Chapter 1
DECISION SUPPORT
SYSTEMS AND
BUSINESS
INTELLIGENCE
8th Edition
2nd semester 2010 Dr. Qusai Abuein
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Learning Objectives
• Understand today’s turbulent business
environment and describe how organizations
survive and even excel in such an environment
• Understand the need for computerized support
of managerial decision making
• Understand an early framework for managerial
decision making
• Learn the conceptual foundations of the
decision support systems (DSS) methodology
2nd semester 2010 Dr. Qusai Abuein
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Learning Objectives
• Describe the business intelligence (BI)
methodology and concepts and relate them to
DSS
• Describe the concept of work systems and its
relationship to decision support
• List the major tools of computerized decision
support
• Understand the major issues in implementing
computerized support systems
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Preface
• Nowadays managers use computerized
support in making decisions.
• DSS is quickly becoming a shared commodity
across the organization, utilizing the networks
(Internet and Intranet).
• Data are stored in multiple locations. Using
distributed systems, intranet, extranet and
Internet, corporations can easily access those
data, analyzing it and report it to decision makers.
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Preface
• Various IS are being integrated with each other
and/or with other automated systems. That
integration results more accurate information,
which enables managers to make better
decisions.
• The friendly and easy to use DSS interface
allows users to view and process data and
models with standard web browsers with flexibility
and efficiency.
• Managers can communicate with computer and
the web using wireless and/or wired devices
(cell phones, PADs)
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Preface
• Data warehouse and their analytical tools (such
as OLAP: On-Line Analytical Processing)
enhance information access across
organizational boundaries.
• Artificial Intelligence methods are improving the
quality of decision making support and are
becoming embedded in many applications (web
search engines).
• Developments in organizational learning and
knowledge management deliver the entire
organization’s expertise to bear on problems
anytime and anywhere.
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Preface
• This course introduces these technologies, which
we call management support systems (MMS).
• This course also introduces knowledge
management, supply chain decision support, and
web DSS.
• This course is about emerging advanced
computer technologies for supporting the solution
of managerial problems.
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Introduction
• This chapter covers the managerial decision making and
its computerized support.
• The business environment today is changing and
becoming more and more complex.
• Organizations are required to make frequent strategic,
tactical and organizational decisions. Some of which are
very complex.
• Making such decisions may require considerable data,
information and knowledge.
• Processing these, must be done quickly, frequently in
real-time and suing computerized support.
• this book is about using business intelligent as
computerized support for managerial decision making.
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(1.1) Opening Vignette: Toyota using
Business Intelligent to Excel
• Keeping Vehicle in transit is money costing.
• 144 to 160 million US$ / year
• Problems in supply chain, deliver cars to dealers
made customers to buy cars from competitors
(Honda).
• Data exists, but managers can not use this data
strategically. No shared data, reports were
always late.
• Managers were unable to make timely decisions.
• IT in organization was unable to respond to the
growing business.
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(1.2) Changing Business Environments
and Computerized Decision Support
• To realize why Toyota embraces computerized
support, including business intelligence a “business
pressures-responses-support model” has been
developed. See Figure 1.1 next slide.
• The model components are:
1. The business environment (becomes complex)
2. Organizational responses: be reactive,
anticipative, adaptive, and proactive, so as to
take advantage of opportunities available
3. Computerized support that facilitates
monitoring and enhance response
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Managerial Decision Making
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(1.2) Changing Business Environments
and Computerized Decision Support
• The business Environment:
– Today's environment complexity creates
a) opportunity on one hand and
b) problems on the other hand for organizations.
– Example: Globalization (Internet)
a) One can easily find suppliers and costumers in many countries,
which means buying cheaper materials and sell more products
and services.
b) More and stronger competitors.
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(1.2) Changing Business Environments
and Computerized Decision Support
• The intensity of the business environment factors
(Markets, customer demands, Technology and
societal) see table 1.1, increases with time, leading
to more pressure and competition.
• Q) How managers will respond quickly, innovative
and agilely under the above environment?
– By using computerized support. Take for example Toyota (opening vignette) TSL .
They turned to BI to improve communication and to support executives in their effort
to know exactly what is going on in each area of operation (real-time)
• Doing so, organization can cut expenses and increase customer
satisfaction.
• Q) What is the major objective of the computerized DS?
