CHAPTER TWO

DECISIONS AND
PROCESSES

VALUE DRIVEN
BUSINESS

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CHAPTER TWO OVERVIEW

 SECTION 2.1 – Decision Support Systems
• Making Organizational Business Decisions
• Measuring Organizational Business Decisions
• Using MIS to Make Business Decisions
• Using AI to Make Business Decisions

 SECTION 2.2 – Business Processes

• Managing Business Processes
• Using MIS to Improve Business Processes
SECTION 2.1

DECISION
SUPPORT
SYSTEMS

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LEARNING OUTCOMES
1. Explain the importance of decision making for managers at
each of the three primary organization levels along with the
associated decision characteristics

2. Define critical success factors (CSFs) and key performance

indicators (KPIs), and explain how managers use them to
measure the success of MIS projects
3. Classify the different operational, managerial, and strategic
support systems, and explain how managers can use them
to make decisions & gain competitive advantage
4. Describe artificial intelligence and identify its five main
types
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MAKING ORGANIZATIONAL
BUSINESS DECISIONS
 Managerial decision-making challenges

• Analyze large amounts of information

• Apply sophisticated analysis techniques
• Make decisions quickly
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The Decision-Making Process

 The six-step decision-making process
1. Problem identification
2. Data collection
3. Solution generation
4. Solution test
5. Solution selection
6. Solution implementation
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The Decision-Making Process

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Decision-Making Essentials

Decision-making
and problem-
solving occur at
each level in an
organization
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Decision-Making Essentials
 Operational decision
making - Employees
develop, control, and
maintain core business
activities required to run the
day-to-day operations
OPERATIONAL
 Structured decisions -
Situations where established
processes offer potential
solutions
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Decision-Making Essentials
 Managerial decision making –
Employees evaluate company
operations to identify, adapt to,
and leverage change
MANAGERIAL
 Semistructured decisions –
Occur in situations in which a few
established processes help to
evaluate potential solutions, but
not enough to lead to a definite
recommended decision
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Decision-Making Essentials

 Strategic decision making –

Managers develop overall
strategies, goals, and objectives
STRATEGIC
 Unstructured decisions –
Occurs in situations in which no
procedures or rules exist to
guide decision makers toward
the correct choice
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MEASURING ORGANIZATIONAL
BUSINESS DECISIONS
 Project – A temporary activity a company
undertakes to create a unique product, service,
or result
 Metrics – Measurements that evaluate results
to determine whether a project is meeting its
goals
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MEASURING ORGANIZATIONAL
BUSINESS DECISIONS
 Critical success factors (CSFs) – The crucial
steps companies make to perform to achieve their
goals and objectives and implement strategies
• Create high-quality products
• Retain competitive advantages
• Reduce product costs
• Increase customer satisfaction
• Hire and retain the best professionals
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MEASURING ORGANIZATIONAL
BUSINESS DECISIONS
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MEASURING ORGANIZATIONAL
BUSINESS DECISIONS
 Key performance indicators (KPIs) – The
quantifiable metrics a company uses to evaluate
progress toward critical success factors
• Turnover rates of employees
• Number of product returns
• Number of new customers
• Average customer spending
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MEASURING ORGANIZATIONAL
BUSINESS DECISIONS
 External KPI
• Market share – The portion of the
market that a firm captures (external)

 Internal KPI
• Return on investment (ROI) –
Indicates the earning power of a project
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Efficiency and Effectiveness

Metrics
 Efficiency MIS metrics – Measure the
performance of MIS itself, such as
throughput, transaction speed, and
system availability
 Effectiveness MIS metrics –
Measures the impact MIS has on
business processes and activities,
including customer satisfaction and
customer conversation rates
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The Interrelationship Between

Efficiency and Effectiveness Metrics

 Ideal operation occurs in the upper right corner

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The Interrelationship Between

Efficiency and Effectiveness Metrics
 Benchmark – Baseline values the
system seeks to attain
 Benchmarking – A process of
continuously measuring system
results, comparing those results to
optimal system performance
(benchmark values), and identifying
steps and procedures to improve
system performance
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USING MIS TO MAKE BUSINESS

DECISIONS
 Model – A simplified representation or
abstraction of reality
 Models help managers to
 Calculate risks
 Understand uncertainty
 Change variables
 Manipulate time to make
decisions
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USING MIS TO MAKE BUSINESS

DECISIONS

Types of Decision Making MIS Systems

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Operational Support Systems

 Transaction processing system (TPS) –
Basic business system that serves the
operational level and assists in making
structured decisions
 Online transaction processing (OLTP) -
Capturing of transaction and event
information using technology to process,
store, and update
 Source document – The original
transaction record
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Operational Support Systems

Systems Thinking View of a TPS

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Managerial Support Systems

 Online analytical processing
(OLAP) – Manipulation of
information to create business
intelligence in support of
strategic decision making
 Decision support system
(DSS) – Models information to
support managers and business
professionals during the
decision-making process
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Managerial Support Systems

