Business Intelligence and Analytics: Systems

for Decision Support

(10th Edition)

Chapter 2:
Foundations and Technologies
for Decision Making
 Opening Vignette
Decision Modeling at HP Using
Spreadsheets
 Background
 Problem description
 Proposed solution
 Results
 Answer & discuss the case questions...
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 Questions for
the Opening Vignette
1. What are some of the key questions to
be asked in supporting decision making
through DSS?
2. What guidelines can be learned from
this vignette about developing DSS?
3. What lessons should be kept in mind for
successful model implementation?

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 Characteristics of Decision Making
 Groupthink (listen to others)
 Evaluating what-if scenarios
 Experimentation with a real system!(learn from
fault experiments)
 Changes in the decision-making environment
may occur continuously
 Time pressure on the decision maker
 Analyzing a problem takes time/money
 Insufficient or too much information

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 Characteristics of Decision Making
Decision Support Systems (DSS)
Dissecting DSS
into its main
concepts 
Building successful
DSS requires a
thorough
understanding of
these concepts
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 Decision-Making Disciplines
 Behavioral: law, philosophy, political science,
psychology, social psychology, and sociology
 Scientific: computer science, decision
analysis, economics, engineering, the hard
sciences (e.g., biology, chemistry, physics),
management science/operations research,
mathematics, and statistics
 Each discipline has its own set of
assumptions and each contributes a unique,
valid view of how people make decisions

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 Decision-Making Disciplines
 Better decisions
 Tradeoff: accuracy versus speed
 Fast decision may be detrimental
 Effectiveness(‫ )ف اعليه‬vs Efficiency(،‫ك فاءه‬
‫)ن جاعه‬
 Effectiveness  “goodness” “accuracy”
 Efficiency  “speed” “less resources”
 A fine balance is what is needed!

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 Decision Style
 The manner by which decision makers think and
react to problems
 perceive a problem
 cognitive response
 values and beliefs
 When making decisions, people…
 follow different steps/sequence
 give different emphasis, time allotment, and priority to
each step
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 Decision Style
 Decision-making styles
 Heuristic versus Analytic
 Autocratic versus Democratic
 Consultative (with individuals or groups)
 A successful computerized system should fit the
decision style and the decision situation
 Should be flexible and adaptable to different users
(individuals vs. groups)

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 Decision Makers
 Small organizations
 Individuals
 Conflicting objectives
 Medium-to-large organizations
 Groups
 Different styles, backgrounds, expectations
 Conflicting objectives
 Consensus is often difficult to reach
 Help: Computer support, GSS, ERP, CRM…
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 Phases of
Decision-Making Process
 Humans consciously or subconsciously follow a
systematic decision-making process
- Simon (1977)
1) Intelligence
2) Design
3) Choice
4) Implementation
5) (?) Monitoring (a part of intelligence?)

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 Simon’s Decision-Making Process

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 Decision Making:
Intelligence Phase
 Scan the environment, either intermittently or
continuously
 Identify problem situations or opportunities
 Problem is the difference between what
people desire (or expect) and what is actually
occurring
 Symptom versus Problem
 E.g. excessive costs may be symptom of a problem
(e.g., improper inventory levels).
 Timely identification of opportunities is as
important as identification of problems
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 Decision Making:
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
 Key data may be qualitative
 Data change over time (time-dependence)

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 Decision Making:
Intelligence Phase
 Problem Classification
 Classification of problems according to the degree of
structuredness
 Problem Decomposition
 Often solving the simpler subproblems may help in
solving a complex problem.
 Information/data can improve the structuredness of a
problem situation
 Problem Ownership: assignment of authority to
solve the problem A Formal
 Outcome of intelligence phase  Problem
Statement
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 Decision Making:
The Design Phase
 Finding/developing and analyzing possible
courses of actions
 A model of the decision-making problem is
constructed, tested, and validated
 Modeling: conceptualizing a problem and
abstracting it into a quantitative and/or
qualitative form (i.e., using symbols/variables)
 Abstraction: making assumptions for simplification
 Tradeoff (cost/benefit): more or less abstraction
 Modeling: both an art and a science

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 Decision Making:
The Design Phase
 Selection of a Principle of Choice
 It is a criterion that describes the acceptability of a
solution approach
 Reflection of decision-making objective(s)
 In a model, it is the result variable
 Choosing and validating against
 High-risk versus low-risk
 Optimize versus satisfice

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 Decision Making:
The Design Phase
 Normative models (= optimization)
 the chosen alternative is demonstrably the
best of all possible alternatives
 Assumptions of rational decision makers
 Humans are economic beings whose objective is to
maximize the attainment of goals
 For a decision-making situation, all alternative
courses of action and consequences are known
 Decision makers have an order or preference that
enables them to rank the desirability of all
consequences
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 Decision Making:
The Design Phase
 Heuristic models (= suboptimization)
 The chosen alternative is the best of only a
subset of possible alternatives
 Often, it is not feasible to optimize realistic
(size/complexity) problems
 Suboptimization may also help relax unrealistic
assumptions in models
 Help reach a good enough solution faster

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 Decision Making:
The Design Phase
 Descriptive models
 Describe things as they are or as they are
believed to be (mathematically based)
 They do not provide a solution but information
that may lead to a solution
 Simulation - most common descriptive
modeling method (mathematical depiction of
systems in a computer environment)

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 Decision Making:
The Design Phase
 Good Enough, or Satisficing
“something less than the best”
 A form of suboptimization

 Seeking to achieve a desired level of

performance as opposed to the “best”

 Benefit: time saving

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 Decision Making:
The Design Phase
 Developing (Generating) 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
 Measuring/ranking the outcomes
 Using the principle of choice

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 Decision Making:
The Choice Phase
 The actual decision and the commitment to
follow a certain course of action are made here
 The boundary between the 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

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 Decision Making:
The Choice Phase
 Search approaches
 Analytic techniques (solving with a formula)
 Algorithms (step-by-step procedures)
 Heuristics (rule of thumb)
 Blind search (truly random search)
 Additional activities
 Sensitivity analysis
 What-if analysis
 Goal seeking
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 Decision Making:
The Implementation Phase
“Nothing more difficult to carry out, nor
more doubtful of success, nor more
dangerous to handle, than to initiate a new
order of things.”
- The Prince, Machiavelli 1500s
 Solution to a problem  Change
 Change management ?..
 Implementation: putting a recommended
solution to work
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 DSS Capabilities

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 DSS Classifications
 AIS SIGDSS Classification
1. Communication-driven and group DSS
 Use computer, collaboration, and communication
technologies to support groups in tasks that may
or may not include decision making.
 Support meetings, design collaboration, SCM, KMS
2. Data-driven DSS
 Involved data and their processing into
information and presenting the information to a
decision maker
 OLAP and reporting analytics
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 DSS Classifications
 AIS SIGDSS Classification
3. Document-driven DSS
 Use documents in various forms(text, voice …)
 Depend on knowledge coding, analysis, search, and retrieval
for decision support
4. Knowledge-driven DSS
 Involve the application of knowledge technologies to address
specific need
 ANN and ES are included
 Use of automated decision-making systems
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 DSS Classifications
 AIS SIGDSS Classification
5. Model-driven DSS
 Use model(s) to optimize one or more objectives
 A good example of this type is Excel with its dozens of
statistical packages, a linear programming package (Solver),
and many financial and management science models
 Often DSS is a hybrid of many classes

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