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LECTURE NOTES
SECTION I: Management Information and Decision Support Systems
11-1
Introduction:
This chapter focuses on the major types of information systems and how they support the diverse information and decisionmaking needs of managers.
Analysing Parsons Brinckerhoff
We can learn a lot from this case about how intranet technologies are changing the face of traditional information systems for
managerial information and decision support from the Real World Case of Parsons Brinckerhoff.
Take a few minutes to read it, and we will discuss it (See Parsons Brinckerhoff in section XI)
Information, Decisions, and Management: [Figure 11.2]
The type of information required by managers is directly related to the level of management and the amount of structure in
the decision situation they face. You should realize that the framework of the classic managerial pyramid applies even in
todays downsized organizations and flattened or non-hierarchical organizational structures. Levels of management decision
making still exist, but their size, shape, and participants continue to change as todays fluid organizational structures evolve.
Thus, the levels of managerial decision making that must be supported by information technology in a successful organization
are:
They direct the use of resources and the performance of tasks according to procedures and within budgets and schedules
they establish for the teams and other workgroups of the organization.
Structured Decisions - Involve situations where the procedures to follow when a decision is needed can be specified in
advance.
Operational Decision Makers - Require more prespecified internal reports emphasizing detailed current and historical
data comparisons that support their more structured responsibilities in day-to-day operations.
Providing information and support for all levels of management decision making is no easy task. Conceptually, several
major types of information systems are needed:
Management information systems
Decision support systems
Executive information systems
Management Reporting Versus Decision-Making Support:
Management information systems
- MIS are designed to indirectly support the more structured types of decisions
involved in operational and tactical planning and control.
Objective of MIS
Objective of DSS
11-2
Management information systems were the original type of management support systems, and are still a major category of
information systems. MIS produce information products that support many of the day-to-day decision-making needs of
management. Reports, displays, and responses produced by information systems provide information that managers have
specified in advance as adequately meeting their information needs. Such predefined information products satisfy the
information needs of managers at the operational and tactical levels of the organization who are faced with more structured
types of decision situations.
Management Reporting Alternatives:
MIS provide a variety of information products to managers. Three major reporting alternatives are provided by such systems:
Push Reporting
- information is pushed to a managers networked workstation.
Consolidation - Involves the aggregation of data. This can involve simple roll-ups or
involving interrelated data.
complex groupings
Drill-Down - OLAP can go in the reverse direction and automatically display detail data
data.
Slicing & Dicing - Refers to the ability to look at the database from different
viewpoints. Slicing and
dicing is often performed along a time axis in order to analyse
trends and find patterns.
OLAP applications:
1. Access very large amounts of data.
2. Analyse the techniques between many types of business elements.
3. Involves aggregated data.
4. Compare aggregated data over hierarchical time periods.
5. Present data in different perspectives.
6. Involve complex calculations between data elements.
7. Are able to respond quickly to user requests so that managers or analysts can pursue an analytical or decision thought
process without being hindered by the system.
OLAP at MasterCard International
MasterCard International developed OLAP software called Market Advisor, which enables members to query a data
warehouse and drill down into information to analyse transactions and trends online. Market Advisor also provides a 13month historical database, extended report graphing, and triggered marketing alerts based on above - or below-average
merchant or cardholder activity.
11-3
Decision support systems are a major category of management information systems. They are computer-based information
systems that provide interactive information support to managers during the decision-making process. Decision support
systems use:
1. Analytical models
2. Specialized databases
3. Decision makers own insights and judgements
4. Interactive, computer-based modelling processes to support the making of semistructured and unstructured decisions by
individual managers.
DSS are designed to be ad-hoc, quick-response systems that are initiated and controlled by managerial end users. Decision
support systems are thus able to directly support the specific types of decisions and the personal decision-making styles and
needs of individual managers.
DSS Models and Software:
Unlike management information systems, decision support systems rely on model bases as well as databases as vital system
resources. A DSS model base is a software component that consists of models used in computational and analytical routines
that mathematically express relationships among variables.
11-4
Decisions support systems are used for a variety of applications in both business and government.
Institutional DSS - DSS which are developed to solve large or complex problems that
organization.
Ad-hoc DSS - DSS which are quickly developed to solve smaller or less complex
used to solve one-time situations.
Industry DSS - DSS which are developed to solve problems faced by a specific
Functional DSS - DSS which are developed to solve problems in a specific functional
continually face an
problems. They are also
industry.
area.
