Chapter 12

Question 1

12.1 What are a manager’s three basic roles? Hint: IID

Answer 1

All managers perform three basic roles:

1. Interpersonal roles: Figurehead, leader, liaison
2. Informational roles: Monitor, disseminator, spokesperson, analyzer
3. Decisional roles: Entrepreneur, disturbance handler, resource allocator, negotiator

Question 2

12.1 What is a decision?

Answer 2

A decision refers to a choice among two or more alternatives that individuals and groups make. Decision making is a systematic process.

Economist Herbert Simon (1977) described decision making as composed of three major phases: intelligence, design, and choice.

Question 3

12.1 Describe the three phases of the decision-making process? Hint: IDC

Answer 3

The decision-making process starts with the intelligence phase, in which managers examine a situation and then identify and define the problem or opportunity.

In the design phase, decision makers construct a model for addressing the situation.

The choice phase involves selecting a solution or course of action that seems best suited to resolve the problem. Computer-based decision support assists managers in the decision-making process.

Question 4

12.1 Why do managers need IT support?

Answer 4

The turbulent business environment and borderless world has created more business opportunities, but has also generated more data, and in turn more decisions to be made.

The number of alternatives is constantly increasing.

Most decisions must be made under time pressure.

It is often necessary to rapidly access remote information, consult with experts, or reference points as such.

The increased complexity of decisions require sophisticated analysis.

Question 5

12.1 What are the two major dimensions in the framework for computerized decision analysis?

Answer 5

Various types of decisions can be placed along two major dimensions: problem structure and the nature of the decision.

Question 6

12.1 What are the three categories of problem structures (framework for computerized decision analysis)?

Answer 6

Decision-making processes fall along a continuum ranging from highly structured to highly unstructured.

1. Structured decisions
2. Unstructured decisions
3. Semistructured decisions

Question 7

12.1 What are structured decisions?

Answer 7

Structured decisions deal with routine and repetitive problems for which standard solutions exist, such as inventory control. The first three phases of the decision process—intelligence, design, and choice—are laid out in a particular sequence. These types of decisions are candidates for decision automation.

Question 8

12.1 What are unstructured decisions?

Answer 8

Unstructured decisions are intended to deal with “fuzzy,” complex problems for which there are no cut-and-dried solutions. An unstructured decision is one in which there is no standardized procedure. Human intuition and judgment often play an important role.

Question 9

12.1 What are semistructured decisions?

Answer 9

Semistructured decisions are decisions in which only some of the decision-process phases are structured. Semistructured decisions require a combination of standard solution procedures and individual judgment.

Question 10

12.1 What are the three categories of managerial decision-making (nature of decisions)? Hint: OMS

Answer 10

1. Operational control: Executing specific tasks efficiently and effectively
2. Management control: Acquiring and using resources efficiently in accomplishing organizational goals
3. Strategic planning: The long-range goals and policies for growth and resource allocation

Question 11

12.2 What is business analytics?

Answer 11

Business analytics (BA) is the process of developing actionable decisions or recommendations for actions based on insights generated from historical data.

Question 12

12.2 What are the three specific analytics targets (in BA)?

Answer 12

1. The development of one or a few related analytics applications:
   This target is often a point solution for a departmental need, such as campaign management in marketing.
2. The development of infrastructure to support enterprise-wide analytics:
   This target may require other investments such as an enterprise data warehouse.
3. Support for organizational transformation:
   With this target, a company uses business analytics to fundamentally transform the ways it competes in the marketplace.
   Business analytics supports a new business model, and it enables the business strategy.

Question 13

12.2 What are the steps in the business analytics process?

Answer 13

1. Identifying business problem - “pain points”. Organizations turn to BA and its underlying technologies to help solve business problems.
2. Data management
3. Descriptive analytics, predictive analytics, prescriptive analytics
4. Presentation tools - Many organizations have employees who “translate” the results of these analyses into business terms for the decision makers. These employees often use presentation tools in the form of dashboards to communicate the message visually.
5. Asking the right question - Decision makers must be ready to “ask the next question.” Everyone involved in the BA process must use their creativity and intuition.

Question 14

12.2 What is data management in the BA process? Hint: ETL

Answer 14

Organizations are now able to combine and analyze structured and unstructured data from many sources in the form of Big Data.

At this point, organizations integrate and “clean” these data into data marts and data warehouses through a process called extract, transform, and load (ETL). The data in the data warehouse are now available to be analyzed by data scientists, analysts, and decision makers.

