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Chapter 12
Enhancing Decision Making
6.1 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

Management Information Systems
Chapter 12: Enhancing Decision Making
Learning Objectives
• What are the different types of decisions and how does the
decision-making process work? How do information systems
support the activities of managers and management
decision making?
• How do business intelligence and business analytics support
decision making?
• How do different decision-making constituencies in an
organization use business intelligence? What is the role of
information systems in helping people working in a group
make decisions more efficiently?
12.2 Copyright © 2016 Pearson Education, Inc.

Germany Wins the World Cup with Big Data at Its Side
• Problem: Extreme competition; opportunities

from new technology
• Solutions: Use improved statistical analysis to
identify player weaknesses and strengths,
use new metrics to improve player and team
performance
• Demonstrates the use of business
intelligence to develop better performance
metrics
Decision Making and Information Systems

• Business value of improved decision making
– Improving hundreds of thousands of “small” decisions
adds up to large annual value for the business
• Types of decisions:
– Unstructured: Decision maker must provide
judgment, evaluation, and insight to solve problem
– Structured: Repetitive and routine; involve definite
procedure for 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

• Senior managers:
– Make many unstructured decisions
– For example: Should we enter a new market?
• Middle managers:
– Make more structured decisions but these may include unstructured
components
– For example: Why is order fulfillment report showing decline in
Minneapolis?
• Operational managers, rank and file

employees
– Make more structured decisions
– For example: Does customer meet criteria for credit?
INFORMATION REQUIREMENTS OF KEY DECISION-MAKING GROUPS IN A FIRM
FIGURE 12-1 Senior managers, middle managers, operational managers, and employees have different types of decisions
and information requirements.

• The four stages of the decision-making process

1. Intelligence
• Discovering, identifying, and understanding the problems
occurring in the organization
2. Design
• Identifying and exploring solutions to the problem
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and continuing to monitor
how well solution is working

STAGES IN DECISION MAKING
The decision-making process is

broken down into four stages.
FIGURE 12-2

• Information systems can only assist in some

of the roles played by managers
• Classical model of management: five
functions
– Planning, organizing, coordinating, deciding, and
controlling
• More contemporary behavioral models
– Actual behavior of managers appears to be less
systematic, more informal, less reflective, more reactive,
and less well organized than in classical model
• Mintzberg’s 10 managerial roles

– Interpersonal roles
1. Figurehead
2. Leader
3. Liaison
– Informational roles
4. Nerve center
5. Disseminator
6. Spokesperson
– Decisional roles
7. Entrepreneur
8. Disturbance handler
9. Resource allocator
10. Negotiator
• Three main reasons why investments in information

technology do not always produce positive results
1. Information quality
• High-quality decisions require high-quality information
2. Management filters
• Managers have selective attention and have variety of biases
that reject information that does not conform to prior
conceptions
3. Organizational inertia and politics
• Strong forces within organizations resist making decisions
calling for major change
• High-velocity automated decision making

– Made possible through computer algorithms
precisely defining steps for a highly structured
decision
– Humans taken out of decision
– For example: High-speed computer trading programs
• Trades executed in 30 milliseconds
• Responsible for “Flash Crash” of 2010
– Require safeguards to ensure proper operation and
regulation

Business Intelligence and Business Analytics
• Business intelligence
– Infrastructure for collecting, storing, analyzing data
produced by business
– Databases, data warehouses, data marts
• Business analytics
– Tools and techniques for analyzing data
– OLAP, statistics, models, data mining
• Business intelligence vendors
– Create business intelligence and analytics purchased
by firms
• Business Intelligence (BI) is an umbrella term that combines

architectures, tools, databases, analytical tools, applications and
methodologies. BI’s major objective is to enable interactive
access (sometimes in real-time) to data, to enable manipulation
of data, and to give business managers and analysts the ability
to conduct appropriate analysis.

BUSINESS INTELLIGENCE AND ANALYTICS FOR DECISION SUPPORT
Business
intelligence and
analytics requires
a strong database
foundation, a set
of analytic tools,
and an involved
management
team that can ask
intelligent
questions and
analyze data.
FIGURE 12-3

• Six elements in the business intelligence

environment
1. Data from the business environment
2. Business intelligence infrastructure
3. Business analytics toolset
4. Managerial users and methods
5. Delivery platform—MIS, DSS, ESS
6. User interface
• Business intelligence and analytics capabilities

– Goal is to deliver accurate real-time information to
decision makers
– Main functionalities of BI systems
1. Production reports
2. Parameterized reports
3. Dashboards/scorecards
4. Ad hoc query/search/report creation
5. Drill down
6. Forecasts, scenarios, models

• Business intelligence users

– 80 percent are casual users relying on production reports
– Senior executives
• Use monitoring functionalities
– Middle managers and analysts
• Ad-hoc analysis
– Operational employees
• Prepackaged reports
• For example: sales forecasts, customer satisfaction,
loyalty and attrition, supply chain backlog, employee
productivity
BUSINESS INTELLIGENCE USERS
FIGURE 12-4 Casual users are consumers of BI output, while intense power users are the producers of reports, new
analyses, models, and forecasts.

