Chapter 6 Old Textbook

8 E-Business Decision Support (Chapter 6 old textbook)

Please note that you are not required to read section II (pages 270-293) of this chapter. (p.220-237 in old textbook)

Section I: Decision Support in Business

E-Business and Decision Support:

To succeed in business, including E-business and E-commerce, companies need information systems that can support the diverse information and decision-making needs of their managers and business professionals. This chapter focuses on the major types of management information systems, decision support, and executive information systems. The chapter concentrates on how the Internet, intranets, and other web-enabled information technologies have significantly strengthened the role of information systems play in supporting the decision-making activities of every manager and knowledge worker in the internetworked E-business enterprise.

Information, Decisions, and Management: Figure 8.1 [Figure 6.4 old textbook]

The type of information required by decision-makers in a company is directly related to the level of management decision-making and the amount of structure in the decision situations they face. The framework of the classic managerial pyramid applies even in today’s downsized organizations and flattened or non-hierarchical organizational structures. Levels of management decision making still exist, but their size, shape, and participants continue to change as today’s fluid organizational structures evolve. Thus, the levels of managerial decision-making that must be supported by information technology in a successful organization are:

 Strategic Management: - Typically, a board of directors and an executive committee of the CEO and top executives develop overall organizational goals, strategies, policies, and objectives as part of a strategic planning process. They also monitor the strategic performance of the organization and its overall direction in the political, economic, and competitive business environment.  Tactical Management - Increasingly self-directed teams as well as middle managers develop short- and medium-range plans, schedules, and budgets and specify the policies, procedures, and business objectives for their subunits of the organization. They also allocate resources and monitor the performance of their organizational subunits, including departments, divisions, process teams, and other workgroups.  Operational Management - The members of self-directed teams or supervisory managers develop short-range plans such as weekly production schedules. They direct the use of resources and the performance of tasks according to procedures and within budgets and schedules they establish for the teams and other workgroups of the organization.

Information Quality (taken from chapter 1 p.15 old textbook)

Figure 8.2 (figure 1.8 old textbook) is a summary of the attributes that would ensure high quality information that is valuable to the user. It looks at information in three dimensions: time, content and form and lists the necessary attributes for each dimension.

Decision Structure (chapter 6, p204 old textbook)

 Structured Decisions - Involve situations where the procedures to follow when a decision is needed can be specified in advance. Tend to be made at the operational level of the business. Eg. inventory re-ordering  Unstructured Decisions - Involve decision situations where it is not possible to specify in advance most of the decision procedures to follow.  Semi-Structured Decisions – covers many decision situations. Some decision procedures can be pre-specified, but not enough to lead to a definite recommended decision.

Figure 8.3 (Figure 6.5 old textbook) gives some examples of business decisions by type of structure and level of management.

Information systems must be designed to produce a variety of information products to meet the changing needs of decision-makers throughout an organization.

Strategic Decision Makers - Require more summarized, ad hoc, unscheduled reports, forecasts, and external intelligence to support their more unstructured planning and policy-making responsibilities.

Tactical Decision-Makers - Require information from both the operational level and the strategic level to support their semi-structured decision making responsibilities.

Operational Decision Makers - Require more pre-specified internal reports emphasizing detailed current and historical data comparisons that support their more structured responsibilities in day-to-day operations.

E-Business Decision Support Trends: (p.202 old textbook)

Information systems are increasingly being used to support business decision-making. A number of trends have occurred in this area:  Fast pace of new information technologies like PC hardware and software suites, client/server networks, and networked PC versions of DSS/EIS software, made EIS/DSS access available to lower levels of management, as well as to non-managerial individuals and self-directed teams of business professionals.  E-business and e-commerce growth caused by the Internet and the World Wide Web is expanding the information and decision support uses and expectations of employees, managers, customers, suppliers and other business partners.  E-commerce participants expect easy and instant access to information and Web-enabled self service data analysis. Businesses have responded with a variety of personalized and pro-active Web-based analytical techniques to support decision making requirements of all their stakeholders.

