McGraw-Hill/Irwin

Copyright 2007 by The McGraw-Hill Companies, Inc. All

Chapter

9
Decision Support Systems
Decision Support
MIS and DSS
Artificial Intelligence
Expert Systems
McGraw-Hill/Irwin

Copyright 2007 by The McGraw-Hill Companies, Inc. All

Learning Objectives
1.
2.
3.

4.

Identify the changes taking place in the form

and use of decision support in business.
Identify the role and reporting alternatives of
management information systems.
Describe how online analytical processing
can meet key information needs of
managers.
Explain the decision support system concept
and how it differs from traditional
management information systems.

Learning Objectives
5.

Explain how the following information

systems can support the information needs
of executives, managers, and business
professionals:
Executive information systems
b. Enterprise information portals
c. Knowledge management systems
a.

Learning Objectives
5.

6.

Identify how neural networks, fuzzy logic,

genetic algorithms, virtual reality, and
intelligent agents can be used in business.
Give examples of several ways expert
systems can be used in business decisionmaking situations.

Case 1: Centralized Business

Intelligence at Work
Starting

each business-intelligence project

from scratch leads to
Reinventing

the wheel
High development and support costs
Incompatible systems
Some

companies are standardizing on fewer

business-intelligence tools and making them
available throughout the organization and
Business-intelligence competency centers

Case Study Questions

1.

2.
3.

What is business intelligence? Why are

business intelligence systems such a popular
business application of IT?
What is the business value of the various BI
applications discussed in the case?
Is a business-intelligence system an MIS or a
DSS?

Real World Internet Activity

1.

Companies are taking advantage of the

competitive edge they enjoy from highquality business intelligence. To meet the
demand for applications to support the
process, vendors are developing a wide
variety of offerings. Using the Internet,
See if you can find several examples of
software products to support the management
of business intelligence.
Do they all take the same approach, or are
there different ways of managing the process?

Real World Group Activity

Business

intelligence competency centers can

be quite costly to start and maintain. There
prevalence, however, suggests the benefits
are worth the costs. In small groups,
Discuss

the various skills and job roles necessary

for a competitive business intelligence
competency center.
Can such centers be considered competitive
advantage or simply competitive necessity?

Information required at different

management levels

Levels of Management
Decision Making
Strategic

management

Executives

develop organizational goals,

strategies, policies, and objectives
As part of a strategic planning process
Tactical

management

Managers

and business professionals in selfdirected teams

Develop short- and medium-range plans,
schedules and budgets
Specify the policies, procedures and business
objectives for their subunits

Levels of Management
Decision Making
Operational
Managers

management

or members of self-directed teams

Develop short-range plans such as weekly
production schedules

Information Quality
Information

products whose characteristics,

attributes, or qualities make the information
more value
Information has 3 dimensions:
Time
Content
Form

Attributes of Information
Quality

Decision Structure
Structured

situations where the procedures

to follow when a decision is needed can be
specified in advance
Unstructured decision situations where it is
not possible to specify in advance most of the
decision procedures to follow
Semistructured - decision procedures that can
be prespecified, but not enough to lead to a
definite recommended decision

Information Systems to support

decisions
Management
Information
Systems

Decision Support
Systems

Decision
support
provided

Provide information about

the performance of the
organization

Provide information and

techniques to analyze
specific problems

Information
form and
frequency

Periodic, exception,
demand, and push reports
and responses

Interactive inquiries and

responses

Information
format

Prespecified, fixed format

Ad hoc, flexible, and

adaptable format

Information
processing
methodology

Information produced by
extraction and manipulation
of business data

Information produced by
analytical modeling of
business data

Decision Support Trends

Personalized

proactive decision analytics

Web-Based applications
Decisions at lower levels of management and
by teams and individuals
Business intelligence applications

Business Intelligence Applications

Decision Support Systems

DSS
Provide

interactive information support to

managers and business professionals during
the decision-making process
Use:
Analytical

models
Specialized databases
A decision makers own insights and judgments
Interactive computer-based modeling
To

support semistructured business decisions

DSS components

DSS Model base

Model

base

software component that consists of models

used in computational and analytical routines
that mathematically express relations among
variables

Examples:
Linear

programming models,
Multiple regression forecasting models
Capital budgeting present value models

Management Information
Systems
MIS
Produces

information products that support

many of the day-to-day decision-making needs
of managers and business professionals
Prespecified reports, displays and responses
Support more structured decisions

