MIS-410: Decision Support System (DSS)

Ashis Talukder Lecturer, MIS Dhaka University

Book:

DECISION SUPPORT AND BUSINESS INTELLIGENCE SYSTEMS

Efraim Turban Jay E Aronson Teng-Peng Liang Reamesh Sharda

Chapter 1: Decision Support System and Business Intelligence

DECISION SUPPORT SYSTEMS AND BUSINESS INTELLIGENCE

Learning Objectives
Understand todays turbulent business environment and describe how organizations survive and even excel in such an environment Understand the need for computerized support of managerial decision making Understand an early framework for managerial decision making Learn the conceptual foundations of the decision support systems (DSS) methodology

Learning Objectives
Describe the business intelligence (BI) methodology and concepts and relate them to DSS Describe the concept of work systems and its relationship to decision support List the major tools of computerized decision support Understand the major issues in implementing computerized support systems

Changing Business Environments and Computerized Decision Support

The business pressures-responsessupport model has 3 components:
The business environment Organizational responses: be reactive, anticipative, adaptive, and proactive Computerized support

Managerial Decision Making

Managerial Decision Making

The nature of managers work (Mintzbergs Classic Study, 1980)
Interpersonal (figurehead, leader, liaison) Informational (monitor, Disseminator, Spokesperson) Decisional (Entrepreneur, Disturbance Handler, Resource Allocator, Negotiator)

To do that s/he needs information in time (to computer, laptop, pda, cellphone by network, web)

Managerial Decision Making

The process of 4-step decision making
1. Defining the problem (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

Managerial Decision Making

Decision support systems (DSS) A conceptual framework for a process of supporting managerial decision- making, usually by modeling problems and employing quantitative models for solution analysis

Computerized Support for Decision Making

Why use computerized decision support systems
Speedy computations Improved communication and collaboration Increased productivity of group members Improved data management Managing giant data warehouses

Computerized Support for Decision Making

Why use computerized decision support systems
Quality support Agility support Overcoming cognitive limits in processing and storing information Using the Web Anywhere, anytime support

Computerized Support for Decision Making

Cognitive limits The limitations of the human mind related to processing information

An Early Framework for Computerized Decision Support

Four Phase Decision making process (Simon 1977 stated 3 later last one added)
Intelligence:
searching for conditions that call for decision

Design
Inventing, developing and analyzing possible alternative actions (solutions)

Choice:
selecting a course of action among those

Implementation:
Adopting the selected course of action in decision situation

An Early Framework for Computerized Decision Support

An Early Framework for Computerized Decision Support

Unstructured Problems
None of the above 4 phases is structured Fuzzy, complex problems No cut-and-dried solution exists

Structured Problem
Typically repeated for which standard solution method exist All phases re structured Procedure for best (at least good enough) solution is known

Semi-structured Problem
Fall between above two Have some structured elements, some unstructured elements Trading bonds, setting marketing budget for consumers

An Early Framework for Computerized Decision Support

An Early Framework for Computerized Decision Support

Gorry & Scott-Morton (1971) proposed the classical frame work of 33 matrix Then Simons (1977) idea added Degree of structuredness
Four-phase decision making process
Intelligence: searching for conditions that call for decision Design Inventing, developing and analyzing possible alternative actions (solutions) Choice: selecting a course of action among those Implementation: Adopting the selected course of action in decision situation

An Early Framework for Computerized Decision Support

Types of control in all managerial activities
Strategic planning
Long range of goals and policies for resource allocation

Management control
Acquisition and efficient use of resources for organization goal

Operational control
Efficient and effective execution of specific task.

The decision support matrix

For semi-structured decisions and unstructured decisions, conventional MIS and MS (mgt Sc) tools are insufficient Decision support systems (DSS) are used for unstructured problems.

