Chapter 10 Supporting Decision Making Mc Graw-Hill Irwin Copyright

Chapter 10 Supporting Decision Making Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives v Identify the changes taking place in the form and use of decision support in business. v Identify the role and reporting alternatives of management information systems. v Describe how online analytical processing can meet key information needs of managers. v Explain the decision support system concept and how it differs from traditional management information systems. Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives v Explain how the following information systems can support the information needs of executives, managers, and business professionals: v. Executive information systems v. Enterprise information portals v. Knowledge management systems Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives v Identify how neural networks, fuzzy logic, genetic algorithms, virtual reality, and intelligent agents can be used in business. v Give examples of several ways expert systems can be used in business decision-making situations. Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Section 1 Supporting Decision Making Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Introduction v An organization is a nexus of decisions with information needs supplied by an Information System v Information, Decisions, and Management – the type of information required by decision makers is directly related to the level of management decision making and the amount of structure in the decision situation v Strategic Management – executive level, long-range plans, organizational goals and policies, and objectives v Tactical Management – mid-level management, medium- and short-range plans to support objectives made by executives, and allocation of resources and performance monitoring of organizational subunits v Operational Management – short-range plans, day-to-day operations, direct the use of resources and performance of tasks Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Introduction v Information Quality – characteristics of information products v Timeliness – was information present when needed? v Accuracy – was the information correct & error free? v Completeness – was all the needed information there? v Relevance – was the information related to the situation? v Decision Structure v Structured – operational level, occur frequently, much information available v Semistructured – managerial level (most business decisions are here), not as frequent, less information available v Unstructured – executive level, infrequent, little information available Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Introduction Information Requirements of Decision Makers Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Introduction Dimensions of Information Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. Decision Support Trends v. Using IS to support business decision making is increasing v. Business Intelligence (BI) – improving business decision making using factbased support systems v. Business Analytics (BA) – iterative exploration of a firm’s historical performance to improve the strategic planning process Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Hyatt Hotels: Dashboards Integrate Financial and Operational Information v What did Hyatt want that was different from traditional dashboards? v What made this necessary? v What tool did they adopt to do this? v What benefits does it provide? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Decision Support Systems • IS providing interactive support to managers during the decision-making process • DSS Components – DSS relies on modelbases as well as databases Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

United Agri Products: Making Better Decisions Using Models and Data v What BI tools was UAP unhappy with? Why? v What tools did the new system supply and why were they better than the old ones? v What benefits did they bring to UAP? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Management Information Systems v Supports day-to-day managerial decision making v Management Reporting Alternatives – MIS reports: v. Periodic Scheduled Reports – supplied on a regular basis v. Exception Reports – created only when something out of the ordinary happens v. Demand Reports and Responses- available when requested v. Push Reporting – reports sent without being requested Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

V. Online Analytical Processing v Enables examination/manipulation of large amounts of detailed and consolidated data from many perspectives v Consolidation aggregation of data v Drill-Down – displaying details that comprise the consolidated data v Slicing and Dicing – looking at a database from different viewpoints v OLAP Examples – the real power of OLAP is the combining of data and models on a large scale, allowing solution of complex problems v Geographic Information (GIS) and Data Visualization (DVS) Systems v GIS – facilitate use of data associated with a geophysical location v DVS – represent complex data using interactive 3 -dimensional models, assist in discovery of patterns, links and anomalies Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Direct Energy: Mining BI to Keep Its Customers v What was the problem with the old business intelligence at Direct Energy? v What BI technique did they use for the new system? v What benefits did Direct Energy obtain from it? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

