1. 4-1 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Chapter 4 Decision Support and Artificial Intelligence Brainpower for Your Business

2. 4-2 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Presentation Overview Decisions, Decisions, Decisions Decisions, Decisions, Decisions Decision Support Systems Decision Support Systems Collaboration Systems Collaboration Systems Geographic Information Systems Geographic Information Systems Artificial Intelligence Artificial Intelligence Expert Systems Expert Systems Neural Networks Neural Networks Genetic Algorithms Genetic Algorithms Intelligent Agents Intelligent Agents

3. 4-3 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Opening Case Study Continental Airlines Files High with Decision Support Continental implemented a decision support system to provide up-to-the- minute flight information. Continental implemented a decision support system to provide up-to-the- minute flight information. What other types of decision support systems could Continental Airlines implement? What other types of decision support systems could Continental Airlines implement?

4. 4-4 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Introduction Types of computer-aided decision support. Types of computer-aided decision support.

5. 4-5 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decisions, Decisions, Decisions How You Make a Decision Four phases of decision making Four phases of decision making

6. 4-6 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved 1.Intelligence – find or recognize a problem, need, or opportunity. 2.Design – consider ways to solve the problem, fill the need, or take advantage of an opportunity. Decisions, Decisions, Decisions How You Make a Decision

7. 4-7 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved 3.Choice – examine and weigh the merits of each solution, estimate the consequences of each, and choose the best one. 4.Implementation – carry out the chosen solution, monitor the results, and make adjustments as necessary. Decisions, Decisions, Decisions How You Make a Decision

8. 4-8 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decisions, Decisions, Decisions Types of Decisions You Face

9. 4-9 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decisions, Decisions, Decisions Types of Decisions You Face Structured decision - processes a certain kind of information in a specified way so that you will always get the right answer. Structured decision - processes a certain kind of information in a specified way so that you will always get the right answer. Nonstructured decision - one for which there may be several “right” answers, and there is no precise way to get a right answer. Nonstructured decision - one for which there may be several “right” answers, and there is no precise way to get a right answer.

10. 4-10 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decisions, Decisions, Decisions Types of Decisions You Face Recurring decision - one that happens repeatedly, and often periodically. Recurring decision - one that happens repeatedly, and often periodically. Nonrecurring decision - one that you make infrequently. Nonrecurring decision - one that you make infrequently.

11. 4-11 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decision Support Systems Decision support system (DSS) - highly flexible and interactive IT system that is designed to support decision making when the problem is not structured. Decision support system (DSS) - highly flexible and interactive IT system that is designed to support decision making when the problem is not structured.

12. 4-12 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decision Support Systems Components of a Decision Support System

13. 4-13 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decision Support Systems Components of a Decision Support System A typical DSS has three components: A typical DSS has three components:  Model management  Data management  User interface management Model management - consists of both the DSS models and the DSS model management system. Model management - consists of both the DSS models and the DSS model management system.

14. 4-14 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Decision Support Systems Components of a Decision Support System Data management - performs the function of storing and maintaining the information that you want your DSS to use. Data management - performs the function of storing and maintaining the information that you want your DSS to use. User interface management - allows you to communicate with the DSS. User interface management - allows you to communicate with the DSS.

15. 4-15 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Collaboration System Collaboration system – software that is designed specifically to improve the performance of teams by supporting the sharing and flow of information. Collaboration system – software that is designed specifically to improve the performance of teams by supporting the sharing and flow of information.

16. 4-16 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Collaboration System Enterprise-wide Collaboration Lotus Notes and Microsoft Exchange are types of integrated collaboration systems. Lotus Notes and Microsoft Exchange are types of integrated collaboration systems.

17. 4-17 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Collaboration System Supply-Chain Collaboration Supply chain management means working with your suppliers and distributors in all phases of planning, production, and distribution. Supply chain management means working with your suppliers and distributors in all phases of planning, production, and distribution.

18. 4-18 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Collaboration System Web-Based Collaboration Web-based collaboration tools use the power of the Internet to enable people to work together effectively and efficiently. Web-based collaboration tools use the power of the Internet to enable people to work together effectively and efficiently. The peer-to-peer file-sharing feature is combined with the ability to create and edit documents collaboratively, and to send and receive text and voice messages. The peer-to-peer file-sharing feature is combined with the ability to create and edit documents collaboratively, and to send and receive text and voice messages.

