Introduction to DSS Week 1 Business Today

Introduction to DSS Week 1

Business Today n n n Business Climate constantly changing Complex Must respond quickly Must be innovative in the way they operate Make quick decisions (sometimes complex) at all levels n n n Strategic Tactical Operational

Making the Decisions n May require considerable amounts of n n n Relevant data Information Knowledge Frequently made in real time Must have computerized support

Ex: Norfolk Southern n n Use of BI and DS Large Freight RR company n n 500 freight trains 21, 000 route miles in 22 eastern states, DC and Ontario $26 billion in assets 30, 000 people

Ex: Norfolk Southern n n RR industry partially deregulated in 1980 so on-time delivery became important Norfolk transformed into a “scheduled RR” n n Fixed train schedules, connection for cars to go between trains and yards Allowed managers to predict when they could get a shipment to a customer

Ex: Norfolk Southern n Becoming a scheduled RR required new systems based on statistical models to determine best route and connections to optimize RR performance This was not enough Norfolk also needed to monitor and measure its performance against the plan

Ex: Norfolk Southern n n Numerous systems generated millions of records about freight, railcars, train GPS info, train fuel levels, revenue info, crew management, and historical tracking records Could not access the information without a significant impact on systems’ performance

Ex: Norfolk Southern n Solution: 1 Terabyte data warehouse with access through a browser and manipulated for DS Data comes from source systems so users can access it without impacting operations Built a dashboard application pulling data from the warehouse and graphically depicting actual performance against the trip plan for both train performance and connection performance

Ex: Norfolk Southern n n The visualization allows field managers to interpret large amounts of data (160, 000 weekly connections) RESULT: Missed connections decreased by 60 percent, railcar cycle time has decreased by an entire day = millions of dollars in annual savings

Ex: Norfolk Southern n n Enterprise data warehouse = data available across the company for other uses Marketing developed a self-service systems for Norfolk’s customers allowing them to find out where their shipments are ‘right now’ as well as providing access to many other reports

Ex: Norfolk Southern n n First RR to provide self-service BI system to customers Provided a huge competitive advantage but other RRs followed

Changing Business Environment n n Companies are moving aggressively to computerized support of their operations => Business Intelligence Business Pressures–Responses–Support Model n n n Business pressures result of today's competitive business climate Responses to counter the pressures Support to better facilitate the process

Business Pressures–Responses –Support Model

Business Environment Complex n Globalization n Suppliers and customers anywhere in world n n Buy cheaper materials Sell more products & services also More and stronger competitors Business Environment Factors n n Markets Consumer Demands Technology Societal

Business Environment Factors n Markets n n n Strong competition Expanding global markets Booming electronic markets on the Internet Innovative marketing methods Opportunities for outsourcing Need for real-time, on-demand transactions

Business Environment Factors n Consumer Demands n n n Desire for customization Desire for quality, diversity of products, and speed of delivery Customers getting powerful and less loyal

Business Environment Factors n Technology n n More innovations, new products, and new services Increasing obsolescence rate Increasing information overload Social networking, Web 2. 0 and beyond

Business Environment Factors n Societal n n n Growing government regulations and deregulation Workforce more diversified, older Necessity of Sarbanes-Oxley Act and other reporting-related legislation Increasing social responsibility of companies Greater emphasis on sustainability

Actions on the Business Pressures n n n n Employ strategic planning Use new innovative business models Restructure business processes Participate in business alliances Improve corporate information systems Improve partnership relationships Encourage innovation and creativity Improve customer service and relationships

Actions on the Business Pressures n n n n Move to electronic commerce Move to make-to-order and on-demand manufacturing and services Use new IT to improve communication, data access (discovery of information), and collaboration Respond quickly to competitors’ actions (e. g. pricing, promotions, new products and services) Automate many tasks of white-collar employees Automate certain decision processes, especially those dealing with customers Improve decision making by employing analytics => Many if not all require computerized support

Organizational Responses n n Be Reactive, Anticipative, Adaptive, and Proactive A major objective of computerized decision support is to close the gap between current performance and desired performance, as expressed in its mission, objectives, and goals, and the strategy to achieve them

Managerial Decision Making n Management is a process by which organizational goals are achieved by using resources n n n Inputs: resources Output: attainment of goals Measure of success: outputs / inputs Management ≈ Decision Making Decision making: selecting the best solution from two or more alternatives

Mintzberg's 10 Managerial Roles Interpersonal n 1. Figurehead n 2. Leader n 3. Liaison n Informational n 4. Monitor n 5. Disseminator n 6. Spokesperson n Decisional 7. Entrepreneur 8. Disturbance handler 9. Resource allocator 10. Negotiator

