE DARPA How is the DoD using AI to improve its operations and save lives? Why would the DoD use an event, such as the DARPA Grand Challenge, to further technological innovation?

CLOSING CASE ONE DARPA Describe how autonomous vehicles could be used by organizations around the world to improve business efficiency and effectiveness Describe the potential business impacts of the Ansari X competition

CLOSING CASE TWO Revving Up Sales at Harley-Davidson How does Talon help Harley-Davidson employees improve their decision-making capabilities? Identify a few key metrics a Harley-Davidson marketing executive might want to monitor on a digital dashboard How can Harley-Davidson benefit from using decision support systems in its business

CLOSING CASE TWO Revving Up Sales at Harley-Davidson How can Harley-Davidson use business process improvement to increase customer satisfaction? How can Harley-Davidson use business process reengineering to improve its supplier relationships?

CLOSING CASE THREE Delta Airlines Plays Catch-Up What business risks would Delta be taking if it decided not to catch up with industry leaders in using IT to gain a competitive advantage? What competitive advantages can an airline gain by using DSS and EIS? What other industries could potentially benefit from the use of yield management systems?

CLOSING CASE THREE Delta Airlines Plays Catch-Up How can American and United use customer information to gain a competitive? What types of metrics would Delta executives want to see in a digital dashboard?

BUSINESS DRIVEN BEST SELLERS Reengineering the Corporation, by Michael Hammer and James Champy

BUSINESS DRIVEN BEST SELLERS The First 90 Days, by Michael Watkins

BUSINESS DRIVEN BEST SELLERS Execution, by Larry Bossidy and Ram Charan