– It is to facilitate closing the gap between the current performance of an organization
and its desired performance.
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(1.3) Managerial Decision Making
• A decision is selection the best alternative from
two or more solutions.
• Management is a process by which organizational
goals are achieved through the use of resources.
• Resources are considered to be Input
• Attaining goals is viewed as output
• The degree of success is measured by
productivity (ratio of output to input)
• Managers continuously make decisions to carry
out their functions (planning, organizing, directing
and controlling)
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(1.3) Managerial Decision Making
• The nature of manager’s work
• Managers perform 10 major roles classified into 3
categories (see table 1.2):
– Interpersonal
– Informational
– Decisional
• To execute these roles, managers need
information that is delivered efficiently and timely
by computers.
• Manager is a decision maker.
• Organizations are filled with decision makers at
different levels.
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2nd semester 2010 Dr. Qusai Abuein
(1.3) Managerial Decision Making
• The process of decision making
• Lately, managers considered decision making as a
talent acquired over a long period of time through
experience.
• Managers usually make decision by following a 4
steps process:
1.
2.
3.
4.
Defining the problem (a decision situation that may deal with
some difficulty or with an opportunity)
Constructing a model that describes the real-world problem
Identifying possible solutions to the modeled problem and
evaluating the solutions
Comparing, choosing, and recommending a potential
solution to the problem
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2nd semester 2010 Dr. Qusai Abuein
(1.3) Managerial Decision Making
• One must make sure that sufficient alternative
solutions are being considered, that the
consequences using these alternatives can be
predicted.
• The environment factors (table 1.1) make the evaluation process
difficult for:
– Technology and globalization result in more alternatives
– Uncertainty produced from government, politics competition and changing
consumer demand, make prediction difficult.
– Need for making rapid decisions
– Environmental complexity grows every day, making decisions a complex task
• Based on above 4 reasons, it is nearly impossible to rely on trialand-error approach to management
• Managers must use new tools and techniques for decision making
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2nd semester 2010 Dr. Qusai Abuein
(1.3) Managerial Decision Making
• Technology insights 1.1
• Making clear-cut decision when
needed is the most important 10
managerial practices.
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(1.3) Managerial Decision Making
• Decision support systems (DSS)
A conceptual framework for a process of
supporting managerial decision- making,
usually by modeling problems and
employing quantitative models for
solution analysis
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(1.4) Computerized Support for Decision
Making
• Computerized support are now penetrating
complex managerial areas:
– Design
– Management of automated factories
– Application of AI methods
– Evaluation process
• Computer applications have moved from
transaction processing and monitoring activities to
problem analysis and solution applications. Most of
the activities are done with the web-based
technologies.
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(1.4) Computerized Support for
Decision Making
• The followings are the cornerstone of today’s
modern management for decision support:
1.
2.
3.
4.
5.
6.
BI tools
Data warehousing
Data Mining
Online Analytical processing (OLAP)
Dashboards
The web
Dashboard is a term now being used generally to refer to a web-based technology
page on which real time information is collated from various sources in the business.
The metaphor of dashboard is adopted here to emphasize the nature of the data
being displayed on the page, it is a real-time analysis as to how a business is
operating, just like on an automobile dashboard real time information is displayed
about the performance of that vehicle.
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(1.4) Computerized Support for Decision
Making
• Why use computerized decision support systems?
1. Speedy computations: enables decision makers to
perform quick computations, low cost, timely and
thousands of alternatives can be evaluated fast
2. Improved communication and collaboration: groups
in different locations can use the web-based tools to
communicate
3. Increased productivity of group members: using
web-based tools saves money and time, since group
gathering in one place is no more needed. Also
software help decision makers to determine the best
way to run a business in a short time
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2nd semester 2010 Dr. Qusai Abuein
(1.4) Computerized Support for Decision
Making
• Why use computerized decision support systems?
4. Improved data management: data stored inside and
outside the organization (web). Computers transmit,
search and store needed data quickly, economically,
securely and transparently (how?)
5. Managing giant data warehouses: computers can deal
(store, access) with huge digital data of any type
quickly (parallel computers)
6. Quality support: quality of decisions can be improved
since more data can be accessed, more alternatives
can be evaluated, view of experts can be collected
quickly, AI methods can be used to derive expertise,
and complex simulations can be performed.