19. 4-19 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Geographic Information Systems Geographic information system (GIS) - a decision support system designed to work with spatial information. Geographic information system (GIS) - a decision support system designed to work with spatial information. Spatial information is any information that can be shown in map form, such as roads, the distribution of bald eagle populations, and the layout of electrical lines. Spatial information is any information that can be shown in map form, such as roads, the distribution of bald eagle populations, and the layout of electrical lines.

20. 4-20 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Geographic Information Systems

21. 4-21 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Artificial Intelligence Artificial intelligence (AI) - the science of making machines imitate human thinking and behavior. Artificial intelligence (AI) - the science of making machines imitate human thinking and behavior. Robot - mechanical device equipped with simulated human senses and the capability of taking action on its own. Robot - mechanical device equipped with simulated human senses and the capability of taking action on its own.

22. 4-22 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Artificial Intelligence The AI systems that businesses use most can be classified into four categories: The AI systems that businesses use most can be classified into four categories: 1. Expert systems 2. Neural networks 3. Genetic algorithms 4. Intelligent agents

23. 4-23 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Expert system, or knowledge-based system - artificial intelligence system that applies reasoning capabilities to reach a conclusion. Expert system, or knowledge-based system - artificial intelligence system that applies reasoning capabilities to reach a conclusion.

24. 4-24 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Components of an Expert System Expert systems are good for diagnostic (what’s wrong?) and prescriptive (what to do?) problems. Expert systems are good for diagnostic (what’s wrong?) and prescriptive (what to do?) problems.

25. 4-25 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Components of an Expert System An expert system combines information, people, and IT components. An expert system combines information, people, and IT components. Information types include: Information types include:  Domain expertise – the reasoning process that will solve the problem.  “Why” information.  Problem facts.

26. 4-26 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Components of an Expert System

27. 4-27 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Components of an Expert System People People  Domain expert - provides the domain expertise in the form of problem-solving strategies.  Knowledge engineer – IT specialist who formulates the domain expertise into an expert system.  Knowledge worker or user - that’s you.

28. 4-28 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems Components of an Expert System IT Components IT Components  Knowledge base - stores the rules of the expert system.  Knowledge acquisition – used to enter the rules.  Inference engine - takes the problem facts and searches the knowledge base for rules that fit.  User interface – used to run the consultation.  Explanation module – where information is stored.

29. 4-29 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Expert Systems What Expert Systems Can and Can’t Do An expert system can: An expert system can:  Reduce errors  Improve customer service  Reduce costs An expert system can’t: An expert system can’t:  Use common sense  Automate all processes On Your Own Traffic Lights Revisited (p. 199)

30. 4-30 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Neural Networks Neural network (often called an artificial neural network or ANN) - an artificial intelligence system that is capable of finding and differentiating patterns. Neural network (often called an artificial neural network or ANN) - an artificial intelligence system that is capable of finding and differentiating patterns.

31. 4-31 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Neural Networks Types of Neural Networks Self-organizing neural network - finds patterns and relationships in vast amounts of data by itself. Self-organizing neural network - finds patterns and relationships in vast amounts of data by itself. Back-propagation neural network - a neural network trained by someone. Back-propagation neural network - a neural network trained by someone. Team WorkHow Would You Classify People? (p. 202)

32. 4-32 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Neural Networks Inside a Neural Network

33. 4-33 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Genetic Algorithms Genetic algorithm - an artificial intelligence system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem. Genetic algorithm - an artificial intelligence system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem.

34. 4-34 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Genetic Algorithms Genetic algorithms use three concepts of evolution: Genetic algorithms use three concepts of evolution:  Selection — survival of the fittest.  Crossover — combining portions of good outcomes in the hope of creating an even better outcome.  Mutation — randomly trying combinations and evaluating the success (or failure) of the outcome.

