Enhancing Management Decision Making For The Digital Firm

Chapter 12
Essentials of Management Information Systems, 6e

Chapter 12 Enhancing Management Decision Making for the Digital Firm
Enhancing Management Decision Making

for the Digital Firm
12.1
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?
12.2
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?
12.3
Management Challenges
1. Building information systems that can actually

fulfill executive information requirements
2. Create meaningful reporting and management

decision-making processes
12.4
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
12.5
MIS and DSS
MIS
• Provides reports based on routine flow

of data
• Assists in general control of the organization
12.6
MIS and DSS
DSS
• Emphasizes change, flexibility, rapid response,

models, assumptions, ad-hoc queries, and display
graphics
12.7
Types of Decision-Support Systems
Model-Driven DSS
• Primarily stand-alone
• Uses model to perform “what-if” and other kinds

of analysis
12.8
• 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
12.9
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?
12.10
Cargo revenue optimization of Continental Airlines
Figure 12-1
12.11
• Associations: Occurrences linked to a single

event
• Sequences: Events linked over time
12.12
• 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
12.13
Overview of a decision-support system (DSS)
Figure 12-2
12.14
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
12.15
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
12.16
Components of DSS
• Model: Abstract representation illustrating

components or relationships of a
phenomenon
• Sensitivity Analysis: Models that ask “what-

if” questions repeatedly to determine the
impact of changes in one or more factors on
the outcomes
12.17
Sensitivity analysis
Figure 12-3
12.18
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
12.19
• Southern Railway: Train dispatching and routing
• Texas Oil and Gas Corporation: Evaluation of

potential drilling sites
• The Gap: Inventory stocking and merchandising
12.20
• United Airlines: Flight scheduling, passenger

demand forecasting
• U.S. Department of Defense: Defense contract

analysis
12.21
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
12.22
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
12.23
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?
12.24
DSS for customer analysis and segmentation
Figure 12-4
12.25
DSS for Customer Relationship Management
Predictive Analysis
• Use of datamining techniques, historical data,

and assumptions about future conditions to
predict outcomes of events
12.26
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
12.27
Web-Based Customer Decision-Support Systems
Customer Decision-Support System (CDSS)
• System to support the decision-making process

of an existing or potential customer
12.28
Group Decision-Support Systems (GDSS)
What is a GDSS?
• 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
12.29
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
12.30
Components of GDSS
• Electronic questionnaires
• Electronic brainstorming tools
• Idea organizers
• Questionnaire tools
12.31
Components of GDSS
• Tools for voting or setting priorities
• Stakeholder identification and analysis tools
• Policy formation tools
• Group dictionaries
12.32
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
12.33
Group system tools
Figure 12-5
12.34
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
12.35
• Increase the number of ideas generated
• Can lead to more participative and democratic

decision making
12.36
Organizational Memory
• Store learning from an organization’s history

that can be used for decision making and other
purposes
12.37
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
12.38
Executive Support Systems (ESS)
• Monitor organizational performance
• Track activities of competitors
• Spot problems
• Identify opportunities
• Forecast trends
12.39
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
12.40
Drill Down
• The ability to move from summary data to lower

and lower levels of detail
12.41
Developing ESS
• Ease of use
• Facility for environmental scanning
• External and internal sources of information to

be used for environmental scanning
12.42
Benefits of Executive Support Systems
• Analyze, compare, and highlight trends
• Provide greater clarity and insight into data
• Speed up decision making
12.43
Benefits of Executive Support Systems
• Improve management performance
• Increase management’s span of control
• Better monitoring of activities
12.44
Executive Support Systems and the Digital Firm
ESS for Competitive Intelligence
• Identify changing market conditions
• Formulate responses
• Track implementation efforts
• Learn from feedback
12.45
Executive Support Systems and the Digital Firm
Balanced Scorecard
• 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
12.46
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)
12.47
Enterprise-Wide Reporting and Analysis
Activity-Based Costing
• 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
12.48
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?
12.49
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

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Chapter 12

Essentials of Management Information Systems, 6e

Enhancing Management Decision Making

1. How can information systems help

2. How can information systems help people

3. Are there any special systems that can

4. What value can systems to support

1. Building information systems that can actually

2. Create meaningful reporting and management

Decision-Support Systems (DSS)

• Computer system at the management level of an

• Combines data, analytical tools, and models

• Supports semistructured and unstructured decision

Decision-Support Systems (DSS)

MIS and DSS

• Provides reports based on routine flow

• Assists in general control of the organization

Decision-Support Systems (DSS)

MIS and DSS

• Emphasizes change, flexibility, rapid response,

Decision-Support Systems (DSS)

Types of Decision-Support Systems

• Uses model to perform “what-if” and other kinds

Decision-Support Systems (DSS)

Types of Decision-Support Systems

• Data-driven DSS: Supports decision making by

• Datamining: Finds hidden patterns and

Decision-Support Systems (DSS)

Data Drive Customer Care at Intrawest

• How does this customer care DSS help Intrawest

• How has it provided value for the firm?

Decision-Support Systems (DSS)

Cargo revenue optimization of Continental Airlines

Decision-Support Systems (DSS)

Types of Decision-Support Systems

• Associations: Occurrences linked to a single

• Sequences: Events linked over time

Decision-Support Systems (DSS)

Types of Decision-Support Systems

• Classification: Recognizing patterns that

• Clustering: Similar to classification when no

Decision-Support Systems (DSS)

Overview of a decision-support system (DSS)

Decision-Support Systems (DSS)

• DSS Database: Collection of current or

Decision-Support Systems (DSS)

• DSS Software System: Collection of software

Decision-Support Systems (DSS)

• Model: Abstract representation illustrating

• Sensitivity Analysis: Models that ask “what-

Decision-Support Systems (DSS)

Decision-Support Systems (DSS)

DSS Applications and the Digital Firm

Examples of Decision-Support Systems

• General Accident Insurance: Customer buying

• Bank of America: Customer profiles

• Frito-Lay, Inc.: Price, advertising, and promotion

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