BUSINESS DECISION SUPPORT

•MANAGEMENT DECISION-MAKING
 BUSINESS DECISION SUPPORT:
MODULE CONTENT
• Module introduction: Spreadsheets in business
• Using models to support decision-making
• Good spreadsheet design and development principles
• Spreadsheet management and auditing
- Multidimensional data analysis
- What-If analysis
- Estimation modelling
WHO MAKES WHAT TYPE OF
DECISION?

Unstructured
Strategic
management

Tactical
management

Operational
Structured management

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SOME CHARACTERISTICS OF
DECISIONS

Consider:
• Time frame
• Consequences Strategic
management
• Risk
• Complexity Tactical
management
• Frequency
• Availability of information Operational
management
• Sources of information
4
 MANAGEMENT DECISION-MAKING
(AND THE ROLE OF SPREADSHEETS)
 WHAT HAPPENS IN DECISION-MAKING?

• Trigger for decision-making

• To solve a problem
• To take advantage of an opportunity
• Stages of decision-making (Simon, 1977)
• Intelligence: define the problem or opportunity
• Design: develop and evaluate alternative solutions
• Choice: select the ‘best’ course of action
THE DECISION_MAKING PROCESS
 EXCEL SUPPORT FOR DECISION-MAKING

• Intelligence stage
• Becoming aware of the problem
• Defining the problem details and scope
• Design stage
• Identifying alternative solutions
• Evaluating the feasibility of each solution
• Choice stage
• Deciding on the ‘best’ solution
 SELECTING THE ‘BEST’ SOLUTION

• Optimising
• Explores all possible solutions
• Identifies the best outcome based on numbers
• Satisficing
• Explores a limited number of possible solutions
• Stops if the best outcome meets requirements
• Heuristics
• Relies on approaches that have worked in the past
 HOW SPREADSHEETS CAN ADD VALUE
• A key to good decision making is to explore and compare many relevant
alternatives
• The more alternatives there are, the more computer-assisted searching
and comparison is needed
• Typically, decisions must be made under time pressure.
• It may not be possible to manually process the needed information fast
enough to be effective
• It’s often necessary to conduct sophisticated mathematical analysis in order
to make a good decision
• This type of analysis requires the use of modeling
MANAGEMENT DECISION-MAKING

STAGE 1: INTELLIGENCE
 INVESTIGATING THE PROBLEM

On-Line Analytical Processing (OLAP)

• Explores the relationship between multiple variables
• Usually at least three variables involved
• Relies on large data sets
• Usually has a time component
• Graphical display aids understanding
• Identifies patterns occurring in data
• The Excel equivalent is a Pivot Chart
 HOW OLAP WORKS

• The user selects a set of (possibly) relevant variables

• The user request a particular view of the data set
• The user can specify desired calculations e.g. sum/average
• Underlying relationships and/or trends are shown visually
• Views are easily adjusted and manipulated
• Underlying data values can be revealed (“drill-down”)
 OLAP VS DATA MINING

• Identification of (possibly) relevant variables to be analysed:

• OLAP: Variables are selected by the user based on experience or intuition
• Data mining: The system takes into account all available variables

• Type of analysis
• OLAP: Patterns & trends based on aggregated data are shown graphically or as a table of values, with drill-down
facility to access underlying values
• Data mining: Automated processing of a range of statistical tests (correlation, regression etc) revealing hidden
patterns in the underlying data based on the relationships between variables

• Presentation of results
• OLAP: Basically visual
• Data mining: Basically numeric
• In both cases it’s up to the user to interpret & explain the results