Management Information Systems:

Managing the Digital Firm

Seventeenth Edition, Global Edition

Chapter 12
Enhancing Decision Making

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 Learning Objectives
12.1 What are the different types of decisions, and how does the decision-making
process work?

12.2 How do information systems support the activities of managers and

management decision making?

12.3 How do business intelligence and business analytics support decision

making?

12.4 How do different decision-making constituencies in an organization use

business intelligence?

12.5 How will MIS help my career?

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 Video Cases
• Case 1: PSEG Leverages Big Data and Business Analytics
Using GE’s PREDIX Platform
• Case 2: FreshDirect Uses Business Intelligence to Manage
Its Online Grocery
• Case 3: Business Intelligence Helps the Cincinnati Zoo
Work Smarter

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 Eastspring: Targeted Enterprise System
Building
• Problem
– End-of-life technology and legacy systems
– Business needs of regional business units
• Solutions
– Systems offering a breadth of services
– Using outside vendors for products and systems
– Changing business processes
• Illustrates benefits of implementing a new system solution while
changing business processes
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 What Are the Different Types of Decisions,
and How Does the Decision-Making Process
Work? (1 of 2)
• 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
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 What Are the Different Types of Decisions,
and How Does the Decision-Making Process
Work? (2 of 2)
• Senior managers
– Make many unstructured decisions
• Middle managers
– Make more structured decisions but these may include
unstructured components
• Operational managers and rank and file employees
– Make more structured decisions
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 Figure 12.1 Information Requirements of
Key Decision-Making Groups in a Firm

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 The Decision-Making Process
• Intelligence
– Discovering, identifying, and understanding the problems
occurring in the organization
• Design
– Identifying and exploring solutions to the problem
• Choice
– Choosing among solution alternatives
• Implementation
– Making chosen alternative work and continuing to monitor how
well solution is working
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 Figure 12.2 Stages in Decision Making

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 Managerial Roles
• 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

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 Mintzberg’s 10 Managerial Roles (1 of 2)
• Interpersonal roles
– Figurehead
– Leader
– Liaison
• Informational roles
– Nerve center
– Disseminator
– Spokesperson
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 Mintzberg’s 10 Managerial Roles (2 of 2)
• Decisional roles
– Entrepreneur
– Disturbance handler
– Resource allocator
– Negotiator

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 Real-World Decision Making
• Three main reasons why investments in IT do not always produce
positive results
– Information quality
 High-quality decisions require high-quality information
– Management filters
 Managers have selective attention and have variety of biases
that reject information that does not conform to prior
conceptions
– Organizational inertia and politics
 Strong forces within organizations resist making decisions
calling for major change
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 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 nanoseconds
• Require safeguards to ensure proper operation and
regulation

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 What is Business Intelligence?
• Business intelligence
– Infrastructure for collecting, storing, analyzing data produced by
business
– Databases, data warehouses, data marts, Hadoop, analytic
platforms
• Business analytics
– Tools and techniques for analyzing data
– OLAP, statistics, models, data mining
• Business intelligence vendors
– Create business intelligence and analytics purchased by firms
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 The Business Intelligence Environment
• Six elements in the business intelligence environment
– Data from the business environment
– Business intelligence infrastructure
– Business analytics toolset
– Managerial users and methods
– Delivery platform—MIS, DSS, ESS
– User interface
 Data visualization tools

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 Figure 12.3 Business Intelligence and
Analytics for Decision Support

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 Business Intelligence and Analytics
Capabilities
• Goal is to deliver accurate real-time information to decision makers
• Main analytic functionalities of BI systems
– Production reports
– Parameterized reports
– Dashboards/scorecards
– Ad hoc query/search/report creation
– Drill down
– Forecasts, scenarios, models

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 Table 12.4 Examples of Business Intelligence
Predefined Production Reports
Business Functional Area Production Reports

Sales Forecast sales; sales team performance; cross-selling; sales cycle times

Service/call center Customer satisfaction; service cost; resolution rates; churn rates

Marketing Campaign effectiveness; loyalty and attrition; market basket analysis

Procurement and support Direct and indirect spending; off-contract purchases; supplier performance

Supply chain Backlog; fulfillment status; order cycle time; bill of materials analysis

Financials General ledger; accounts receivable and payable; cash flow; profitability

Human resources Employee productivity; compensation; workforce demographics; retention

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 Predictive Analytics
• Uses 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

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 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

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 Operational Intelligence and Analytics
• Operational intelligence: Business activity monitoring
• Collection and use of data generated by sensors
• Internet of Things (IoT)
– 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

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 Interactive Session: Organizations:
Predictive Maintenance in the Oil and Gas
Industry
• Class discussion
– Why is predictive maintenance so important in the oil and gas
industry? What problems does it solve?
– What is the role of the Internet of Things (IoT) and Big Data
analytics in predictive maintenance?.
– How did BP and Royal Dutch Shell’s predictive maintenance
applications change business operations and decision making?
– Give an example of how predictive maintenance systems could be
used in another industry.
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 Location Analytics and Geographic
Information Systems
• 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
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 Interactive Session: Management:
GIS Helps Land O’Lakes Manage
Assets Strategically
• Class discussion
– Why is geographic location data so important to Land O’Lakes.
What categories of geographic information does Land O’Lakes
use?
– How did using GIS improve operations and decision making at
Land O’Lakes?
– Give examples of three decisions at Land O’Lakes that were
improved by using GIS.
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 Decisional Support for Operational and
Middle Management
• Charged with monitoring key aspects of business
• Most decisions fairly structured
• Middle managers typically use MIS
– Increasingly online; can be queried interactively
– Exception reports

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 Figure 12.4 Business Intelligence Users

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 Support for 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
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 Figure 12.5 Sensitivity Analysis

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 Figure 12.6 A Pivot Table That Examines Customer
Regional Distribution and Advertising Source

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 Decision Support for Senior Management: Balanced
Scorecard and Enterprise Performance Management
Methods (1 of 2)
• ESS: decision support for senior management
– Help executives focus on important performance information
• Balanced scorecard method
– Measures outcomes on four dimensions
 Financial
 Business process
 Customer
 Learning and growth
– Key performance indicators (KPIs) measure each dimension
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 Figure 12.7 The Balanced Scorecard
Framework

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 Decision Support for Senior Management: Balanced
Scorecard and Enterprise Performance Management
Methods (2 of 2)
• 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

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 How Will MIS Help My Career?
• The Company: Western Well Health
• Position Description: Entry-level data analyst
• Job Requirements
• Interview Questions
• Author Tips

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 Copyright

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