Essentials of Management Information Systems, 6e
Chapter 12
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Enhancing Management Decision Making
for the Digital Firm
12.1
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Objectives
1. How can information systems help
individual managers make better decisions
when the problems are nonroutine and
constantly changing?
2. How can information systems help people
working in a group make decisions more
efficiently?
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Objectives
3. Are there any special systems that can
facilitate decision making among senior
managers? Exactly what can these systems
do to help high-level management?
4. What value can systems to support
management decision making provide for
the organization as a whole?
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Management Challenges
1. Building information systems that can actually
fulfill executive information requirements
2. Create meaningful reporting and management
decision-making processes
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
• Computer system at the management level of an
organization
• Combines data, analytical tools, and models
• Supports semistructured and unstructured decision
making
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
MIS and DSS
MIS
• Provides reports based on routine flow
of data
• Assists in general control of the organization
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
MIS and DSS
DSS
• Emphasizes change, flexibility, rapid response,
models, assumptions, ad-hoc queries, and display
graphics
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Types of Decision-Support Systems
Model-Driven DSS
• Primarily stand-alone
• Uses model to perform “what-if” and other kinds
of analysis
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Types of Decision-Support Systems
• Data-driven DSS: Supports decision making by
allowing users to extract and analyze useful
information previously buried in large databases
• Datamining: Finds hidden patterns and
relationships in large databases to infer rules from
them and predict future behavior
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Window on Organizations
Data Drive Customer Care at Intrawest
• How does this customer care DSS help Intrawest
make decisions?
• How has it provided value for the firm?
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Cargo revenue optimization of Continental Airlines
Figure 12-1
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Types of Decision-Support Systems
• Associations: Occurrences linked to a single
event
• Sequences: Events linked over time
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Types of Decision-Support Systems
• Classification: Recognizing patterns that
describe the group to which an item belongs
• Clustering: Similar to classification when no
groups have yet been defined. Discovers different
groupings within data
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Overview of a decision-support system (DSS)
Figure 12-2
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Components of DSS
• DSS Database: Collection of current or
historical data from a number of applications or
groups. Can be a small PC database or a massive
data warehouse
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Components of DSS
• DSS Software System: Collection of software
tools used for data analysis, such as OLAP tools,
datamining tools, or a collections of mathematical
and analytical models
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Components of DSS
• Model: Abstract representation illustrating
components or relationships of a
phenomenon
• Sensitivity Analysis: Models that ask “whatif” questions repeatedly to determine the
impact of changes in one or more factors on
the outcomes
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Sensitivity analysis
Figure 12-3
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS Applications and the Digital Firm
Examples of Decision-Support Systems
• General Accident Insurance: Customer buying
patterns and fraud detection
• Bank of America: Customer profiles
• Frito-Lay, Inc.: Price, advertising, and promotion
selection
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS Applications and the Digital Firm
Examples of Decision-Support Systems
• Southern Railway: Train dispatching and routing
• Texas Oil and Gas Corporation: Evaluation of
potential drilling sites
• The Gap: Inventory stocking and merchandising
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS Applications and the Digital Firm
Examples of Decision-Support Systems
• United Airlines: Flight scheduling, passenger
demand forecasting
• U.S. Department of Defense: Defense contract
analysis
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS for Pricing Decisions
• By analyzing several years of sales data for similar
items, the software estimates a “seasonal demand
curve” for each item and predicts how many units
would sell each week at various prices.
• The software uses sales history to predict how
sensitive customer demand will be to price
changes
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS for Supply Chain Management
• Can help firms model inventory stocking levels,
production schedules, or transportation plans
• Can provide firms with information on key
performance indicators such as lead time, cycle
time, inventory turns, or total supply chain costs
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Window on Technology
A DSS Makes Subaru More Parts-Savvy
• How does the Servigistics system provide value
for Subaru of New England?
• How did it change the way the company ran its
business?
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS for customer analysis and segmentation
Figure 12-4
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
DSS for Customer Relationship Management
Predictive Analysis
•
12.26
Use of datamining techniques, historical data,
and assumptions about future conditions to
predict outcomes of events
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Data Visualization and Geographic Information Systems (GIS)
•
Data Visualization: Technology for helping users
see patterns and relationships in large amounts
of data by presenting the data in graphical form
•
Geographic Information System (GIS): System
with software that can analyze and display data
using digitized maps to enhance planning and
decision making
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Decision-Support Systems (DSS)
Web-Based Customer Decision-Support Systems
Customer Decision-Support System (CDSS)
•
System to support the decision-making process
of an existing or potential customer
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
What is a GDSS?
