CHAPTER TWO

DECISIONS
AND
PROCESSES
VALUE DRIVEN
BUSINESS
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor
use. Not authorized for sale or distribution in any manner. This document may not be copied,
scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

CHAPTER TWO OVERVIEW

SECTION 2.1 Decision Support Systems

Making Business Decisions

Metrics: Measuring Success
Support: Enhancing Decision Making with MIS
The Future: Artificial Intelligence

SECTION 2.2 Business Processes

Evaluating Business Processes

Models: Measuring Performance
Support: Enhancing Business Processes with MIS
The Future: Business Process Management

SECTION 2.1
DECISION
SUPPORT
SYSTEMS
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor
use. Not authorized for sale or distribution in any manner. This document may not be copied,
scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

LEARNING OUTCOMES
1.

Explain the importance of decision making for managers at

each of the three primary organization levels along with the
associated decision characteristics

2.

Define critical success factors (CSFs) and key performance

indicators (KPIs), and explain how managers use them to
measure the success of MIS projects

3.

Classify the different operational, managerial, and strategic

support systems, and explain how managers can use them
to make decisions & gain competitive advantage
Describe artificial intelligence and identify its five main
types

4.

MAKING BUSINESS DECISIONS

Managerial decision-making challenges

Analyze large amounts of information

Apply sophisticated analysis techniques

Make decisions quickly

The Decision-Making Process

The six-step decision-making process
1. Problem identification
2. Data collection
3. Solution generation
4. Solution test
5. Solution selection
6. Solution implementation

Decision-Making Essentials
Decision-making
and problemsolving occur at
each level in an
organization

Decision-Making Essentials
Operational decision
making - Employees
develop, control, and
maintain core business
activities required to run the
day-to-day operations
Structured decisions Situations where established
processes offer potential
solutions

OPERATIONAL

Operational Decision Making

Employee Type: lower management,
analysts, staf
Focus: Internal, functional
Time Frame: Short term, day-to-day
operations
Decision Types: Structured,
recurring, repetitive
MIS Type: Information
Metrics: Key performance indicators
focus on efficiency

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Decision-Making Essentials
Managerial decision making
Employees evaluate company
operations to identify, adapt to, and
leverage change
Semistructured decisions
Occur in situations in which a few
established processes help to
evaluate potential solutions, but
not enough to lead to a definite
recommended decision

MANAGERIAL

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Managerial Decision
Making
Employee Type: Middle mgmt.,
managers, directors
Focus: Internal, cross-functional
Time Frame: Short term, daily,
monthly, yearly
Decision Types: Semistructured,
adhoc, reporting
MIS Type: Business Intelligence
Metrics: KPIs focusing on efficiency,
and CSFs focusing on efectiveness

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Decision-Making Essentials
Strategic decision making
Managers develop overall
strategies, goals, and objectives
Unstructured decisions
Occurs in situations in which no
procedures or rules exist to
guide decision makers toward
the correct choice

STRATEGIC

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Strategic Decision
Making
Employee Type: Senior management,
presidents
Focus: external, industry, cross company
Time Frame: Long term, yearly, multiyear
Decision Types: Unstructured,
nonrecurring, one time
MIS Type: Knowledge
Metrics: CSFs focusing on efectiveness

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METRICS: MEASURING SUCCESS

Project A temporary activity a company
undertakes to create a unique product, service,
or result
Metrics Measurements that evaluate results
to determine whether a project is meeting its
goals

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METRICS: MEASURING SUCCESS

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METRICS: MEASURING SUCCESS

Critical success factors (CSFs) The crucial
steps companies make to perform to achieve their
goals and objectives and implement strategies
Create high-quality products
Retain competitive advantages
Reduce product costs
Increase customer satisfaction
Hire and retain the best professionals

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METRICS: MEASURING SUCCESS

Key performance indicators (KPIs) The
quantifiable metrics a company uses to evaluate
progress toward critical success factors
Turnover rates of employees
Number of product returns
Number of new customers
Average customer spending
http://www.kpilibrary.com

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METRICS: MEASURING SUCCESS

External KPI
Market share The portion of the
market that a firm captures (external)

Internal KPI
Return on investment (ROI)
Indicates the earning power of a project

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Efficiency and Effectiveness

Metrics
Efficiency MIS metrics Measure the
performance of MIS itself, such as
throughput, transaction speed, and
system availability
Effectiveness MIS metrics
Measures the impact MIS has on
business processes and activities,
including customer satisfaction and
customer conversation rates

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The Interrelationship Between

Efficiency and Effectiveness Metrics

Ideal operation occurs in the upper right corner

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The Interrelationship Between

Efficiency and Effectiveness Metrics
Benchmark Baseline values the
system seeks to attain
Benchmarking A process of
continuously measuring system
results, comparing those results to
optimal system performance
(benchmark values), and identifying
steps and procedures to improve
system performance

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SUPPORT: ENHANCING DECISION

MAKING WITH MIS
Model A simplified representation or
abstraction of reality
Models help managers to
Calculate risks
Understand uncertainty
Change variables
Manipulate time to make
decisions

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SUPPORT: ENHANCING DECISION

MAKING WITH MIS

Types of Decision Making MIS Systems

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Operational Support Systems

Transaction processing system (TPS)
Basic business system that serves the
operational level and assists in making
structured decisions
Online transaction processing (OLTP) Capturing of transaction and event
information using technology to process,
store, and update
Source document The original
transaction record

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Operational Support Systems

Systems Thinking View of a TPS

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Managerial Support Systems

Online analytical processing
(OLAP) Manipulation of
information to create business
intelligence in support of
strategic decision making
Decision support system
(DSS) Models information to
support managers and business
professionals during the
decision-making process