• Production reports
– Most widely used output of BI suites
– Common predefined, prepackaged reports
• Sales: Forecast sales; sales team performance
• Service/call center: Customer satisfaction; service cost
• Marketing: Campaign effectiveness; loyalty and attrition
• Procurement and support: Supplier performance
• Supply chain: Backlog; fulfillment status
• Financials: General ledger; cash flow
• Human resources: Employee productivity; compensation

• Predictive analytics
– Use 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
Business Intelligence in the Enterprise
• Big data analytics

– Big data: Massive datasets collected from social
media, online and in-store customer data, and so on
– Help create real-time, personalized shopping
experiences for major online retailers
– Smart cities
• Public records
• Sensors, location data from smartphones
• Ability to evaluate effect of one service change on
system

Big Data
• About 2.5 quintillion bytes of data are generated every
day and almost 90% of the global existing data has been
created during the past two years.
• Data is growing faster than ever before and by the year
2020, about 1.7 megabytes of new information will be
created every second for every human being on the
planet.
• This volume of data equates to 2-hourlong HD movies,
which one person would need 47 million years to watch
in their entirety.

Big Data
• Every second we create new data. For

example, we perform 40,000 search queries
every second (on Google alone), which
makes it 3.5 searches per day and 1.2
trillion searches per year
• By 2018, nearly 80% of photos will be
taken on smart phones.
12.24
2
Copyright © 2016 Pearson Education, Inc.
Big Data
• Black Box Data: It is a component of

helicopter, airplanes, and jets, etc. It captures
voices of the flight crew, recordings of
microphones and earphones, and the
performance information of the aircraft.

Big Data
• Huge volumes of data which is in,
-> Terabytes(1024 Gigabytes)
-> Petabytes(1024 Terabytes)
-> Exabytes(1024 Petabytes)
-> Zettabytes(1024 Exabytes)
-> Yottabytes(1024 Zettabytes)
-> Brontobytes(1024 yottabytes)
12.26
2

Big Data
Big Data is a collection of large and complex
data sets which are difficult to process using
common database management tools or
traditional data processing applications. The
US Congress defines big data as “a term that
describes large volumes of high velocity,
complex, and variable data that require
advanced techniques and technologies to
enable the capture, storage, distribution,
management, and analysis of the
12.28 information.” Copyright © 2016 Pearson Education, Inc.
Big Data
Big data is a broad term for
data sets so large or complex
that traditional data processing
applications are inadequate.
Challenges include analysis,
capture, data curation, search,
sharing, storage, transfer,
visualization, information
security and information
privacy.
Big data



Big Data
• Facebook users generating 90 pieces of

contents (notes, photos, link, stories,
posts), while 600 million active users of
social platform spent over 9.3 billion hours
a month on the site
• Every minute 24 hours of video is uploaded
in YouTube


Socially connected world

•Almost 7 billion cell phones (6,800,000,000).

•More than 48.9% of mobile phone users, go online via mobile at
least monthly in 2014.
•The global smartphone audience surpassed 1.75 billion worldwide
this year.
•2 Billion Consumers Worldwide to Get Smart(phones) by 2018.
Over half of mobile phone users globally will have smartphones in
2018
•There are 1 million apps available, which have been downloaded
more than 100 billion times.
•More than 48.9% of mobile phone users, go online via mobile at
least monthly in 2014.




Internet of Things
• The Internet of Things (IoT) is a scenario in which
objects, animals or people are provided with
unique identifiers and the ability to transfer data
over a network without requiring human-to-
human or human-to-computer interaction.
• The Internet of things is the network of physical
devices, vehicles, home appliances and other items
embedded with electronics, software, sensors,
actuators, and network connectivity which enables
these objects to connect and exchange
• The Internet of Things (IoT), also sometimes

referred to as the Internet of Everything (IoE),
consists of all the web-enabled devices that
collect, send and act on data
they acquire from their surrounding environment
s using embedded sensors, processors and commun
ication hardware.
• According to Gartner, Inc. (a technology research
and advisory corporation), there will be nearly 26
12.42
billion devices on the Internet of Things by 2020
• Using your smartphone's range of sensors