•
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Group Decision-Support System (GDSS): An
interactive computer-based system to facilitate
the solution to unstructured problems by a set of
decision makers working together as a group
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
Components of GDSS
•
Hardware: Conference facility, electronic
hardware
•
Software tools: Tools for organizing ideas,
gathering information, and ranking and seeking
priorities
•
People: Participants, trained facilitator, staff
supporting hardware and software
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
Components of GDSS
•
Electronic questionnaires
•
Electronic brainstorming tools
•
Idea organizers
•
Questionnaire tools
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
Components of GDSS
•
Tools for voting or setting priorities
•
Stakeholder identification and analysis tools
•
Policy formation tools
•
Group dictionaries
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
Overview of a GDSS Meeting
•
Each attendee has a workstation
•
Workstations are networked and connected to the
facilitator’s console
•
Data the attendees forward to the group are collected and
saved on a file server
•
Facilitator projects computer images onto the projection
screen
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
Group system tools
Figure 12-5
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making
•
Number of attendees can increase while
productivity increases
•
More collaborative atmosphere
•
Software tools follow structured methods for
organizing and evaluating ideas and preserving
the results of meetings
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making
•
Increase the number of ideas generated
•
Can lead to more participative and democratic
decision making
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Group Decision-Support Systems (GDSS)
How GDSS Can Enhance Group Decision Making
Organizational Memory
•
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Store learning from an organization’s history
that can be used for decision making and other
purposes
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Executive Support Systems (ESS)
•
Focus on the information needs of senior
management
•
Combine data from internal and external sources
•
Create a generalized computing and
communications environment that can be
focused and applied to a changing array of
problems
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Executive Support Systems (ESS)
•
Monitor organizational performance
•
Track activities of competitors
•
Spot problems
•
Identify opportunities
•
Forecast trends
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
The Role of Executive Support Systems in the Organization
•
Bring together data from the entire organization
•
Allow managers to select, access, and tailor data
•
Enable executive and any subordinates to look at
the same data in the same way
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
The Role of Executive Support Systems in the Organization
Drill Down
•
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The ability to move from summary data to lower
and lower levels of detail
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
The Role of Executive Support Systems in the Organization
Developing ESS
•
Ease of use
•
Facility for environmental scanning
•
External and internal sources of information to
be used for environmental scanning
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Benefits of Executive Support Systems
•
Analyze, compare, and highlight trends
•
Provide greater clarity and insight into data
•
Speed up decision making
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Benefits of Executive Support Systems
•
Improve management performance
•
Increase management’s span of control
•
Better monitoring of activities
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Executive Support Systems and the Digital Firm
ESS for Competitive Intelligence
•
Identify changing market conditions
•
Formulate responses
•
Track implementation efforts
•
Learn from feedback
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Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Executive Support Systems and the Digital Firm
Balanced Scorecard
•
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Model for analyzing firm performance that
supplements traditional financial measures with
measurements from additional business
perspectives, such as customers, internal
business processes, and learning and growth
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Enterprise-Wide Reporting and Analysis
Strategic performance management tools
for enterprise systems
•
SAP: Web-enabled mySAP.com™,
Management Cockpit
•
PeopleSoft: Web-enabled Enterprise
Performance Management (EPM)
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Executive Support in the Enterprise
Enterprise-Wide Reporting and Analysis
Activity-Based Costing
•
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Model for identifying all the company activities
that cause costs to occur while producing a
specific product or service so that managers can
see which products or services are profitable or
losing money and make changes to maximize
firm profitability
Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Chapter 12 Case Study
Harrah’s and Mohegan Sun: A Tale of Two Casino DSS
1. Analyze Harrah’s and Mohegan Sun using the
competitive forces and value chain models.
2. Compare the business strategies of Harrah’s and
Mohegan sun. What role do customer reward
systems play in these strategies? How are they
similar? How are they different?
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Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm
Chapter 12 Case Study
Harrah’s and Mohegan Sun: A Tale of Two Casino DSS
3.
What kind of decision-support systems did Harrah’s and
Mohegan Sun develop? How are they related to their
business strategy?
4.
Are Harrah’s and Mohegan Sun successful? Which
casino is more successful? Why? Can its competitive
advantage be sustained? Why or why not?
5.
Are there any ethical problems raised by these casinos’
use of customer data? Explain your response.
12.50