Management Information Systems:

 Problem: Extreme competition; opportunities from

Managing the Digital Firm new technology
Sixteenth Edition  Solutions: Use analysis methods of business
intelligence to improve organization and team
performance.

Lecture 5
Enhancing Decision Making

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Introduction

Data/Big data
Decision making

 Statistics
 Data mining
Business  Artificial
Intelligence/Bus Intelligence
iness Analytics  Data analysis
Demo toolset

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Learning Objectives What Are the Different Types of
5.1 What are the different types of decisions, and how does Decisions, and How Does the
the decision making process work? Decision Making Process Work?
5.2 How do information systems support the activities of (1 of 2)
managers and management decision making?
• Business value of improved decision making
5.3 How do business intelligence and business analytics – Improving hundreds of thousands of “small” decisions adds up to
support decision making? large annual value for the business

5.4 How do different decision-making constituencies/systems • Types of decisions

in an organization use business intelligence, and what is – Unstructured: Decision maker must provide judgment, evaluation,
and insight to solve problem
the role of information systems in helping people
– Structured: Repetitive and routine; involve definite procedure for
working in a group make decisions more efficiently?
handling so they do not have to be treated each time as new
– Semistructured: Only part of problem has clear-cut answer
provided by accepted procedure
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What Are the Different Types of Figure 12.1 Information Requirements

Decisions, and How Does the Decision of Key Decision-Making Groups in a
Making Process Work? (2 of 2) Firm
• Senior managers
– Make many unstructured decisions
• Middle managers
– Make more structured decisions but these may include
unstructured components
• Operational managers and rank and file employees
– Make more structured decisions

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Figure 12.2 Stages in Decision The Decision Making Process
Making which step is important, give the reason
• Intelligence
which step use the data
what is the purpose of step – Discovering, identifying, and understanding the
problems occurring in the organization
• Design
– Identifying and exploring solutions to the problem
• Choice
– Choosing among solution alternatives
• Implementation
– Making chosen alternative work and continuing to
monitor how well solution is working

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Managerial Roles Real-World Decision Making

• Information systems can only assist in some of the roles • Three main reasons why investments in IT do not always
played by managers produce positive results
• Classical model of management: five functions – Information quality
– Planning, organizing, coordinating, deciding, and  High-quality decisions require high-quality information
controlling – Management filters
• More contemporary behavioral models  Managers have selective attention and have variety of
biases that reject information that does not conform to
– Actual behavior of managers appears to be less prior conceptions
systematic, more informal, less reflective, more reactive,
and less well organized than in classical model – Organizational inertia and politics
 Strong forces within organizations resist making
decisions calling for major change

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High-Velocity Automated Decision What is Business Intelligence?
Making • Business intelligence
• Made possible through computer algorithms precisely – Infrastructure for collecting, storing, analyzing data
defining steps for a highly structured decision produced by business
– Humans taken out of decision – Databases, data warehouses, data marts

• For example: High-speed computer trading programs • Business analytics

– Trades executed in 30 milliseconds – Tools and techniques for analyzing data
– OLAP, statistics, models, data mining
• Require safeguards to ensure proper operation and
regulation • Business intelligence vendors
– Create business intelligence and analytics purchased
by firms

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The Business Intelligence Environment

• Six elements in the business intelligence environment
– Data from the business environment
– Business intelligence infrastructure
– Business analytics toolset
– Managerial users and methods
– Delivery platform—MIS, DSS, ESS
– User interface
 Data visualization tools

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Figure 12.3 Business Intelligence and Business Intelligence and Analytics
Analytics for Decision Support Capabilities
• Goal is to deliver accurate real-time information to decision
makers
• Main analytic functionalities of BI systems
– Production reports
– Parameterized reports
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecasts, scenarios, models

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Analytics Overview Predictive Analytics

• Uses variety of data, techniques to predict future trends
and behavior patterns
– Statistical analysis
– Data mining
– Historical data
– Assumptions
• Incorporated into numerous BI applications for sales,
marketing, finance, fraud detection, health care
– Credit scoring
– Predicting responses to direct marketing campaigns

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Big Data Analytics Operational Intelligence and
• Big data: Massive datasets collected from social media, Analytics
online and in-store customer data, and so on
• Operational intelligence: Business activity monitoring
• Help create real-time, personalized shopping experiences
• Collection and use of data generated by sensors
for major online retailers
• Internet of Things
• Smart cities
– Creating huge streams of data from web activities,
– Public records
sensors, and other monitoring devices
– Sensors, location data from smartphones
• Software for operational intelligence and analytics enable
– Ability to evaluate effect of one service change on
companies to analyze their big data
system

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Location Analytics
Location Analytics and Geographic
Information Systems
• Location analytics
– Ability to gain business insight from the location
(geographic) component of data
 Mobile phones
 Sensors, scanning devices
 Map data
• Geographic information systems (GIS)
– Ties location-related data to maps
– Example: For helping local governments calculate
response times to disasters
Google map: Công ty TNHH TMTH Tuấn Việt see location
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Location Analytics

Describe how MIS, DSS, ESS

and GDSS provide decision
DISCUSSION
support for each of these
groups.

