Decision Support Systems

Strategic Planning
• Strategic planning is an organization's process of defining,
often in hyperbolic terms, its strategy, or direction, and
making decisions on allocating its resources to pursue this
strategy, including its capital and people.
• V arious business analysis techniques can be used in strategic
planning, including S W O T analysis, PEST analysis, STEER
analysis (Socio-cultural, Technological, Economic, Ecological,
and Regulatory factors), and EPISTEL (Environment, Political,
Informatic, Social, Technological, Economic and Legal).
 Strategic Planning
• Strategic planning is the formal consideration of an
organization's future course. All strategic planning deals with
at least one of three key questions:
– what do we do?
– for whom do we do it?
– how do we excel?
• In order to determine where it is going, the organization
needs to know exactly where it stands, then determine where
it wants to go and how it will get there.
• The resulting document is called the strategic plan.
 Strategic planning outline
• Analysis of the current situation - past year
• Business trends analysis
• Market analysis
• Competitive analysis
• Market segmentation
• Marketing-mix
• SWOT analysis
• Positioning - analyzing perceptions
• Sources of information
 Strategic planning outline
• Marketing plan strategy & objectives - next year
• Marketing strategy
• Desired market segmentation
• Desired marketing-mix
• T O W S -based objectives as a result of the S W O T
• Position & perceptual gaps
• Y early sales forecast
 Decision Support Systems
• Decision support systems (DSS)
– Offer potential to assist in solving both semi-structured
and unstructured problems
• A DSS is an interactive, flexible, and adaptable CBIS, specially
developed for supporting the solution of a non-structured
management problem for improved decision making. It
utilizes data, it provides easy user interface, and it allows for
the decision maker’s own insights
• DSS may utilize models, is built by an interactive process
(frequently by end-users), supports all the phases of the
decision making, and may include a knowledge component
Decision Making as a Component of
Problem Solving
Intelligence

Decision
making Design

Problem
Choice solving

Implementation

Monitoring
 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
 Problem Solving Factors
• Multiple decision objectives
• Increased alternatives
• Increased competition
• The need for creativity
• Social and political actions
• International aspects
• Technology
• Time compression
 Characteristics of a DSS
• Handles large amounts of data from different sources
• Provides report and presentation flexibility
• Offers both textual and graphical orientation
• Supports drill down analysis
• Performs complex, sophisticated analysis and comparisons
using advanced software packages
• Supports optimization, satisficing, and heuristic approaches
 Characteristics of a DSS
• 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
 Capabilities of a DSS
• Supports
– Problem solving phases
– Different decision frequencies

Merge with How many

another widgets
company? should I order?

low high
Frequency
 Capabilities of a DSS
• 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
 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
 Database Model base

DBMS MMS

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

Dialogue manager
 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
 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
 DSS Applications
• DSS used in many industries
– Food production and retailing
• Forecast number of patrons
• Amount of ingredients to purchase
– Agriculture
• Farmers make decisions controlling pests
• Picking farm locations
– Tax planning
• Tax helper applications are DSSs
– Website planning and adjustment
• Analyze shopper behavior
• Design site based on page usage
 DSS Applications
– Y ield management
• Maximize revenue
• Airline trips
• Lodging
– Financial services
• Loan amounts
• Based on credit history
Factors influencing success and failure
in DSS
• User Training/Involvement
• User Experience
• Length of Use (Familiarity)
• Top Management Support
• Orientation toward Top Management
• Novelty of Application
• Return on Investment
 MIS
Structured tasks & routine Decisions
Identifies information requirement
Data storage
Delivers system based on frozen
requirements
Provides only indirect access to data
by managers
Reliance on computer expert
Wait to access data
Nature of decision not completely
understood
Emphasis on efficiency
DSS
Semi/unstructured tasks, requiring
managerial judgment
Establishes tools for decision process
Data manipulation
Follows iterative process hence
current data can be used
Managers have direct access to data
Reliance on managerial judgment
Direct access, hence no wait
Manager aware of decision making
environment
Emphasis is on effectiveness
DSS for Customer Analysis and
Segmentation
 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
 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
 Characteristics of a GDSS
• Special design
• Ease of use
• Flexibility
• Decision-making support
– Delphi approach (decision makers are geographically
dispersed)
– Brainstorming
– Group consensus
– Nominal group technique
 Characteristics of a GDSS
• Anonymous input
• Reduction of negative group behavior
• Parallel communication
• Automated record keeping
• Cost, control, complexity factors
 EIS / ESS
• The primary goal is to obtain data from a
variety of sources, integrate and
aggregate that data and display the
resulting information in an easy to use
comprehensive format
• A computer based system that serves the
information needs of top executives
• It is very user-friendly and is supported by
graphics, providing exception reporting
and drill down capabilities
 EIS / ESS
• ESS is a comprehensive executive support
system that goes beyond the EIS to
include communications, office
automation, analysis support and
intelligence
 Executive Support System

• Characteristics Board of directors

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

Function area
managers
 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
 Capabilities of an ESS
• Support for
– defining overall vision
– strategic planning
– strategic organizing and staffing
– strategic control
– crisis management
 EIS / ESS Benefits
• Facilitates the attainment of organizational
objectives
• Facilitates access to information by many sources
of data and provides broad, highly aggregated
information
• Improves the users’ productivity by enabling
more effective decision making
• Increases communication capability and quality
• Facilitates better strategic planning and control
 EXPERT SYSTEMS
• An expert system, also known as
knowledge based system, is a computer
program that contains some of the
subject-specific knowledge of one or more
human experts.
 Components of Expert System
• The knowledge base: This contains knowledge
necessary for understanding, formulating and solving
a specific class of problems. It includes two basic
elements: Facts: such as the problem and its various
states and Rules: That direct the use of knowledge to
solve the specific class of problems

• The blackboard: This is an area of working memory

set aside for the description of current problem. It is
also used for storing intermediate results. It is a
temporary database used by the interference engine
to execute its tasks.
 Components of Expert System
• The interference engine: This is a computer
program that provides a methodology for reasoning
and formulating conclusions

• The user interface: This allows for user-computer

dialogue which can be best carried out in a natural
language

• The explanation subsystem: This can trace

responsibility for conclusions to their source which is
crucial both in transfer of expertise and in problem
solving.
 Limitations of Expert Systems
• Limited expertise
• No single correct solution
• Natural cognitive limits
• Narrowly defined subject areas
• Occasional incorrect recommendations
• Limited vocabulary or jargon
• Cost
• Lack of trust by end users
• Bias
• Liability issues
 Artificial Intelligence
• Artificial Intelligence (AI) is a term that
includes many definitions. Most experts agree
that AI is concerned with two basic ideas.
First, it involves studying the thought
processes of humans; second, it deals with
representing those processes via machines.
• The three major objectives of AI are:
– To make machines smarter
– To understand what intelligence is
– To make machines more useful
 Capabilities of AI
• Learning or understanding from experience
• Making sense of ambiguous or contradictory
messages
• Responding quickly and successfully to a new
situation
• Using reasoning to solve problems and direct
actions effectively
• Dealing with complex situations
 Capabilities of AI
• Understanding and interfering in ordinary,
rational ways
• Applying knowledge to manipulate the
environment
• Recognizing the relative importance of
different elements in a situation
 Some AI Systems
• Expert Systems
• Natural Language Technology
• Speech understanding
• Robotics and sensory systems
• Computer vision and scene recognition
• Machine learning
• Handwriting recognizers
• Intelligent agents
• Neural Networks