CHAPTER 9 :
ENABLING THE ORGANIZATIONS - DECISION MAKING
Organizational information
ü Employees
must be able to obtain and analyze to many different levels, formats and
granu larities of organizational information to make decision
ü Successfully
collecting, compiling, sorting and analyzing information can provide tremendous
insight into how an organization is performing
The
value of timely information
ü Timeliness
is an aspect of information that depends on the situation :
- Real-time
information – immediate up-to-date information
- Real-time
system – provides real-time information in response to query requests
The value of quality information
ü Business
decisions are only as good as the quality of the information used to make the
decisions
ü You
never want to find yourself using technology to help you make a bad decision
faster
ü Characteristic
of high-quality information include :
- Accuracy
- Completeness
- Consistency
- Uniqueness
- Timeliness
Understanding the cost of poor
information
ü The
four primary sources of low quality information include :
I. Online
customers intentionally enter inaccurate information to protect their privacy
II. Information
from different systems have different entry standards and formats
III. Call
center operators enter abbreviated or erroneous by accident or to save time
IV. Third
party and external information contains inconsistencies, inaccuracies and
errors
ü Potential business effects resulting from low quality
information include :
- Inability
to accurately track customers
- Difficulty
identifying valuable customers
- Inability
to identify selling opportunities
- Marketing
to nonexistent customers
- Difficulty
tracking revenue due to inaccurate invoices
- Inability
to build strong customer relationship
· Understanding
the benefits of good information
ü High
quality information can significantly improve the chances of making a good
decision
ü Good
decision can directly impact an organization’s bottom line
DECISION MAKING
Reasons
for the growth of decision making information systems
-people need to
analyze large amounts of information
-people must take
decision quickly
-people must apply
sophisticated analysis techniques, such as modeling and foresting, to make good
decisions
-people must
protect the corporate asset of organizational information
MODEL
A simplified
representation or abstraction of reality
IT SYSTEMS IN AN
ENTERPRISE
EXECUTIVES -
EXECUTIVE INFORMATION SYSTEM (EIS)
MANAGERS - DECISION
SUPPORT SYSTEMS (DSS)
ANALYSIS –
TRANSACTION PROCESSING SYSTEMS (TPS)
TRANSACTION PROCESSING SYSTEMS
-Moving up through the organizational pyramid users move from
requiring transactional information to analytical information
-Transaction
processing system – the basic business system that serves the
operational level (analysts) in an organization
-Online
transaction processing (OLTP) – the capturing of transaction and event
information using technology to (1) process the information according to
defined business rules, (2) store the information, (3) update existing
information to reflect the new information
-Online
analytical processing (OLAP) – the manipulation of information to
create business intelligence in support of strategic decision making
DECISION SUPPORT SYSTEMS
-Decision
support systems (DSS) – models information to support managers and
business professionals during the decision-making process
-Three quantitative
models used by DSSs include :
1. Sensitively
analysis – the study of the impact that changes in one
(or
more) parts of the model have on other parts of the model
2. What-if
analysis – checks the impact of a change in an assumption on the
proposed solution
3. Goal-seeking
analysis – finds the inputs necessary to achieve a goal such as a
desired level of output
EXECUTIVE INFORMATION SYSTEMS
-Executive
information system (EIS) – a specialized DSS that supports senior
level executives within the organization
-most EISs offering
the following capabilities :
1.consolodation–
involves the aggregation of intelligent system that mimics the evolutionary,
survival-of-the-fittest process to generate increasingly better solutions to a
problem
2.drill-down –
enables, users to get details and details of details, of information
3.slice-and-dice –
looks at information from different perspectives
ARTIFICIAL INTELLIGENCE
-INTELLIGENT
SYSTEM – various commercial applications of artificial intelligence
-ARTIFICIAL
INTELLIGENCE (AI) – Simulates human intelligence such as the ability
to reason and learn
-advantages: can
check info on competitor
-the ultimate goal
of AI is the ability to build a system that can mimic human intelligence
-Four most common
categories of AI include :
1. expert
system – computerized advisory programs that imitate the reasoning
processes of expert in solving difficult problems
2. neural
network – attempts to emulate the way the human brain works
-fuzzy logic – a
mathematical method of handling imprecise or
subjective information
3. genetic
algorithm – an AI system that mimics the evolutionary,
survival-if-the-fittest process to generate increasingly better solutions to a
problem
4. intelligent
agent – special-purposed-knowledge-based information system that
accomplishes specific tasks on behalf of its users
DATA-MINING
-data-mining
software includes many forms of AI such as neural networks and expert system
-common forms of
data-mining analysis capabilities include:
1. cluster analysis
2. association
detection
3. statistical
analysis
CLUSTER ANALYSIS
-CLUSTER
ANALYSIS – To
divide an information set into mutually exclusive groups such that the members
of each group are as possible to one another and the different groups are as
far apart as possible
-CRM systems depend on cluster analysis to
segment customer information and identify behavioral traits
ASSOCIATION DETECTION
-Association
detection reveals
the degree to which variables are related and the nature and frequency of these
relationships in the information
-Market
basket analysis such
items as Web sites and checkout scanner information to detect customers’ buying
behavior and predict future behavior by identifying affinities among customers’
choices of products and services
STATISTICAL
ANALYSIS performs
such functions as information correlations, distributions, calculations and
variance analysis
-
forecast– predictions made
on the basis of time-series information
-
time-series information – time-stamped information collected at a particular
frequency
