Decision Support Systems

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Business Decision Making and the Decision-Making Process

Decision-Making Levels:

• Senior management

• Middle management and project teams

• Operational management and project teams

• Individual employees

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Information Requirements of Key Decision-Making Groups
in a Firm

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 Types of Decisions

Unstructured decisions:

• New, non-routine decisions requiring judgment and

insights

• Examples: Approve capital budget; decide corporate

objectives

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 Types of Decisions (Continued)
Structured decisions:

• Routine decisions with definite procedures

• Examples: Restock inventory; determine special offers

to customers
Semi-structured decisions:
• Only part of decision has clear-cut answers provided
by accepted procedures

• Examples: Allocate resources to managers; develop a

marketing plan

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 Systems for Decision Support

There are four kinds of systems that support the different levels
and types of decisions:
• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

• Group Decision-Support Systems (GDSS)

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 Stages in Decision Making

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 Decision Support Systems
• Decision support systems (DSS)
• Offer potential to assist in solving both semi-structured
and unstructured problems

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 Decision Making as a Component of
Problem Solving
Intelligence

Decision
making Design

Problem
Choice solving

Implementation

Monitoring

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 Solution Types
• Optimization model
• Finding the best solution
• Satisficing model
• Finding a good -- but not necessarily the best -- solution
to a problem
• Heuristics
• Commonly accepted guidelines or procedures that
usually find a good solution

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 Problem Solving Factors
• Multiple decision objectives
• Increased alternatives
• Increased competition
• The need for creativity
• Social and political actions
• International aspects
• Technology
• Time compression
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 Characteristics of a DSS (1)
• Handles large amounts of data from different
sources
• Provides report and presentation flexibility
• Offers both textual and graphical orientation

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 Characteristics of a DSS (2)
• Supports drill down analysis
• Performs complex, sophisticated analysis and
comparisons using advanced software packages
• Supports optimization, satisficing, and heuristic
approaches

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 Characteristics of a DSS (3)
• Performs different types of analyses
• “What-if” analysis
• Makes hypothetical changes to problem and observes impact
on the results
• Simulation
• Duplicates features of a real system
• Goal-seeking analysis
• Determines problem data required for a given result

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 Goal Seeking Example
• You know the desired result
• You want to know the required input(s)
• Example:
• Microsoft Excel’s “Goal Seek” and “Solver” functions

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 Excel
demo

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 Capabilities of a DSS (1)
• Supports
• Problem solving phases
• Different decision frequencies

Merge with How many

another widgets
company? should I order?

low high
Frequency

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 Capabilities of a DSS (2)
• Highly structured problems
• Straightforward problems, requiring known facts and
relationships.
• Semi-structured or unstructured problems
• Complex problems wherein relationships among data
are not always clear, the data may be in a variety of
formats, and are often difficult to manipulate or obtain

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 Decision Making Levels

Strategic
Strategic-level managers
involved with long-term
Tactical decisions
Operational-level
managers involved with
Operational
daily decisions
High Low

Decision Frequency

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 Integration of
TPS, MIS, and DSS
• In many organizations they are integrated through a
common database
• Separation of DSS transactions in the database
from TPS and MIS transactions may be important
for performance reasons

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 Web-Based
Decision Support Systems

• Web-based decision support systems

• Decision support system software provides business
intelligence through web browser clients that access
databases either through the Internet or a corporate
intranet

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 Components of a DSS
• Model management software (MMS)
• Coordinates the use of models in the DSS
• Model base
• Provides decision makers with access to a variety of
models
• Dialogue manager
• Allows decision makers to easily access and manipulate
the DSS

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 Database Model base

DBMS MMS

Access to the
internet, networks, External database External
and other computer access databases
systems

Dialogue manager

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 Model Base

• Model Base
• Provides decision makers with
access to a variety of models and
assists them in decision making
• Models
• Financial models
• Statistical analysis models
• Graphical models
• Project management models

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 Advantages and Disadvantages
of Modeling
• Advantages
• Less expensive than custom approaches or real systems.
• Faster to construct than real systems
• Less risky than real systems
• Provides learning experience (trial and error)
• Future projections are possible
• Can test assumptions
• Disadvantages
• Assumptions about reality may be incorrect
• Accuracy of predications often unreliable
• Requires abstract thinking