Using a decision support system involves an interactive analytical modelling process. Typically, a manager uses a DSS
software package at his workstation to make inquires, responses and to issue commands. This differs from the demand
responses of information reporting systems, since managers are not demanding prespecified information. Rather, they are
exploring possible alternatives. They do not have to specify their information needs in advance. Instead they use the DSS to
find the information they need to help them make a decision.
Using a DSS involves four basic types of analytical modelling activities:
Sensitivity Analysis: - Is a special case of what-if analysis. Typically, the value of only one variable is changed
repeatedly, and the resulting changes on other variables are
observed. So sensitivity analysis is really a case of
what-if analysis involving repeated
changes to only one variable at a time. Typically, sensitivity analysis is used
when
decision makers are uncertain about the assumptions made in estimating the value of
certain key
variables.
Goal Seeking Analysis: - Reverses the direction of the analysis done in what-if and
sensitivity analysis. Instead of
observing how changes in a variable affect other variables,
goal seeking analysis sets a target value for a variable and
then repeatedly changes other
variables until the target value is achieved.
relationships among
Business and other organizations are significantly increasing their attempts to assist the human intelligence and productivity
of their knowledge workers with artificial intelligence tools and techniques. AI includes natural languages, industrial robots,
expert systems, and intelligent agents.
Question: Is AI possible? Answer: Only time will tell
Artificial intelligence (AI) is a 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 think, as well as see, hear, walk,
talk, and feel. A major thrust of AI is the development of computer functions normally associated with human intelligence,
such as reasoning, learning, and problem solving.
The Domains of Artificial Intelligence: [Figure 11-17]
AI application can be grouped into three major areas:
Genetic Algorithm - software uses Darwinian (survival of the fittest), randomizing, and other mathematical functions to
simulate evolutionary processes that can generate increasingly better solutions to problems.
Intelligent Agents - Use expert system and other AI technologies to serve as software surrogates for a variety of end user
applications.
Robotics: - AI, engineering, and physiology are the basic disciplines of robotics. This technology produces robot
machines with computer intelligence and computer-controlled, humanlike physical capabilities.
Robotics applications include:
1. Visual perception (sight)
2. Tactility (touch)
3. Dexterity (skill in handling and manipulation)
4. Locomotion (ability to move over any terrain)
5. Navigation (properly find ones way to a destination)
Natural Interface: - The development of natural interfaces is considered a major area of AI applications and is essential
to the natural use of computers by humans. For example, the development of natural languages and speech recognition
are major thrusts of this area. Being able to talk to computers and robots in conversational human languages and have
then understand us is the goal of AI researchers. This application area involves research and development in
linguistics, psychology, computer science, and other disciplines. Efforts in this area include:
Natural Languages - A programming language that is very close to human language. Also, called very high-level language.
Multisensory Interfaces - The ability of computer systems to recognize a variety of human body movement which allows
them to operate.
Speech Recognition - The ability of a computer system to recognizes speech patterns, and to operate using these patterns.
Virtual Reality - The use of multisensory human/computer interfaces that enables human users to experience computersimulated objects, entities, spaces, and Aworlds@ as if they actually existed.
11-8
Neural networks:
Neural networks are computing systems modelled on the human brain's mesh-like network of interconnected processing
elements, called neurons. Of course, neural networks are much simpler than the human brain (estimated to have more than
100 billion neuron brain cells). Like the brain, however, such networks can process many pieces of information
simultaneously and can learn to recognize patterns and programs themselves to solve related problems on their own.
Neural networks can be implemented on microcomputers and other computer systems via software packages which simulate
the activities of a neural network of many processing elements. Specialized neural network coprocessor circuit boards are
also available. Special-purpose neural net microprocessor chips are used in some application areas.
Uses include:
1. Military weapons systems
2. Voice recognition
3. Check signature verification
4. Manufacturing quality control
5. Image processing
6. Credit risk assessment
7. Investment forecasting
Neural Nets at Infoseek:
Infoseek has developed a targeted marketing service that more closely targets advertising on its Internet search engine to
users interests by keeping track of every search that a user makes. The service uses neural network technology to observe all
the searches users run every time they visit the InfoSeek search engine. The neural net software then calculates a single
numeric value, or vector, that describes users interests. InfoSeek uses that information to match users to the online ads it
sells to advertisers on its Web search pages.
