Chapter 12 Essentials of Management Information Systems 6

Chapter 12 Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 12. 1

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 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? 12. 2

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 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? 12. 3

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Management Challenges 1. Building information systems that can actually fulfill executive information requirements 2. Create meaningful reporting and management decision-making processes 12. 4

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 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 12. 5

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) MIS and DSS MIS • Provides reports based on routine flow of data • Assists in general control of the organization 12. 6

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) MIS and DSS • Emphasizes change, flexibility, rapid response, models, assumptions, ad-hoc queries, and display graphics 12. 7

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Types of Decision-Support Systems Model-Driven DSS • Primarily stand-alone • Uses model to perform “what-if” and other kinds of analysis 12. 8

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) 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 12. 9

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Window on Organizations Data Drive Customer Care at Intrawest • How does this customer care DSS help Intrawest make decisions? • How has it provided value for the firm? 12. 10

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Cargo revenue optimization of Continental Airlines Figure 12 -1 12. 11

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Types of Decision-Support Systems • Associations: Occurrences linked to a single event • Sequences: Events linked over time 12. 12

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Types of Decision-Support Systems • 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 12. 13

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Overview of a decision-support system (DSS) Figure 12 -2 12. 14

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Components of DSS • 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 12. 15

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) 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 12. 16

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Components of DSS • Model: Abstract representation illustrating components or relationships of a phenomenon • Sensitivity Analysis: Models that ask “whatif” questions repeatedly to determine the impact of changes in one or more factors on the outcomes 12. 17

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Sensitivity analysis Figure 12 -3 12. 18

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS Applications and the Digital Firm 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 12. 19

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS Applications and the Digital Firm Examples of Decision-Support Systems • Southern Railway: Train dispatching and routing • Texas Oil and Gas Corporation: Evaluation of potential drilling sites • The Gap: Inventory stocking and merchandising 12. 20

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS Applications and the Digital Firm Examples of Decision-Support Systems • United Airlines: Flight scheduling, passenger demand forecasting • U. S. Department of Defense: Defense contract analysis 12. 21

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS for Pricing Decisions • 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 12. 22

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS for Supply Chain Management • 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 12. 23

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Window on Technology 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? 12. 24

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS for customer analysis and segmentation Figure 12 -4 12. 25

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) DSS for Customer Relationship Management Predictive Analysis • 12. 26 Use of datamining techniques, historical data, and assumptions about future conditions to predict outcomes of events

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Data Visualization and Geographic Information Systems (GIS) • 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 12. 27

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Decision-Support Systems (DSS) Web-Based Customer Decision-Support Systems Customer Decision-Support System (CDSS) • System to support the decision-making process of an existing or potential customer 12. 28

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) What is a GDSS? • 12. 29 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

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) Components of 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 12. 30

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) Components of GDSS • Electronic questionnaires • Electronic brainstorming tools • Idea organizers • Questionnaire tools 12. 31

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) Components of GDSS • Tools for voting or setting priorities • Stakeholder identification and analysis tools • Policy formation tools • Group dictionaries 12. 32

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) Overview of a GDSS Meeting • 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 12. 33

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) Group system tools Figure 12 -5 12. 34

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) How GDSS Can Enhance Group Decision Making • 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 12. 35

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) How GDSS Can Enhance Group Decision Making • Increase the number of ideas generated • Can lead to more participative and democratic decision making 12. 36

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Group Decision-Support Systems (GDSS) How GDSS Can Enhance Group Decision Making Organizational Memory • 12. 37 Store learning from an organization’s history that can be used for decision making and other purposes

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Executive Support Systems (ESS) • 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 12. 38

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Executive Support Systems (ESS) • Monitor organizational performance • Track activities of competitors • Spot problems • Identify opportunities • Forecast trends 12. 39

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise The Role of Executive Support Systems in the Organization • 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 12. 40

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise The Role of Executive Support Systems in the Organization Drill Down • 12. 41 The ability to move from summary data to lower and lower levels of detail

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise The Role of Executive Support Systems in the Organization Developing ESS • Ease of use • Facility for environmental scanning • External and internal sources of information to be used for environmental scanning 12. 42

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Benefits of Executive Support Systems • Analyze, compare, and highlight trends • Provide greater clarity and insight into data • Speed up decision making 12. 43

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Benefits of Executive Support Systems • Improve management performance • Increase management’s span of control • Better monitoring of activities 12. 44

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Executive Support Systems and the Digital Firm ESS for Competitive Intelligence • Identify changing market conditions • Formulate responses • Track implementation efforts • Learn from feedback 12. 45

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise Executive Support Systems and the Digital Firm Balanced Scorecard • 12. 46 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

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise-Wide Reporting and Analysis Strategic performance management tools for enterprise systems • SAP: Web-enabled my. SAP. com™, Management Cockpit • People. Soft: Web-enabled Enterprise Performance Management (EPM) 12. 47

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm Executive Support in the Enterprise-Wide Reporting and Analysis Activity-Based Costing • 12. 48 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

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 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? 12. 49

Essentials of Management Information Systems, 6 e Chapter 12 Enhancing Management Decision Making for the Digital Firm 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. 12. 50