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Support for Semistructured

Decisions
MIS • Decision-support systems
– Support for semistructured decisions
DSS • Use mathematical or analytical models
• Allow varied types of analysis
– “What-if” analysis is a useful feature for solving If-Then
ESS
problems in computational models when input
parameters change, such as Goal Seek
GDSS – Sensitivity analysis
– Multidimensional analysis
For example: pivot tables
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 Example: Using Excel for What-If
What-If Analysis
Analysis
• Spreadsheet models allow you to easily evaluate what-if
questions by changing input values and recalculating • Uncertain demand in the Profit Model
model outputs. • Excel table using formulas:
• Systematic approaches to what-if analysis that are
available in Excel make the process easier and more
useful.
– Data tables
– Scenario Manager
– Goal Seek
Visualization of
profit:

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Creating One-Way (Column) Data

Data Tables Tables in Excel
• Data Tables summarize the impact of one or two • Create a range of values for some input cell in your model that
you wish to vary.
inputs on a specified output.
– A one-way data table evaluates an output variable • Enter the cell reference for the output variable in your model
over a range of values for a single input variable. that you wish to evaluate in the row above the first value and
one cell to the right of the column of input values.
– Two-way data tables evaluate an output variable over
a range of values for two different input variables. • Select the range of cells that contains both the formulas and
values you want to substitute.

• Type the cell reference for the input

cell in your model in the Column input
cell box.

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Example: A One-Way Data Table for
Uncertain Demand Two-Way Data Tables
1. Create a column of demand values • Type a list of values for one input variable in a column and a list of
(column E). input values for the second input variable in a row, starting one row
2. Enter =C22 in cell F3 (to reference above and one column to the right of the column list.
the output cell).
• In the cell in the upper left-hand corner immediately above the column
3. Highlight the range list and to the left of the row list, enter the cell reference of the output
variable you wish to evaluate.
• Select the range of cells that contain this cell reference and both the
5. Enter B8 for Column input cell in the row and column of values.
Data Table dialog (tells Excel that
column E refers to demand) • In the Row input cell of the dialog box, enter the reference for the input
cell in the model that corresponds to the input values in the row.
• In the Column input cell box, enter the reference for the input cell in the
model that corresponds to the input values in the column.

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Sensitivity Analysis
Scenario Manager
• Allows creation of scenarios – sets of
values that are saved and can be
substituted in worksheets.

• Click Add button to open Add Scenario

dialog.
• Enter a Scenario Name.
• In Changing Cells box, enter cell
references to include in scenario.
• In the Scenario Values dialog enter
values for each of the changing cells.
• Click Show button to display the results.

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  Example - What-if: You need to analyze the quantity of goods
sold to achieve the desired revenue
Goal Seek
• If you know the result that you want from a formula but are not
sure what input value the formula needs to get that result, use
the Goal Seek feature in Excel.

• Set cell contains the cell reference for the

formula you want to resolve.
• To value is the target value you want the
formula to return.
• By changing cell is the reference of the input
value that you want to change to achieve the
set cell value.

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Regression Analysis
Simple Linear Regression
• Regression analysis is a tool for building
mathematical and statistical models that • Finds a linear relationship between:
characterize relationships between a dependent – one independent variable X and
(ratio) variable and one or more independent, or – one dependent variable Y
explanatory variables (ratio or categorical), all of
which are numerical. • First prepare a scatter chart to verify the data has a
linear trend.
• Simple linear regression involves a single
independent variable. • Use alternative approaches if the data is not linear.

• Multiple regression involves two or more

independent variables.

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 Example : Home Market Value Data Example 8.4: Using Excel to Find the
Size of a house is
Best Regression Line
typically related to its
• Market value
market value. – The estimated market value of a home with 2,200 square feet
would be: market value
X = square footage
Y = market value ($) The regression
model explains
The scatter chart of the variation in market
full data set (42 homes) value due to size of
the home.
indicates a linear trend.
It provides better
estimates of market
value than simply
using the average.
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Home Market Value Regression

Simple Linear Regression with Excel Results

Input Y Range
(with header)
Input X Range
(with header)
Check Labels box

Excel outputs a table

with many useful
regression statistics.

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 Example: Interpreting Regression Regression Modeling
Statistics for Simple Linear Regression • x: input, y: output
• Simple Linear Regression

y = β 0 + β1 x
• Multiple Linear Regression
y = β 0 + β1 x1 + β 2 x2 + β 3 x3 + ... + β n xn

• The meaning of Beta (β ) coefficients

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Decision Support for Senior Figure 12.7 The Balanced Scorecard

Management (1 of 2) Framework
• ESS: decision support for senior management
– Help executives focus on important performance information
• Balanced scorecard method
– Measures outcomes on four dimensions
 Financial
 Business process
 Customer
 Learning and growth
– Key performance indicators (KPIs) measure each dimension

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Decision Support for Senior Group Decision-Support Systems
Management (2 of 2) (GDSS)
• Business performance management (BPM) • Interactive system to facilitate solution of unstructured
– Translates firm’s strategies (e.g., differentiation, low- problems by group
cost producer, scope of operation) into operational • Specialized tools
targets
– Virtual collaboration rooms
– KPIs developed to measure progress toward targets
– Software to collect, rank, edit participant ideas and
• Data for ESS responses
– Internal data from enterprise applications • Promotes collaborative atmosphere, anonymity
– External data such as financial market databases
• Cisco’s Collaboration Meeting Rooms Hybrid (CMR)
– Drill-down capabilities
• Skype for Business

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