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"Part II Using Information Systems“ II 8 Using Information Systems for Decision Making Information Systems Technology Ross Malaga Copyright © 2005 Prentice Hall, Inc. 8-1 LEARNING GOALS • Discuss the problems associated with management decision making. • Explain the decision-making process. • Describe decision support systems. • Explain how group decision support systems work. • Describe executive information systems. • Discuss artificial intelligence technologies and their applications. Copyright © 2005 Prentice Hall, Inc. 8-2 Using Information Systems for Decision Making • Expansion is on the horizon. – Three new studios – Five new franchises – Many difficult decisions • Meredith – Needs help making strategic decisions • Suzanne – Where to locate the new studios? • Leda – How to evaluate potential franchisees? • Mitch – Scheduling and routing sales appointments • Julia – Purchase or lease new buildings? • Miriam – Where should we focus our marketing resources? • Rachel – How do I maintain the right inventory at the right price? • Jim – Needs help with hiring decisions Copyright © 2005 Prentice Hall, Inc. 8-3 Decision Making Today • Business decisions are increasingly difficult to make – Dramatic increase in the internal business data available to managers – Managers must keep current on vast amounts of data resources on the Internet – Globalization – The speed of commerce – The increased number of business choices available – Group decision making • Teams may include members from many companies • Members may have different backgrounds and opinions • Difficult to reach consensus Copyright © 2005 Prentice Hall, Inc. 8-4 Roadblocks to Good Decision Making • Human cognition – Our mental ability to comprehend and understand something • Human perception – Difficulty isolating problems – Tend to think of only narrow range of possible solution • Human bias – Tendency to shape responses based on stereotypes, memory, and current position Copyright © 2005 Prentice Hall, Inc. 8-5 How to Overcome the Roadblocks • Decision support systems (DSS) are one tool – A computer-based system that supports and improves human decision making – Helps analyze complex problems – Process vast amounts of analytical data • Group decision support systems (GDSS) – Tool for supporting team decision making • Executive information system (EIS) – Computer-based system that supports the decision-making processes of senior managers Copyright © 2005 Prentice Hall, Inc. 8-6 The Decision-Making Process • Simon’s model of the decision-making process – Intelligence – Design – Choice Copyright © 2005 Prentice Hall, Inc. 8-7 Intelligence Phase • Scan the environment for a problem. • Determine if decision-maker can solve the problem. – Within scope of influence • Fully define the problem by gathering more information about the problem. Copyright © 2005 Prentice Hall, Inc. 8-8 Design Phase • Develop a model of the problem. – Determine type of model. – Verify model. • Develop and analyze potential solutions. Copyright © 2005 Prentice Hall, Inc. 8-9 Choice Phase • Select the solution to implement. – More detailed analysis of selected solutions might be needed. – Verify initial conditions. – Analyze proposed solution against real-world constraints. Copyright © 2005 Prentice Hall, Inc. 8-10 Problem Structure • Structured problems • Unstructured problems • Semi-structured problems Copyright © 2005 Prentice Hall, Inc. 8-11 Decision Support Systems • Major components – Data management system • Internal and external data sources – Model management system • Typically mathematical in nature – User interface • How the people interact with the DSS • Data visualization is the key – Graphs – Charts – Geographic information systems (GIS) Copyright © 2005 Prentice Hall, Inc. 8-12 Copyright © 2005 Prentice Hall, Inc. 8-13 Modeling Tools and Techniques • Simulation – Computerized model of the problem – Used to examine proposed solutions and their impact • Sensitivity analysis – Determine how changes in one part of the model influence other parts of the model • What-if analysis – Manipulate variables to see what would happen in given scenarios • Goal-seeking analysis – Work backward from desired outcome Copyright © 2005 Prentice Hall, Inc. 8-14 Groups Decision Support Systems • Having multiple participants in the decision process adds potential problems – – – – Production blocking Evaluation apprehension Social loafing Group think • GDSS tools contain special tools to overcome these problems Copyright © 2005 Prentice Hall, Inc. 8-15 GDSS Tools • • • • • • Brainstorming tools Commenter tools Categorizing tools Idea-ranking tools Electronic-voting tools Group facilitator Copyright © 2005 Prentice Hall, Inc. 8-16 Executive Information Systems • Computer-based tool that specifically helps top-level management make strategic decisions – Processes both internal and external data – Presents data in summary form – Drill-down is a key feature – gives the manager the ability to see more details when needed Copyright © 2005 Prentice Hall, Inc. 8-17 Copyright © 2005 Prentice Hall, Inc. 8-18 Artificial Intelligence (AI) • Field of study that explores the development of computer systems that behave like humans – Strong AI – create a computer that can think like a human – Weak AI – develop computers and programs that employ thinkinglike features Copyright © 2005 Prentice Hall, Inc. 8-19 Copyright © 2005 Prentice Hall, Inc. 8-20 Expert Systems • AI systems that codify human expertise in a computer system – Main goal is to transfer knowledge from one person to another – Wide range of subject areas • Medical diagnosis • Computer purchasing • Whale watching – Knowledge engineer elicits the expertise from the expert and encodes it in the expert system Copyright © 2005 Prentice Hall, Inc. 8-21 Expert Systems Components • • • • Knowledge base Inference engine User interface Explanation system Copyright © 2005 Prentice Hall, Inc. 8-22 Other Artificial Intelligence Technologies • Neural networks – use software to simulate the neural working of the human brain • Intelligent agents (bots) – autonomously handle tasks for humans and act on user’s behalf • Genetic algorithms – Computer instructions that create a population of thousands on potential solutions and evolves the population toward better solutions • Fuzzy logic – a way to get computers to come closer to the ability to see fine distinctions, not just ones and zeros Copyright © 2005 Prentice Hall, Inc. 8-23 A Neural Network Copyright © 2005 Prentice Hall, Inc. 8-24 Copyright © 2005 Prentice Hall, Inc. 8-25 Bead Bar Consultant • How Decision-Making Technologies Affect the Bead Bar. – Meredith – EIS looks to provide needed support and a reality check on previous decisions – Suzanne – GIS help to determine new studio locations – Leda – Develop a DSS to evaluate franchise applicants – Mitch – Use genetic algorithms to solve the sales appointment problem – Julia – Use Excel to perform What-if and goal-seeking analyses – Miriam – Use expert system to determine the best marketing media – Rachel – Intelligent agents to search for best pricing – Jim – Expert system to assist employees in selecting best combination of benefits options Copyright © 2005 Prentice Hall, Inc. 8-26 Learning Goals Summary In this chapter you have learned: The problems associated with management decision making The decision-making process How to describe decision support systems How group decision support systems work How to describe executive information systems About artificial intelligence technologies and their applications Copyright © 2005 Prentice Hall, Inc. 8-27