MIS Reporting Alternatives

Periodic

Scheduled Reports

Prespecified

Exception

format on a regular basis

Reports

Reports

about exceptional conditions

May be produced regularly or when exception
occurs
Demand

Reports and Responses

Information

Push

available when demanded

Reporting

Information

pushed to manager

Online Analytical Processing

OLAP
Enables

mangers and analysts to examine and

manipulate large amounts of detailed and
consolidated data from many perspectives
Done interactively in real time with rapid
response

OLAP Analytical Operations

Consolidation
Aggregation

of data

Drill-down
Display

detail data that comprise consolidated

data
Slicing

and Dicing

Ability

to look at the database from different

viewpoints

OLAP Technology

Geographic Information
Systems
GIS
DSS

that uses geographic databases to construct

and display maps and other graphics displays
That support decisions affecting the geographic
distribution of people and other resources
Often used with Global Position Systems (GPS)
devices

Data Visualization Systems

DVS
DSS

that represents complex data using

interactive three-dimensional graphical forms
such as charts, graphs, and maps
DVS tools help users to interactively sort,
subdivide, combine, and organize data while it is
in its graphical form.

Using DSS
What-if

Analysis

End

user makes changes to variables, or

relationships among variables, and observes the
resulting changes in the values of other
variables

Sensitivity
Value

Analysis

of only one variable is changed repeatedly

and the resulting changes in other variables are
observed

Using DSS
Goal-Seeking
Set

a target value for a variable and then

repeatedly change other variables until the
target value is achieved
How can analysis
Optimization
Goal

is to find the optimum value for one or

more target variables given certain constraints
One or more other variables are changed
repeatedly until the best values for the target
variables are discovered

Data Mining
Main

purpose is to provide decision support to

managers and business professionals through
knowledge discovery
Analyzes vast store of historical business data
Tries to discover patterns, trends, and
correlations hidden in the data that can help a
company improve its business performance
Use regression, decision tree, neural network,
cluster analysis, or market basket analysis

Market Basket Analysis

One

of most common data mining for

marketing
The purpose is to determine what products
customers purchase together with other
products

Executive Information
Systems
EIS
Combine

many features of MIS and DSS

Provide top executives with immediate and easy
access to information
About the factors that are critical to
accomplishing an organizations strategic
objectives (Critical success factors)
So popular, expanded to managers, analysts and
other knowledge workers

Features of an EIS
Information

presented in forms tailored to the

preferences of the executives using the system
Customizable

graphical user interfaces

Exception reporting
Trend analysis
Drill down capability

Enterprise Interface Portals

EIP
Web-based

interface
Integration of MIS, DSS, EIS, and other
technologies
Gives all intranet users and selected extranet
users access
To a variety of internal and external business
applications and services
Typically

tailored to the user giving them a

personalized digital dashboard

Enterprise Information Portal

Components

Knowledge Management
Systems
The

use of information technology to help

gather, organize, and share business
knowledge within an organization

Enterprise
EIPs

Knowledge Portals

that are the entry to corporate intranets

that serve as knowledge management systems

Enterprise Knowledge Portals

Case 2 Artificial Intelligence

The Dawn of the Digital Brain
Numenta

will translate the way the brain

works into an algorithm that can run on a new
type of computer
The human brain does not work like a
computer
Intelligence, according to Hawkins, is pattern
recognition

Case Study Questions

1.

2.
3.

What is the business value of AI technologies

in business today? What value might exist if
Jeff Hawkins can build a machine to think like
humans?
Why has artificial intelligence become so
important to business?
Why do you think banks and other financial
institutions are leading users of AI
technologies? What are the benefits and
limitations of this technology?

Real World Internet Activity

1.

The concept of human thought is still a mystery

despite the development of our understanding
of the fundamental processes of the human
brain. For many years, scientists have worked
hard to develop humanlike machines, but none
have been able to perform as well as the human
brain when it comes to reasoning. Using the
Internet,

See if you can find evidence of other projects

similar to that of Hawkins.
What is the current state of the art in this area of
research and development?

Real World Group Activity

The

case ends by asking the question of

whether we can ever build a machine more
intelligent than a human. The real question is
what will we do with it, or with us, if we are
successful. In small groups,
Brainstorm

about a future with machines that

can equal or exceed the intelligence of humans.
What good would come of such an
accomplishment?
What potential risks might occur?

Artificial Intelligence (AI)

A

field of science and technology based on

disciplines such as computer science, biology,
psychology, linguistics, mathematics, and
engineering
Goal is to develop computers that can
simulate the ability to think, as well as see,
hear, walk, talk, and feel

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

Domains of Artificial
Intelligence

Cognitive Science
Based

in biology, neurology, psychology, etc.