JPMorgan and Panopticon: Data Visualization Helps Fixed income Traders v What does Panopticon provide for JPMorgan? v What does this provide for JPMorgan’s customers? v How does the software present the data to the customers? v How does this help a business? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VI. Using Decision Support Systems • Involves interactive analytical modeling for exploring possible alternatives • What-If Analysis – change variables and relationships among variables to see changing outcomes • Sensitivity Analysis – special case of what-if; change one variable at a time to see the effect on a prespecified value • Goal-Seeking Analysis – reverse of what-if; changing variables to reach a target goal of a variable • Optimization Analysis – complex goal-seeking; finding the optimal value for a target variable Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Casual Male Retail Group: On-Demand Business Intelligence v What type of system was Casual Male using? v What were its weaknesses? v How did they solve this problem? v What business tools does this system provide? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VI. Using Decision Support Systems v Data Mining for Decision Support – providing decision support through knowledge discovery (analyze data for patterns and trends) v. Market Basket Analysis (MBA) – one of the most common and useful types of data mining; MBA applications: v Cross-Selling – offer associated items to that being purchased v Product Placement – related items physically near each other v Affinity Promotion – promotions based on related products v Survey Analysis – useful to analyze questionnaire data v Fraud Detection – detect behavior associated with fraud v Customer Behavior – associate purchases with demographic and socioeconomic data Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Warner Home Video: Predicting Harry Potter DVD Sales v What does Warner use to help in sales forecasting? v What does this help them do? v What are the first steps and what do they do with that information? v What does this better data enable them to do? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VII. Executive Information Systems (EIS) a. k. a. Executive Support Systems (ESS) v. Popular to the point of being called “Everyone’s Information Systems” v. Features of an EIS – can be tailored to preferences of the executive, provides drilldown capabilities and “dashboards” Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Pure. Sense and Farming: Watering Plans Based on Minute-by-Minute Data v Although the farmer was receiving more information than ever before, he wanted …. ? v Why would a dashboard be important? Or helpful? v Even with the experience ot analyze all the data, many of the decisions are … ? Why? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VIII. Enterprise Portals and Decision Support v. Enterprise Information Portals (EIP) – Web-based interface with integration of MIS, DSS, EIS, etc. , to give intranet/extranet users access to a variety of applications and services Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IX. Knowledge Management Systems v. Use of IT to gather, organize, and share knowledge within an organization v. Enterprise Knowledge Portal – entry to knowledge management systems Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Mitre and 3 M: Two Takes on Knowledge Management v What is the organizational culture that should be fostered to support knowledge management? v How does social networking support this culture? v How can this culture help a business? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Section 2 Advanced Technologies for Decision Support Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

I. Business and AI v A variety of ways to support decision making and improve competitive advantage Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. An Overview of Artificial Intelligence (AI) v Goal of AI is to simulate the ability to think – reasoning, learning, problem solving v Turing Test – if a human communicates with a computer and does not know it is a computer, the computer is exhibiting artificial intelligence v CAPTCHA (Completely Automated Public Turing Test) – a test to tell people from computers – a distorted graphic with letters/numbers; a human can see the letters/numbers a computer cannot Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. An Overview of Artificial Intelligence (AI) v Domains of Artificial Intelligence v Cognitive Science – how humans think and learn v Robotics – machines with intelligence and human-like physical capabilities v Natural Interfaces – speaking to a computer in a normal voice Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

II. An Overview of Artificial Intelligence (AI) Applications of Artificial Intelligence Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Artificial Intelligence Gets Down to Business v. What sort of things do AI applications do? v. What is at the heart of AI applications? v. What benefits can businesses obtain from AI? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Expert Systems v Components of an Expert System v Knowledge Base – contains facts and the heuristics (rules) to express the reasoning procedures the expert uses v Software Resources – v. Inference Engine – the program that processes the knowledge (rules and facts) v. Interface – the way the user communicates with the system Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

III. Expert Systems v. Expert System Applications v. Decision Management – consider alternatives, recommendations v. Diagnostics/Troubleshooting – infer causes from symptoms v. Design/Configuration – help configure equipment components v. Selection/Classification – help users choose products/processes v. Process Monitoring/Control – monitor/control procedures/processes Mc. Graw-Hill/Irwin v. Benefits of Expert Systems – captures expertise of a specialist in a limited problem domain v. Limitations of Expert Systems – limited focus, inability to learn, cost Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Healthways: Applying Expert Systems to Health Care v. What is the key to successful disease management? v. How does Healthways generally improve its members’ health outcomes? v. What is Healthways’ goal? v. How is Healthways using technology to meet this goal? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

IV. Developing Expert Systems v. Easiest is an expert system shell – an experts systems without the knowledge base v. Knowledge Engineering – a knowledge engineer (similar to a systems analyst) is the specialist who works with the expert to build the system V. Neural Networks v. Computing systems modeled after the brain Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Bio. Password: Neural Networks Applied to Authentication v. What are the basic tradeoffs when dealing with security? v. What are three basic approaches to providing security? v. What is the new approach from Bio. Password? v. What are the advantages of this method? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VI. Fuzzy Logic Systems v. Reasoning with incomplete or ambiguous data v. Fuzzy Logic in Business – rare in the U. S. (preferring expert systems), but popular in Japan VII. Genetic Algorithms v. Simulates evolutionary processes that yield increasingly better solutions Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

United Distillers: Moving Casks Around with Genetic Algorithms v. What is the forgotten side of the business at United Distillers? v. What technology did they use to remedy this? v. What are the results of using this technology? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

VIII. Virtual Reality (VR) v. Computer-simulated reality v. VR Applications – CAD, medical diagnostics, flight simulation, entertainment IX. Intelligent Agents v. Use built-in and learned knowledge to make decisions and accomplish tasks that fulfill the intentions of the user Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Real Students Practice on Virtual Surgeries v. What does this virtual software allow medical students to do? v. What may be the location of their instructors? v. Why is this important? v. What benefits would this software offer? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Security Uses of Intelligent Software Agents v. How did the Army use intelligent agents? v. What are intelligent agents good at doing? v. How much effort did intelligent agents save the Army? Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.