Supporting Information-

Centric Decision
Making
Chapter 12
Information Systems
Management in Practice
8th Edition

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Part IV: Systems for Supporting
Knowledge-Based Work
 This part consists of three chapters that
discuss supporting three kinds of work
—decision making, collaboration, and
knowledge work
 Procedure-based versus knowledge-
based information-handling activities
 Part III dealt with procedural-based work
 Part IV focuses on knowledge-based work
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Framework For IS Management

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Chapter 12
 Introduction
 Technologies-supported decision making
 Building timely business intelligence
 Decision support systems
 Data mining
 Executive information systems
 Expert systems
 Agent-based modeling

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Chapter 12 cont’d
 Toward the real-time enterprise
 Enterprise nervous systems
 Straight-through processing
 Real-time CRM
 Communicating objects
 Vigilant information systems
 Requisites for successful real-time management
 Conclusion

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Introduction
 Decision making is a process that involves a
variety of activities, most of which handle
information
 Most computer systems support decision
making by automating decision processes
 A wide variety of computer-based tools and
approaches can be used to solve problems.

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A Problem-Solving Scenario
Case Example: Supporting decision making
1. Use of executive information systems (EIS) to
compare budget to actual sales
2. Discovery of a sale shortfall in one region
3. Analysis of possible cause(s) of the shortfall
 Economic conditions, competitive analysis, data mining,
sales reports
 Sales pattern via marketing DSS
 Brainstorming session via GDSS
4. No discernable singular cause
5. Solution: Multimedia sales campaign

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Technologies-Supported
Decision Making

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Building Timely Business
Intelligence
 Business intelligence (BI) is a broad set of concepts,
methods and technologies to improve context-
sensitive business decisions
 Gather, filter and analyze large quantities of data from
various sources
 Sense-making is central to BI
 Ability to be aware and assess situations that seem
important to the organization
 Awareness: Inductive process (data-driven)

 Assessment: Fitting observed data into a pre-determined

model

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Decision Support Systems
 Computer-based systems that help decision
makers confront ill-structured problems
through direct interaction with data and
analysis models.
 Architecture for DSS
 Dialog-Data Model (DDM)
 Ad hoc information requests
 Specific data query

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Components of a Decision
Support System

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ORE-IDA Foods
Case Example: Institutional DSS
 Frozen food division of H.J. Heinz
 Marketing DSS must support three main tasks in
decision making process:
1. Data retrieval
• “What has happened?”
2. Marketing analysis (70% of DSS function)
• “Why did it happen?”
3. Modeling
• “What will happen if…?”
 Modeling for projection purposes offers greatest
potential value of marketing management

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A Major Services Company
Case Example: ‘Quick Hit’ DSS - short analysis
programs
 Employee stock ownership plan (ESOP)
 Determine possible impact of the ESOP on the company
and answer questions including
 How many company shares needed in 10-30 years?
 Level of growth needed to meet stock requirements?
 IS manager wrote a program to perform calculations
 Program produced impact projections of ESOP over 30-
year period (surprising results)
 DSS program subsequently expanded to other employee
benefit programs

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Data Mining
 Use of computers to uncover unknown
correlations from a large data set
 Classes
 Clusters
 Associations
 Sequential patterns
 Data mining gives people insights into data
 Customer data

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Harrah’s Entertainment
Case Example: Data Mining (Customer)
 Total Rewards Program
 Mined customer data to create 90 demographic
clusters for different direct mail offers
 Calculates the ROI on each customer
 Found that 80% of profits from slot machine and
electronic game machine players rather than ‘high
rollers’
 Within first two years of program, revenue from
repeat customers increased by $100 million

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Executive Information Systems
 EIS an “executive summary” form of DSS
 Used to gauge company performance, address a
critical business need and scan the environment
1. Provides access to summary performance data
2. Uses graphics to display and visualize the data in a
user-friendly fashion
3. Has a minimum of analysis for modeling capability
beyond that for examining summary data

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Xerox Corporation
Case Example: Executive Information Systems
 Objective for EIS at Xerox was to improve
communications and strategic planning
 Quick access to related information at the right time
 Executive meetings
 More efficient and better planning, especially across
divisions
 Explore relationships between plans and activities at
several divisions
 Xerox corporate chief of staff was executive sponsor
of EIS development

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Executive Information Systems
cont’d
 Pitfalls for EIS development
1. Lack of executive support
2. Undefined system objectives
3. Poorly defined information requirements
4. Inadequate support staff
5. Poorly planned evolution (expansion of EIS)

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General Electric
Case Example: Executive Information Systems
 Most senior GE executives have a real-time view of
their portion of GE via “dashboard”
 GE’s goal is to gain visibility into all its operations in
real time and give managers a way to monitor
operations quickly and easily
 EIS based on complex enterprise software that interlinks
existing systems
 GE’s actions are also moving its partners and
business ecosystem closer to real-time operations

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Expert Systems
 Expert systems are a real-world use of
artificial intelligence (AI)
 AI mimics human cognition and communication to
analyze a situation or solve a problem
 e.g. MIT’s Commonsense Computing project
 Expert system components
 User interface
 Inference engine
 Reasoning methods
 Knowledge base

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Expert Systems cont’d
 Knowledge representation
 Cases
 Knowledge from hundreds or thousands of cases to
draw inferences from
 Neural networks
 Knowledge stored as nodes in a network (adaptive
learning)
 Rules
 Knowledge obtained from human experts drawing on
own expertise, experience, common sense,
regulations, laws and regulations