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Managerial Support Systems

Four quantitative models used by DSSs
include
1. What-if analysis
2. Sensitivity analysis
3. Goal-seeking analysis
4. Optimization analysis

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Managerial Support Systems

Systems Thinking View of a DSS

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Managerial Support Systems

Interaction Between a TPS and DSS

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Strategic Support Systems

Information Levels Throughout An Organization

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Strategic Support Systems

Executive information system (EIS) A
specialized DSS that supports senior level
executives within the organization

Granularity

Visualization

Digital dashboard

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Strategic Support Systems

Interaction Between a TPS and EIS

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Strategic Support Systems

Most EISs offering the following
capabilities
Consolidation
Drill-down
Slice-and-dice

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THE FUTURE:
ARTIFICIAL INTELLIGENCE (AI)

Artificial intelligence (AI) Simulates human

intelligence such as the ability to reason and learn

Intelligent system Various commercial

applications of artificial intelligence

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Artificial Intelligence (AI)

Five most common categories of AI

1. Expert system Computerized advisory
programs that imitate the reasoning
processes of experts 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

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Artificial Intelligence (AI)

3. Genetic algorithm An artificial
intelligent system that mimics the
evolutionary, survival-of-the-fittest
process to generate increasingly
better solutions to a problem.
Essentially an optimizing system, it
finds the combination of inputs
that give the best outputs

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Artificial Intelligence (AI)

4. Intelligent agent Special-purpose knowledgebased information system that accomplishes
specific tasks on behalf of its users
Shopping bot Software that will search several retailer
websites and provide a comparison of each retailers
offerings including price and availability

5. Virtual reality - A computer-simulated

environment that can be a simulation of the real
world or an imaginary world

SECTION 2.2
BUSINESS
PROCESSES

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor
use. Not authorized for sale or distribution in any manner. This document may not be copied,
scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

39

LEARNING OUTCOMES
1. Explain the value of business processes for a company
and differentiate between customer-facing and
business-facing processes
2. Demonstrate the value of business process
modeling and compare As-Is and To-Be models
3. Differentiate between business process
improvements, streamlining, and reengineering
4. Describe business process management and its
value to an organization

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EVALUATING BUSINESS PROCESS

Businesses gain a
competitive edge
when they
minimize costs
and streamline
business
processes

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EVALUATING BUSINESS PROCESS

Business facing
Customer facing
process - Invisible to the
process - Results in a
external customer but
product or service that is
essential to the effective
received by an
management of the
organizations external
business
customer

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EVALUATING BUSINESS PROCESS

The Order-to-Delivery Process

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MODELS: MEASURING
PERFORMANCE
Business process modeling (or mapping) - The
activity of creating a detailed flow chart or process
map of a work process showing its inputs, tasks,
and activities, in a structured sequence
Business process model - A graphic description
of a process, showing the sequence of process
tasks, which is developed for a specific
As-Is process model
To-Be process model

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MODELS: MEASURING PERFORMANCE

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MODELS: MEASURING PERFORMANCE

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MODELS: MEASURING PERFORMANCE

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MODELS: MEASURING
PERFORMANCE

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MODELS: MEASURING
PERFORMANCE

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SUPPORT: CHANGING BUSINESS

PROCESSES WITH MIS

Workflow Includes the tasks, activities, and

responsibilities required to execute each step in
a business process

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SUPPORT: CHANGING BUSINESS

PROCESSES WITH MIS

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SUPPORT: CHANGING BUSINESS

PROCESSES WITH MIS

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SUPPORT: CHANGING BUSINESS

PROCESSES WITH MIS
Types of change
an organization
can achieve, along
with the
magnitudes of
change and the
potential business
benefit

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IMPROVING OPERATIONAL BUSINESS

PROCESSES - AUTOMATION
Customers are demanding better
products and services
Business process improvement
Attempts to understand and
measure the current process and
make performance improvements
accordingly
Automation The process of
computerizing manual tasks

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IMPROVING OPERATIONAL BUSINESS

PROCESSES - AUTOMATION

Steps in Business Process Improvement

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IMPROVING MANAGERIAL BUSINESS

PROCESSES - STREAMLINING
Streamlining Improves business
process efficiencies by simplifying or
eliminating unnecessary steps
Bottleneck Occur when resources
reach full capacity and cannot handle any
additional demands
Redundancy Occurs when a task or
activity is unnecessarily repeated

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IMPROVING STRATEGIC BUSINESS

PROCESSES - REENGINEERING

Business process reengineering (BPR) - Analysis and

redesign of workflow within and between enterprises

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IMPROVING STRATEGIC BUSINESS

PROCESSES - REENGINEERING

A company can improve the way it travels the road by

moving from foot to horse and then horse to car
BPR looks at taking a different path, such as an airplane
which ignore the road completely

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IMPROVING STRATEGIC BUSINESS

PROCESSES - REENGINEERING

Progressive Insurance Mobile Claims Process

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THE FUTURE: BUSINESS

PROCESS MANAGEMENT
Business process
management (BPM)
Focuses on evaluating and
improving processes that
include both person-toperson workflow and
system-to-system
communications

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BPM
BPM allows business process to be executed
more efficiently and measures performance and
identifies opportunities for improvement such as:
Bringing processes, people, and information together
Identifying the business processes is relatively easy
Breaking down the barriers between business areas
and finding owners for the processes are difficult
Managing business processes within the enterprise
and outside the enterprise with suppliers, business
partners, and customers
Looking at automation horizontally instead of
vertically