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 Group Decision Support System
• Group Decision Support System (GDSS)
• Contains most of the elements of DSS plus software to
provide effective support in group decision-making
settings

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 Databases

Model base GDSS processor GDSS software

Access to the internet

and corporate intranet,
Dialogue External database External
networks, and other manager access databases
computer system

Users

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 Characteristics of a GDSS (1)
• Special design
• Ease of use
• Flexibility
• Decision-making support
• Delphi approach (also known as Estimate-Talk-Estimate (ETE)) is a
structured communication technique or method, originally
developed as a systematic, interactive forecasting method which
relies on a panel of experts.)
• Brainstorming
• Group consensus
• Nominal group technique

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 Characteristics of a GDSS (2)
• Anonymous input
• Reduction of negative group behaviour
• Parallel communication
• Automated record keeping
• Cost, control, complexity factors

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 Components of a GDSS and GDSS
Software
• Database
• Model base
• Dialogue manager
• Communication capability
• Special software (also called GroupWare)
• E.g., Lotus Notes
• people located around the world work on the same
project, documents, and files, efficiently and at the same
time

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 GDSS Alternatives

high

Local area Wide area

Decision frequency

decision network decision network

Decision
Teleconferencing
room
low

close distant
Location of group members

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 Decision Room
• Decision Room
• For decision makers located in the same geographic area
or building
• Use of computing devices, special software, networking
capabilities, display equipment, and a session leader
• Collect, coordinate, and feed back organized information
to help a group make a decision
• Combines face-to-face verbal interaction with
technology-aided formalization

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 Wide Area Decision Network
• Characteristics
• Location of group members is distant
• Decision frequency is high
• Virtual workgroups
• Groups of workers located around the world working on
common problems via a GDSS

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 Executive Support System

• Characteristics Board of directors

• A specialized DSS that includes all
the hardware, software, data,
procedures, and people used to President
assist senior-level executives within
the organization
Function area
vice presidents

Function area
managers

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 Characteristics of ESSs
• Tailored to individual executives
• Easy to use
• Drill down capabilities
• Support the need for external data
• Help with situations with high degree of
uncertainty
• Futures orientation (predictions, forecasting)
• Linked with value-added business processes

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 Capabilities of an ESS
• Support for
• defining overall vision
• strategic planning
• strategic organizing and staffing
• strategic control
• crisis management

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 Artificial intelligence technologies
in business

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 An Overview of Artificial Intelligence
• Artificial intelligence (AI) is a field of science and
technology based on disciplines such as computer
science, biology, psychology, linguistics, mathematics, and
engineering.

• The goal of AI is to develop computers that can simulate

the ability to think, as well as see, hear, walk, talk, and
feel.

• Some of the attributes of intelligent behavior. AI is

attempting to duplicate these capabilities in computer-
based systems.
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 Attributes of Intelligent Behavior
• Think and reason.
• Use reason to solve problems.
• Learn or understand from experience.
• Acquire and apply knowledge.
• Exhibit creativity and imagination.
• Deal with complex or perplexing situations.
• Respond quickly and successfully to new situations.
• Recognize the relative importance of elements in a situation.
• Handle ambiguous, incomplete, or erroneous information.

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 The Domains of Artificial Intelligence

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 Examples of some of the latest commercial
applications of AI.

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 Examples of some of the latest commercial
applications of AI.

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 Expert Systems

• An expert system (ES) is a knowledge-based

information system that uses its knowledge about a
specific, complex application area to act as an
expert consultant to end users.

• Expert systems provide answers to questions in a

very specific problem area by making humanlike
inferences about knowledge contained in a
specialized knowledge base.

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 Components of an Expert System

The components of an expert system include a

knowledge base and software modules that
perform inferences on the knowledge in the
knowledge base and communicate answers to a
user’s questions.

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 Components of an Expert System

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 Four ways that knowledge can be represented in an
expert system’s knowledge base.

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 Virtual Reality
• Virtual reality (VR) is computer-simulated reality.
Virtual reality is a fast-growing area of artificial
intelligence that had its origins in efforts to build
more natural, realistic, multisensory human–
computer interfaces.
• Virtual reality will be integrated into daily life and
activity and will be used in various human ways.

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