T. Hala AL-Rumaih 1

Decision Support Systems And Business Intelligence

Chapter 1 in “DECISION SUPPORT AND BUSINESS INTELLIGENCE SYSTEMS”

Kingdom Of Saudi ArabiaAl-Imam Muhammad Ibn Saud Islamic UniversityCollege of Computer and Information Sciences

Information System Department2nd semester, 2010 – 2011

IS 332: Decision Support Systems

Introduction• Organizations feel increasing pressures that force them to

respond quickly to changing the way they operate.

• Making such decisions may require relevant data,..

• Processing these, must be done quickly, frequently, in real time and requires computerized support.

• This course will taking about using business intelligence as a computerized support for decision making.

2

Changing Business Environments and Computerized Decision Support

• To understand why companies are embracing computerized support, a model has been developed called the Business Pressures-Responses-Support Model.

• The Business Pressures-Responses-Support Model:

1. The business environment • Business environment factors divided into four

categories: markets, consumer demands, technology, and societal.

3

Changing Business Environments and Computerized Decision Support (cont.)

2. Organizational responses: be reactive, anticipative, adaptive, and proactive

• Employ strategic planning• Use new and innovative business model• Restructure business process• Use new IT to improve communication.• :• :

3. Computerized support • It used to facilitate closing the gap between the

current performance and the desired performance

4

Changing Business Environments and Computerized Decision Support (cont.)

5

Managerial Decision Making• Management is a process by which organizational goals

are achieved through the use of resources (people, money, energy, materials, space, time).

• These resources are considered to be inputs, and the attainment of the goals is viewed as the output of the process.

6

Measuring success: Productivity= output/input

Orgnizational and managerial performance

Managerial Decision Making (cont.)

• The Nature of Managers’ Work • Managers perform 10 major roles can be classified into

three major categories:

1.Interpersonal: figurehead, leader, liaison.

2.Informational: monitor, disseminator, spokesperson.

3.Decisional: entrepreneur, disturbance handler, resource

allocator, negotiator.• To perform these rolles, managers need information and

computerized support.

7

Management is decsion makingThe manager is decsion maker

Managerial Decision Making (cont.)

• The process of decision making:

1. Defining the problem (i.e., a decision situation that may deal with some difficulty or with an opportunity)

2. Constructing a model that describes the real-world problem

3. Identifying possible solutions to the modeled problem and evaluating the solutions

4. Comparing, choosing, and recommending a potential solution to the problem

8

Managerial Decision Making (cont.)

• Factors Affecting Decision-Making:• Environmental factors make the evaluation process

difficult for the following reasons:

1. New technologies and better information distribution have resulted in more alternatives for management.

2. Increasing governmental regulation coupled with political destabilization have caused great uncertainty.

3. Other factors are the need to make rapid decisions, the frequent and unpredictable changes, and the potential costs of making mistakes.

4. These environments are growing more complex, making decision today is indeed a complex task.

9

Computerized Support For Decision Making

• Computer applications have moved from transaction processing and monitoring activities to problem analysis and solution applications.

• BI tools such data warehousing, data mining, online analytical processing,……, are the cornerstones of today’s modern management.

10

Computerized Support For Decision Making (cont.)

• Why We Use Computerized Decision Support Systems?• Speedy computations • Improved communication and collaboration • Increased productivity of group members • Improved data management • Managing giant data warehouses • Quality support • Agility Support• Overcoming cognitive limits in processing and storing

information• Using the Web • Anywhere, anytime support

11

Intelligence PhaseIntelligence Phase

Design PhaseDesign Phase

Choice PhasesChoice Phases

REALITY

Implementationof Solution

Implementationof Solution

SUCCESS

FAILURE

Verification, Testing of Proposed Solution

Verification of the Model

Examination

Steps of the Decision Making

Steps of the Decision Making (cont.)

• Intelligence phase• Organizational objectives• Search and scanning procedures• Data collection• Problem identification• Problem classification• Problem statement

13

Result: Reality is examined The problem is identified and defined

Steps of the Decision Making (cont.)

• Design phase• Formulate a model (Assumption)• Set criteria for choice• Search for alternative• Predict and measure outcomes

14

Result: Representative model is constructed The model is validated and evaluation criteria are set

Steps of the Decision Making (cont.)

• Choice phase• Sensitivity analysis• Selection of Best (Good) alternative• Plan for implementation

15

Result: Proposed solution is included to the model If reasonable, move to implementation phase.

Steps of the Decision Making (cont.)

