BIS II - Foundations & Technologies for Decision Making and Support Flashcards
Managerial Decision Making
1) Management is a process by which organizational goals are achieved by using resources.
a. Inputs: resources
b. Output: attainment of goals
c. Measure of success: outputs/inputs
2) Decision making is selecting the best solution from two or more alternatives
3) Simon: Management ≈ Decision Making?
a. Managerial decision making is synonymous with the entire management process
b. Example of planning: What should be done? When? Where? Why? How? By whom?
Phases of decision-making process
Humans consciously or subconsciously follow a systematic decision-making process
a. Simon’s model
i. Intelligence: gathering information by examining reality, then identifying and defining the problem
ii. Design: determining alternatives and evaluating them
iii. Choice: selecting a tentative solution and testing validity
iv. Implementation: putting the selected solution into effect
v. Monitoring (a part of intelligence?)
1) The Intelligence Phase: Problem (opportunity) identification
- problem ownership
- problem classification
- problem decomposition
Problem = the difference between what people desire (or expect) and what is actually occurring
ii. Scan the environment, either intermittently or continuously
iii. Identify problem situations or opportunities
iv. Monitor the results of the implementation
Problem ownership: the assignment of authority to solve the problem
vii. Problem classification: classification of problems according to the degree of structure
viii. Problem decomposition: often solving the simpler subproblems may help in solving a complex problem. Information/data can improve the structure of a problem situation
1) Intelligence phase - potential issues in data/information collection and estimation
- Lack of data
- Cost of data collection
- Inaccurate and/or imprecise data
- Data estimation is often subjective
- Data may be insecure
- Key data may be qualitative
- Data change over time
2) The Design Phase
Model formulation = conceptualizing and abstracting the problem into a quantitative and/or qualitative form (i.e. using symbols/variables).
Abstraction = making assumptions for simplification. Tradeoff (cost/benefit): more or less abstraction
1) Choose a model
2) Select criteria for choice
3) Search for alternatives
4) Measure/rank outcomes
2) Design phase - types of models
- Normative (prescriptive models (=optimization=
- Heuristic models (=suboptimization)
- Descriptive models/simulation
2) Design phase - criteria for choice
- Good enough/satisfying: “something less than the best”; form of suboptimzation; seeking to achieve a desired level of performance as opposed to the “best”. Is time-saving
2) Design phase - searching for alternatives
- In optimization models (such as linear programming), the alternatives may be generated automatically
- In most MSS situations, however, it is necessary to generate alternatives manually
- Use of GSS helps generate alternatives
2) Design phase - Measuring/ranking the outcomes
- Using the criteria for choice
2. Risks: lack of precise knowledge (uncertainty); can be measured with probability
3) The Choice phase
- Actual decision and the commitment to follow a certain course of action.
- Boundary between design and choice is often unclear (partially overlapping phases)
- Generate alternatives while performing evaluations
- Includes the search, evaluation, and recommendation of an appropriate solution to the model
The implementation phase
1) Implementation = putting a recommended solution to work
2) Solution to a problem implies change -> change management
Decision Support Framework - Decisions can be structured according to
1) Degree of Structuredness
a. Highly structured (aka programmed)
b. Semi-structured
c. Highly unstructured
2) Types of Control
a. Strategic planning (top-level, long-range)
b. Management control (tactical planning)
c. Operational control
Decision Support for the Intelligence Phase
a. Enabling continuous scanning of external and internal information sources to identify problems and/or opportunities
b. Resources/technologies: WEB, ES, OLAP data warehousing, data/text/Web mining, EIS/Dashboards, KMS, GSS, GIS
c. Business activity monitoring (BAM)
d. Business process management (BPM)
e. Product life-cycle management (PLM)
Decision support for the design phase
a. Enabling generating alternative courses of action, determining the criteria for choice
b. Generating alternatives: for structured/simple problems, use standard and or special models; or unstructured/complex problem, use human experts, ES, KMS, GSS, OLAP, data/text mining
c. Good criteria for choice are critical
Decision support for the choice phase:
a. Enabling a selecting of the best alternative given a complex constraint structure
b. Use sensitivity analyses, what-if analyses, goal seeking
c. Resources: KMS, CRM, ERP and SCM, Simulation and other descriptive models