Decision Support Systems Classical Definitions of DSS n n Interactive computer-based systems, which help decision makers utilize data and models to solve unstructured problems - Gorry and Scott-Morton, 1971 Decision support systems couple the intellectual resources of individuals with the capabilities of the computer to improve the quality of decisions. It is a computer-based support system for management decision makers who deal with semistructured problems - Keen and Scott-Morton, 1978

DSS as an Umbrella Term n The term DSS can be used as an umbrella term to describe any computerized system that supports decision making in an organization n e. g. , an organization wide knowledge management system; a decision support system specific to an organizational function (marketing, finance, accounting, manufacturing, planning, SCM, etc. )

DSS as a Specific Application n n In a narrow sense DSS refers to a process for building customized applications for unstructured or semi-structured problems Components of the DSS Architecture n n Data, Model, Knowledge/Intelligence, User, Interface (API and/or user interface) DSS often is created by putting together loosely coupled instances of these components

High-Level Architecture of a DSS

Types of DSS n Two major types: n n n Model-oriented DSS Data-oriented DSS Evolution of DSS into Business Intelligence n n Use of DSS moved from specialist to managers, and then whomever, whenever, wherever Enabling tools like OLAP, data warehousing, data mining, intelligent systems, delivered via Web technology have collectively led to the term “business intelligence” (BI) and “business analytics”

Business Intelligence (BI) n n BI is an umbrella term that combines architectures, tools, databases, analytical tools, applications, and methodologies Like DSS, BI a content-free expression, so it means different things to different people BI's major objective is to enable easy access to data (and models) to provide business managers with the ability to conduct analysis BI helps transform data, to information (and knowledge), to decisions and finally to action

A Brief History of BI n n The term BI was coined by the Gartner Group in the mid-1990 s However, the concept is much older n n n 1970 s - MIS reporting - static/periodic reports 1980 s - Executive Information Systems (EIS) 1990 s - OLAP, dynamic, multidimensional, ad-hoc reporting -> coining of the term “BI” 2005+ Inclusion of AI and Data/Text Mining capabilities; Web-based Portals/Dashboards 2010 s - yet to be seen

The Evolution of BI Capabilities

The Architecture of BI n A BI system has four major components n n a data warehouse, with its source data business analytics, a collection of tools for manipulating, mining, and analyzing the data in the data warehouse; business performance management (BPM) for monitoring and analyzing performance a user interface (e. g. , dashboard)

The Benefits of BI n n The ability to provide accurate information when needed, including a real-time view of the corporate performance and its parts A survey by Thompson (2004) n n Faster, more accurate reporting (81%) Improved decision making (78%) Improved customer service (56%) Increased revenue (49%)

The DSS–BI Connection n First, their architectures are very similar because BI evolved from DSS Second, DSS directly support specific decision making, while BI provides accurate and timely information, and indirectly support decision making Third, BI has an executive and strategy orientation, especially in its BPM and dashboard components, while DSS, in contrast, is oriented toward analyst

The DSS–BI Connection – cont. n n n Fourth, most BI systems are constructed with commercially available tools and components, while DSS is often built from scratch Fifth, DSS methodologies and even some tools were developed mostly in the academic world, while BI methodologies and tools were developed mostly by software companies Sixth, many of the tools that BI uses are also considered DSS tools (e. g. , data mining and predictive analysis are core tools in both)

The DSS–BI Connection – cont. n Although some people equate DSS with BI, these systems are not, at present, the same n n some people believe that DSS is a part of BI—one of its analytical tools others think that BI is a special case of DSS that deals mostly with reporting, communication, and collaboration (a form of data-oriented DSS) BI is a result of a continuous revolution and, as such, DSS is one of BI's original elements MSS = BI and/or DSS

A Work System View of Decision Support (Alter, 2004) n n n drop the word “systems” from DSS focus on “decision support” “use of any plausible computerized or noncomputerized means for improving decision making in a particular repetitive or nonrepetitive business situation in a particular organization” Work system: a system in which human participants and/or machines perform a business process, using information, technology, and other resources, to produce products and/or services for internal or external customers

Elements of a Work System n n Business process. Variations in the process rationale, sequence of steps, or methods used for performing particular steps Participants. Better training, better skills, higher levels of commitment, or better real-time or delayed feedback Information. Better information quality, information availability, or information presentation Technology. Better data storage and retrieval, models, algorithms, statistical or graphical capabilities, or computer interaction

Elements of a Work System – cont. n n n Product and services. Better ways to evaluate potential decisions Customers. Better ways to involve customers in the decision process and to obtain greater clarity about their needs Infrastructure. More effective use of shared infrastructure, which might lead to improvements Environment. Better methods for incorporating concerns from the surrounding environment Strategy. A fundamentally different operational strategy for the work system

Now What? n The Decision Making Process – Week 2 Questions / Comments / Criticisms