35. 4-35 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Genetic Algorithms Team Work Be a Genetic Algorithm and Put Nails in Boxes (p. 206)

36. 4-36 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Intelligent agent - software that assists you, or acts on your behalf, in performing repetitive computer-related tasks. Intelligent agent - software that assists you, or acts on your behalf, in performing repetitive computer-related tasks. Four types of intelligent agents include: Four types of intelligent agents include:  Buyer agents or shopping bots  User or personal agents  Monitoring-and-surveillance or predictive agents  Data-mining agents

37. 4-37 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Buyer Agents Buyer agent or shopping bot - an intelligent agent on a Web site that helps the customer find products and services. Buyer agent or shopping bot - an intelligent agent on a Web site that helps the customer find products and services.

38. 4-38 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Buyer Agents Types of filtering include: Types of filtering include:  Collaborative filtering - a method of placing you in an affinity group of people with the same characteristics.  Profile filtering - requires that you choose terms or enter keywords.

39. 4-39 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Buyer Agents Types of filtering continued: Types of filtering continued:  Psychographic filtering - anticipates your preferences based on the answers you give to a questionnaire.  Adaptive filtering - asks you to rate products or situations and also monitors your actions over time to find out what you like and dislike.

40. 4-40 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents User Agents User agents (sometimes called personal agents) - intelligent agents that take action on your behalf. User agents (sometimes called personal agents) - intelligent agents that take action on your behalf. On Your Own Go Bargain Hunting Online (p. 209)

41. 4-41 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Monitoring-and-Surveillance Agents Monitoring-and-surveillance agents (also called predictive agents) - observe and report on equipment. Monitoring-and-surveillance agents (also called predictive agents) - observe and report on equipment.

42. 4-42 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Data-Mining Agents Data-mining agent - operates in a data warehouse discovering information. Data-mining agent - operates in a data warehouse discovering information.

43. 4-43 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Intelligent Agents Components of an Intelligent Agent Autonomy - act without your telling them every step to take. Autonomy - act without your telling them every step to take. Adaptivity - discovering, learning, and taking action independently. Adaptivity - discovering, learning, and taking action independently. Sociability - conferring with other agents. Sociability - conferring with other agents.

44. 4-44 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Closing Case Study One Using Neural Networks To Categorize People Using neural network software, businesses now have the ability to look for patterns in their customer information. Using neural network software, businesses now have the ability to look for patterns in their customer information. How accurate is it for a business to predict the future behavior of customers on the basis of past behavior? How accurate is it for a business to predict the future behavior of customers on the basis of past behavior?

45. 4-45 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Closing Case Study Two Decision Support and Artificial Intelligence in Health Care Good health care is based largely on good information. Good health care is based largely on good information. How can DSS and AI be used to track symptoms, treatment, and outcomes that require the collection and maintenance of a huge amount of qualitative and quantitative information? How can DSS and AI be used to track symptoms, treatment, and outcomes that require the collection and maintenance of a huge amount of qualitative and quantitative information?

46. 4-46 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Summary Student Learning Outcomes 1.Define decision support system, list its components, and identify the type of applications it’s suited to. 2.Define collaboration systems along with their features and uses. 3.Define geographic information systems and state how they differ from other decision support tools.

47. 4-47 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Summary Student Learning Outcomes 4.Define artificial intelligence and list the different types that are used in business. 5.Define expert systems and describe the types of problems to which they are applicable. 6.Define neural networks, their uses, and a major strength and weakness of these AI systems.

48. 4-48 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Summary Student Learning Outcomes 7.Define genetic algorithms and list the concepts on which they are based, and the types of problems they solve. 8.Define intelligent agents, list the four types, and identify the types of problems they solve.

49. 4-49 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Summary Assignments & Exercises 1.Make a GIS 2.Collaboration work 3.Choose a financing option 4.Which software would you use? 5.What should the music store owner do?

50. 4-50 Management Information Systems for the Information Age Copyright 2004 The McGraw-Hill Companies, Inc. All rights reserved Visit the Web to Learn More www.mhhe.com/haag Learning about investing Learning about investing Researching the company behind the stock Researching the company behind the stock Finding other sources of company financials Finding other sources of company financials Making trades online Making trades online Retrieving stock quotes Retrieving stock quotes Computer-aided decision support Computer-aided decision support