Enhancing Management Decision Making for the Digital Firm

Essentials of Management Information Systems, 6eEssentials of Management Information Systems, 6eChapter 12 Enhancing Management Decision Making for the Digital FirmChapter 12 Enhancing Management Decision Making for the Digital Firm

12.1 © 2005 by Prentice Hall

Enhancing Management Decision Making for the Digital Firm

Chapter 12



Objectives

1. How can information systems help individual managers make better decisions when the problems are nonroutine and constantly changing?

2. How can information systems help people working in a group make decisions more efficiently?



Objectives

3. Are there any special systems that can facilitate decision making among senior managers? Exactly what can these systems do to help high-level management?

4. What value can systems to support management decision making provide for the organization as a whole?



Management Challenges

1. Building information systems that can actually fulfill executive information requirements

2. Create meaningful reporting and management decision-making processes



Decision-Support Systems (DSS)

• Computer system at the management level of an organization

• Combines data, analytical tools, and models

• Supports semistructured and unstructured decision making




MIS

• Provides reports based on routine flow of data

• Assists in general control of the organization

MIS and DSS




DSS

• Emphasizes change, flexibility, rapid response, models, assumptions, ad-hoc queries, and display graphics

MIS and DSS




Model-Driven DSS

• Primarily stand-alone

• Uses model to perform “what-if” and other kinds of analysis

Types of Decision-Support Systems




• Data-driven DSS: Supports decision making by allowing users to extract and analyze useful information previously buried in large databases

• Datamining: Finds hidden patterns and relationships in large databases to infer rules from them and predict future behavior





Data Drive Customer Care at Intrawest

• How does this customer care DSS help Intrawest make decisions?

• How has it provided value for the firm?

Window on Organizations




Cargo revenue optimization of Continental Airlines

Figure 12-1




• Associations: Occurrences linked to a single event

• Sequences: Events linked over time





• Classification: Recognizing patterns that describe the group to which an item belongs

• Clustering: Similar to classification when no groups have yet been defined. Discovers different groupings within data





Overview of a decision-support system (DSS)

Figure 12-2




• DSS Database: Collection of current or historical data from a number of applications or groups. Can be a small PC database or a massive data warehouse

Components of DSS




• DSS Software System: Collection of software tools used for data analysis, such as OLAP tools, datamining tools, or a collections of mathematical and analytical models

Components of DSS




• Model: Abstract representation illustrating components or relationships of a phenomenon

• Sensitivity Analysis: Models that ask “what-if” questions repeatedly to determine the impact of changes in one or more factors on the outcomes

Components of DSS




Sensitivity analysis

Figure 12-3




Examples of Decision-Support Systems

• General Accident Insurance: Customer buying patterns and fraud detection

• Bank of America: Customer profiles

• Frito-Lay, Inc.: Price, advertising, and promotion selection

DSS Applications and the Digital Firm





• Southern Railway: Train dispatching and routing

• Texas Oil and Gas Corporation: Evaluation of potential drilling sites

• The Gap: Inventory stocking and merchandising






• United Airlines: Flight scheduling, passenger demand forecasting

• U.S. Department of Defense: Defense contract analysis





• By analyzing several years of sales data for similar items, the software estimates a “seasonal demand curve” for each item and predicts how many units would sell each week at various prices.

• The software uses sales history to predict how sensitive customer demand will be to price changes

DSS for Pricing Decisions




• Can help firms model inventory stocking levels, production schedules, or transportation plans

• Can provide firms with information on key performance indicators such as lead time, cycle time, inventory turns, or total supply chain costs

DSS for Supply Chain Management




A DSS Makes Subaru More Parts-Savvy

• How does the Servigistics system provide value for Subaru of New England?

• How did it change the way the company ran its business?

Window on Technology




DSS for customer analysis and segmentation

Figure 12-4




Predictive Analysis

• Use of datamining techniques, historical data, and assumptions about future conditions to predict outcomes of events

DSS for Customer Relationship Management




• Data Visualization: Technology for helping users see patterns and relationships in large amounts of data by presenting the data in graphical form

• Geographic Information System (GIS): System with software that can analyze and display data using digitized maps to enhance planning and decision making

Data Visualization and Geographic Information Systems (GIS)




Customer Decision-Support System (CDSS)

• System to support the decision-making process of an existing or potential customer

Web-Based Customer Decision-Support Systems



Group Decision-Support Systems (GDSS)

• Group Decision-Support System (GDSS): An interactive computer-based system to facilitate the solution to unstructured problems by a set of decision makers working together as a group

What is a GDSS?