(Accelerometer, Gyro, Video, Proximity,
Compass, GPS, etc) and connectivity options
(Cell, WiFi, Bluetooth, NFC, etc) you have a well
equipped Internet of Things device in your pocket
that can automatically monitor your
movements, location, and workouts throughout
the day
• According to Gartner, Inc. (a technology research
and advisory corporation), there will be nearly 26








Smart City
• By 2030, roughly 66%, or 5 billion people will live in
urban areas. It is about 80% of the urban population in
Western and Industrialized countries. It is expected that
Asia and Africa will reach at 50% of urban population
by 2020 and 2035, respectively. The urban life is
consisting of various environmental hazards like, lower
level of sustainability, more energy consumption, more
population and more waste generation etc. This not only
represents a massive challenge in how we build and
manage cities but a significant opportunity to improve the
lives of billions of people.
Smart City
• Rising to that challenge, engineers worldwide are

turning to new technology ‐ such as the Cyber Physical
Systems, 5G, AI and data analytics ‐ searching for new
approaches and solutions that will improve city
transportation, water and waste management, energy
usage, and a host of other infrastructure is sues that
underpin the operation of cities and the lifestyle of
urban citizens. The city should be “Smart” after
practicing these ways through smart programming and
planning management.

Smart City
• A smart city is an innovative city that uses
information and communication technologies
(ICTs) and other means to improve quality of
life, efficiency of urban operation and services,
and competitiveness, while ensuring that it
meets the needs of present and future
generations with respect to economic, social
and environmental aspects.

Smart City
• A smart city is an urban area that uses

different types of electronic data collection
sensors to supply information which is used to
manage assets and resources efficiently.
• A smart city may therefore be more prepared
to respond to challenges than one with a
simple "transactional" relationship with its
citizens.

Smart City
• Smart city as high-tech intensive and advanced
city that connects people, information, and
city elements using new technologies in order
to create a sustainable, greener city,
competitive and innovative commerce and
increased life quality.
• Smart city means using all available
technologies and resources, investing in
human and social capital for improving the
quality of life for everyone.
Characteristics of Smart City

Components of
Chapter 12: Enhancing Smart
Decision Making City

Technologies of Smart City
• Open-data initiatives: New York City's BigApps

competition, which produce useful and resource-saving
apps to improve cities and keep citizens informed.
Things like air quality, restaurant sanitation scores,
building inspection scores and impending legislation
should be readily available for all citizens.
• Parking apps that show drivers where the nearest
available parking spot it. These will save commuters
time, gas, emissions and money, while also easing the
flow of traffic.

• High-tech waste management systems.

Pay As You Throw (PAYT) garbage disposal would
encourage people to recycle more and waste less, while
using tools like RFID could improve sorting so
recyclable plastic bottles don't end up in landfills.
• A city guide app, with information about museums,
parks, landmarks, public art, restaurants and real-time
traffic data. These apps help citizens and tourists alike
improve their experience in the city.


• Touchscreens around the city — whether it's a kiosk to buy a
MetroCard or the TVs in taxis — should be bacteria-resistant.
• Wi-Fi in subway stations and on trains, along with weather
information at every station.
• Dynamic kiosks that display real-time information
, concerning traffic, weather and local news, like Urbanflow in
Helsinki.
• App or social media-based emergency alert and crisis response
systems — every citizen should have access to vital information.
Whether it's an alert about a crime that just happened or advice for
a storm approaching the city.

• Police forces that use real-time data to monitor

and prevent crime.
• More public transit, high-speed trains, and bus
rapid transit (BRT) to help citizens traverse the
city with speed and low emissions.
• Smart climate control
systems in homes and businesses, for example, th
e Nest thermostat
.

Charging stations
, like the solar-powered Strawberry Tree in Serbia.
They also function as bus stops and Wi-Fi hot
spots.


• Roofs covered with solar panels
or gardens. You could even generate solar en
ergy on bike paths, like Amsterdam's SolaRoad
.

Technologies of Smart
Management Information Systems City
• Bike-sharing programs, like in Paris, Washington, D.C.,

and the ones coming to Los Angeles and New York. And
bike parking would be nice, too — maybe even
underground and machine-driven, like the
Eco Cycle in Japan.

• A sharing economy, instead of a buying

economy. If we share or rent from each other,
we each need to buy and store fewer goods —
think Rent the Runway, Netflix, Airbnb
. On a similar note, there should be apps to he
lp you find charities that actually need the st
uff you want to toss, such as Zealous Good
in Chicago.