An Early Framework for Computerized Decision Support

An Early Framework for Computerized Decision Support

Computer support for structured decisions
Structured problems encountered repeatedly Possible to abstract, analyze, and classify into specific categories for high level of structure

An Early Framework for Computerized Decision Support

Computer support for structured decisions
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) By 4-step-systematic process (mentioned earlier)

An Early Framework for Computerized Decision Support

Computer support for structured decisions
Management science (MS) process adds a new step 2 to the process:
1. Defining the problem (a decision situation that may deal with some difficulty or with an opportunity) 2. Classify the problem into a standard category. 3. Constructing a model that describes the real-world problem 4. Identifying possible solutions to the modeled problem and evaluating the solutions 5. Comparing, choosing, and recommending a potential solution to the problem

An Early Framework for Computerized Decision Support

Computer support for structured decisions
Automated decision systems (ADS)
A business rules-based system uses intelligence to recommend solutions to repetitive decisions (such as pricing)

An Early Framework for Computerized Decision Support

An Early Framework for Computerized Decision Support

Computer support for unstructured decisions
Partially supported by STD computerized methods so, need Customized solutions intuition and judgment play large role in this types of decisions Computerized communication and collaboration technologies may help Knowledge management may help

An Early Framework for Computerized Decision Support

Computer support for semistructured problems
A combination of both standard solution procedures and human judgment Management Science (MS) can provide models for the structured portion For the unstructured portion, a DSS can improve the quality of the information on which the decision is based by providing a range of alternative solutions along with their potential impacts

An Early Framework for Computerized Decision Support

The benefits of computerized decision support
1. Companies work in an unstable or rapidly changing economy. 2. There are difficulties in tracking the numerous business operations. 3. Competition has increased especially global competition. 4. Electronic commerce is changing the ways business is done. 5. Existing information systems do not fully support decision making.

An Early Framework for Computerized Decision Support

The benefits of computerized decision support
6. The Information systems department is too busy to address all of managements inquiries. 7. Special analysis of profitability and efficiency is needed. 8. Accurate information is needed. 9. Computerized support is viewed as an organizational winner. 10. New information is needed.

An Early Framework for Computerized Decision Support

The benefits of computerized decision support
11. Management mandates computerized decision support. 12. Higher decision quality is needed. 13. Improved communication. 14. Improved customer and employee satisfaction. 15. Timely information is provided. 16. Cost reduction is achieved. 17. Employees productivity has been improved.

The Concept of Decision Support Systems (DSS)

Gorry & Scott-Morrison, 1971
Interactive computer-based systems, which help decision makers to utilize data and models to solve unstructured problem

Keen & Scott-Morrison, 1978

Decision support systems couple the intellectual resources of individuals with the capabilities of the computer to improve the quality of decisions. It is a computer-based support system fro management decision makers who deal with semi-structured problems

The Concept of Decision Support Systems (DSS)

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

DSS as a specific application The architecture of DSS

Data Models manipulate data as related to a specific situation Knowledge component Users User interface

The Concept of Decision Support Systems (DSS)

The Concept of Decision Support Systems (DSS)

Data
1st component of DSS architecture Needs data to solve problems Data can come from different sources including web Every problem to be solved, every opportunity or strategy to be analyzed, requires data

Models manipulate data as related to a specific situation

2nd Component of DSS architecture Data related to specific situation are manipulated by a model Models can be standard or customized

The Concept of Decision Support Systems (DSS)

Knowledge component
Some system has a 3rd component as knowledge/intelligence

Users
Users are the vital 4th component of the DSS architecture

User interface
Interfacing the system via a user interface is the 5th component of DSS Architecture

The Concept of Decision Support Systems (DSS)

Types of DSS
model-oriented DSS: quantitative models used to generate a recommended solution to a problem data-oriented DSS: support ad-hoc reporting and queries

A Framework for Business Intelligence (BI)

Business intelligence (BI)
An umbrella term that combines architectures, tools, databases, applications, and methodologies Major Objective:
Enable interactive access to data Enable manipulation of data Give business manager and analyst to the ability to conduct appropriate analysis.

