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Chapter two: Decision Making, Systems, Modelling, and Support

 Characteristics of Decision Making
The following are the characteristics of decision making
 Groupthink: (i.e. group members accept the solution without thinking for
themselves) can lead to bad decision.
 Evaluating what-if scenarios. Decision makers are interesting in evaluating
what- if scenarios.
 Experimentation with a real system (eg: develop a schedule, try it, and see how
it works )
 Changes in the decision-making environment may occur continuously
 Time pressure on the decision maker
 Analyzing a problem takes time/money
 Insufficient or too much information
 Define Decision Making
A process of choosing among two or more alternative courses of action for the
purpose of attaining a goal(s).Managerial decision making is synonymous with the
entire management process.
 Decision Making and Problem Solving
A problem occurs when the system does not meet its established goals, does not
yield the predicted results, or does not work as planned. Problem solving may also
deal with identifying new opportunities. Differentiating the terms Decision making
and problem solving can be confusing. one way to distinguish between the two is to
examine the phases of decision process which are 1) intelligence 2)design 3) choice
and 4) implementation .some consider the entire process(phases 1-4) as problem
solving .others view phases (1-3) as formal decision making. For conclusion the main
difference between problem solving and decision making is problem solving has an
implementation phase where decision making has not implementation phase.
 Describe Decision-Making Disciplines
Decision making is directly influenced by several major disciplines. Some of which
are behavioral and some of which are scientific in nature. Behavioral disciplines
include anthropology, law, philosophy, political science, psychology, social
psychology, and sociology. And scientific disciplines include computer science,
decision analysis, economics, engineering, the hard sciences (e.g., biology, chemistry,
and physics), management science/operations research, mathematics, and statistics.

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Each discipline has its own set of assumptions and each contributes a unique, valid
view of how people make decisions.
 Define decision style
Decision style can be defined as the manner by which decision makers think and
react to problems. This includes the way they perceive problem, their cognitive
responses and how values and beliefs vary from individual to individual and from
situation to situation.
When making decisions, people follow different steps/sequence, give different
emphasis, time allotment, and priority to each steps, Personality temperament tests
are often used to determine decision styles, and various tests measure somewhat
different aspects of personality.
 List the types of decision style
Types of Decision styles are:
 Heuristic versus Analytic
 Autocratic versus Democratic
 Consultative (with individuals or groups)
A successful computerized system should fit the decision style and the decision
situation.
 Explain decision makers.
Decisions are often made by individuals, especially lower managerial levels and small
organizations. There may be conflicting objectives even for a sole decision maker.
For example. When making an investment decision an individual visitor may
consider the rate of return on the investment, liquidity and safety as objectives.
 Explain model
A major characteristic of a DSS and many BI tools is to the inclusion of at least one
model. The basic idea to perform the DSS analysis on a model of reality rather than
on the real system. A model is simplified representation or abstraction of reality. It’s
usually simplified because reality is too complex to describe exactly and because
much of the complexity is actually irrelevant in solving specific problem. Models can
represent systems/problems at various degrees of abstraction
 List and describe Types of models
Models can be classified based on their degree of abstraction
Types of models on their degree of abstraction are Iconic models (scale models),
Analog model, Mental Models, Mathematical (quantitative) models.

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Iconic model: also called scale model. The least abstract type of a model it’s the
physical replica of the system, usually on different scale from the original. Iconic
model may be three dimensional such as a model of airplane, car, a bridge or a
production line.
Analog model: behaves like the real system but does not look like it. It’s a more
abstract than an iconic model and is a symbolic representation of reality. Models of
this type are usually two dimensional charts or diagrams. They can be physical
models, but the shape of model differs from that actual system. Example of analog
models include organization chart that depicts the structure, authority and
responsibility relationships.
Mental model: are descriptive representations of decision making situations that
people from in their heads and think about. Their thought processes work through
scenarios to consider the utility and the risk involved each potential alternative.
Mental models are used when there are most qualitative factors in decision making
problem.
Mathematical model: the complexity of relationships in many organizational
systems can not be represented by icons or analogically because such representations
would soon become cumbersome and using them would be time consuming,
therefore more abstract are described mathematically. Most DSS analysis are
performed numerically with mathematical or other quantitative models.
 What are the benefits of models
 Ease of manipulation: manipulating a model is much easier than manipulating
real system.
 Compression of time: models enable the compression of time, years of
operations can be simulated in minutes or seconds of computer time.
 Lower cost of analysis on models: the cost of modeling analysis is much lower
than the cost of similar experiment conducted on real system.
 Cost of making mistakes on experiments: the cost of making mistakes during
a trial and error experiment is much lower when the models are used than with
real systems.
 Inclusion of risk/uncertainty: the business environment involves considerable
uncertainty, when a modeling a manager can estimate risks resulting from
specific actions.

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 Evaluation of many alternatives: mathematical models enable the analysis of a

very large sometimes infinite number of possible solutions, even in simple
problems; managers often have large number of alternatives from which to
choose.
 Reinforce learning and training: models enhance and reinforce learning and
training.
 Web is source and a destination for it: models and solution methods are
readily available on the web.
 Phases of Decision-Making Process
It’s advisable to follow systematic decision making process; Simon 1977 said that
this involves four major phases which are 1) intelligence 2) design 3) choice 4)
implementation.
 Decision making : Intelligence Phase
Intelligence in decision making involves scanning the environment, either
intermittently or continuously .it includes several activities at identifying
problem situation or opportunities, it may also include monitoring the results of
the implementation phase of decision making process.
 Define problem in decision making
Problem is the difference between what people desire (or expect) and what is
actually occurring Symptom versus Problem.

