Module 01

Easy Explanation of the Decision-Making Process

For a long time, people thought that making decisions was an art that could only be learned through experience
and intuition. Managers used their creativity, judgment, and gut feelings to solve problems. However, research
now shows that companies do better when their leaders focus on careful analysis and planning rather than just
communication skills.

Today, businesses use data and technology to make better decisions. Companies collect and analyze huge
amounts of information to understand what is happening, predict the future, and decide on the best course of
action. This shift has been made possible by the rapid growth of computers and the internet, allowing managers
to make smarter decisions faster.

How Technology Helps with Decision Making

Better Communication and Teamwork

1. People in different locations can work together easily using online tools and mobile devices.
2. The COVID-19 pandemic increased remote work, making digital collaboration even more important.
3. Supply chain partners (such as manufacturers and suppliers) can share information quickly to adjust to market
demands.

Improved Data Storage and Management

1. Companies deal with huge amounts of data, stored in different formats (text, images, videos, etc.).
2. Modern systems allow fast, secure, and efficient storage and transfer of data.

Handling Big Data

1. Large companies like Walmart store massive amounts of data.

2. Special technologies like cloud computing, Hadoop, and Spark help manage and analyze this data.

Advanced Data Analysis

1. More options can be explored before making a decision.

2. Forecasting future trends becomes more accurate.
3. Risk analysis can be done faster and at a lower cost.

Helping the Human Brain Process Informatio

1. The human mind has limits when handling large amounts of information.
2. Computers help by quickly retrieving and organizing relevant data for decision-making.

Knowledge Management

1. Companies collect valuable information from employees, customers, and business processes.
2. Technologies like text analytics help businesses make sense of this knowledge.

Access Anytime, Anywhere

1. Managers can make decisions on the go using mobile devices.

2. The demand for fast decision-making has increased with technology advancements.

Innovation and Artificial Intelligence (AI)

 1. AI is now used in many decision-making steps.
2. AI improves analytics and helps businesses make smarter, data-driven choices.

Overall, modern decision-making relies heavily on data, analytics, and AI to improve efficiency and accuracy.

Simons decision making process

When making decisions, we go through four main phases: Intelligence, Design, Choice, and Implementation.

1. Intelligence Phase: Identifying the Problem or Opportunity

This phase is about recognizing issues within an organization, such as poor inventory management, hiring
difficulties, or a weak online presence. Problems arise when reality doesn’t match expectations.

 The first step is to identify whether a problem exists, understand its symptoms, and measure its impact.
 Sometimes, what seems like a problem (e.g., high costs) is just a symptom of a deeper issue (e.g., poor inventory control).
 It’s important to analyze productivity data to spot problems early.

Problem Classification

Problems can be categorized based on how structured they are:

 Structured problems have clear steps to solve them.

 Unstructured problems are more complex and require creative solutions.

Problem Decomposition

Breaking a big problem into smaller subproblems can make it easier to solve. Some unstructured problems
may have structured parts that can be addressed separately.

Problem Ownership

A problem can only be solved if someone takes responsibility for it.

 If no one owns a problem, it may go unnoticed or ignored.

 Some problems, like high-interest rates, are outside a company’s control. Instead of trying to change them, businesses
must figure out how to adapt to them.

At the end of this phase, a clear problem statement is created to guide the next steps.

2. Design Phase: Finding Possible Solutions

In this phase, different solutions are explored and tested for feasibility.

Models in Decision Making

A model is a simplified version of reality that helps analyze problems without testing them in real life.

 Models help find relationships between different factors.

 They simplify reality to reduce costs and speed up decision-making.
 However, oversimplification can lead to inaccurate results.
3. Choice Phase: Selecting the Best Solution

This phase involves choosing the best solution from the available options.

 The best alternative is selected based on various factors, including cost, feasibility, and impact.
 Sensitivity analysis checks how small changes in conditions affect the solution.
 What-if analysis helps explore possible outcomes of big changes.
 Goal seeking helps find the best decision by adjusting different variables.

Since decision-making is a dynamic process, we might go back to the design phase to modify or refine
solutions before making a final choice.

4. Implementation Phase: Putting the Solution into Action

Once a decision is made, it needs to be implemented effectively.

 Change management is crucial because people often resist new ideas.

 Success depends on support from top management and proper training.
 Many projects fail because of poor planning, so project management skills are essential

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Here’s a simpler version of the text:

Types of Analytics

There are three main types of analytics: Descriptive, Predictive, and Prescriptive.

1. Descriptive Analytics (Reporting Analytics)

Descriptive analytics helps us understand what is happening in an organization. It looks at past data to find
patterns and trends.

 It involves collecting and organizing data from different sources so it can be analyzed.
 Companies use reports, queries, alerts, and trend analysis to gain insights from the data.
 Data visualization (such as charts and graphs) plays a key role in making the data easier to understand.

2. Predictive Analytics

Predictive analytics helps us forecast the future based on past data. It uses statistical methods and data
mining techniques to make predictions.

Some examples of predictive analytics include:

 Predicting if a customer will switch to a competitor.

  Identifying what a customer is likely to buy next.
 Assessing if a customer is a credit risk.

Techniques used in predictive analytics include:

 Classification algorithms like decision trees and neural networks (e.g., predicting a movie’s box office performance).
 Clustering algorithms to group customers for targeted marketing.
 Association mining to find relationships between purchases (e.g., Amazon recommending related products).

3. Prescriptive Analytics

Prescriptive analytics helps determine the best course of action based on both descriptive and predictive
insights. It not only predicts what will happen but also suggests the best decisions to optimize outcomes.

 It is used to improve business performance and make better decisions.

 This approach is often linked to operations research (OR) and management science.
 It provides specific recommendations for actions based on data analysis.

This version simplifies the concepts while keeping the important details intact. Let me know if you need further
clarification!

Evolution of Decision Support to Analytics/Data Science

 1970s: Businesses used basic reports to help managers make decisions. These reports were structured and focused on past
events.
 1980s: Companies started using Enterprise Resource Planning (ERP) systems and databases to store and manage business
data more efficiently.
 1990s: Business Intelligence (BI) tools like dashboards and scorecards were introduced. Data Warehouses (DW) were
developed to store large amounts of business data for better decision-making.
 2000s: The focus shifted to data mining, where companies analyzed stored data to discover useful insights. Real-time data
warehousing became popular, allowing businesses to get fresher and more accurate data.
 2010s: Big Data and AI started playing a major role. Social media, IoT, and online data collection became important sources
of business insights.
 2020s: Automation, AI, and smart technologies (like chatbots, AI assistants, and machine learning) are now being used to
improve decision-making. Businesses rely on real-time analytics and cloud-based AI tools.

Types of Analytics

1. Descriptive Analytics – Answers "What happened?" by summarizing past data using reports, charts, and dashboards.
2. Predictive Analytics – Answers "What is likely to happen?" using techniques like machine learning and data mining.
Examples include predicting customer behavior or detecting fraud.
3. Prescriptive Analytics – Answers "What should we do?" by providing recommendations and optimizing decisions, often
using AI and mathematical models.