By analyzing historical and current data, situation, and performance

Provide decision makers with insight to take better decision

BI process:
Data
Information

Decision

Action

A Framework for Business Intelligence (BI)

A Framework for Business Intelligence (BI)

BI architecture
Data warehouse
Source of data

Business analytics
A collection of tools for manipulating, mining, and analyzing the data in the data warehouse

Business Performance management (BPM)

For monitoring and analyzing the performance

User Interface
Example: Dash board

A Framework for Business Intelligence (BI)

A Framework for Business Intelligence (BI)

Data warehouse
Originally, included historical data that were organized and summarize, so end users could easily view or manipulate data and information Today, some data warehouses include current data as well, so they can provide real time decision support

A Framework for Business Intelligence (BI)

Business analytics: end user access data using tools and techniques of categories:
Reporting and queries
BI includes Static & dynamic reporting, queries, discovery of information, multidimensional view

Advanced analytics
Many statistical, financial, mathematical and other models to analyze data & information

Data, text and Web mining and other sophisticated mathematical and statistical tools
Data mining, neural computing

A Framework for Business Intelligence (BI)

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

A Framework for Business Intelligence (BI)

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 corporatewide strategy

A Framework for Business Intelligence (BI)

Business performance management
User interface Dashboard A visual presentation of critical data for executives to view. It allows executives to see hot spots in seconds and explore the situation Dashboards integrate information from multiple business areas
Visualization tools

A Framework for Business Intelligence (BI)

Styles of BI
1. 2. 3. 4. 5. Report Delivery and Alerting Enterprise Reporting (dashboard, scorecard) Cube Analysis (Slice and Dice Analysis) Ad-hoc Query Statistics and Data Mining

A Framework for Business Intelligence (BI)

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

A Framework for Business Intelligence (BI)

The DSS-BI connection
1. The architecture is very similar since BI evolved from DSS
BI use data warehouse/DSS not BI for large organization/DSS for any type of organization

2. DSS are constructed to directly support specific decision making; BI systems are geared to provide accurate and timely information (indirect support) 3. BI has an executive and strategy orientation while DSS has been oriented toward analysts

A Framework for Business Intelligence (BI)

The DSS-BI connection
4. BI systems are constructed with commercially available tools and components that are fitted to the needs of organizations; DSS more programming is used to construct custom solutions to very unstructured problems 5. DSS were developed mostly in the academic world; BI were developed mostly by software companies 6. Many tools used by BI are also considered DSS tools (e.g., data mining and predictive analysis )

A Framework for Business Intelligence (BI)

The DSS-BI connection
DSS is apart of BI (one of BIs analytical tools)
BI is a special case of DSS, BI deals mostly with reporting, communication, collaboration BI is the result of continuous revolution, that is DSS is BIs one of the original elements.

A Framework for Business Intelligence (BI)

Management support systems (MSS)
Lac of universal definition of DSS and BI MSS = BI + DSS along with all their tools MSS is a system that applies any type of decision support tool or technique to managerial decision-making

A Work System View of Decision Support

Work system A system in which human participants and/or machines perform a business process using information, technology, and other resources to produce products and/or services for internal or external customers

A Work System View of Decision Support

Nine elements of a work system
1. 2. 3. 4. 5. 6. 7. 8. 9. Business process Participants Information Technology Product and services Customers Infrastructure Environment Strategy

The Major Tools and Techniques of Managerial Decision Support

Computerized Tools for Decision Support
Data management Reporting status tracking Visualization Business analytics Strategy and performance management Communication and collaboration Knowledge management Intelligent systems Enterprise systems

The Major Tools and Techniques of Managerial Decision Support

Tools-Web connection
All of these tools are available in both webbased and non web-based formats

Hybrid (integrated) support systems A support system that uses several tools and techniques to assist management in solving managerial or organizational problems and assess opportunities and strategies

Implementing Computer-Based Managerial Decision Support Systems Developing or acquiring support systems Justification and cost-benefit analysis Security and protection of privacy Integration of systems and applications The Web in DSS/BI implementation
Information portals and MSS