• Airbnb
is an American company which operates an online marke
tplace
and hospitality service for people to lease or rent short-
term lodging including holiday cottages, apartments,
homestays, hostel beds, or hotel rooms, to participate in
or facilitate experiences related to tourism such as
walking tours, and to make reservations at restaurants.
The company does not own any real estate or conduct
tours; it is a broker which receives percentage service
fees in conjunction with every booking. Like all
12.67
hospitality services, Airbnb isCopyrightan © 2016
example of
Pearson Education, Inc.

• Netflix specializes in and provides streaming media and
video-on-demand online and DVD by mail. In 2013,
Netflix expanded into film and television production as
well as online distribution.
• It is a widely popular content-on-demand service that uses
predictive technology to offer recommendations on the
basis of consumers’ reaction, interests, choices, and
behavior. The technology examines from a number of
records to recommend movies based on your previous
liking and reactions.

• Widespread use of traffic rerouting apps, such as
Greenway and Waze. The average person spends 60 hours
in traffic each year, according to Greenway; these apps
calculate the best route for each driver to speed up traffic
flow and reduce CO2 emissions. They also ensure that a
traffic jam on one boulevard doesn't just get displaced to
another area.

• Water-recycling systems, because while water

covers 70% of the earth, we're not preserving the
resource the way we should.
• Crowdsourced urban planning, like Brickstarter.
Brickstarter is a Finland-based
civic crowdfunding website. The site focuses on
crowdfunding urban renewal, architectural and
public art projects

• Broadband Internet access for all citizens —

maybe Google Fiber? — which will reduce the
digital divide and spur economic growth.
• Mobile payments.
Everywhere. For food, apparel and public transpo
rtation.
• Ride-sharing programs: Because it's a waste of
money and gas to have two cars go the same
place when neither is filled to capacity. Uber,
Pathao
Future of Technology for Smart City

Cloud of Things: ClouT

Cloud of Things: ClouT

• ClouT’s overall concept is leveraging the
Cloud Computing as an enabler to bridge the
Internet of Things with Internet of People via
Internet of Services, to establish an efficient
communication and collaboration platform
exploiting all possible information sources to
make the cities smarter and to help them
facing the emerging challenges such as
efficient energy management, economic
growth and development.
Interactive Session: Technology
Big Data Make Cities Smarter

Read the Interactive Session and discuss the following questions
• What technologies are New York and Barcelona employing to run

their cities more efficiently and improve citizens’ quality of life?
• What are the people, organization, and technology issues that
should be addressed by “smart city” initiatives?
• What problems are solved by “smart cities”? What are the
drawbacks?
• Give examples of four decisions that would be improved in a “smart
city.”
• Would you be concerned if social media data were used to
supplement public data to help improve the delivery of municipal
services? Why or why not?

• Operational intelligence and analytics

– Operational intelligence: Business activity
monitoring
– Collection and use of data generated by sensors
– Internet of Things
• Creating huge streams of data from Web activities,
sensors, and other monitoring devices
– Software for operational intelligence and analytics
enable companies to analyze their Big Data

Interactive Session: Management
America’s Cup: The Tension Between Technology and Human Decision Makers
Read the Interactive Session and discuss the following questions
• How did information technology change the way America’s

Cup boats were managed and sailed?
• How did information technology impact decision making at
Team USA?
• How much was technology responsible for Team USA’s
America’s Cup victory? Explain your answer.
• Compare the role of big data in Team USA’s America’s Cup
victory with its role in the German team’s 2014 World Cup
victory described in the chapter-opening case.
• 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
• Two main management strategies for

developing BI and BA capabilities
1. One-stop integrated solution
– Hardware firms sell software that run optimally on their
hardware
– Makes firm dependent on single vendor—switching
costs
2. Multiple best-of-breed solution
– Greater flexibility and independence
– Potential difficulties in integration
– Must deal with multiple vendors

Decision-Making Constituencies
• Operational and middle managers

– Use MIS (running data from TPS) for:
• Routine production reports
• Exception reports
• “Super user” and business analysts
– Use DSS for:
• More sophisticated analysis and custom reports
• Semistructured decisions

• Decision support systems: Support for

semistructured decisions
– Use mathematical or analytical models
– Allow varied types of analysis
• “What-if” analysis
• Sensitivity analysis
• Backward sensitivity analysis
• Multidimensional analysis / OLAP
– For example: pivot tables
SENSITIVITY ANALYSIS
FIGURE 12-5 This table displays the results of a sensitivity analysis of the effect of changing the sales price of a necktie
and the cost per unit on the product’s break-even point. It answers the question, “What happens to the
break-even point if the sales price and the cost to make each unit increase or decrease?”