Management Information Systems : (p.204 old textbook)

Management information systems were the original type of information systems developed to support managerial decision-making. A management information system produces information products that support many of the day- to-day decision-making needs of managers and business professionals. Reports, displays, and responses produced by information systems provide information that managers have specified in advance as adequately meeting their information needs. Such predefined information products satisfy the information needs of managers at the operational and tactical levels of the organization who are faced with more structured types of decision situations.

Management Reporting Alternatives:

MIS provide a variety of information products to managers. Four major reporting alternatives are provided by such systems:  Periodic scheduled reports - Traditional form of providing information to managers. Uses a prespecified format designed to provide managers with information on a regular basis. Eg. weekly sales report, monthly financial statements

 Exception Reports - Reports that are produced only when exceptional conditions occur. Produced periodically but only contain information about exceptional conditions. Eg. customers who have exceeded their credit limit. Helps prevent information overload.  Demand Reports and Responses - Information is provided whenever a manager demands it. Wed browsers and database management software query languages and report generators allow managers to get customised reports. It means they do not have to wait for periodic reports to arrive.

 Push Reporting - Information is pushed to a manager’s networked workstation. Used to broadcast reports and other information over corporate intranets.

Online Analytical Processing : Figure 8.7 [Figure 6.7 old textbook]

In a competitive and dynamic market business managers are demanding information systems that can provide fast answers to complex business queries. This has led to the development of analytical databases, data marts, data warehouses, data mining techniques and multidimensional database structures (chapter 3) as well as specialized servers and Web-enabled software to support online analytical processing (OLAP).

Online analytical processing enables managers and analysts to interactively examine and manipulate large amounts of detailed and consolidated data from many perspectives. Online analytical processing involves analyzing complex relationships among large numbers of data items stored in multidimensional databases to find trends, patterns and exception conditions. It is done in real time giving rapid responses to queries. OLAP involves several basic analytical operations:  Consolidation - Involves the aggregation of data. This can involve simple roll-ups or complex groupings involving interrelated data.  Drill-Down - OLAP can go in the reverse direction and automatically display detailed data that comprises consolidated data.  Slicing and Dicing - Refers to the ability to look at the database from different viewpoints. Slicing and dicing is often performed along a time axis in order to analyze trends and find patterns.

Decision Support Systems :

Decision support systems are computer-based information systems that provide interactive information support to managers and business professionals during the decision-making process. Decision support systems use:  Analytical models  Specialized databases  Decision maker’s own insights and judgments  Interactive, computer-based modeling process to support the making of semi-structured and unstructured business decisions

Figure 8.9 (figure 6.9 old textbook) compares a DSS to a MIS.

DSS are designed to be able to answer ad hoc queries, quickly so support specific decisions and the personal- decision making styles of executives, managers and business professionals.

DSS Models and Software:

Decision support systems rely on model bases as well as databases as vital system resources. A DSS model base is a software component that consists of models used in computational and analytical routines that mathematically express relationships among variables. Examples include:  Spreadsheet models  Linear programming models  Multiple regression forecasting models  Capital budgeting present value models

Geographic Information and Data Visualization Systems

Geographic information systems (GIS) and data visualization systems (DVS) are special categories of DSS that integrate computer graphics with other DSS features.  Geographic Information System – is a DSS that uses geographic databases to construct and display maps and other graphics displays that support decisions affecting the geographic distribution of people and other resources. Used to choose new store locations, optimize distribution routes, analyze demographics of store catchment areas.  Data Visualization Systems – DVS systems represent complex data using interactive three-dimensional graphical forms such as charts, graphs, and maps. DVS tools help users to interactively sort, subdivide, combine, and organize data while it is in its graphical form. Helps users discover patterns, links and anomalies in the data.

