DSS Turban 7th Ed Ch2

Turban, Aronson, and Liang
Decision Support Systems and Intelligent

Systems, Seventh Edition
Chapter 2
Decision-Making Systems,
Models, and Support
2005 Prentice Hall, Decision Support Systems and Intelligent Systems, 7th 2-1
Edition, Turban, Aronson, and Liang
Learning Objectives
Learn the basic concepts of decision

making.
Understand systems approach.
Learn Simons four phases of
decision making.
Learn which factors affect decision
making.
Learn how DSS supports decision
making in practice.
Standard Motor Products Shifts
Gears Into Team-Based Decision-
Making Vignette
Team-based decision making

Increased information sharing
Daily feedback
Self-empowerment
Shifting responsibility towards teams
Elimination of middle management
Typical Business Decision
Aspects
Decision may be made by a group
Group member biases
Groupthink
Several, possibly contradictory objectives
Many alternatives
Results can occur in the future
Attitudes towards risk
Need information
Gathering information takes time and expense
Too much information
What-if scenarios
Trial-and-error experimentation with the real system may result in a loss
Experimentation with the real system - only once
Changes in the environment can occur continuously
Time pressure
4
Decision Support Systems and Intelligent Systems, Efraim Turban and Jay E. Aronson, 6th edition,
Copyright 2001, Prentice Hall, Upper Saddle River, NJ
Decision Making
Process of choosing amongst

alternative courses of action for the
purpose of attaining a goal or goals.
The four phases of the decision
process are:
Intelligence
Design
Choice
implementation
What each Phase consists
of?
The Intelligence Phase consists of:
- Organizational objectives. - Search and scanning procedures.
- Data collection. - Problem identification.
- Problem ownership. - Problem classification.
- Problem statement.
The Design Phase consists of:

- Formulate a model. - Set criteria for choice.
- Search for alternatives. - Predict and measure outcomes.
The Choice Phase consists of:
- Solution to the model.
- Sensitivity analysis.
- Selection of the best (good) alternative (s).
- Plan for implementation.
Managerial Decision Making is synonymous
with the whole process of management
Systems
A SYSTEM is a collection of objects such as

people, resources, concepts, and procedures
intended to perform an identifiable function or to
serve a goal
System Levels (Hierarchy): All systems are

subsystems interconnected through interfaces
8
Systems
Structure
Inputs
Processes
Outputs
Feedback from output to decision maker
Separated from environment by boundary
Surrounded by environment
Input Processes Output

boundary
Environment
Inputs: are elements that enter the system.
Processes: are all the necessary to convert or
transform inputs into outputs.
Outputs: are the finished products or the
consequences of being in the system.
Feedback from output to decision maker; there is
a flow of information from the output component
to the decision-maker concerning the systems
output or performance. Based on the outputs, the
decision-maker, may decide to modify the inputs,
the processes, or both. the decision-maker
compares the output to the expected output and
adjusts the input and possibly the processes to
move close to the output targets.
The environment: Is composed of several
elements that lie outside in in the sense
that they are not inputs, output, or
processes. However they affect the
systems performance and consequently
the attainment of its goals. Environmental
elements can be social, political, legal,
physical, or economic .
The Boundary: A system is separated
from its environment by boundary.
Environmental Elements Can Be
Social
Political
Legal
Physical
Economical
DecisionAronson,
Edition, Turban, Support Systems
andand Intelligent Systems, Efraim Turban and Jay E. Aronson, 6th edition,
Liang
The Boundary Separates
a System From Its
Environment
Boundaries may be physical or nonphysical (by definition
of scope or time frame)
Information system boundaries are usually by definition!
14
System Types
Closed system
Independent
Takes no inputs
Delivers no outputs to the environment
Black Box: is one which inputs and outputs are
well defined, but the process itself is not
specified.
Such as transaction processing system (TPS).
Open system
Very Dependant on it environment.
Accepts inputs from the environment.
Delivers outputs to environment
An Information System
Collects, processes, stores, analyzes, and disseminates

information for a specific purpose
Is often at the heart of many organizations
Accepts inputs and processes data to provide

information to decision makers and helps decision
makers communicate their results
16
System Effectiveness and
Efficiency
Two Major Classes of Performance Measurement
Effectiveness is the degree to which goals are achieved