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2nd semester 2010 Dr. Qusai Abuein
(1.4) Computerized Support for Decision
Making
• H.W.: find simulations, videos and text about Japanese
expected destructive earthquake, and how it affected
decision making.
• Why use computerized decision support systems?
7. Agility support: DS technologies (intelligent systems)
can empower people by allowing them to make good
decisions quickly, even if they lack knowledge.
8. Overcoming cognitive limits in processing and storing
information: the man mind has limited ability to process
and store information.
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(1.4)Computerized Support for Decision
Making
•
•
•
Cognitive limits indicates that the individual’s
problem-solving capability is limited when a wide
range of diverse information and knowledge is
required.
Computerized systems overcome the cognitive limits
by quickly accessing and processing vast amount of
stored information.
Why use computerized decision support systems?
9. Using the Web: the web changed how decision
makers are supported.
10. Anywhere, anytime support: using wireless
technology
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(1.5) An Early Framework for
Computerized Decision Support
• Figure 1.2 (next slide) shows the 3x3 matrix proposed
framework for computerized DS introduced by Gorry and
Scott (1971).
• The two dimensions are:
– D1: Degree of structuredness for the type of the decision.
– D2: Type of control
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(1.5) An Early Framework for
Computerized Decision Support
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(1.5) An Early Framework for
Computerized Decision Support
– Degree of structuredness (D1)
1. Structured decisions (programmed): routine and
typically repetitive problems for which standard
solution exist.
2. Unstructured decisions (unprogrammed):
complex problems for which there are no cutand-dried solution methods.
• Four-phase decision making process (see Figure
1.3) next slide
–
–
–
–
Intelligence
Design
Choice
Implementation
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An Early Framework for
Computerized Decision Support
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(1.5) An Early Framework for
Computerized Decision Support
– Degree of structuredness (D1)
3. Semistructured problems: fall between
structured and unstructured problems. Such as
setting marketing budget for customer product.
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(1.5) An Early Framework for
Computerized Decision Support
– Types of control in all managerial activities
(D2):
– Type of control that encompass all managerial
activities:
1. Strategic planning: long range goals
2. Management control: efficient use of resources
3. Operational control: efficient execution of tasks
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(1.5) An Early Framework for
Computerized Decision Support
– The decision support matrix
• The initial purpose of this matrix was to suggest
different types of computerized support to different
cells in the matrix
• Structures and operational control-oriented tasks
(cells 1,2,4) are performed by low-level managers.
• Tasks (cells 6,8,9) are performed by top executives.
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(1.5) An Early Framework for
Computerized Decision Support
• Computer support for structured decisions
– For each category of decision, an easy-to-apply
prescribed model and solution approach have been
developed, this approach is called management
science (MS). Also called operations research (OR).
– Management science (MS) or operations
research (OR)
The application of a scientific approach and
mathematical models to the analysis and
solution of managerial decision situations (e.g.,
problems, opportunities)
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(1.5) An Early Framework for
Computerized Decision Support
• MS says that solving a problem, managers should follow
the 4 steps system.
• MS added a new step (step 2) to the process:
1.
2.
3.
4.
5.
•
Defining the problem (a decision situation that may deal with
some difficulty or with an opportunity)
Classify the problem into a standard category
Constructing a model that describes the real-world problem
Identifying possible solutions to the modeled problem and
evaluating the solutions
Comparing, choosing, and recommending a potential solution to
the problem
Computerized methodologies can find solutions to the
standard category model quickly and efficiently.
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(1.5) An Early Framework for
Computerized Decision Support
• Automated decision systems (ADS)
– A new approach to support decision making is
called ADS
– ADS is a business rules-based system that
provides a solution uses intelligence, usually in
one functional area, to a specific repetitive
decisions (such as pricing)
– ADS are mostly suitable for frontline employees
who can see the customer information online
and frequently make quick decisions.
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(1.5) An Early Framework for
Computerized Decision Support
• Case Study (Intelligent price setting
using ADS).
– Page 17. (H.W. for one student)
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(1.5) An Early Framework for
Computerized Decision Support
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(1.5) An Early Framework for
Computerized Decision Support
• Computer support for unstructured decisions
• Unstructured problems can be only partially
supported by standard computerized quantitative
methods.
• Customized solutions are usually necessary, such
solutions may require certain expertise, that can be
provided by intelligent systems.