Using Decision Support Systems: Figure 8.13 [Figure 6.13 old textbook]

Using a decision support system involves an interactive analytical modelling process. Typically, a manager uses a DSS software package at his workstation to make inquiries, responses and to issue commands. This differs from the demand responses of information reporting systems, since managers are not demanding pre-specified information. Rather, they are exploring possible alternatives. They do not have to specify their information needs in advance. Instead they use the DSS to find the information they need to help them make a decision.

Using a DSS involves four basic types of analytical modelling activities:  What-If Analysis: - In what-if analysis, an end user makes changes to variables, or relationships among variables, and observes the resulting changes in the values of other variables.  Sensitivity Analysis: - Is a special case of what-if analysis. Typically, the value of only one variable is changed repeatedly, and the resulting changes on other variables are observed. So sensitivity analysis is really a case of what-if analysis involving repeated changes to only one variable at a time. Typically, sensitivity analysis is used when decision-makers are uncertain about the assumptions made in estimating the value of certain key variables.  Goal-Seeking Analysis: - Reverses the direction of the analysis done in what-if and sensitivity analysis. Instead of observing how changes in a variable affect other variables, goal-seeking analysis sets a target value for a variable and then repeatedly changes other variables until the target value is achieved.  Optimization Analysis: - Is a more complex extension of goal-seeking analysis. Instead of setting a specific target value for a variable, the goal is to find the optimum value for one or more target variables, given certain constraints. Then one or more other variables are changed repeatedly, subject to the specified constraints, until the best values for the target variables are discovered.

Data Mining for Decision Support:

The main purpose of data mining is knowledge discovery, which will lead to decision support. Characteristics of data mining include:  Data mining software analyzes the vast stores of historical business data that have been prepared for analysis in corporate data warehouses.  Data mining attempts to discover patterns, trends, and correlations hidden in the data that can give a company a strategic business advantage.  Data mining software may perform regression, decision-tree, neural network, cluster detection, or market basket analysis for a business.  Data mining can highlight buying patterns, reveal customer tendencies, cut redundant costs, or uncover unseen profitable relationships and opportunities.

Executive Information Systems:

 Executive information systems (EIS) are information systems that combine many of the features of management information systems and decision support systems. EIS focus was on meeting the strategic information needs of top management. The goal of EIS was to provide top executives with immediate and easy access to information about a firm's critical success factors (CSFs), that is, key factors that are critical to accomplishing the organization’s strategic objectives. They are now so widely used by managers, analysts and other knowledge workers they have jokingly become to be known as “everyone’s information systems”. More serious alternative names are enterprise information systems (EIS) and executive support systems (ESS). More features such as web browsing, electronic mail, groupware tools, and DSS and expert system capabilities are being added to make them more useful to managers.

Capabilities of EIS include:  Information is presented in forms tailored to the preferences of the executives using the system. Heavy use of graphical user interface and graphics displays.  Information presentation methods used by an EIS include exception reporting and trend analysis.  The ability to drill down allows executives to quickly retrieve displays of related information at lower levels of detail.  Internet and intranet technologies have added Web browsing capabilities to EIS systems.  EIS’s have spread into the ranks of middle management and business professionals as they have recognized their feasibility and benefits, and as less-expensive systems for client/server and corporate intranets become available.

Enterprise Information Portals and Decision Support:

Major changes and expansion are taking place in traditional MIS, DSS, and EIS tools for providing the information and modeling that managers need to support their decision making. Decision support in business is changing, driven by rapid developments in end user computing and networking; Internet, web browser, and related technologies, and the explosion of E-commerce activity.

Enterprise information portals are Web-based interface and integration of intranets and other technologies that give all intranet users and selected extranet users access to a variety of internal and external business applications and services.

Internal applications may include e-mail, project Web sites and discussion groups, human resources Web self- services, customer, inventory and other corporate databases, DSS and KMS.

External applications may be industry, financial and other Internet news services, links to industry discussion groups, links to customer and supplier Internet and extranet Web sites.

Business benefits – more specific and selective information for users, easy access to key corporate intranet Web site resources, delivering industry and business news, better access to company data for selected customers, suppliers and business partners.

