Chapter 5 Business Intelligence and Knowledge Management Systems

Learning Objectives • To recognize how information is used for different types of decisions at various levels in the organization • To become familiar with the support that management receives from decision aids such as Business Intelligence systems, OLAP, groupware, expert systems, and intelligent agents • To understand the importance and challenges of formally managing organizational knowledge, and to recognize the technologies that enable successful knowledge management Copyright © 2004 South-Western. All rights reserved. 2

Management Decision Making • Classic decision making model (Simon) Ø Intelligence: searching the environment for conditions calling for a decision. Ø Design: inventing, developing, and analyzing possible courses of action. Ø Choice: selecting a course of action. • Types of decisions Ø Structured decisions Ø Unstructured decisions Copyright © 2004 South-Western. All rights reserved. 3

Steps in Decision Making Note: To simplify the figure, we have omitted feedback loops to each of the circles. Such feedback, of course, is an integral part of decision making and should improve the intelligence, design, and choice that occur as part of an iterative process. FIGURE 5. 1 Copyright © 2004 South-Western. All rights reserved. 4

Nature of Information Required • Strategic managers Ø Assess environment; project future events and conditions. • Tactical managers Ø Focused on relevant operational units. • Operational managers Ø Narrower in scope, more detailed, more accurate, from within. Copyright © 2004 South-Western. All rights reserved. 5

Management Problem Structures and Information Requirements FIGURE 5. 2 Copyright © 2004 South-Western. All

Roadblocks for Quality Decisions FIGURE 5. 3 Copyright © 2004 South-Western. All rights reserved.

Systems for Aiding Decision Makers • Business Intelligence systems Ø Online Analytical Processing (OLAP) systems • Group support systems also groupware Ø collaboration, virtual meetings, and group scheduling • Artificial intelligence (AI) Ø Expert systems Ø Neural networks Ø Intelligent agents Copyright © 2004 South-Western. All rights reserved. 8

Business Intelligence Systems TI 5. 2 Copyright © 2004 South-Western. All rights reserved. 9

Converting Tabular Data to Graphical Representation FIGURE 5. 4 Copyright © 2004 South-Western. All

Expert Systems • Human expert Ø Possesses relevant knowledge. • Knowledge engineer Ø Has the skill to extract knowledge and encode in knowledge base. • Knowledge base Ø Contains relevant expertise, in the form of rules. Copyright © 2004 South-Western. All rights reserved. • Inference engine Ø Executes line of reasoning based on facts and rules. • User interface Ø Provides for user input to system and displays output. Ø Contains explanation facility to let user ask why and how. 11

Expert Systems Conditions favor the use of expert systems when: v v Decisions are extremely complex. Consistency of decision making is desirable. The decision must optimized (minimized for time and maximized for quality). An expert decision maker can be computer-modeled. TI 5. 3 Copyright © 2004 South-Western. All rights reserved. 12

Neural Networks (NN) • Computer-based systems of hardware and software. Ø Mimic the human brain’s ability to recognize patterns, predict outcomes with incomplete information. Ø Derive knowledge from data; must be “trained”. • Four types of neural network output: Ø Prediction Ø Classification Ø Data Filtering Ø Optimization Copyright © 2004 South-Western. All rights reserved. 13

Knowledge Management • The process of capturing, storing, retrieving, and distributing the knowledge of the individuals in an organization for use by others to improve the quality and/or efficiency of decision making. • Factors impeding knowledge management Ø Reluctance to share knowledge or expertise for fear of losing power. Ø Failure to record knowledge of problems solved in the past. Copyright © 2004 South-Western. All rights reserved. 14

Knowledge Management System Groupware uses of knowledge management: v v v Purchasing Inventory control Distribution Exchanges and auctions Channel and partner relationship management Customer care and support FIGURE 5. 5 Copyright © 2004 South-Western. All rights reserved. 15