Chapter Nine: Managerial Support Systems

Section 9.1 - Before You Go On

1. Describe the decision-making process proposed by Simon.

Decision making is a systematic process. Simon (1977) described the process as composed of four major stages: intelligence, design, choice and implementation.

1. Intelligence: managers examine a situation, an identify and define a problem
2. Design: decision makers construct a model that simplifies the problem; they do this by making assumptions that simplify reality and by expressing the relationships among all the relevant variables; models are then validated in a test data
3. Choice: decision makers set criteria for evaluating all potential solutions that are proposed; involves selecting a solution which is tested 'on paper'; decision makers choose the solution that is most feasible
4. Implementation: if successful the proposed solution would have solved the problem, if not then the failure leads to a return to the previous phases

2. Why do managers need IT support?

Managers need IT support as it is difficult to make good decisions without valid and relevant information. Information is vital for each phase and activity in the decision-making process. Decision making is become increasingly difficult for several reasons including:

• The number of alternatives to be considered constantly increases. (global market, internet)
• Decisions must be made under time pressure.
• Decisions are more complex (requires modeling)
• Decision makers can be in different locations and so is the information.

3. Describe the decision matrix

The three primary classes of problem structure (structured, unstructured, semi-structured) and the three broad categories of the nature of decisions (operational control, management control and strategic planning) can be combined together in a decision support matrix that consists of nine cells, as shown in the diagram below.

Lower-level managers usually perform the structured and operational-control oriented tasks in cells 1, 2, and 4. (Blue color above).

Middle managers and staff usually perform the tasks in cells 3, 5, and 7. (Orange color above).

Senior executives usually perform the tasks in cells 6, 8, and 9. (Yellow color above.)

Section 9.2 - Before You Go On

1. Describe the capabilities of data mining.

Data mining derives its name from searching for valuable business information in a large database, data warehouse, or data mart. It addresses why it is happening and provides predictions of what will happen in the future. Data mining can perform two operations:

1. Predicting Trends and Behaviours

• automates the process of finding predictive information in large databases with questions that traditionally require extensive hands on analysis, are able to be answered directly and quickly from the data
• example targeted marketing: data mining can use data from past promotional mailings to identify people who are most likely to respond favourably to future mailings

2. Identifying previously unknown patterns

• can identify previously hidden patterns in a single step
• example fraudulent credit card transactions: pattern emerges of the typical ways you are using your credit card (e.g. places); if card is stolen and used fraudulently this usage is often different from your usual pattern of use; data mining tools can distinguish the difference in the two patterns of use and bring this issue to the card holders attention

Section 9.3 - Before You Go On

1. What are some of the capabilities of digital dashboards?

Digital dashboards evolved from executive information systems and provide rapid access to timely informations and direct access to management reports. It is very user friendly and is supported by graphics.

Capabilities of digital dashboards:

• Drill-down reports: ability to go to details, at several levels; can be done by a series of menus or by direct queries (using intelligent agents and natural language processing)
• Critical success factors (CSFs): the factor most critical for the success of the business; can be organisational, industrial, departmental, etc.
• Key performance indicators (KPIs): the specific measures of CSFs
• Status access: the latest data available on KPI or some other metrics; ideally in real time
• Trend analysis: short-,medium-, and long-term trend of KPIs or metrics, which are projected using forecasting methods
• Ad-hoc analysis: analyses made any time, upon demands and with any desired factors and relationships
• Exception reports: reports that highlight deviations larger than certain thresholds; reports may include only deviations