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Neural Networks

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American Express
Case Example: Expert System
 Authorizer’s Assistant one of most successful
commercial uses of expert system
 Approves all AmEx credit card transactions and assesses
for fraud based on over 2600 rules
 Credit worth of card holders
 Bill payment
 Purchases within normal spending pattern
 Rules derived from authorizers with various levels of
expertise
 Customer sensitive (to avoid customer embarrassment)
 Can be changed to meet changing business demands

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Agent-Based Modeling
 A simulation technology for studying emergent
behavior (from large number of individuals)
 Simulation contains “software agents” making decisions to
understand behavior of markets and other complex
systems
 Nasdaq Example
 Performed simulation to investigate effect of switch in tick
size from fixed eighths (.125) to decimals
 Found increase in buy-ask price spread instead of initially
predicted decrease because of the reduction in market’s
ability to do price discovery

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Toward Real-Time Enterprise
 This section builds on the five different types
of decision support technologies and
demonstrates how they can be mixed and
matched to form the foundation for the real-
time enterprise

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Toward the Real-Time
Enterprise
 IT, especially the Internet, is giving companies a
way to know how they are doing “at the moment”
and disseminate the closer-to-real-time information
about events
 Occurring on a whole host of fronts including
 Enterprise nervous systems
 Coordinate company operations
 Straight-through processing
 Reduce distortion in supply chains
 Communicating objects
 Gain real-time data about the physical world

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Enterprise Nervous Systems
 A kind of network that connects people, applications
and devices (buzz phrase?)
 Message-based
 Messages are efficient and effective for dispersing
information
 Event driven
 Events are recorded and made available

 Publish and subscribe approach

 Events are published to electronic address, which can be
subscribed to as an information feed
 Common data formats

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Delta Airlines
Case Example: Enterprise Nervous Systems
 Delta integrated existing disparate systems to
build an enterprise nervous system to
manage gate operations
 Information about each flight is managed in real-
time by the system
 System uses a publish-and-subscribe approach
using messaging middleware
 Delta is now expanding system out to their
partners who serve their passengers

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Straight-Through Processing
 Real-time information
 Zero latency
 Quick reaction to new information
 Straight-through processing means
transaction data are entered just once in a
process, especially a supply chain
 Goal is to reduce bullwhip effect from process
lags and latency

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Real-Time CRM
 Another view of real-time response might
occur between a company and a potential
customer (touch points)
 Customer call
 Web site

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A Real-Time Interaction On a
Web Site
 An illustration of how real-time CRM works
 A potential guest visits the Web site of a hotel
chain
 The real-time CRM system initiates requests to create
profile of customer
 Past interactions with the customer
 Past billing information
 Past purchasing history
 Using this information, it makes real-time offers to
the visitor, and visitor’s responses are recorded
and taken into account for Web site visits

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A Real-Time Interaction On a
Web Site cont’d

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Communicating Objects
 These are “smart” sensors and tags that
provide information about the physical world
via real-time data
 radio frequency identification device (RFID)
 pet micro-chips (satellite GPS), product tags
 A tag can be passive (read-only) or active
(send out signals)
 Carries far more information than bar codes
 Item code, price and history

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Communicating Objects cont’d
 Example: Real-time electronic road pricing
(ERP) system in Singapore to control traffic
congestion
 Cars have smart card devices attached to their
windscreens
 Smart cards are debited (wirelessly) when cars
pass through gantries in certain areas of the city
 Variable pricing dependent on when and where
you drive

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Vigilant Information Systems
 The premise of a real-time enterprise is not only
having the ability to capture data in real time, but
also acting on that data quickly
 US Air Force pilot’s OODA framework
 Never lost a dog-fight even to superior aircraft!
 Observe where his challenger’s plane is

 Orient himself and size up his own vulnerabilities and

opportunities
 Decide which maneuver to take

 Act to perform before the challenger through the same four

steps

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OODA Loop

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Western Digital
Case Example: Vigilant Information Systems
 PC disk manufacturer used OODA type of
thinking to move itself closer to operating in
real-time with a sense-and-respond culture
for competitive advantage
 Built “alertly watchful” vigilant information
system (VIS)
 Complex and builds on the firm’s legacy systems
 Essentially four layers

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Western Digital’s Vigilant
Information Systems

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Western Digital cont’d
 Changed business processes to complement VIS to give
Western Digital a way to operate inside competitors’
OODA loops
 Established new company policies
 Translate strategic goals to time-based objectives
 Capture real-time key performance indicators (KPIs)
 Collaborate decision making and coordinate actions
 Three levels of OODA loops to maximize VIS “alerts”
 Shop-floor, Factory, Corporate

 Benefits of VIS
 Quickened all OODA loops and helped link decisions across
them, which ultimately led to significant increase in firm
performance

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Requisites for Successful
Real-Time Management
 Real-time data and real-time performance
metrics
 Focus on high value-added data
 Identify key activities and performance indicators that
are needed in real time
 Technology readiness
 Substantial computing resources
 Integrated and seamless system that is capable of
selecting, filtering and compiling data to send them in
real time to designated users on demand.

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Conclusion
 Use of IT to support decision making covers
a variety of functions including
 Alert, recommendation or decision making itself
 Computer-supported decision making needs
to be monitored
 IS managers must comprehend the potentials
and limitations of these technologies

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