ISM/U3 Topic 4 Decision Making – Business Intelligence
Decision making in businesses used to be limited to management. Today, lower-level employees are responsible for some of these decisions, as information systems make information available to lower levels of the business.
Types of Decisions
Decisions are classified as structured, semi-structured, and unstructured.
Fig. Information Requirements of Key Decision-Making Groups In A Firm
Unstructured decisions are those in which the decision maker must provide judgement, evaluation, and insight to solve the problem. Structured decisions, by contrast, are repetitive and routine, and they involve a definite procedure for handling them so that they do not have to be treated each time as if they were new. Many decisions have elements of both types of decisions and are semistructured, where only part of the problem has a clear-cut answer provided by an accepted procedure. In general, structured decisions are more prevalent at lower organizational levels, whereas unstructured problems are more common at higher levels of the firms.
The Decision-Making Process
There are four different stages in decision making: intelligence, design, choice, and implementation.
Fig. Stages In Decision Making
- Intelligence consists of discovering, and understanding the problems occurring in the organization – why a problem exists, where, and what effects it is having on the firm.
- Design involves identifying and exploring various solutions to the problem.
- Choice consists of choosing among solution alternatives.
- Implementation involves making the chosen alternative work and continuing to monitor how well the solution is working.
Managers and Decision Making In the Real World
Managers play key roles in organizations. Managerial roles are expectations of the activities that managers should perform in an organization. These managerial roles fell into three categories: interpersonal, informational, and decisional.
- Interpersonal Roles: managers act as leaders, attempting to motivate, counsel, and support subordinates.
- Informational Roles: managers act as the nerve centers of their organizations, receiving the most concrete, up-to-date information and redistributing it to those who need to be aware of it.
- Decisional Roles: managers act as entrepreneurs by initiating new kinds of activities; they handle disturbances arising in the organization; they allocate resources to staff members who needs them; and they negotiate conflicts and mediate between conflicting groups.
What is Business Intelligence?
“Business intelligence” is a term used by hardware and software vendors and information technology consultants to describe the infrastructure for warehousing, integrating, reporting, and analyzing data that comes from the business environment.
The Business Intelligence Environment
There are six elements in this business intelligence environment:
- Data from the business environment: business must deal with both structured and unstructured data from many different sources and need to be integrated and organized so that they can be analyzed and used by human decision makers.
- Business intelligence infrastructure: it is a powerful underlying foundation database system that captures all the relevant data to operate the business.
- Business analytics toolset: a set of software tools are used to analyze data and produce reports, respond to questions posed by managers, and track the progress of the business using key indicators of performance.
- Managerial users and methods: business intelligence hardware and software are only as intelligent as the human beings who use them. Managers impose other on the analysis of data using a variety of managerial methods that defines strategic business goals and specify how progress will be measured. You need to remember that, so far, only humans can ask intelligent questions.
- Delivery platform-MIS, DDS, ESS: the results from business intelligence and analytics are delivered to managers and employees in a variety of ways, depending on what they need to know to perform their jobs. MIS, DDS, and ESS deliver information and knowledge to different people and levels in the firm.
- User Interface: business people are no longer tied to their desks and desktops. They often learn quicker from a visual representation of data than from a dry report with columns and rows of information.
Business Intelligence And Analytics Capabilities
Business intelligence and analytics promise to deliver correct, nearly real-time information to decision makers, and the analytic tools help them quickly understand the information and take action.
- Production reports: reports based on industry-specific requirements.
- Parameterized reports: users enters several parameters as in a pivot table to filter data and isolate impacts of parameters.
- Dashboards/scorecards: visual tools for presenting performance data defined by users.
- Ad hoc query/search/report creations: they allow users to create their own reports based on queries and searches
- Drill down: the ability to move from a high-level summary to a more detailed view.
- Forecasts, scenarios, models: the ability to perform linear forecasting, what-if- scenario analysis, and analyze data using standard statistical tools.
Fig. Business Intelligence Users
Decision Support For Senior Management: Balanced Scorecard And Enterprise Performance Management Methods
The purpose of executive support systems (ESS), is to help C-level executive managers focus o the really important performance information that affect the overall profitability and success of the firm. The leading methodology for understanding the really important information needed by a firm’s executives is called the balanced scorecard method, a framework for operationalizing a firm’s strategic plan by focusing on measurable outcomes on four dimensions of firm performance: financial, business process, customer, and learning and growth. Performance on each dimension is measured using key performance indicators (KPIs).
Fig. The Balanced Scorecard Framework
Group Decision-Support Systems (GDSS)
A group decision-support systems (GDSS) is an interactive computer-based system for facilitating the solution of unstructured problems by a set of decision makers working together as a group in the same location or in a different locations. GDSS-guided meetings take place in conference rooms with special hardware and software tools to facilitate group decision making. GDDS make it possible to increase meeting size while at the same time increasing productivity because individuals contribute simultaneously rather than one at a time.
Fig. Group Decision-Support Systems (GDSS)