Intelligence Phase also include

 Potential issues in data/information collection and estimation

 Problem Classification: is the conceptualization of problem in attempt to place it in
a definable category, possibly leading to standard solution approach. An important
approach classifies problems according to the degree of structuredness evident in
them.
 Problem Decomposition: many complex problems can be divided into
subproblems. Solving simpler subproblems may help in solving a complex problem.
 Problem Ownership: in the intelligence phase it’s important to establish problem
ownership. A problem exists in an organization only if someone or some group takes
on the responsibility of attacking it and if the organization has the ability to solve it.
The assignment of authority to solve the problem is called problem ownership.

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 Decision making : The Design Phase

The design phase involves finding or developing and analysing possible courses of
actions. These include understanding the problem and testing solutions for
feasibility.in this phase a model of decision making problem is constructed, tested
and validated.
Modelling involves conceptualizing a problem and abstracting it into a quantitative
and/or qualitative form (i.e., using symbols/variables)
Abstraction: making assumptions for simplification
Tradeoff (cost/benefit): more or less abstraction
Modeling: both an art and a science
 Define Selection of a Principle of Choice
A principal of choice is a criterion that describes the acceptability of a solution
approach. Selecting a principal of choice is not part of choice phase but involves how
a person establishes decision making objective.
 Explain Normative models:
Normative models: are models in which the chosen alternative is demonstrably the
best of all possible alternatives .To find it, the decision maker should examine all
alternatives and prove that the one selected is needed the best. This process is
basically optimization. Optimization can be achieved in one of three ways.
1. Get the highest level of goal attainment from a given set of resources.
2. Find the alternative with the highest ratio of a goal attainment to cost
3. Find the alternative with the lowest cost that will meet an acceptable level of
goals.
Normative decision making theory based on the following assumptions of
rational decision makers.
 Humans are economic beings whose objective is to maximize the attainment
of goals
 For a decision-making situation, all alternative courses of action and
consequences are known
 Decision makers have an order or preference that enables them to rank the
desirability of all consequences.

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 Explain Descriptive models:

Descriptive model: describe things as they are or as they are believed to be. These
models are typically mathematically based. Descriptive models are extremely useful
in DSS for investigating consequences of various alternative courses of action under
different configurations of inputs and processes. However descriptive analysis
checks the performance of the system for a given set of alternatives.
 Describe Simulation model –
Simulation most common descriptive modelling method (mathematical depiction of
systems in a computer environment).
Simulation: is the imitation of reality and has been applied to many areas of decision
making. Computer and video games are a form of simulation.
 Explain heuristic model: Heuristic models (= suboptimization)
The chosen alternative is the best of only a subset of possible alternatives, Often, it is
not feasible to optimize realistic (size/complexity) problems and also
Suboptimization may also help relax unrealistic assumptions in models
Help reach a good enough solution faster.
 Good Enough or Satisficing: something less than the best”. Is a form of
suboptimization, seeking to achieve a desired level of performance as opposed to the
“best” its Benefit: time saving?

 Developing (Generating) Alternatives: In optimization models (such as linear

programming), the alternatives may be generated automatically
 Measuring/ranking the outcomes : Using the principle of choice
 Risk is the Lack of precise knowledge (uncertainty). Risk can be measured with
probability
 Decision making :The Choice Phase
Choice is a critical act of decision making .the choice phase is the one in which the
actual decision and the commitment to follow a certain course of action are made
here. The boundary between the design and choice is often unclear (partially
overlapping phases) and includes the search, evaluation, and recommendation of an
appropriate solution to the model, solving the model versus solving the problem!
Search approaches
 Analytic techniques (solving with a formula)
 Algorithms (step-by-step procedures)
 Heuristics (rule of thumb)

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 Blind search (truly random search)

Additional activities
 Sensitivity analysis
 What-if analysis
 Goal seeking
 The Implementation Phase
Implementation phase involves putting a recommended solution to work not
necessarily implementing a computer system. Many generic implementation issues.
 How Decisions Are Supported
Support for the Intelligence Phase
 Enabling continuous scanning of external and internal information sources
to identify problems and/or opportunities
 Resources/technologies: Web; ES, OLAP, data warehousing, data/text/Web
mining, EIS/Dashboards, KMS, GSS, GIS,…
 Business activity monitoring (BAM)
 Business process management (BPM)
 Product life-cycle management (PLM)
Support for the Design Phase
 Enabling generating alternative courses of action, determining the criteria
for choice
 Generating alternatives
Support for the Choice Phase
 Enabling selection of the best alternative given a complex constraint
structure
 Use sensitivity analyses, what-if analyses, goal seeking
 Resources
Support for the Implementation Phase
 Enabling implementation/deployment of the selected solution to the system
 Decision communication, explanation and justification to reduce resistance to
change
 New Technologies to Support Decision Making
 Web-based systems
 m-Commerce
 PDA, Cell phones, Tablet PCs

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 GSS with visual/immersive presence

 RFID and other wireless technologies
 Faster computers, better algorithms, to process “huge” amounts of
heterogeneous/distributed data

END OF CHAPTER TWO

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