Doing the right thing!
Efficiency is a measure of the use of inputs (or resources) to

achieve outputs
Doing the thing right!
MSS emphasize effectiveness

Often: several non-quantifiable, conflicting goals
17
Models
Major component of DSS
Use models instead of experimenting on the real system
A model is a simplified representation or abstraction of

reality.
Reality is generally too complex to copy exactly
Much of the complexity is actually irrelevant in
problem solving
18
Models Used for DSS
Iconic
Small physical replication of system, it may be
three dimensional such as that of an airplane,
car, or production line. Or two-dimensional such
as photographs.
Analog
Behavioral representation of system
May not look like system
Ex. Stock market charts that represent the price
movements of stocks. Animations, videos, and movies.
Quantitative (mathematical)
Demonstrates relationships between systems
Benefits of Models
1. Time compression
2. Easy model manipulation
3. Low cost of construction
4. Low cost of execution (especially that of errors)
5. Can model risk and uncertainty
6. Can model large and extremely complex systems with
possibly infinite solutions
7. Enhance and reinforce learning, and enhance training.
DecisionAronson,
Edition, Turban, Support Systems
andand Intelligent Systems, Efraim Turban and Jay E. Aronson, 6th edition,
Liang
Phases of Decision-Making
Simons original three phases:

Intelligence
Design
Choice
He added fourth phase later:
Implementation
Book adds fifth stage:
Monitoring
Decision-Making
Intelligence Phase
Scan the environment
Analyze organizational goals
Collect data
Identify problem
Categorize problem
Programmed and non-programmed (p55)
Decomposed into smaller parts (p55)
Assess ownership and responsibility for
problem resolution
The Intelligence Phase
Scan the environment to identify problem situations or

opportunities
Find the Problem

Identify organizational goals and objectives
Determine whether they are being met
Explicitly define the problem
24
Problem Classification
Structured versus Unstructured
Programmed versus Nonprogrammed Problems

Simon (1977)
Nonprogrammed Programmed
Problems Problems
25
Problem Decomposition: Divide a complex problem into (easier to solve)
subproblems
Chunking (Salami)
Some seemingly poorly structured problems may have some highly structured
subproblems
Problem Ownership
Outcome: Problem Statement
26
Decision-Making Design
Phase
Develop alternative courses of action
Analyze potential solutions
Create model
Test for feasibility
Validate results
Select a principle of choice
Establish objectives
Risk assessment and acceptance
Criteria and constraints
Decision-Making Choice
Phase
Principle of choice
Is a criterion that Describes acceptability of a
solution approach
Normative Models
Optimization
Effect of each alternative
Rationalization
More of good things, less of bad things
Courses of action are known quantity
Options ranked from best to worse
Suboptimization
Decisions made in separate parts of organization without
consideration of whole
Normative Models:
are those in which the chosen
alternative is demonstrably the best of
all possible alternatives. To find it, one
should examine all alternatives and
prove that one selected is indeed the
best, which is what one would
normally want.
Normative Models
The chosen alternative is demonstrably the best of

all (normally a good idea)
Optimization process
Normative decision theory based on rational decision

makers
30
The Principle of Choice
What criteria to use?

Best solution?
Good enough solution?
31
Selection of a
Principle of Choice
Not the choice phase
A decision regarding the acceptability

of a solution approach
Normative
Descriptive
32
The Modeling Process--
A Preview
Solution Approaches
Trial-and-Error
Simulation
Optimization
Heuristics
33
Components of
Quantitative Models
Decision Variables
Uncontrollable Variables (and/or Parameters)
Result (Outcome) Variables
Mathematical Relationships
or
Symbolic or Qualitative Relationships
(Figure 2.3)
34
Results of Decisions are
Determined by the
Decision
Uncontrollable Factors
Relationships among Variables
35
Decision Variables
Describe alternative courses of action

The decision maker controls them
Examples - Table 2.2
36
Uncontrollable Variables or
Parameters
Factors that affect the result variables
Not under the control of the decision maker
Generally part of the environment
Some constrain the decision maker and are called
constraints
Examples - Table 2.2
Intermediate Result Variables

