Enhancing Decision Making
Information driven management
Use data to drive decision
Moneyball: Data-driven Baseball
• Baseball: unfair games
– New York Yankees:
• Payroll of $126 millions
– Oakland A’s
• About $41 millions
– The poorest team
• Can only afford players what the “better” teams reject
• Conventional winning formula
– Big-name highly athletics hitters
– Skillful young pitchers
• A’s general manager
– Used advanced statistical analysis
– Found a different set of metrics
– Sought out affordable players
• Achievements since 2002
– Athletics
• Made the playoffs five times in the next 8 seasons
– Boston Red Sox
• Adopted the same strategy
• With more money
• Won 2004 World series
– Most teams have embraced statistical analysis
• Decision Making & Information Systems
• Business Intelligence in the Enterprise
• Business Intelligence Constituencies
• Decision Making & Info Systems
– Business value of improved decision making
– Types of Decisions
• Unstructured decisions
– Judgment, evaluation, insight
• Structured decisions
– Repetitive and routine
– Definite procedure
• Semistructured
– The Decision-Making Process
– Managers & Decision Making in the real world
• Managerial functions & roles
– Classical model
» Planning
» Organizing
» Coordinating
» Deciding
» controlling
– Behavioral model
» Managers perform a great deal of work
» Managerial activities are fragmented
» Managers prefer current, specific, and ad hoc info
» Managers prefer oral forms of communication
• Flexible, fast response
» Managers maintain diverse and complex web of contacts
• Mintzberg’s 10 managerial roles
– Interpersonal roles
1.
2.
3.
Figurehead
Leader
Liaison
(telepresence systems)
(telepresence, social networks)
(smartphones, social networks)
4.
5.
6.
Nerve center
Disseminator
Spokesperson
(MIS, ESS)
(email, social networks)
(Webinars, telepresence)
7.
8.
9.
10.
Entrepreneur
Disturbance handler
Resource allocator
Negotiator
– Informational roles
– Decisional roles
(None exist)
(None exist)
(Business intelligence, DSS)
(None exist)
• Real world decision making
– Factors affect information technology to produce positive
results
» Information quality
• High quality decisions requires high quality info
• Accuracy
• Integrity
• Consistency
• Completeness
• Validity
• Timeliness
• Accessibility
» Management filters
• Human being absorb info through a series of filters
• Selective attention
• Focus on certain kinds of problems and solutions
• Variety of biases
• Lehman Brothers
• Intentionally underestimate the risk of mortgage
securities
• Overly optimistic assumption
• Overly simplistic data
» Organizational Inertia and Politics
• Organizations are bureaucracies
• with limited capabilities and competencies for
acting decisively
• Balance various interest groups
– High-velocity automated decision making
• Organization decision are not made by human.
– Google’s search
– The New York Stock Exchange
• Decisions are highly structured
• Decision making process are captured by the software
algorithms
– May 6, 2010, Dow Jones lost 600 points in minutes
• Decision Making & Information Systems
• Business Intelligence in the Enterprise
• Business Intelligence Constituencies
• What is Business Intelligence
– Ability to take data
– Understand the meaning and significance
– Act appropriately
– Business Intelligence & Business Analytics
• Business Intelligence
– The infrastructure
» Warehousing
» Integrating
» Reporting
» Analyzing
data from business environment
• Business Analytics
– Tools and techniques
» Analyzing
» Understanding
data
• Hallmark Cards
– SAS Analytics Software
– Customers segments
» Direct mails
» emails
– Business intelligence vendors
•
•
•
•
•
SAP
Oracle
IBM
SAS
Microsoft
• The business intelligence environment
• Business intelligence & analytics capabilities
– Production reports
– Parameterized reports
• Starbucks
– Sales by region and time
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecast, scenarios, models
• Business intelligence users
• Examples of BI applications
– Predictive analytics
• Capital One
– Identify the best potential customers for credit cards
– Identify customers who are at risk for leaving
• FedEx
– How customers will respond to price changes
• Big data analysis
– Online retailers making personalized
recommendations
• Based on behaviors of similar groups of customers
– New trend
• Based on big data analysis
– Customers transactions
– Social media stream
• Hunch “taste graph”
– Coin collector purchasing
– Data visualization and Geographic Information
Systems
• Data visualization
– In visual form
– In list and text
• Human capital management systems
– Determine when and where to reassign workers
• GIS
– Visualize geographic distribution of people & resources
– Manage natural disasters and emergencies
– Management strategies for developing BI & BA
capabilities
• One-stop integrated solutions
– IBM, HP, Oracle
– Advantage: deal with a single dealer
– Disadvantage: dependent to one vendor
• Best-of-breed vendor solutions
– SAP, SAS, Microsoft
• Decision Making & Information Systems
• Business Intelligence in the Enterprise
• Business Intelligence Constituencies
• Business constituencies
– Operational management
– Middle management
– Senior management
each has different responsibilities, each has
different needs
– Operational & Middle management
• Monitor the performance of key aspects of the
business
– Downtime of machines
– Daily, weekly sales of franchise stores
• Exceptional conditions (reports)
– Fall below an anticipated level
– Exceed the spending limits
• Support for semi-structured decisions
– Super users & Keen business analysts
» Create their own report
» Use more sophisticated analytics and models
• Find patterns,
• Test specific hypotheses
– Sensitivity analysis
– Pivot table
» 樞紐分析
– Sensitivity analysis
– Pivot table 樞紐分析
– Progress Insurance
• Small group of customers, “Cells”
• Motorcycle riders
–
–
–
–
Age 30 or older
College education
Credit scores over a certain level
No accidents
set prices for each cell
• Profitably insure traditional high risk categories
– Decision support for senior management
• Balanced scorecard
• Enterprise performance management
affect the overall profitability and success of the
firm
– ESS
• Find the really important performance info
• Develop systems capable of delivering the info
– Balanced scorecard methods
– Business performance management
• Firms strategies
–
–
–
–
Differentiation
Low-cost producer
Market share growth
Scope of operation
• Operational strategies
• KPI
– Info drawn from the enterprise database systems
– Information driven management
– Management by facts
– Real time management
• Info drawn from the enterprise database systems
– Group decision support systems
•
•
•
•
Interactive computer-based system
Collaboration system
Video conferencing
Communication
Group decision making
• Electronic meeting software
– Collect
– Document
– Rank
– Edit
– Store
ideas
• Mini Cases
– Organization
• Analytics help the Cincinnati zoo know its customers
• P. 494
– Management
• Colgate-Palmolive keeps managers smiling with
executive dashboard
• P. 506