• Implementation phase• Put solution into action

16

Result: Solution to the original problem

An Early Framework for Computerized Decision Support

17

Type of Control

Type of Decision:

Operational Control

Managerial Control

Strategic Planning

Structured(Programmed)

Accounts receivable, accounts payable, order entry

Budget analysis, short-term forecasting, personnel reports

Investments, warehouse locations, distribution centers

Semistructured Production scheduling, inventory control

Credit evaluation, budget preparation, project scheduling, rewards systems

Mergers and acquisitions, new product planning, compensation, QA, HR policy planning

Unstructured(Unprogrammed)

Buying software, approving loans, help desk

Negotiations, recruitment, hardware purchasing

R&D planning, technology development, social responsibility plans

An Early Framework for Computerized Decision Support (cont.)

• Three Types of Decision or Structuredness: 1. Structured problems (programmed): are routine problems for

which standard solution method exist.• All phases are structured.• Procedure for obtaining the best solution are known

2. Unstructured problems (nonprogrammed): are fuzzy, complex problem for which there are no cut-and direct solution methods.

• None of the four phases is structured• Depend on human judgment.

3. Semi-structured problem: is a decision problem in which some but not all phases are structured.

• In between solve with standard solution procedure and human judgment

18

An Early Framework for Computerized Decision Support (cont.)

• Three Types of control:

1. Strategic planning • the long-range goals & policies for resource

allocation;

2. Management control• the acquisition & efficient utilization of resources in

the accomplishment of organizational goals

3. Operational control • the efficient & effective execution of specific tasks.

19

An Early Framework for Computerized Decision Support (cont.)

• The Decision Support Matrix: • The initial purpose of previous matrix was to suggest

different types of computerized support to different cells in the matrix:• For semi-structured decisions and unstructured

decisions:• conventional MIS and MS tools are insufficient ; • BUT Decision support systems (DSS) are used.

• For structured decisions: • Management science (MS) or operations research (OR)

are used .

• Automated decision systems (ADS) is used.

20

An Early Framework for Computerized Decision Support (cont.)

• Management science (MS) or operations research (OR):• The application of a scientific approach and

mathematical models to the analysis and solution of managerial decision situations (e.g., problems, opportunities)

• It adds new step 2 to the process of decision making, that is classify the problem into standard category.

21

An Early Framework for Computerized Decision Support (cont.)

• Automated decision systems (ADS) :• New approach to support decision making, also known

as decision automation system.• A rules-based system that uses provides a solution

usually in one functional area to a specific repetitive managerial problem (such as pricing).

22

An Early Framework for Computerized Decision Support (cont.)

• The Benefits of Computerized Decision Support:

1. Competition

2. E-commerce.

3. Accurate information is needed

4. Higher decision quality is needed

5. The company desires improved communication

6. The company want to reduce costs

7. ………

23

The Concept of Decision Support Systems (cont.)

• Decision support systems (DSS) are “interactive computer-based systems, which help decision makers utilize data and models to solve unstructured problems”.

• DSS are used to make business decision often based on data collected by On-Line-Analytical-Processing system (OLAP)

• DSS as an Umbrella term: Describes any computerized system that supports decision making in an organization

24

The Concept of Decision Support Systems (cont.)

25

• The Architecture of DSS

A Framework for Business Intelligence

• Business intelligence (BI) • An umbrella term that combines architectures, tools, databases,

applications, and methodologies

• BI’s major objective:• Enable interactive access to data• Enable manipulation of data• Give the ability to conduct appropriate analysis.• Enable to make more informed and better decisions

26

BI = data information decisions actions

A Framework for Business Intelligence (cont.)

27

A Framework for Business Intelligence (cont.)

28

A Framework for Business Intelligence (cont.)

• Data warehouse • Originally, included historical data that were organized

and summarize, so end users could easily view or manipulate data and information

29

A Framework for Business Intelligence (cont.)

• Business analytics• Reporting and queries • Advanced analytics • Data, text and Web mining and other sophisticated

mathematical and statistical tools

• Data mining

A process of searching for unknown relationships or information in large databases or data warehouses, using intelligent tools such as neural computing, predictive analytics techniques, or advanced statistical methods.

30

A Framework for Business Intelligence (cont.)

• Business performance management (BPM)

An advanced performance measurement and analysis approach that embraces planning and strategy

• BPM extends the monitoring, measuring, and comparing of sales, profit, cost, profitability, and other performance indicators by introducing the concept of “management and feedback

• BPM provides a top-down enforcement of corporate-wide strategy

31

A Framework for Business Intelligence (cont.)

• Benefits of BI• Faster, more accurate reporting• Improved decision making• Improved customer service• Increased revenue

32