A PIVOT TABLE THAT EXAMINES CUSTOMER REGIONAL

DISTRIBUTION AND ADVERTISING SOURCE
In this pivot table, we

are able to examine
where an online
training company’s
customers come from
in terms of region and
advertising source.
FIGURE 12-6

• ESS: decision support for senior management

– Help executives focus on important performance
information
– Balanced scorecard method:
• Measures outcomes on four dimensions:
1. Financial
2. Business process
3. Customer
4. Learning and growth
• Key performance indicators (KPIs) measure each
dimension
THE BALANCED SCORECARD FRAMEWORK
FIGURE 12-7
In the balanced scorecard framework, the firm’s

strategic objectives are operationalized along four
dimensions: financial, business process, customer,
and learning and growth. Each dimension is
measured using several KPIs.

• Decision support for senior management (cont.)

– Business performance management (BPM)
• Translates firm’s strategies (e.g., differentiation, low-
cost producer, scope of operation) into operational
targets
• KPIs developed to measure progress toward targets
– Data for ESS
• Internal data from enterprise applications
• External data such as financial market databases
• Drill-down capabilities

• Group decision support systems (GDSS)

– Interactive system to facilitate solution of unstructured
problems by group
– Specialized hardware and software; typically used in
conference rooms
• Overhead projectors, display screens
• Software to collect, rank, edit participant ideas and responses
• May require facilitator and staff
– Enables increasing meeting size and increasing
productivity
– Promotes collaborative atmosphere, anonymity
– Uses structured methods to organize and evaluate ideas

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Chapter 12

Enhancing Decision Making

6.1 Copyright © 2014 Pearson Education, Inc. publishing as Prentice Hall

12.2 Copyright © 2016 Pearson Education, Inc.

• Problem: Extreme competition; opportunities

Decision Making and Information Systems

12.4 Copyright © 2016 Pearson Education, Inc.

Decision Making and Information Systems

• Operational managers, rank and file

INFORMATION REQUIREMENTS OF KEY DECISION-MAKING GROUPS IN A FIRM

12.6 Copyright © 2016 Pearson Education, Inc.

Decision Making and Information Systems

• The four stages of the decision-making process

12.7 Copyright © 2016 Pearson Education, Inc.

STAGES IN DECISION MAKING

The decision-making process is

12.8 Copyright © 2016 Pearson Education, Inc.

Decision Making and Information Systems

• Information systems can only assist in some

Decision Making and Information Systems

• Mintzberg’s 10 managerial roles

Decision Making and Information Systems

• Three main reasons why investments in information

Decision Making and Information Systems

• High-velocity automated decision making

12.12 Copyright © 2016 Pearson Education, Inc.

Business Intelligence and Business Analytics

• Business Intelligence (BI) is an umbrella term that combines

12.14 Copyright © 2016 Pearson Education, Inc.

BUSINESS INTELLIGENCE AND ANALYTICS FOR DECISION SUPPORT

12.15 Copyright © 2016 Pearson Education, Inc.

Business Intelligence and Business Analytics

• Six elements in the business intelligence

Business Intelligence and Business Analytics

• Business intelligence and analytics capabilities

12.17 Copyright © 2016 Pearson Education, Inc.

Business Intelligence and Business Analytics

• Business intelligence users

BUSINESS INTELLIGENCE USERS

12.19 Copyright © 2016 Pearson Education, Inc.

Business Intelligence and Business Analytics

12.20 Copyright © 2016 Pearson Education, Inc.

Business Intelligence and Business Analytics

Business Intelligence in the Enterprise

• Big data analytics

12.22 Copyright © 2016 Pearson Education, Inc.

12.23 Copyright © 2016 Pearson Education, Inc.

• Every second we create new data. For

• Black Box Data: It is a component of

12.25 Copyright © 2016 Pearson Education, Inc.

12.27 Copyright © 2016 Pearson Education, Inc.

12.30 Copyright © 2016 Pearson Education, Inc.

12.31 Copyright © 2016 Pearson Education, Inc.

12.32 Copyright © 2016 Pearson Education, Inc.

• Facebook users generating 90 pieces of

12.33 Copyright © 2016 Pearson Education, Inc.

12.34 Copyright © 2016 Pearson Education, Inc.

Socially connected world

12.35 Copyright © 2016 Pearson Education, Inc.

•Almost 7 billion cell phones (6,800,000,000).

12.37 Copyright © 2016 Pearson Education, Inc.

12.38 Copyright © 2016 Pearson Education, Inc.

12.39 Copyright © 2016 Pearson Education, Inc.

12.40 Copyright © 2016 Pearson Education, Inc.