© 2009 pearson education, inc. publishing as prentice hall supporting information- centric decision...

© 2009 Pearson Education, Inc. Publishing as Prentice Hall

Supporting Information-Centric Decision

Making

Chapter 12Information 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 making1. Use of executive information systems (EIS) to

compare budget to actual sales2. Discovery of a sale shortfall in one region3. 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 cause5. 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 environment1. 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 development1. 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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Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

© 2009 pearson education, inc. publishing as prentice hall supporting information- centric decision...

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