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  • Decision Support and Business Intelligence Systems(9th Ed., Prentice Hall)Chapter 2:Decision Making, Systems, Modeling, and Support

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Learning ObjectivesUnderstand the conceptual foundations of decision makingUnderstand the need for and the nature of models in decision makingUnderstand Simon's four phases of decision making: intelligence, design, choice, and implementation

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Learning ObjectivesRecognize the concepts of rationality and bounded rationality and how they relate to decision makingDifferentiate between the concepts of making a choice and establishing a principle of choiceLearn how DSS provide support for decision making in practiceUnderstand the systems approach

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Opening Vignette:Decision Modeling at HP Using SpreadsheetsCompany backgroundProblemProposed solutionResultsAnswer and discuss the case questions

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision Support Systems (DSS)Dissecting DSS into its main concepts

    Building successful DSS requires a through understanding of these concepts

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Characteristics of Decision MakingGroupthinkEvaluating what-if scenariosExperimentation with a real system!Changes in the decision-making environment may occur continuouslyTime pressure on the decision makerAnalyzing a problem takes time/moneyInsufficient or too much information

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Characteristics of Decision MakingBetter decisionsTradeoff: accuracy versus speedFast decision may be detrimentalAreas suffering most from fast decisions personnel/human resources (27%)budgeting/finance (24%)organizational structuring (22%)quality/productivity (20%)IT selection and installation (17%)process improvement (17%)

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision MakingA process of choosing among two or more alternative courses of action for the purpose of attaining a goal(s)Managerial decision making is synonymous with the entire management process - Simon (1977)e.g., PlanningWhat should be done? When? Where? Why? How? By whom?

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision Making and Problem SolvingA problem occurs when a systemdoes not meet its established goalsdoes not yield the predicted results, ordoes not work as plannedProblem is the difference between the desired and actual outcomeProblem solving also involves identification of new opportunities

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision Making and Problem SolvingAre problem solving and decision making different? Or, are they the same thing?Consider phases of the decision process Phase (1) Intelligence Phase (2) DesignPhase (3) Choice, andPhase (4) Implementation(1)-(4): problem solving; (3): decision making(1)-(3): decision making; (4): problem solvingThis book: decision making problem solving

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making DisciplinesBehavioral: anthropology, law, philosophy, political science, psychology, social psychology, and sociologyScientific: computer science, decision analysis, economics, engineering, the hard sciences (e.g., biology, chemistry, physics), management science/operations research, mathematics, and statisticsEach discipline has its own set of assumptions and each contributes a unique, valid view of how people make decisions

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision StyleThe manner by which decision makers think and react to problemsperceive a problemcognitive responsevalues and beliefsWhen making decisions, peoplefollow different steps/sequencegive different emphasis, time allotment, and priority to each steps

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision Style Personality temperament tests are often used to determine decision styles There are many such testsMeyers/Briggs,True Colors (Birkman),Keirsey Temperament Theory, Various tests measure somewhat different aspects of personalityThey cannot be equated!

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision Style Decision-making stylesHeuristic versus AnalyticAutocratic versus DemocraticConsultative (with individuals or groups)A successful computerized system should fit the decision style and the decision situationShould be flexible and adaptable to different users (individuals vs. groups)

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision MakersSmall organizationsIndividualsConflicting objectivesMedium-to-large organizationsGroupsDifferent styles, backgrounds, expectationsConflicting objectivesConsensus is often difficult to reachHelp: Computer support, GSS,

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    ModelA significant part of many DSS and BI systemsA model is a simplified representation (or abstraction) of realityOften, reality is too complex to describeMuch of the complexity is actually irrelevant in solving a specific problemModels can represent systems/problems at various degrees of abstraction

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Types of ModelsModels can be classified based on their degree of abstraction

    Iconic models (scale models)

    Analog models

    Mental Models

    Mathematical (quantitative) modelsDegree of abstractionLessMore

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    The Benefits of ModelsEase of manipulationCompression of timeLower cost of analysis on modelsCost of making mistakes on experimentsInclusion of risk/uncertaintyEvaluation of many alternatives Reinforce learning and trainingWeb is source and a destination for it

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Phases of Decision-Making ProcessHumans consciously or sub consciously follow a systematic decision-making process - Simon (1977) IntelligenceDesignChoiceImplementation(?) Monitoring (a part of intelligence?)

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Simons Decision-Making Process

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: Intelligence PhaseScan the environment, either intermittently or continuouslyIdentify problem situations or opportunitiesMonitor the results of the implementationProblem is the difference between what people desire (or expect) and what is actually occurringSymptom versus ProblemTimely identification of opportunities is as important as identification of problems

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: Intelligence PhasePotential issues in data/information collection and estimationLack of dataCost of data collectionInaccurate and/or imprecise dataData estimation is often subjectiveData may be insecureKey data may be qualitativeData change over time (time-dependence)

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: Intelligence PhaseProblem ClassificationClassification of problems according to the degree of structuredness Problem Decomposition Often solving the simpler subproblems may help in solving a complex problemInformation/data can improve the structuredness of a problem situationProblem OwnershipOutcome of intelligence phase:A Formal ProblemStatement

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: The Design PhaseFinding/developing and analyzing possible courses of actionsA model of the decision-making problem is constructed, tested, and validatedModeling: conceptualizing a problem and abstracting it into a quantitative and/or qualitative form (i.e., using symbols/variables)Abstraction: making assumptions for simplificationTradeoff (cost/benefit): more or less abstractionModeling: both an art and a science

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: The Design PhaseSelection of a Principle of ChoiceIt is a criterion that describes the acceptability of a solution approachReflection of decision-making objective(s) In a model, it is the result variableChoosing and validating againstHigh-risk versus low-riskOptimize versus satisficeCriterion is not a constraint

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: The Design PhaseNormative models (= optimization)the chosen alternative is demonstrably the best of all possible alternativesAssumptions of rational decision makersHumans are economic beings whose objective is to maximize the attainment of goalsFor a decision-making situation, all alternative courses of action and consequences are knownDecision makers have an order or preference that enables them to rank the desirability of all consequences

    Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall2-*

    Decision-Making: The Design PhaseHeuristic models (= suboptimization)the chosen alternative is the best of only a subset of possible alternativesOften, it is not feasible to optimize realistic (size/complexity) problemsSuboptimization may also help relax unrealistic assumptions in modelsHelp reach a good enough solution faster

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