Reflect intermediate outcomes
37
Rationality Assumptions
Humans are economic beings whose objective is to maximize

the attainment of goals; that is, the decision maker is rational
In a given decision situation, all viable alternative courses of

action and their consequences, or at least the probability and
the values of the consequences, are known
Decision makers have an order or preference that enables

them to rank the desirability of all consequences of the
analysis
38
Descriptive Models
Describe things as they are,or how things are

believed to be
These Model are Typically, mathematically
based
Applies single set of alternatives
Examples:
Simulations
What-if scenarios
Cognitive map: understand issues better, focus better
and reach closure
Narratives: is a story that, when told, helps a decision
maker uncover the important aspects of the situation and
leads to better understanding and framing.
Descriptive Models
Describe things as they are, or as they are believed

to be
Extremely useful in DSS for evaluating the
consequences of decisions and scenarios
No guarantee a solution is optimal
Often a solution will be good enough
Simulation: Descriptive modeling technique
Satisficing (Good Enough)
Most human decision makers will settle for a good

enough solution
Tradeoff: time and cost of searching for an

optimum versus the value of obtaining one
Good enough or satisficing solution may meet a

certain goal level is attained
(Simon, 1977)
41
Why Satisfice?
Bounded Rationality
(Simon)
Humans have a limited capacity for rational thinking
Generally construct and analyze a simplified model
Behavior to the simplified model may be rational
But, the rational solution to the simplified model may
NOT BE rational in the real-world situation
Rationality is bounded by
limitations on human processing capacities
individual differences
Bounded rationality: why many models are descriptive,
not normative
42
Predicting the Outcome of
Each Alternative
Must predict the future outcome of each proposed

alternative
Consider what the decision maker knows (or
believes) about the forecasted results
Classify Each Situation as Under

Certainty
Risk
Uncertainty
43
Decision Making Under
Certainty
Assumes complete knowledge available
(deterministic environment)
Example: U.S. Treasury bill investment
Typically for structured problems with short

time horizons
Sometimes DSS approach is needed for certainty
situations
44
Risk (Risk Analysis)
Probabilistic or stochastic decision situation
Must consider several possible outcomes for each
alternative, each with a probability
Long-run probabilities of the occurrences of the
given outcomes are assumed known or estimated
Assess the (calculated) degree of risk associated with

each alternative
45
Risk Analysis
Calculate the expected value of each alternative
Select the alternative with the best expected value
Example: poker game with some cards face up (7

card game - 2 down, 4 up, 1 down)
46
Uncertainty
Several outcomes possible for each course of action
BUT the decision maker does not know, or cannot
estimate the probability of occurrence
More difficult - insufficient information

Assessing the decision maker's (and/or the
organizational) attitude toward risk
Example: poker game with no cards face up (5 card
stud or draw)
47
Measuring Outcomes
Goal attainment
Maximize profit
Minimize cost
Customer satisfaction level (minimize number of
complaints)
Maximize quality or satisfaction ratings (surveys)
48
Scenarios
Useful in
Simulation
What-if analysis
49
Importance of Scenarios
in MSS
Help identify potential opportunities and/or
problem areas
Provide flexibility in planning
Identify leading edges of changes that management
should monitor
Help validate major assumptions used in modeling
Help check the sensitivity of proposed solutions to
changes in scenarios
50
Decision-Making Choice
Phase
Decision making with commitment to
act
Determine courses of action
Analytical techniques ( solving a formula)
Algorithms( step-by-step procedures)
Heuristics (rules of thumb)
Blind searches( shooting in the dark, ideally in a logical way)
Analyze for robustness
2-51
Decision-Making
Implementation Phase
Putting solution to work
Vague (unknown) boundaries which
include:
Dealing with resistance to change
User training
Upper management support
Source: Based on Sprague, R.H., Jr., A Framework for the Development of DSS. MIS Quarterly, Dec. 1980, Fig. 5, p. 13.
Decision Support Systems
Intelligence Phase
Automatic
Data Mining
Expert systems, CRM, neural networks
Manual
OLAP
KMS
Reporting
Routine and ad hoc
Design Phase
Financial and forecasting models
Generation of alternatives by expert
system
Business process models from CRM,
ERP, and SCM
Choice Phase
Identification of best alternative
Identification of good enough alternative
What-if analysis
Goal-seeking analysis
May use KMS, GSS, CRM, ERP, and
SCM systems
Implementation Phase
Improved communications
Collaboration
Training
Supported by KMS, expert systems,
GSS
Other Important
Decision- Making Issues
Personality types
Gender
Human cognition
Decision styles
58
Personality
(Temperament) Types
Strong relationship between personality and
decision making
Type helps explain how to best attack a
problem
Type indicates how to relate to other types
important for team building
Influences cognitive style and decision style
59
Gender
Sometimes empirical testing indicates
gender differences in decision making
Results are overwhelmingly
inconclusive
60
Bias and Heuristics in DSSs
Heuristics are often built through trail-and-error

