Chapter Six

Intro to Information Technology Wednesday, Nov 20th

Assignment #3 is due today Assignment #4 is due on Dec 4th Final Exam is on Dec 11 from 7 – 10

pm

Chapter Six: E-Business Decision Support

E-Business Decision Support Using info systems to support business

decision making is one of the primary reasons for business use of information technology

The type of information required by decision makers in a company is directly related to the level of management decision making and the amount of structure in the decision situations that they face

E-Business Decision Support Levels of management decision making

still exist, but have changed as organizational structures have changed

The levels of managerial decision making that must be supported by information technology in a successful organization are:

Strategic Management Tactical Management Operational Management

Strategic Management A board of directors and an executive

committee of the CEO and top executives develop overall organizational goals, strategies, policies, and objectives as part of a strategic planning process

They also monitor the strategic performance of the organization and its overall direction in political, economic, and competitive business environment

Tactical Management Business professionals in self-directed

teams develop short and medium range plans, schedules, and budgets and specify the policies, procedures, and business objectives for their subunits of the company

They also allocate resources and monitor the performance of their subunits including depts, divisions, process teams, project teams, and other workgroups

Operational Management The members of self-directed teams or

operating managers develop short range plans such as weekly production schedules

They direct the use of resources and the performance of tasks according to procedures and within budgets and schedules they establish for teams and other workgroups

Decision Structure Decisions at operational

management level tend to be more structured

Decisions at tactical management level more semi-structured

Decisions at strategic management level tend to be unstructured (not possible to specify in advance most of the decision procedures to follow)

Decision Structure Info systems must be designed to

produce a variety of information products to meet the changing needs of decision makers throughout an organization

I.e. unscheduled reports for unstructured decisions vs pre-specified internal reports for more structured decisions

Management Info Systems Produces information products that

support many of the day-to-day decision-making needs of managers and business professionals

Decision makers specify in advance which information products will fulfill their needs

They have a good idea about what info they need to manage performance

They request info at their workstations

Management Info Systems Four Major Reporting Alternatives

Periodic Scheduled Reports Pre-specified format to provide info on a

regular basis. I.e. daily sales reports Exception Reports

Reports are only produced when exception conditions occur. I.e. the names of customers who have exceeded their credit limit

Reduces information overload

Management Info Systems Four Major Reporting Alternatives

continued… Demand Reports and Responses

Information is available whenever a manager requests it

Get customized reports instead of waiting for periodic reports

Push Reporting Info is pushed to the managers

networked workstation Selectively broadcast reports

Online Analytical Processing OLAP enables managers and analysts

to interactively examine and manipulate large amounts of detailed and consolidated data from many perspectives to discover patterns, trends, and exception conditions

An OLAP session takes place in real-time with rapid responses to queries

Online Analytical Processing Several basic analytical operations

Consolidation Aggregation of data Can involve simple rollups or complex

groupings of inter-related data Drill Down

Display detail data that comprises the consolidated data

Online Analytical Processing Several basic analytical operations

continued… Slicing and Dicing

Ability to look at database from different viewpoints

Ex. Show sales of all products within one region

Ex. Show sales of one product in all regions

Decision Support Systems Decision support systems are

computer based systems that provide interactive information support to managers and business professionals during the decision making process

They are quick response systems that are initiated and controlled by decision makers

Decision Support Systems They use the following to support the

making of semi-structured and unstructured business decisions Analytical models Specialized databases Decision maker’s insights and

judgements An interactive computer-based

modelling process

Decision Support Systems DSS Model bases

A software component that consists of models used in computational and analytical routines that mathematically express relationships among variables

Ex. Simple accounting relationship such as Revenue – Expenses = Profit

DSS software can come with built-in models as well as ability to create your own

Decision Support Systems Geographic Info Systems

GIS are used to display maps and other graphic info that support decisions affecting the geographic distribution of people and other resources

Data visualization Represents complex data using interactive

3-D graphical forms such as charts, graphs and maps

Helps users discover patterns, links, and anomalies in business or scientific data

Decision Support Systems Using Decision Support Systems

Interactive modeling process Users are exploring possible

alternatives They do not have to specify their

information needs in advance They use the DSS to find the

information that they need

Decision Support Systems Four types of analytical modeling

What-If Analysis User makes changes to variables or

relationships and observes the resulting changes to other variables

This type of analysis would be repeated until the manager was satisfied with with what the results revealed about the effects of the possible decisions


Sensitivity Analysis User makes changes to value of one

variable repeatedly observing the results This is used when decision makers are

uncertain about the assumptions made is estimating values of certain key variables


Goal-Seeking Analysis A target value is set for a variable and

other variables are changed repeatedly until the goal is met

This would help answer the question “How can we achieve 2 million dollars in revenue after taxes?”