Knowledge Management Systems (Enterprise Knowledge Portals in old textbook p. 218)

Knowledge management systems – use of information technology to help gather, organise and share business knowledge. In many organisations hypermedia databases at corporate intranet Web sites have become the knowledge bases for storage and dissemination of information. Typically includes best practices, policies, and business solutions at the project, team, business unit and enterprise levels of the company.

For many companies the enterprise information portal is the entry point for the company’s intranet that serves as its knowledge management system. Such portals are called enterprise knowledge portals. KEY TERMS AND CONCEPTS - DEFINED

Analytical Modeling: Interactive use of computer-based mathematical models to explore decision alternatives using what-if analysis, sensitivity analysis, goal-seeking analysis, and optimization analysis.

Analytical Modeling – Goal-Seeking Analysis: Making repeated changes to selected variables until a chosen variable reaches a target value.

Analytical Modeling - Optimization Analysis: Finding an optimum value for selected variables in a mathematical model, given certain constraints.

Analytical Modeling - Sensitivity Analysis: Observing how repeated changes to a single variable affects other variables in a mathematical model.

Analytical Modeling - What-if Analysis: Observing how changes to selected variables affect other variables in a mathematical model.

Data Mining: Using special-purpose software to analyze data from a data warehouse to find hidden patterns and trends.

Data Visualization Systems: DVS systems represent complex data using interactive three-dimensional graphical forms such as charts, graphs, and maps. DVS tools help users to interactively sort, subdivide, combine, and organize data while it is in its graphical form.

Decision Structure: Information systems can support a variety of management levels and decisions. These include the three levels of management activity (strategic, tactical, and operational), and three types of decision structures (structured, semistructured, and unstructured).

Decision Support versus Management Reporting: Information reporting systems focus on providing managers with prespecified information products that report on the performance of the organization. Decision support systems focus on providing information interactively to support specific types of decisions by individual managers.

Decision Support System: An information system that utilizes decision models, a database, and a decision maker’s own insights in an ad hoc, interactive analytical modelling process to reach a specific decision by a specific decision maker.

DSS Software: Software resources include software packages such as DSS generators and spreadsheet packages that support database management, model database management, and dialog generation and management.

E-Business DSS: The use of web-enabled DSS software tools by managers, employees, customers, suppliers, and other business partners of an internetworked E-business enterprise for customer relationship management, supply chain management, and other E-business applications.

E-Business Decision Support Trends: Major changes are taking place in traditional MIS, DSS, and EIS tools for providing the information and modeling managers need to support their decision-making. Enterprise Information Portal: Enterprise information portals are being developed by companies as a way to provide web-enabled information, knowledge, and decision support to executives, managers, employees, suppliers, customers, and other business partners.

Executive Information System: An information system that provides strategic information tailored to the needs of top management.

Geographic Information System: A GIS is a DSS that constructs and displays maps and other graphics displays that support decisions affecting the geographic distribution of people and other resources.

Knowledge Management System: Knowledge management systems are defined as the use of information technology to help gather, organize, and share business knowledge within an organization.

Level of Management Decision Making: Information systems can support a variety of management levels and decisions. These include the three levels of management activity (strategic, tactical, and operational), and three types of decision structures (structured, semistructured, and unstructured).

Management Information System: A management support system that produces prespecified reports, displays, and responses on a periodic, exception, or demand basis.

Management Support System: An information system that provides information to support managerial decision-making. More specifically, an information-reporting system, executive information system, or decision support system.

Model Base: An organized collection of conceptual, mathematical, and logical models that express business relationships, computational routines, or analytical techniques. Such models are stored in the form of programs and program subroutines, command files, and spreadsheets.

Online Analytical Processing: Management, decision support, and executive information systems can be enhanced with an online analytical processing capability. Through OLAP, managers are able to analyze complex relationships in order to discover patterns, trends, and exception conditions in an online, realtime process that supports their business analysis and decision-making.

Reporting Alternatives: Three major reporting alternatives include periodic scheduled reports, exception reports, and demand reports and responses.