Question 15

12.2 What are the main business analytics tools?

Answer 15

• Excel (most popular BA tool)
• Multidimensional analysis (also called OLAP)
• Data mining
• Decision-support systems
• Statistical procedures: descriptive statistics; affinity analysis; linear, multiple and logistic regression; and others

Question 16

12.3 What is data reduction?

Answer 16

Data reduction is the conversion of raw data into a smaller amount of more useful information. Descriptive, predictive, and prescriptive analytics are essentially steps in data reduction.

Question 17

12.3 What is descriptive analytics?

Answer 17

Descriptive analytics is the first step in data reduction. Descriptive analytics summarizes what has happened in the past and enables decision makers to learn from past behaviors.

Question 18

12.3 What are the BA tools in descriptive analytics?

Answer 18

• Online analytical processing (OLAP) (i.e., multidimensional analysis)
• Data mining
• Decision-support systems (DSSs)
• Decision-support systems
  
  • Sensitivity analysis
  • What-If analysis
  • Goal-Seeking analysis

Question 19

12.3 What is online analytical processing (OLAP) in descriptive analytics?

Answer 19

Some BA applications include online analytical processing (OLAP), also referred to as multidimensional analysis capabilities.

OLAP involves “slicing and dicing” the data that are stored in a dimensional format, “drilling down” in the data to greater detail, and “rolling up” the data to greater summarization (less detail).

• OLAP performs multidimensional data analysis
• OLAP is a capability
• OLAP is a certain class of database applications

Question 20

12.3 What is data mining in descriptive analytics? What are data mining’s two basic operations?

Answer 20

Data mining refers to the process of searching for valuable business information in a large database, data warehouse, or data mart. Data mining can perform two basic operations: (1) identifying previously unknown patterns and (2) predicting trends and behaviors. (The first operation is a descriptive analytics application, and the second is a predictive analytics application.)

In descriptive analytics, data mining can identify previously hidden patterns in an organization’s data.

Question 21

12.3 What is affinity analysis (a data mining application)?

Answer 21

Affinity analysis is a data mining application that discovers co-occurrence relationships among activities performed by specific individuals or groups. (Ex.: If you buy A (coffee), you might want to buy B (cream) too)

Question 22

12.3 What are decision-support systems (DSSs) in descriptive analytics?

Answer 22

Decision-support systems (DSSs) combine models and data to analyze semistructured problems and some unstructured problems that involve extensive user involvement.

Models are simplified representations, or abstractions, of reality. Decision-support systems enable business managers and analysts to access data interactively, to manipulate these data, and to conduct appropriate analyses.

They have the related capabilities of sensitivity analysis, what–if analysis, and goal-seeking analysis.

Question 23

12.3 What is sensitivity analysis in descriptive analytics?

Answer 23

Sensitivity analysis examines how sensitive an output is to any change in an input while keeping other inputs constant.

Question 24

12.3 What is what-if analysis in descriptive analytics?

Answer 24

A model builder must make predictions and assumptions on the assessment of uncertain futures. The results depend on the accuracy of these assumptions.

What-if analysis attempts to predict the impact of changes in the assumptions—that is, the input data—on the proposed solution.

Question 25

12.3 What is goal-seeking analysis in descriptive analytics?

Answer 25

Goal-seeking analysis represents a “backward” solution approach. Goal seeking attempts to calculate the value of the inputs necessary to achieve a desired level of output.

Question 26

12.4 What is predictive analytics?

Answer 26

Predictive analytics examines recent and historical data to detect patterns and predict future outcomes and trends. Predictive analytics provides estimates about the likelihood of a future outcome.

The purpose of predictive analytics is not to tell decision makers what will happen in the future. Predictive analytics can only forecast what might happen in the future, based on probabilities.

Question 27

12.4 What are some BA tools in predictive analytics?

Answer 27

The tools include data mining, and statistical procedures include linear regression, multiple regression, and logistic regression.

→ Data Mining

Recall that data mining can perform two basic operations: (1) identifying previously unknown patterns and (2) predicting trends and behaviors. The first operation is a descriptive analytics application, and the second is a predictive analytics application.

In predictive analytics, data mining can predict trends and behaviors.

Question 28

12.5 What is prescriptive analytics?

Answer 28

Prescriptive analytics goes beyond descriptive and predictive models by recommending one or more courses of action and by identifying the likely outcome of each decision.

Predictive analytics does not predict one possible future; rather, it suggests multiple future outcomes based on the decision maker’s actions.

Basically, prescriptive analytics requires predictive analytics with two additional components: actionable data and a feedback system that tracks the outcome produced by the action taken.

Question 29

12.5 What are the BA tools in prescriptive analytics? Hint: OSD

Answer 29

Statistical procedures include:
• optimization
• simulation
• decision trees