experience
If heuristics are well tested, they can serve as a
reliable tool for reducing the search space for
alternatives
Search directed by heuristics is usually less costly
and more efficient than blind search
Heuristics can provide solutions close to those
produced by a comprehensive blind search with
regards to quality
Advantages of using heuristics in problem solving
Simple to understand
Easy to implement
Requires less time
Require less cognitive effort
Can produce multiple solutions
When to use Heuristics
The input data are limited
The computation time for the optimal solution is excessive
Problems that are being solved frequently
The efficiency of an optimisation process can be improved
Decision Styles
The manner in which decision makers think and react to
problems
Varies from individual to individual and from situation to

situation
64
Types of Decision styles
Directive: low tolerance of context ambiguity. Does not
requires large volumes of information and verbal
communication
is preferable on writing methods for managers
Analytical: High tolerance of context ambiguity and
requires
great values of information. Not quick in taking
decisions.
Conceptual: The people person and they tend to be
thinkers
rather than doers.
Behavioural: It requires low amount of input data and
demonstrate a short-rang vision
The Decision Makers
Individuals
Groups
66
Individuals
May still have conflicting objectives

Decisions may be fully automated
67
Groups
Most major decisions made by groups
Conflicting objectives are common
Variable size
People from different departments
People from different organizations
The group decision-making process can be very complicated
Consider Group Support Systems (GSS)
Organizational DSS can help in enterprise-wide decision-

making situations
68
Technology is used to access information and
data. Describe how information technology can
help the teams.
Information technology is used to provide immediate

access to information to each team member.
Information technology is used for group support
group discussions directly, through technologies
such as interactive chat or indirectly such as
through the use of email. Information technology
can also help team disseminate information
through technologies such as Web portals.
Review what is meant by decision-making
versus problem-solving. Compare the two, and
determine whether or not it makes sense to
distinguish between them..
It is a matter of definition. Some people
consider decision-making as a step in
problem-solving,. Some people refer to
decision-making as the process of making
a recommendation, whereas problem-
solving includes the implementation of the
recommendation.
Compare the normative ( standard) and
descriptive approaches to decision-
making.
Normative refers to models that tell you
what you should do. These are
prescriptive models that usually utilize
optimization.
Descriptive models are those that tell you
"what-if." These are usually simulation
models.
What is the impact on decision-making of giving
people responsibility for their own work? Why are
self-directed team members happier than workers
under a traditional hierarchy?
Responsibility for their work will allow people to feel

they are truly empowered to make decisions and
therefore will be more willing to do so. Self-directed
teams feel more in control of their own destiny, they
have more control over their work activities.

DSS Turban 7th Ed Ch2

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Turban, Aronson, and Liang

Decision Support Systems and Intelligent

Learn the basic concepts of decision

Team-based decision making

Process of choosing amongst

The Design Phase consists of:

A SYSTEM is a collection of objects such as

System Levels (Hierarchy): All systems are

Input Processes Output

Information system boundaries are usually by definition!

Collects, processes, stores, analyzes, and disseminates

Is often at the heart of many organizations

Accepts inputs and processes data to provide

Effectiveness is the degree to which goals are achieved

Efficiency is a measure of the use of inputs (or resources) to

MSS emphasize effectiveness

A model is a simplified representation or abstraction of

Simons original three phases:

Scan the environment to identify problem situations or

Find the Problem

Structured versus Unstructured

Programmed versus Nonprogrammed Problems

Outcome: Problem Statement

The chosen alternative is demonstrably the best of

Normative decision theory based on rational decision

What criteria to use?

Not the choice phase

A decision regarding the acceptability

Describe alternative courses of action

Intermediate Result Variables

Humans are economic beings whose objective is to maximize

In a given decision situation, all viable alternative courses of

Decision makers have an order or preference that enables

Describe things as they are,or how things are

Describe things as they are, or as they are believed

Most human decision makers will settle for a good

Tradeoff: time and cost of searching for an

Good enough or satisficing solution may meet a

Must predict the future outcome of each proposed

Classify Each Situation as Under

Typically for structured problems with short

Assess the (calculated) degree of risk associated with

Calculate the expected value of each alternative

Select the alternative with the best expected value

Example: poker game with some cards face up (7

More difficult - insufficient information

Heuristics are often built through trail-and-error

Varies from individual to individual and from situation to

May still have conflicting objectives

Organizational DSS can help in enterprise-wide decision-

Information technology is used to provide immediate

Responsibility for their work will allow people to feel

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