 Four quantitative models used by DSSs
include
1. What-if analysis
2. Sensitivity analysis
3. Goal-seeking analysis
4. Optimization analysis
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Managerial Support Systems

Systems Thinking View of a DSS

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Managerial Support Systems

Interaction Between a TPS and DSS

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Strategic Support Systems

Information Levels Throughout An Organization

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Strategic Support Systems

 Executive information system (EIS) – A

specialized DSS that supports senior level
executives within the organization
• Granularity
• Visualization
• Digital dashboard
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Strategic Support Systems

Interaction Between a TPS and EIS

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Strategic Support Systems

 Most EISs offering the following

capabilities
• Consolidation
• Drill-down
• Slice-and-dice
• Pivot
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USING AI TO MAKE BUSINESS

DECISIONS

 Artificial intelligence (AI) – Simulates human

intelligence such as the ability to reason and
learn
 Intelligent system – Various commercial
applications of artificial intelligence
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USING AI TO MAKE BUSINESS

DECISIONS
 Five most common categories of AI
1. Expert system – Computerized advisory
programs that imitate the reasoning
processes of experts in solving difficult
problems
2. Neural Network – Attempts to emulate the
way the human brain works
– Fuzzy logic – A mathematical method of
handling imprecise or subjective
information
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USING AI TO MAKE BUSINESS

DECISIONS
3. Genetic algorithm – An artificial
intelligent system that mimics the
evolutionary, survival-of-the-
fittest process to generate
increasingly better solutions to a
problem
- Shopping bot – Software that will
search several retailer websites and
provide a comparison of each
retailer’s offerings including price
and availability
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USING AI TO MAKE BUSINESS

DECISIONS
4. Intelligent agent – Special-purpose knowledge-
based information system that accomplishes
specific tasks on behalf of its users
5. Virtual reality - A computer-simulated
environment that can be a simulation of the real
world or an imaginary world
SECTION 2.2

BUSINESS
PROCESSES

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LEARNING OUTCOMES
5. Explain the value of business processes for a
company and differentiate between customer-
facing and business-facing processes
6. Demonstrate the value of business process
modeling and compare As-Is and To-Be
models
7. Differentiate among automation, streamlining,
and reengineering
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MANAGING BUSINESS PROCESSES

 Businesses
gain a
competitive
edge when they
minimize costs
and streamline
business
processes
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MANAGING BUSINESS PROCESSES

 Customer facing  Business facing

process - Results in a process - Invisible to the
product or service that is external customer but
received by an essential to the effective
organization’s external management of the
customer business
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MANAGING BUSINESS PROCESSES

The Order-to-Delivery Process

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BUSINESS PROCESS MODELING

 Business process modeling (or mapping) - The

activity of creating a detailed flow chart or process
map of a work process showing its inputs, tasks,
and activities, in a structured sequence
 Business process model - A graphic description
of a process, showing the sequence of process
tasks, which is developed for a specific
• As-Is process model
• To-Be process model
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BUSINESS PROCESS MODELING

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BUSINESS PROCESS MODELING

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BUSINESS PROCESS MODELING

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BUSINESS PROCESS MODELING

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BUSINESS PROCESS MODELING

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BUSINESS PROCESS MODELING

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USING MIS TO IMPROVE BUSINESS

PROCESSES

 Workflow – Includes the tasks, activities, and

responsibilities required to execute each step in
a business process
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USING MIS TO IMPROVE BUSINESS

PROCESSES
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USING MIS TO IMPROVE BUSINESS

PROCESSES
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USING MIS TO IMPROVE BUSINESS

PROCESSES
 Types of change
an organization
can achieve, along
with the
magnitudes of
change and the
potential business
benefit
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OPERATIONAL BUSINESS PROCESSES

AUTOMATION
 Customers are demanding better
products and services
 Business process improvement –
Attempts to understand and
measure the current process and
make performance improvements
accordingly
 Automation – The process of
computerizing manual tasks
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OPERATIONAL BUSINESS PROCESSES

AUTOMATION

Steps in Business Process Improvement

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MANAGERIAL BUSINESS PROCESSES

STREAMLINING
 Streamlining – Improves business
process efficiencies by simplifying or
eliminating unnecessary steps
 Bottleneck – Occur when resources
reach full capacity and cannot handle any
additional demands
 Redundancy – Occurs when a task or
activity is unnecessarily repeated
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STRATEGIC BUSINESS PROCESSES

REENGINEERING

 Business process reengineering (BPR) -

Analysis and redesign of workflow within and
between enterprises
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STRATEGIC BUSINESS PROCESSES

REENGINEERING

 A company can improve the way it travels the road

by moving from foot to horse and then horse to car
 BPR looks at taking a different path, such as an
airplane which ignore the road completely
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STRATEGIC BUSINESS PROCESSES

REENGINEERING

Progressive Insurance Mobile Claims Process

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LEARNING OUTCOME REVIEW

 Now that you have finished the chapter please
review the learning outcomes in your text