Chapter 12
Enhancing Decision
Making
VIDEO CASES
Video Case 1: FreshDirect Uses Business Intelligence to Manage Its Online Grocery
Video Case 2: Business Intelligence Helps the Cincinnati Zoo
Instructional Video 1: FreshDirect’s Secret Sauce: Customer Data From the Website
Instructional Video 2: A Demonstration of Oracle’s Mobile Business Intelligence App
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Management Information Systems
Chapter 12: Enhancing Decision Making
Learning Objectives
• Describe the different types of decisions and how the
decision-making process works.
• Explain how information systems support the activities of
managers and management decision making.
• Explain how business intelligence and business analytics
support decision making.
• Explain how different decision-making constituencies in an
organization use business intelligence.
• Describe the role of information systems in helping people
working in a group make decisions more efficiently.
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Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• Business value of improved decision making
– Improving hundreds of thousands of “small” decisions
adds up to large annual value for the business
• Types of decisions:
– Unstructured: Decision maker must provide
judgment, evaluation, and insight to solve problem
– Structured: Repetitive and routine; involve definite
procedure for handling so they do not have to be
treated each time as new
– Semistructured: Only part of problem has clear-cut
answer provided by accepted procedure
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Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• Senior managers:
– Make many unstructured decisions w
c
– For example: Should we enter a new market?
• Middle managers:
– Make more structured decisions but these may include
g
– l unstructured components
For example: Why is order fulfillment report showing decline in
Minneapolis?
• Operational managers, rank and file
employees
– Make more structured decisions I
– For example: Does customer meet criteria for credit?
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Management Information Systems
Chapter 12: Enhancing Decision Making
INFORMATION REQUIREMENTS OF KEY DECISION-MAKING GROUPS IN
A FIRM
FIGURE 12-1 Senior managers, middle managers, operational managers, and employees have different types of decisions and
information requirements.
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Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• The four stages of the decision-making process
1. Intelligence
• Discovering, identifying, and understanding the problems
occurring in the organization
2. Design
• Identifying and exploring solutions to the problem
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and continuing to monitor
how well solution is working
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Management Information Systems
Chapter 12: Enhancing Decision Making
STAGES IN DECISION MAKING
The decision-making process is
broken down into four stages.
FIGURE 12-2
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Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• Information systems can only assist in some
of the roles played by managers
• Classical model of management: five
functions
– Planning, organizing, coordinating, deciding, and
•
cMore contemporary behavioral models
controlling
– Actual behavior of managers appears to be less
systematic, more informal, less reflective, more reactive,
and less well organized than in classical model
12.0 Copyright © 2014 Pearson Education, Inc.
Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• Mintzberg’s 10 managerial roles
– Interpersonal roles
1. Figurehead
2. Leader
3. Liaison
– Informational roles
4. Nerve center
5. Disseminator
6. Spokesperson
– Decisional roles
7. Entrepreneur
8. Disturbance handler
9. Resource allocator
10. Negotiator
12.0 Copyright © 2014 Pearson Education, Inc.
Management Information Systems
Chapter 12: Enhancing Decision Making
Decision Making and Information Systems
• Three main reasons why investments in information
technology do not always produce positive results
Information quality
• High-quality decisions require high-quality information
C
Management filters
• Managers have selective attention and have variety of biases
c
that reject information that does not conform to prior
conceptions
Organizational inertia and politics
• Strong forces within organizations resist making decisions
calling for major change
12.0 Copyright © 2014 Pearson Education, Inc.
Management Information Systems
Chapter 12: Enhancing Decision Making
BUSINESS INTELLIGENCE AND ANALYTICS FOR DECISION SUPPORT
Business
intelligence and
analytics requires a
strong database
foundation, a set of
analytic tools, and
an involved
management team
that can ask
intelligent
questions and
analyze data.
FIGURE 12-3
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence in the Enterprise
• Six elements in the business intelligence
environment
1. Data from the business environment
2. Business intelligence infrastructure
3. Business analytics toolset
4. Managerial users and methods
5. Delivery platform—MIS, DSS, ESS
6. User interface
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence in the Enterprise
• Business intelligence and analytics capabilities
– Goal is to deliver accurate real-time information to
decision makers
– Main functionalities of BI systems
1. Production reports
2. Parameterized reports
3. Dashboards/scorecards
4. Ad hoc query/search/report creation
5. Drill down
6. Forecasts, scenarios, models
12.0 Copyright © 2014 Pearson Education, Inc.
Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence in the Enterprise
• Business intelligence users
– 80% are casual users relying on production reports
– Senior executives
• Use monitoring functionalities
– Middle managers and analysts
• Ad-hoc analysis
– Operational employees
• Prepackaged reports
• For example: sales forecasts, customer satisfaction,
loyalty and attrition, supply chain backlog, employee
productivity
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Management Information Systems
Chapter 12: Enhancing Decision Making
BUSINESS INTELLIGENCE USERS
FIGURE 12-4 Casual users are consumers of BI output, while intense power users are the producers of reports, new analyses,
models, and forecasts.
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence in the Enterprise
• Two main management strategies for
developing BI and BA capabilities
1. One-stop integrated solution
– Hardware firms sell software that run optimally on their
hardware
– Makes firm dependent on single vendor—switching
costs
2. Multiple best-of-breed solution
– Greater flexibility and independence
– Potential difficulties in integration
– Must deal with multiple vendors
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence Constituencies
• Operational and middle managers
– Use MIS (running data from TPS) for:
• Routine production reports
• Exception reports
• “Super user” and business analysts
– Use DSS for:
• More sophisticated analysis and custom reports
• Semistructured decisions
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence Constituencies
• Decision support systems
– Use mathematical or analytical models
– Allow varied types of analysis
• “What-if” analysis
• Sensitivity analysis
• Backward sensitivity analysis
• Multidimensional analysis / OLAP
– For example: pivot tables
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Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence Constituencies
• ESS: decision support for senior
management
– Help executives focus on important performance
information
– Balanced scorecard method:
• Measures outcomes on four dimensions:
1. Financial
2. Business process
3. Customer
4. Learning and growth
• Key performance indicators (KPIs) measure each
12.0
dimension Copyright © 2014 Pearson Education, Inc.
Management Information Systems
Chapter 12: Enhancing Decision Making
Business Intelligence Constituencies
• Decision support for senior management (cont.)
–
•
Business performance management (BPM)
Translates firm’s strategies (e.g., differentiation, low-
HEY
cost producer, scope of operation) into operational
targets
• KPIs developed to measure progress toward targets
– Data for ESS
• Internal data from enterprise applications
• External data such as financial market databases
• Drill-down capabilities
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