Transcript Learning Objectives

Information Systems: the
Foundation of E-Business (CIS 108)
Decision and Decision Making and its Implications
for the Design of IT/IS
Lecture SEVEN (7th March 2005)
Amare Michael Desta
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Objectives
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To explain the nature of decision-making
To identify different models of the decisionmaking process
To examine the implications of theory and
research on decision-making for the development
of IS/IT systems
To explain the role of DSS in supporting decisionmaking
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Decision and Decision making
defined
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Decision is the ability to decide quickly and
without pausing because of uncertainty:
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Decision making: the processes involved in
making a selection between alternative
courses of action
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Decision-Making Has Become
More Difficult
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Increasing complexity of problems and bewildering
array of alternatives
Decisions often have to be made under tight time
constraints
Increased environmental uncertainty has made
sophisticated analysis more important
Remote working has increased the difficulties of
accessing information and reaching consensual
decisions
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Decision-Making By Level
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Strategic Decisions
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Tactical Decisions
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What products and services to offer, how and where to
obtain resources, market strategies and position,
pricing policies
Obtaining and using resources, allocating duties,
hiring personnel, selecting suppliers
Operational Decisions
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Scheduling production, allocating work, training,
dealing with employee problems and grievances
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Key IT Decisions
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What new systems do we need to acquire to help the
company remain competitive?
Should we outsource any of our IT?
Who should we appoint to manage our IT/IS
systems?
If we merge with another company, should we
install new systems compatible with our own?
Should we invest in expensive new software to make
our systems more secure?
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Decision-Making Models
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Rational Model
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Decision-making by individuals is the outcome
of logical, rational processes
Bounded Rationality
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Various factors conspire to undermine rational
decision-making processes; in reality, people
satisfy rather than optimise
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Rational Model
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People try to maximise outputs in an orderly,
logical way Identify problem
Examine alternatives
Compare and evaluate
alternatives
Select best one
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Bounded Rationality
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People do not always behave in rational ways:
“ .. . The individual is limited by his unconscious
skills, habits and reflexes; he is limited by his
values and conceptions of purpose, which may
diverge from organizational goals; he is limited
by the extent of his knowledge and
information”
(Simon, 1976, p.76)
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Bounded Rationality (Contd….)
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Factors undermining rationality
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Lack of environmental surveillance
 People tend to deal with problems that require
immediate attention rather than focus on the
future; people select the most obvious rather than
the best alternatives
Satisfying behaviour
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People choose the solution that will do rather than is
necessarily the best, I.e. don’t look for optimal solutions
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Bounded Rationality (Contd….)
Identify problem
Determine minimum criteria all alternatives
must meet
Choose the alternative that best deals with the
problem
If acceptable, implement it
Evaluate ease of discovering alternatives and use
this to determine acceptable standards for similar
problems in future
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Bounded rationality (Contd…)
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Other factors that limit rational behaviour
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People are strongly influenced by the outcomes of past
decisions
People will discount information that conflicts with
their beliefs or values
People tend to construct general decision-making rules
and follow them, even if they are inappropriate in a
particular situation
People rationalise their choices
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Organisational Decision-Making
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In theory, decision-making at the organisational level is
more rational since there are likely to be organisation-wide
procedures for identify, evaluating and selecting
alternatives
Research indicates, however, that organisational decisionmaking is strongly influenced by past events, the full range
of alternatives is rarely considered and decisions are taken
on a piecemeal basis
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Computers can help
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Computer-based IS have the capacity can gather
vast amounts of data and present it in easy-tounderstand formats, thus increasing the likely
hood that more and better quality information will
be taken into account in decision-making
Computer-based IS have the capacity to model
alternatives and indicate the outcomes of likely
courses of action. In this way they are able to
simplify what, in reality, is a highly complex
process and help people envisage different
decision scenarios
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Defining Decision Support System
The concept of a (DSS) is extremely broad and its
definitions vary:
 It is "a computer-based system that aids the process of
decision making, (Finlay, 1994)
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It is "an interactive, flexible, and adaptable computerbased IS - especially developed for supporting the
solution of a non-structured management problem for
improved decision making, (Turban, 1995)
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Defining DSS ….. (Contd…)
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“DSS couple the intellectual resources of individuals
with the capabilities of the computer to improve the
quality of decisions”, (Keen & Scott, 1978)
DSS are "interactive computer-based systems that help
decision makers utilize data and models to solve
unstructured problems", (Sprague & Carlson, 1982),
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Defining DSS ….. (Contd…)
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A“ …a computer-based information system
that combines models and data in an attempt to
solve semi-structured problems with extensive
user involvement.”
