Management Information Systems:

Managing the Digital Firm

Sixteenth Edition

Chapter 10
Enhancing Decision Making

Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved
Learning Objectives
10.1 What are the different types of decisions, and how does
the decision making process work?
10.2 How do information systems support the activities of
managers and management decision making?
10.3 How do business intelligence and business analytics
support decision making?
10.4 How do different decision-making constituencies in an
organization use business intelligence, and what is the
role of information systems in helping people working in
a group make decisions more efficiently?
Big Data and the Internet of Things
Drive Precision Agriculture (1 of 2)
• Problem
– Explosive population growth
– Opportunities from new technology
• Solutions
– Identify technologies
– Develop improvements for farmer processes
– IoT wireless sensors
– Supercomputer processing
– Analytic software
– Web links to farmers
Big Data and the Internet of Things
Drive Precision Agriculture (2 of 2)
• Precision Agriculture Systems
• Demonstrates IT’s role in providing information and
business intelligence that help small business like farmers
improve efficiency
• Illustrates how information systems can improve an entire
industry
What Are the Different Types of
Decisions, and How Does the
Decision Making Process Work?
(1 of 2)
• Business value of improved decision making
– Improving hundreds of thousands of “small” decisions adds up to
large annual value for the business
• Types of decisions
– Unstructured: Decision maker must provide judgment, evaluation,
and insight to solve problem
– Structured: Repetitive and routine; involve definite procedure for
handling so they do not have to be treated each time as new
– Semistructured: Only part of problem has clear-cut answer
provided by accepted procedure
What Are the Different Types of
Decisions, and How Does the Decision
Making Process Work? (2 of 2)
• Senior managers
– Make many unstructured decisions
• Middle managers
– Make more structured decisions but these may include
unstructured components
• Operational managers and rank and file employees
– Make more structured decisions
Figure 10.1 Information Requirements
of Key Decision-Making Groups in a
Firm
The Decision Making Process
• Intelligence
– Discovering, identifying, and understanding the
problems occurring in the organization
• Design
– Identifying and exploring solutions to the problem
• Choice
– Choosing among solution alternatives
• Implementation
– Making chosen alternative work and continuing to
monitor how well solution is working
Figure 10.2 Stages in Decision
Making
Managerial Roles
• Information systems can only assist in some of the roles
played by managers
• Classical model of management: five functions
– Planning, organizing, coordinating, deciding, and
controlling
• More contemporary behavioral models
– Actual behavior of managers appears to be less
systematic, more informal, less reflective, more
reactive, and less well organized than in classical
model
Mintzberg’s 10 Managerial Roles
(1 of 2)

• Interpersonal roles
– Figurehead
– Leader
– Liaison
• Informational roles
– Nerve center
– Disseminator
– Spokesperson
Mintzberg’s 10 Managerial Roles
(2 of 2)

• Decisional roles
– Entrepreneur
– Disturbance handler
– Resource allocator
– Negotiator
Real-World Decision Making
• Three main reasons why investments in IT do not always
produce positive results
– Information quality
 High-quality decisions require high-quality
information
– Management filters
 Managers have selective attention and have variety
of biases that reject information that does not
conform to prior conceptions
– Organizational inertia and politics
 Strong forces within organizations resist making
decisions calling for major change
High-Velocity Automated Decision
Making
• Made possible through computer algorithms precisely
defining steps for a highly structured decision
– Humans taken out of decision
• For example: High-speed computer trading programs
– Trades executed in 30 milliseconds
• Require safeguards to ensure proper operation and
regulation
What is Business Intelligence?
• Business intelligence
– Infrastructure for collecting, storing, analyzing data
produced by business
– Databases, data warehouses, data marts
• Business analytics
– Tools and techniques for analyzing data
– OLAP, statistics, models, data mining
• Business intelligence vendors
– Create business intelligence and analytics purchased
by firms
The Business Intelligence
Environment
• Six elements in the business intelligence environment
– Data from the business environment
– Business intelligence infrastructure
– Business analytics toolset
– Managerial users and methods
– Delivery platform—MIS, DSS, ESS
– User interface
 Data visualization tools
Figure 10.3 Business Intelligence and
Analytics for Decision Support
Business Intelligence and Analytics
Capabilities
• Goal is to deliver accurate real-time information to decision
makers
• Main analytic functionalities of BI systems
– Production reports
– Parameterized reports
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecasts, scenarios, models
Interactive Session: Technology:
Siemens Makes Business Processes
More Visible
• Class discussion
– How did information technology change the game of 1. Identify the
problem in this case study. What management, organization, and
technology factors contributed to the problem?
– Describe the capabilities of process mining software. Was this an
effective solution? Explain your answer.
– How did process mining change decision making at Siemens?
– What management, organization, and technology issues need to
be addressed when implementing process mining systems?
Table 10.4 Examples of Business
Intelligence Predefined Production
Reports
Business Functional Area Production Reports