• Hardware: Conference facility, electronic hardware

• Software tools: Tools for organizing ideas, gathering information, and ranking and seeking priorities

• People: Participants, trained facilitator, staff supporting hardware and software

Components of GDSS




• Electronic questionnaires

• Electronic brainstorming tools

• Idea organizers

• Questionnaire tools

Components of GDSS




• Tools for voting or setting priorities

• Stakeholder identification and analysis tools

• Policy formation tools

• Group dictionaries

Components of GDSS




• Each attendee has a workstation

• Workstations are networked and connected to the facilitator’s console

• Data the attendees forward to the group are collected and saved on a file server

• Facilitator projects computer images onto the projection screen

Overview of a GDSS Meeting




Group system tools

Figure 12-5




• Number of attendees can increase while productivity increases

• More collaborative atmosphere

• Software tools follow structured methods for organizing and evaluating ideas and preserving the results of meetings

How GDSS Can Enhance Group Decision Making




• Increase the number of ideas generated

• Can lead to more participative and democratic decision making





Organizational Memory

• Store learning from an organization’s history that can be used for decision making and other purposes




Executive Support in the Enterprise

• Focus on the information needs of senior management

• Combine data from internal and external sources

• Create a generalized computing and communications environment that can be focused and applied to a changing array of problems

Executive Support Systems (ESS)




• Monitor organizational performance

• Track activities of competitors

• Spot problems

• Identify opportunities

• Forecast trends

Executive Support Systems (ESS)




• Bring together data from the entire organization

• Allow managers to select, access, and tailor data

• Enable executive and any subordinates to look at the same data in the same way

The Role of Executive Support Systems in the Organization




Drill Down

• The ability to move from summary data to lower and lower levels of detail





Developing ESS

• Ease of use

• Facility for environmental scanning

• External and internal sources of information to be used for environmental scanning





• Analyze, compare, and highlight trends

• Provide greater clarity and insight into data

• Speed up decision making

Benefits of Executive Support Systems




• Improve management performance

• Increase management’s span of control

• Better monitoring of activities

Benefits of Executive Support Systems




ESS for Competitive Intelligence

• Identify changing market conditions

• Formulate responses

• Track implementation efforts

• Learn from feedback

Executive Support Systems and the Digital Firm




Executive Support Systems and the Digital Firm

Balanced Scorecard

• Model for analyzing firm performance that supplements traditional financial measures with measurements from additional business perspectives, such as customers, internal business processes, and learning and growth




Enterprise-Wide Reporting and Analysis

Strategic performance management tools

for enterprise systems

• SAP: Web-enabled mySAP.com™, Management Cockpit

• PeopleSoft: Web-enabled Enterprise Performance Management (EPM)




Enterprise-Wide Reporting and Analysis

Activity-Based Costing

• Model for identifying all the company activities that cause costs to occur while producing a specific product or service so that managers can see which products or services are profitable or losing money and make changes to maximize firm profitability



Chapter 12 Case Study

Harrah’s and Mohegan Sun: A Tale of Two Casino DSS

1. Analyze Harrah’s and Mohegan Sun using the competitive forces and value chain models.

2. Compare the business strategies of Harrah’s and Mohegan sun. What role do customer reward systems play in these strategies? How are they similar? How are they different?



Chapter 12 Case Study

Harrah’s and Mohegan Sun: A Tale of Two Casino DSS

3. What kind of decision-support systems did Harrah’s and Mohegan Sun develop? How are they related to their business strategy?

4. Are Harrah’s and Mohegan Sun successful? Which casino is more successful? Why? Can its competitive advantage be sustained? Why or why not?

5. Are there any ethical problems raised by these casinos’ use of customer data? Explain your response.

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Enhancing Management Decision Making for the Digital Firm

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