Management Information

Systems
Chapter 11 Improving Decision Making and Managing Knowledge

Business School

Kyung Jin CHA

Kjcha7@hanyang.ac.kr
 Learning Objectives

11.1 What are the different types of decisions, and how does the
decision-making process work?
11.2 How do business intelligence and business analytics support
decision making?
11.3 What are the business benefits of using intelligent techniques in
decision making and knowledge management?
11.4 What types of systems are used for enterprise-wide knowledge
management, and how do they provide value for businesses?

2
Business Value of Improved Decision Making

• Possible to measure value of improved decision making

• Decisions made at all levels of the firm
• Some are common, routine, and numerous
• Although value of improving any single decision may be
small, improving hundreds of thousands of “small”
decisions adds up to large annual value for the business
Table 11.1 Business Value of Enhanced Decision
Making
Example Decision Value Decision Maker # of Annual Estimated Value Annual
Decisions to Firm
Allocate support to most Accounts 12 $100,000 $1,200,000
valuable customers manager
Predict call center daily demand Call Center 4 150,000 600,000
management
Decide parts inventory level daily Inventory 365 5,000 1,825,000
manager
Identify competitive bids from Senior 1 2,000,000 2,000,000
major suppliers management
Schedule production to fill Manufacturing 150 10,000 1,500,000
orders manager
 Types of Decisions
• Unstructured
• Decision maker must provide judgment to solve problem
• Novel, important, nonroutine
• No well-understood or agreed-upon procedure for making them
• Structured
• Repetitive and routine
• Involve definite procedure for handling them so do not have to be
treated as new
• Semi-structured
• Only part of problem has clear-cut answer provided by accepted
procedure
Figure 11.1 Information Requirements of Key
Decision-Making Groups in a Firm
 The Decision-Making Process
1. Intelligence
• Discovering, identifying, and understanding the problems
occurring in the organization

2. Design
• Identifying and exploring various solutions
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and monitoring how well
solution is working
Figure 11.2 Stages in Decision Making
High-Velocity Automated Decision Making

• Humans eliminated
• Decision-making process capture by computer algorithms
• Predefined range of acceptable solutions
• Decisions made faster than managers can monitor and control
• E.g. Trading programs at electronic stock exchanges
Quality of Decisions and Decision Making

• Accuracy
• Comprehensiveness
• Fairness
• Speed (efficiency)
• Coherence
• Due process
 Business Intelligence

• Infrastructure for managing data from business environment

• Warehousing
• Integrating
• Reporting
• Analyzing
• Hadoop, OLAP, analytics
• Products defined by technology vendors and consulting firms
Figure 11.3 Business Intelligence and Analytics for
Decision Support
Business Intelligence and Analytics Capabilities

• Production reports
• Parameterized reports
• Dashboards/scorecards
• Ad-hoc query/search/report creation
• Drill-down
• Forecasts, scenarios, models
• Linear forecasting, what-if scenario analysis, data analysis
Table 11.3 Examples of Predefined Business
Intelligence Production Reports
Business Functional Area Production Reports
Sales Sales forecasts, 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
 Predictive Analytics

• Uses statistical analytics, data mining, historical data;

assumptions of future conditions
• Extracts information from data to predict future trends and
behavior patterns
• Responses to direct marketing campaigns
• Best potential customers for credit cards
• At-risk customers
• Customer response to price changes and new services
• Accuracies range from 65 to 90 percent
 Big Data Analytics

• Predictive analytics can use the big data generated from social
media, consumer transactions, sensor and machine output,
etc.
• Combining with customer data
• Big data analytics driving move toward “smart cities”
• Utility management
• Transportation operation
• Healthcare delivery
• Public safety
Operational Intelligence and Analytics

• Operational intelligence
• Day-to-day monitoring of business decisions and activity
• Real-time monitoring
• Schneider National truckload logistics services provider
• Data developed from sensors in trucks, trains, industrial
systems
• The Internet of Things (IoT) providing huge streams of data
from connected sensors and devices
 Location Analytics and GIS