Optimization Analysis Goal is to find optimum value for one or

more target variables given certain constraints

One or more of the variables are changed repeatedly until the best values are reached

Constraints would be something like limited financing

Decision Support Systems Data Mining for Decision Support

Data mining attempts to discover patterns, trends and correlations hidden in the data to give a company a strategic advantage

Highlight buying patterns Reveal customer tendencies Cut redundant costs Uncover unseen profitable relationships and activities

Data mining software can perform regression, decision tree, neural network, cluster detection, or market basket analysis for a business

Executive Information Systems EIS are info systems that combine many

of the features of management info systems and decision support systems

First goal was to provide top execs with immediate and easy access to information about a firm’s critical success factors

However, now all levels of management make use of EIS

Executive Information Systems Info is presented in forms tailored to the

preferences of the execs using the system Graphical user interfaces are important,

as well as the ability to drill-down quickly to lower levels of information that may be important

A business user can quickly discover the direction key factors are heading and the extent to which they are deviating from desired results

Enterprise Information Portals EIP are ways companies are providing web-

enabled information, knowledge, and decision support to their executives, managers, employees, suppliers, customers, and other business stakeholders

Can give a user secure access to DSS, data mining, and OLAP tools

Can also be called Enterprise Knowledge Portals

Artificial Intelligence Three major domains of AI

Cognitive Science Expert systems Learning Systems Fuzzy Logic Genetic Algorithms Neural Networks Intelligent Agents


Robotics Visual Perception Tactility Dexterity Locomotion Navigation


Natural Interface Natural languages Speech recognition Multisensory interfaces Virtual Reality

Neural Networks Computing systems modeled after the

brain’s mesh-like network of interconnected processing elements called neurons

Processors operate in parallel and interact with each other

This enables the network to learn from the data it processes

It becomes able to recognize patterns and relationships in the data, and the more examples the better it learns

Neural Networks The neural network will change the

strengths of the interconnections between its processing elements in response to changing patterns in the data

Ex: Can be trained to learn which credit characteristics result in good or bad loans – eventually after much training it could make credit decisions on its own.

Fuzzy Logic Systems A method of reasoning that resembles

human reasoning that allows for approximate data and inferences, and incomplete or ambiguous data

Terminology such as very high, increasing, somewhat decreased, reasonable, and acceptable

Allows queries to be stated more naturally and improves extraction of data

Genetic Algorithms Uses Darwinian, randomizing, and

other mathematical functions to simulate an evolutionary process that can yield increasingly better solutions to a problem

Used when there are thousands of solutions possible and must be evaluated to find the optimal solution

Virtual Reality VR allows you to interact with computer-

simulated objects, entities, and environments as if they actually exist

CAD - computer-aided design Allows engineers to design and test 3-D

models of products Virtual surgery, virtual databases, virtual

cities, etc Limitations are cost of equipment and

performance

Intelligent Agents Helps users accomplish many kinds of

tasks in E-business and E-commerce Uses its built in and learned knowledge

base about a person or a process to make decisions and accomplish tasks in a way that fulfills the intentions of a user

Ex. Wizards in Microsoft software, and Office Assistant in Microsoft Office

Expert Systems An expert system is a knowledge based

information system that uses its knowledge about a specific, complex application area to act as an expert consultant to end users

Provide answers to questions in a specific problem area by making human-like inferences about knowledge stored

Must also be able to explain reasoning process and conclusions to users

Expert Systems Components

Knowledge Base Facts about a specific area Heuristics (rules of thumb) that explain

the reasoning procedures of an expert on the subject

Software Resources Inference engine and other programs for

refining knowledge and communicating with users

Expert Systems Developing an Expert System

Software packages called an expert system shell includes software necessary to interact with the knowledge base but not the knowledge base itself

Users can develop their own knowledge bases and not have to worry about writing the software to interact with it.

Expert Systems Benefits

Can outperform a single human expert in many problem situations

Help preserve and reproduce the knowledge of experts

Effective use of expert systems can allow a firm to significantly improve the efficiency of its business processes or produce new knowledge based products and services

Expert Systems Limitations

Only excel in very specific areas of knowledge

Costly to develop and maintain Cannot help when making subjective

managerial decisions Expert systems cannot maintain

themselves – must be taught new knowledge