• intuition and judgment, computerized
communication, collaboration technologies
and knowledge management play a greate
role in this type of decisions.
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(1.5) An Early Framework for
Computerized Decision Support
• Computer support for semistructured problems
• For such problems a combination of both
standard solution procedures and human
judgment may be involved.
• MS can provide models for the structured
portion.
• For the unstructured portion, a DSS can
improve the quality of the information on
which the decision is based by providing a
range of alternative solutions along with
their potential impacts.
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(1.5) An Early Framework for
Computerized Decision Support
•
The benefits of computerized decision support
1.
2.
3.
4.
Companies work in an unstable or rapidly changing economy.
E-commerce is changing the ways business is done.
Existing IS do not fully support decision making.
There are difficulties in tracking the numerous business operations.
(timely information is needed)
5. Competition has increased especially global competition. (Coast
reduction is needed)
Q) What is the difference between e-commerce and Ebusiness? (H.W)
Q) How to support semistructured problems suing several
strategic and operational decisions?
(H.W): case 1.3
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(1.6) The Concept of Decision
Support Systems (DSS)
•
•
•
•
DSS can be used as an Umbrella term: Describes any
computerized system that supports decision making in an
organization
Case study 1.4 (page 21) H.W. It demonstrates some of
the major undtructured or semistructured problems
DSS can refer to a process for building customized
application for unstructured or semistructured problems
The architecture of DSS (Figure 1.5) (next 2nd slide)
1. Data: Every problem needs data to be solved and every opportunity
needs data to be analyzed
2. Models to manipulate data. These models can be A) standard (Excell
function) or B) customized
3. Knowledge component
4. Users
5. User interface
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(1.6) The Concept of Decision
Support Systems (DSS)
• Types of DSS:
1. Models-oriented DSS: quantitative models are used
to generate a recommended solution to a problem.
2. Data-oriented DSS: support ad hoc reporting and
queries.
• Ad hoc: is a Latin phrase which means "for this
purpose". It generally signifies a solution
designed for a specific problem or task, nongeneralizable, and which cannot be adapted to
other purposes.
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(1.6) The Concept of Decision Support
Systems (DSS)
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(1.6) The Concept of Decision
Support Systems (DSS)
– Types of DSS
• model-oriented DSS: quantitative models used to
generate a recommended solution to a problem
• data-oriented DSS: support ad-hoc reporting and
queries
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(1.7) A Framework for
Business Intelligence (BI)
• Business intelligence (BI):
Is an umbrella term that combines architectures,
tools, databases, applications, and
methodologies
• BI’s major objective is to enable interactive
access to data, to enable manipulation of data,
and to give business managers and analysts
the ability to conduct appropriate analysis.
• The process of BI is based on the
transformation of data to information, then to
decisions, and finally to actions.
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(1.7) A Framework for
Business Intelligence (BI)
• Business intelligence (BI):
Is an umbrella term that combines architectures,
tools, databases, applications, and
methodologies
• BI’s major objective is to enable interactive
access to data, to enable manipulation of data,
and to give business managers and analysts
the ability to conduct appropriate analysis.
• The process of BI is based on the
transformation of data to information, then to
decisions, and finally to actions.
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(1.7) A Framework for Business
Intelligence (BI)
History of BI
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(1.7) A Framework for
Business Intelligence (BI)
• BI architecture (Figure 1.7)
– Data warehouse : (Technical staff responsibility)
– Business analytics: a collection of tools for
manipulating, mining and analyzing the data in the
data warehouse. (Business users realm)
– Business Performance Management (BPM): for
monitoring and analyzing performance. (used by Top
Managers )
– User Interface
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(1.7) A Framework for
Business Intelligence (BI)
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(1.7) A Framework for
Business Intelligence (BI)
– Data warehouse
• Originally, included historical data that were
organized and summarize, so end users could
easily view or manipulate data and information
• Today, some data warehouses include current
data as well, so they can provide real time
decision support
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(1.7) A Framework for
Business Intelligence (BI)
• Business analytics: End users can work with the
data and information in a data warehouse by using a
variety of tools and techniques. Those techniques fit into 3
categories:
– Reporting and queries
– Advanced analytics
– Data, text and Web mining and other
sophisticated mathematical and statistical tools
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(1.7) A Framework for
Business Intelligence (BI)
• Data mining
A process of searching (extracting) for
unknown (hidden) relationships or
information in large databases or data
warehouses, using intelligent tools such as
neural computing, predictive analytics
techniques, or advanced statistical
methods
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(1.7) A Framework for
Business Intelligence (BI)
• Business performance management (BPM)
An advanced performance measurement and
analysis approach that embraces planning and
strategy
– BPM extends the monitoring, measuring, and
comparing of sales, profit, cost, profitability, and other
performance indicators by introducing the concept of
“management and feedback
– BPM provides a top-down enforcement of corporatewide strategy
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(1.7) A Framework for
Business Intelligence (BI)
• Business performance management
– User interface
– Dashboard
A visual presentation of critical data for
executives to view. It allows executives to see
hot spots in seconds and explore the situation
– Dashboards integrate information from multiple
business areas
• Visualization tools
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(1.7) A Framework for
Business Intelligence (BI)
– Styles of BI: The architecture of BI depends
on its applications.