• Location analytics
• Big data analytics that uses location data from mobile
phones, sensors, and maps
• E.g. Helping a utility company view customer costs as
related to location
• GIS – Geographic information systems
• Help decision makers visualize problems with mapping
• Tie location data about resources to map
Figure 11.4 Business Intelligence Users
Support for Semi-Structured Decisions
• Decision-support systems (DSS)
• BI delivery platform for “super-users” who want to create
own reports, use more sophisticated analytics and models
• What-if analysis
• Sensitivity analysis
• Backward sensitivity analysis
• Pivot tables: Spreadsheet function for multidimensional
analysis
• Intensive modeling techniques
Figure 11.5 Sensitivity Analysis
Decision Support for Senior Management (1 of 2)

• Executive support systems

• Balanced scorecard method
• Measures four dimensions of firm performance
• Financial
• Business process
• Customer
• Learning and growth
• Key performance indicators (KPI) used to measure each
dimension
Decision Support for Senior Management (2 of 2)

• Business performance management (BPM)

• Management methodology based on firm’s strategies
• Translates strategies into operational targets
• Uses set of KPIs to measure progress toward targets
• ESS combine internal data with external
• Financial data, news, etc.
• Drill-down capabilities
Group Decision-Support Systems (GDSS)

• Facilitate solving of unstructured problems by set of decision

makers
• Software collects, ranks, stores ideas and decisions
• Conference rooms or virtual collaboration
• Support increased meeting sizes with increased productivity
Artificial Intelligent Techniques (1 of 4)

• Artificial intelligence
• Intelligent techniques
• Capture knowledge
• Discover patterns and behaviors in large amounts of data
• Perform some human-like action
• Generate solutions to problems to complex for humans to
solve alone
• Used in decision making and knowledge management
Artificial Intelligent Techniques (2 of 4)

• Machine learning
• Computers improving performance by using algorithms to learn
patterns from data and examples
• Neural networks
• Find patterns and relationships in very large amounts of data
• Sensoring and processing nodes
• Genetic algorithms
• Examine large number of solutions for a problem
• Based on machine learning techniques inspired by evolutionary
biology
Artificial Intelligent Techniques (3 of 4)

• Intelligent agents
• Software programs that work in the background to carry
out specific repetitive tasks
• Natural language processing
• Software that can process voice or text commands using
natural human language
• Computer vision systems
• Emulate human visual system to view and extract
information from real-world images
Artificial Intelligent Techniques (4 of 4)

• Robotics
• Design and use of movable machines that can substitute
for humans
• Expert systems
• Capture human expertise in a limited domain of knowledge
• Express expertise as a set of rules in a software system
• Knowledge base
• Inference engine
 Knowledge Management

• Business processes developed for creating, storing,

transferring, and applying knowledge
• Increases the ability of organization to learn from environment
and to incorporate knowledge into business processes and
decision making
• Knowing how to do things effectively and efficiently in ways
that other organizations cannot duplicate is major source of
profit and competitive advantage
Enterprise-wide Knowledge Management
Systems
• Three kinds of knowledge
• Structured
• Semi-structured
• Tacit knowledge (unstructured)
• Enterprise-wide knowledge management systems
• Deal with all three types of knowledge
• General-purpose, firm-wide systems that collect, store,
distribute, and apply digital content and knowledge
 Learning Management Systems

• Provide tools for management, delivery, tracking, and

assessment of employee learning and training
• Multiple modes of learning
• Videos
• Web-based classes
• Live instruction
• Group learning in online forums
• Massive open online courses (MOOCs)
 Knowledge Work Systems

• Specialized systems for knowledge workers

• Requirements of knowledge work systems:
• Specialized tools
• Powerful graphics, analytical tools, and
communications and document management
• Computing power to handle sophisticated graphics or
complex calculations
• Access to external databases
• User-friendly interfaces
Figure 11.13 Requirements of Knowledge Work
Systems
Examples of Knowledge Work Systems

• Computer-aided design (CAD) systems

• Virtual reality (VR) systems
• Simulation and modeling
• Virtual Reality Modeling Language (VRML)
• Augmented reality (AR) systems
• Live view of physical world with elements augmented by
computer-generated imagery
• E.g. image-guided surgery