1 14 DECISION MAKING IN A DIGITAL AGE

2 Review of Decision Making Stages –Intelligence –Design –Choice –Implementation Models –Rational- Bureaucratic –Cognitive- Political Systematic- Garbage Can Intuitive

3 Decision Support Systems Management level computer system combines data, models, user – friendly software for semistructured & unstructured decision making Model-driven DSS –Performs “what-if” analysis Data-driven DSS: Permit extraction & analysis of large pools of data. Includes tools for: –on-line analytical processing (OLAP) –Datamining

4 OLAP Powerful querying tools for reporting on data Top down approach that is user driven Ex: show me total sales of canister and upright vacuum cleaners for the past three years. Typically deals with dimensions relating to firms’ products, locations and times Time-->year-->quarter-->month-->week-->days Location-->country-->region-->province-->city -->store

5 OLAP ctd. Ex. Total sales of books for western canada for fall ‘01 ProductAmountRegionTime All Books$3,264,329Western canadaFall ‘01 ProductAmountRegionTime Fiction$1,847,000Western canadaFall ‘01 Non Fiction$657,000Western canadaFall ‘01 Periodicals$425,000Western canadaFall ‘01

6 Datamining Automatically find hidden patterns & relationships in large databases –Associations: associate a particular conclusion (ex. Purchase of a product) with a set of conditions (ex. Purchase of other products) –Classification/Prediction: patterns that describe a group that exhibits certain behaviour (ex. Credit card co. can determine class of customer who is likely to leave to another co.) –Sequences: events that are linked over time (ex. After purchase of new tv, within 3 months a dvd player is purchased 30% of the time)

7 How Does Datamining Work? Neural Networks: hardware/software that emulates processing patterns of the human brain. –Excellent for classifications Genetic Algorithms (more next week) Case-Based Reasoning Machine Learning

8 DSS Components #1 DSS database –Frequently data drawn from TPS or data warehouse –Usually a subset of all the data –May be combined with external data (e.g., prime rate) DSS software system –Models: abstractions of reality to represent the real thing Physical (3-D) Mathematical (y=mx+b) Verbal or narrative (explanatory paragraph or article) Graphical (chart or diagram)

9 DSS Components #2 –Libraries of statistical models Statistical (means, std. deviations) Financial (NPV, ROI) Optimization (maximize revenues, minimize costs) Forecasting (trends from historical data) –What-if & sensitivity analysis –OLAP tools: software to assist the user in OLAP –Datamining tools: software to assist the user in extracting & analyzing data from a data warehouse User interface: typically Windows based (a few are menu based) –User: must be trained in using the DSS

10 Examples of DSS #1 Help people with disabilities make work transition decisions (WorkWORLD) Supply chain management –Economic order quantity determination –Production & shipping schedules Customer relationship management –Customer profiling and retention –Web site design, dynamic page execution plan

11 Examples of DSS #2 Geographic information systems (GIS) –Analyze & display data for decision making using digital maps, including modeling capabilities –Example: traffic flow, crime analysis. Web-based –On-line access to DSS & DSS data & models –Example: assist customer in determining investment portfolio allocation

12 Group Decision Support Systems (GDSS) An interactive, computer-based information systems that facilitates solution of problems by a set of decision makers working together as a group Arose out of concern about problems with meetings –Too many –Too long –Too many attendees Group Think

13 Tools of GDSS Electronic questionnaires Electronic brainstorming tools Idea organizers Tools for voting, setting priorities Policy formation Group dictionaries

14 Electronic Meeting System (EMS) Collaborative GDSS –Uses information technology to make group meetings more productive by facilitating communication as well as decision making –Meetings can be at same place and time, or different place and time

15 GDSS Enhance Group Decision Making Improved pre-planning Increased participation Open, collaborative atmosphere Evaluation objectivity Idea organization & evaluation

16 GDSS Enhance Group Decision Making Documentation of meetings Access to external information Preservation of organizational memory

17 What is different about executive (or top) decision making? External focus Time frame (long term vs. short or medium term) Impact on firm (survival?) Who are executives stereotypically? –Older –Not part of the “computer generation” –Not comfortable with “hands-on” technology?

18 Executive Support Systems (ESS) Aid top managers in making decisions –External focus/data –Long term focus –Ability to drill down –User-friendly GUI (graphical user interface) –Customized to user –Use of graphics & models to present information –Can be used for communication & scheduling among executives

19 Benefits of ESS Free executives from gathering data & putting together models Allows executives to focus on the issues at hand Timeliness & availability of data

20 ESS Example: Balanced Scorecard Supplements traditional financial models with measurements from additional biz perspectives –Customer perspective –Internal perspective –Learning and Growth perspective What you measure is what you get

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