– There are five styles of BI, each style have
special tool:
1.
2.
3.
4.
5.
Report Delivery and Alerting
Enterprise Reporting (dashboard, scorecard)
Cube Analysis (Slice and Dice Analysis)
Ad-hoc Query
Statistics and Data Mining
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(1.7) A Framework for
Business Intelligence (BI)
•
•
Benefits of BI: The major benefit of a BI to
a company is the ability to provide
accurate information when needed.
The benefits are:
–
–
–
–
Faster, more accurate reporting
Improved decision making
Improved customer service
Increased revenue
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(1.7) A Framework for
Business Intelligence (BI)
•
The DSS/BI connection
1. The architecture is very similar since BI
evolved from DSS
2. DSS are constructed to directly support
specific decision making; BI systems are
geared to provide accurate and timely
information (indirect support)
3. BI has an executive and strategy orientation
while DSS has been oriented toward analysts
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(1.7) A Framework for
Business Intelligence (BI)
•
The DSS-BI connection
4. BI systems are constructed with commercially
available tools and components that are fitted
to the needs of organizations; DSS more
programming is used to construct custom
solutions to very unstructured problems
5. DSS were developed mostly in the academic
world; BI were developed mostly by software
companies
6. Many tools used by BI are also considered
DSS tools (e.g., data mining and predictive
analysis )
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(1.7) A Framework for
Business Intelligence (BI)
•
Management support systems (MSS)
A system that applies any type of decision
support tool or technique to managerial
decision-making
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(1.8) A Work System
View of Decision Support
• Work system
A system in which human participants
and/or machines perform a business
process using information, technology,
and other resources to produce products
and/or services for internal or external
customers
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(1.8) A Work System
View of Decision Support
•
A work system usually have nine elements, each of
these elements can be varied or modified to provide
better decision quality:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Business process
Participants
Information: better info. quality, availability or presentation
Technology: better data storage and retrieval, algorithms or
statistical capabilities
Product and services
Customers
Infrastructure: more effective use of shared infrastructure
Environment
Strategy
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(1.9) The Major Tools and Techniques
of Managerial Decision Support
Computerized Tools for Decision Support
• Data management
• Reporting status
tracking
• Visualization
• Business analytics
• Strategy and
performance
management
• Communication and
collaboration
• Knowledge
management
• Intelligent systems
• Enterprise systems
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(1.9) The Major Tools and Techniques
of Managerial Decision Support
• Tools-Web connection
– All of these tools are available in both webbased and non web-based formats
• Hybrid (integrated) support systems
A support system that uses several tools and
techniques to assist management in solving
managerial or organizational problems and assess
opportunities and strategies
Q) Why integrating (hybrid) several tool?
– So as to improve decision support because one tool can
provide advantages where another is weak.
– See Application Case 1.7 page 33.
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(1.10) Implementing Computer-Based
Managerial Decision Support Systems
• What is to select? Developing (Building) or acquiring
(buying or renting) support systems
• Justification and cost-benefit analysis are needed to
take the decision for the above.
• Security and protection of privacy are very important
issues.
• Integration of MSS applications and other systems
are very important.
• The Web in DSS/BI implementation is widely used
• Information portals and MSS: visualization aids
serves both customers and employees.
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End Of Chapter 1
Thank you
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