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MIS-410: Decision Support System (DSS)

Ashis Talukder

Lecturer, MIS

Dhaka University

Book:DECISION SUPPORT AND BUSINESS INTELLIGENCE SYSTEMS

Efraim TurbanJay E AronsonTeng-Peng LiangReamesh Sharda

Chapter 1: Decision Support System and Business Intelligence

DECISION SUPPORT SYSTEMS AND BUSINESS INTELLIGENCE

Learning Objectives

• Understand today’s 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-responses-support 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 (Mintzberg’s

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


– 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



– Gorry & Scott-Morton (1971) proposed the classical frame work of 3×3 matrix

– Then Simon’s (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


– 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 • Computer support for structured

decisions – Structured problems encountered

repeatedly– Possible to abstract, analyze, and classify

into specific categories for high level of structure


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


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 • 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.


6. The Information systems department is too busy to address all of management’s 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.


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)


– 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


– 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 ActionDecision

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



– 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 corporate-wide 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


– Styles of BI1. Report Delivery and Alerting

2. Enterprise Reporting (dashboard, scorecard)

3. Cube Analysis (Slice and Dice Analysis)

4. Ad-hoc Query

5. 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


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 )


– DSS is apart of BI (one of BI’s 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 BI’s 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. Business process

2. Participants

3. Information

4. Technology

5. Product and services

6. Customers

7. Infrastructure

8. Environment

9. Strategy

The Major Tools and Techniques of Managerial Decision Support

• Data management• Reporting status

tracking• Visualization• Business analytics• Strategy and

performance management

• Communication and collaboration

• Knowledge management

• Intelligent systems• Enterprise systems

Computerized Tools for Decision Support

The Major Tools and Techniques of Managerial Decision Support • Tools-Web connection

– All of these tools are available in both web-based 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