(Turban et al, 2002)
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Uses of DSS – Some Examples
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Forecast passenger demand and schedule
aircraft
Evaluate bids from various contractors for
major projects
Discern customer buying patterns
Corporate forecasting and planning
Risk evaluation on major projects
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Characteristics of DSSs
Turban et al (2002) identify the following key characteristics
of DSSs
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Can be used by individual managers and groups of managers at
all levels of the organisation to solve semi and unstructured
problems
Supports several interdependent and sequential decisions
Supports all stages of the decision-making process and different
styles of decision-making
Can be adapted over time to meet changing circumstances
Easy to construct and use
Promotes learning which creates demands for improvements
Uses quantitative models
Allows the easy execution of sensitivity analyses
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Characteristics of DSSs (Contd…..)
Curtis (1998) identifies the following
key characteristics of DSSs
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Supports rather than usurps the role of the
decision-maker
Give flexible and interactive access to data
Fragmented – DSS tend to be developed in an ad
hoc way to support the needs of particular
individuals or groups
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Components of a DSS
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Data Management Component
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Contains data that is extracted from various sources and
then entered into DSS database or entered into DSS as
required
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Model Management Component
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Contains standard and customised models used to develop
decision support applications
Contains Model Base Management System that can
create DSS models easily and quickly, stores and manages
different models, allows users to manipulate models thus
enabling them to conduct sensitivity analyses
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Components of a DSS (Contd…)
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User Interface and Users
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Every aspect of the communications between the
system and the user
Most modern user interfaces are Web based.
Users are viewed as part of the system. Typically
comprise managers and specialists
Knowledge Management Component
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For very complex problem situations requiring expert
knowledge, DSS may include special various expert
or intelligent decision
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Group Decision Support Systems (GDSS)
“ … an interactive computer-based system to
facilitate the solution of unstructured
problems by a set of decision-makers
working together as a group”
(Laudon and Laudon, 2001)
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Aims of GDSS
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Aim is to improve the effectiveness of group
meetings
Supports the exchange of ideas, opinions,
information etc within the group
Early systems were designed to support face-toface meetings; more recent systems cater for
networked meetings of participants in different
locations
How Can GDSS Help?
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How Can GDSS Help?
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Providing group with rapid access to
external and internal sources of data
Permit non-sequential discussion of issues
Create instant, anonymous voting results
Structure the planning process
Record proceedings of meetings for future
analysis
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GDSS Components
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Hardware
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Software
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The conference facility, i.e. room which will include electronic
display boards, audiovisual and networking equipment or GDSS
facility specifically designed for electronic meetings, e.e. group-togroup video or teleconferencing
Usually includes ten or more tools and packages integrated into a
comprehensive system. Software includes electronic questionnaires,
electronic brainstorming tools, ideas organisers, tools for voting,
policy formation tools, stakeholder analysis tools
People
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Usually consists of group members and a facilitator
Enterprise Decision Support Systems
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Enterprise Decision Support Systems
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Organisational Decision Support Systems
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Used mainly by specialists such as planners, analysts
and researchers
Used for an organisational task that involves a
sequence of operations and decision-makers, e.g
constructing a marketing plan
DSS cut across organisational levels and units because
it addresses corporate wide problems
Enterprise Decision Support Systems
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Enterprise Decision Support Systems
(Contd…)
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Executive Information System
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Serves the information needs of top executives
Provides access to management reports, provides
exception reporting and drill down facilities, graphics
and is very user-friendly
Executive Support Systems offer enhanced capabilities,
including analysis, office automation, business
intelligence
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Common Features of EIS
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Drill down
Critical Success Factors (CSFs)
Trend analysis
Ad hoc analysis
Exception reporting
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Web-Based DSS
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Many DSS are now available on the Web,
making them available to anyone in the
organisation who needs them
Web-based DSS can be accessed remotely,
thus making them more flexible and easy to
use
Facilitates development and maintenance of
DSS
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Summary
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Decision-making is a key part of the role of management
Evidence suggests that people have limited information
processing capabilities. IT has an important role to play
in providing access to information, helping decisionmakers analyse information and evaluate alternatives in
problem situations
DSS exist for specialists and managers at every level of
the organisation
Development of Web-based DSS is making DSS an
enterprise-wide facility
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Reading
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Cooke, S. and Slack, N. (1991) Making
Management Decisions, Prentice-Hall.
Laudon, K. C. and Laudon, J. P. (2002)
Management Information Systems: Managing the
Digital Firm, Prentice Hall.
Simon, H. A. (1967) Administrative Behavior, The
Free Press.
Turban, E. and Aronson, J. (2001) Decision
Support Systems and Intelligent Systems, PrenticeHall
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