Fuzzy Logic is a method of reasoning that resembles human reasoning since it allows for approximate values and inferences
(fuzzy logic) and incomplete or ambiguous data (fuzzy data) instead of relying only on crisp data, such as binary (yes/no)
choices.
Fuzzy Logic in Business:
An example of the use of fuzzy logic in business is to analyse the credit risk of a business.
11-10 Genetic Algorithms:
The use of genetic algorithms is a growing application of artificial intelligence. Genetic algorithm software uses Darwinian
(survival of the fittest), randomizing, and other mathematical functions to simulate an evolutionary process that can yield
increasingly better solutions to a problem. Genetic algorithms were first used to simulate millions of years in biological,
geological, and ecosystem evolution in just a few minutes on a computer. Now genetic algorithm software is being used to
model a variety of scientific, technical, and business processes.
Genetic algorithms are especially useful for situations in which thousands of solutions are possible and must be evaluated to
produce an optimal solution. Genetic algorithm software uses sets of mathematical process rules (algorithms) that specify
how combinations of process components or steps are to be formed.
VR Limitations:
The use of virtual reality seems limited only by the performance and cost of its technology. For example, some VR users
develop:
Cybersickness - eye strain, motion sickness, performance problems
Cost of VR is quite expensive
11-12 Intelligent Agents [Figure 11-26]
An intelligent agent (also called intelligent assistants/wizards) is a software surrogate for an end user or a process that fulfills
a stated need or activity. An intelligent agent uses a built-in and learned knowledge base about a person or process to make
decisions and accomplish tasks in a way that fulfills the intentions of a user. One of the most well-known uses of intelligent
agents are the Wizards found in Microsoft Word, Excel, Access, and Powerpoint.
The use of intelligent agents is expected to grow rapidly as a way to for users to:
1. Simplify software use.
2. Access network resources.
3. Information screening and retrieval.
2. Expert system asks questions of the user, searches its knowledge base for facts and rules or other knowledge.
3. Explains its reasoning process when asked
4. Gives expert advice to the user in the subject area being explored. Examples include: credit management, customer
service, and productivity management.
Expert System Applications:
Expert systems typically accomplish one or more generic uses. Seven activities include:
1. Decision Management
2. Maintenance/Scheduling
3. Design/configuration
4. Process monitoring/control
5. Diagnostic Troubleshooting
6. Intelligent text/documentation
7. Selection/classification
Advertising Strategy
ADCAD (Advertising Communications Approach Designer) is an expert system that assists advertising agencies in:
1. Setting marketing and communications objectives
2. Selecting creative strategies
3. Identifying effective communications approaches
In
1.
2.
3.
The domain, or subject area, of the problem is relatively small and limited to a well-defined problem
area.
Expertise:
Solutions to the problem require the efforts of an expert. That is, a body of knowledge, techniques, and
intuition is needed that only a few people possess.
Complexity:
Solution of the problem is a complex task that requires logical inference processing, which would not be
handled as well by conventional information processing.
Structure:
The solution process must be able to cope with ill-structured, uncertain, missing, and conflicting data,
and a problem situation that changes with the passage of time.
Availability:
An expert exists who is articulate and cooperative, and who has the support of the management and end
users involved in the development of the proposed system.
Before deciding to acquire or develop an expert system, it is important that managerial end users evaluate its benefits and
limitations. In particular, they must decide whether the benefits of a proposed expert system will exceed its costs.
Benefits of Expert Systems:
1. Captures the expertise of experts. It may outperform a single human expert in many problem situations.
2. Is faster and more consistent than a human expert.
3. Can have the knowledge of several experts.
4. Does not get tired or distracted by too much work or stress.
5. Is available at all times, whereas a human expert may be away, sick, or may have left the company.
6. Can be used to train the novice.
7. Effective use of expert systems can allow a firm to:
a. improve the efficiency of its operations
b. produce new products and services
c. lock in customers and suppliers with new business relationships
d. build knowledge-based strategic information resources.
Limitations of Expert Systems
1. Limited focus (specific problems & specific domains)
2. Inability to learn
3. Difficulties in maintaining expert systems
4. Cost involved in developing them.
11-16 Hybrid AI Systems:
Increasingly, AI developers are constructing products which integrate several AI technologies into a single hybrid AI system.
This frequently includes two popular AI technologies: expert systems and neural nets.
Most integrated AI systems are designed to provide the best features of expert systems, neural nets, or fuzzy logic
technologies, and to offset each others strengths and weaknesses.