Sales Forecast sales; sales team performance; cross-selling; sales cycle

times
Service/call center Customer satisfaction; service cost; resolution rates; churn rates

Marketing Campaign effectiveness; loyalty and attrition; market basket analysis

Procurement and support Direct and indirect spending; off-contract purchases; supplier
performance
Supply chain Backlog; fulfillment status; order cycle time; bill of materials analysis

Financials General ledger; accounts receivable and payable; cash flow;

profitability
Human resources Employee productivity; compensation; workforce demographics;
retention
Predictive Analytics
• Uses variety of data, techniques to predict future trends
and behavior patterns
– Statistical analysis
– Data mining
– Historical data
– Assumptions
• Incorporated into numerous BI applications for sales,
marketing, finance, fraud detection, health care
– Credit scoring
– Predicting responses to direct marketing campaigns
Big Data Analytics
• Big data: Massive datasets collected from social media,
online and in-store customer data, and so on
• Help create real-time, personalized shopping experiences
for major online retailers
• Smart cities
– Public records
– Sensors, location data from smartphones
– Ability to evaluate effect of one service change on
system
Operational Intelligence and
Analytics
• Operational intelligence: Business activity monitoring
• Collection and use of data generated by sensors
• Internet of Things
– Creating huge streams of data from web activities,
sensors, and other monitoring devices
• Software for operational intelligence and analytics enable
companies to analyze their big data
Location Analytics and Geographic
Information Systems
• Location analytics
– Ability to gain business insight from the location
(geographic) component of data
 Mobile phones
 Sensors, scanning devices
 Map data
• Geographic information systems (GIS)
– Ties location-related data to maps
– Example: For helping local governments calculate
response times to disasters
Figure 10.4 Business Intelligence
Users
Support for Semistructured
Decisions
• Decision-support systems
– Support for semistructured decisions
• Use mathematical or analytical models
• Allow varied types of analysis
– “What-if” analysis
– Sensitivity analysis
– Backward sensitivity analysis
– Multidimensional analysis / OLAP
 For example: pivot tables
Figure 10.5 Sensitivity Analysis
Figure 10.6 A Pivot Table That Examines
Customer Regional Distribution and
Advertising Source
Decision Support for Senior
Management (1 of 2)
• ESS: decision support for senior management
– Help executives focus on important performance information
• Balanced scorecard method
– Measures outcomes on four dimensions
 Financial
 Business process
 Customer
 Learning and growth
– Key performance indicators (KPIs) measure each dimension
Figure 10.7 The Balanced Scorecard
Framework
Decision Support for Senior
Management (2 of 2)
• Business performance management (BPM)
– Translates firm’s strategies (e.g., differentiation, low-
cost producer, scope of operation) into operational
targets
– KPIs developed to measure progress toward targets
• Data for ESS
– Internal data from enterprise applications
– External data such as financial market databases
– Drill-down capabilities
Interactive Session: Management:
Anthem Benefits from More Business
Intelligence
• Class discussion
– Why did Anthem need better data and analytics tools for
Human Resources? What management, organization, and
technology factors contributed to Anthem’s need for better
HR data and analytics?
– Describe the business intelligence capabilities of the PDC
portal.
– What groups in the company benefited from Anthem’s new
analytics tools? Explain your answer.
– How did Anthem’s new data analytics capabilities change
the Human Resources function at the company?
Group Decision-Support Systems
(GDSS)
• Interactive system to facilitate solution of unstructured
problems by group
• Specialized tools
– Virtual collaboration rooms
– Software to collect, rank, edit participant ideas and
responses
• Promotes collaborative atmosphere, anonymity
• Cisco’s Collaboration Meeting Rooms Hybrid (CMR)
• Skype for Business