Focuses on researching how the human brain
works and how humans think and learn

Robotics
Based

in AI, engineering and physiology

Robot machines with computer intelligence
and computer controlled, humanlike physical
capabilities

Natural Interfaces
Based

in linguistics, psychology, computer

science, etc.
Includes natural language and speech recognition
Development of multisensory devices that use a
variety of body movements to operate computers
Virtual reality
Using

multisensory human-computer interfaces that

enable human users to experience computersimulated objects, spaces and worlds as if they
actually exist

Expert Systems
ES
A

knowledge-based information system (KBIS)

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

KBIS

is a system that adds a knowledge base

to the other components on an IS

Expert System Components

Knowledge

Base

Facts

about specific subject area

Heuristics that express the reasoning procedures of
an expert (rules of thumb)
Software

Resources

Inference

engine processes the knowledge and

makes inferences to make recommend course of
action
User interface programs to communicate with end
user
Explanation programs to explain the reasoning
process to end user

Expert System Components

Methods of Knowledge
Representation
Case-Based

knowledge organized in form of

cases
Cases:

examples of past performance,

occurrences and experiences

Frame-Based

knowledge organized in a
hierarchy or network of frames
Frames:

entities consisting of a complex

package of data values

Methods of Knowledge
Representation
Object-Based

knowledge organized in
network of objects
Objects:

data elements and the methods or

processes that act on those data

Rule-Based

knowledge represented in rules

and statements of fact
Rules:

statements that typically take the form of

a premise and a conclusion
Such as, If (condition) then (conclusion)

Expert System Benefits

Faster

and more consistent than an expert

Can have the knowledge of several experts
Does not get tired or distracted by overwork or
stress
Helps preserve and reproduce the knowledge
of experts

Expert System Limitations

Limited

focus
Inability to learn
Maintenance problems
Developmental costs
Can only solve specific types of problems in a
limited domain of knowledge

Suitability Criteria for Expert

Systems
Domain:

subject area relatively small and limited to

well-defined area
Expertise: solutions require the efforts of an expert
Complexity: solution of the problem is a complex
task that requires logical inference processing (not
possible in conventional information processing)
Structure: solution process must be able to cope
with ill-structured, uncertain, missing and
conflicting data
Availability: an expert exists who is articulate and
cooperative

Development Tool
Expert

System Shell

Software

package consisting of an expert system

without its knowledge base
Has inference engine and user interface
programs

Knowledge Engineer
A

professional who works with experts to

capture the knowledge they possess
Builds the knowledge base using an iterative,
prototyping process

Neural Networks
Computing

systems modeled after the brains

mesh-like network of interconnected
processing elements, called neurons
Interconnected processors operate in parallel
and interact with each other
Allows network to learn from data it processes

Fuzzy Logic
Method

of reasoning that resembles human

reasoning
Allows for approximate values and inferences
and incomplete or ambiguous data instead of
relying only on crisp data
Uses terms such as very high rather than
precise measures

Genetic Algorithms
Software

that 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

Virtual Reality (VR)

Computer-simulated

reality
Relies on multisensory input/output devices
such as
a

tracking headset with video goggles and

stereo earphones,
a data glove or jumpsuit with fiber-optic sensors
that track your body movements, and
a walker that monitors the movement of your
feet

Intelligent Agents
A

software surrogate for an end user or a

process that fulfills a stated need or activity
Uses its built-in and learned knowledge base
To make decisions and accomplish tasks in a
way that fulfills the intentions of a user
Also

called software robots or bots

User Interface Agents

Interface

Tutors observe user computer

operations, correct user mistakes, and provide
hints and advice on efficient software use
Presentation show information in a variety of
forms and media based on user preferences
Network Navigation discover paths to
information and provide ways to view
information based on user preferences
Role-Playing play what-if games and other
roles to help users understand information and
make better decisions

Information Management
Agents
Search

Agents help users find files and

databases, search for desired information, and
suggest and find new types of information
products, media, and resources
Information Brokers provide commercial
services to discover and develop information
resources that fit the business or personal
needs of a user
Information Filters receive, find, filter,
discard, save, forward, and notify users about
products received or desired

Case 3: Robots are the common

denominator
Telerobotic-assisted

medical procedures
Flexible automobile body shop with wireless
inventory replenishment

Case Study Questions

1.
2.
3.

What is the current and future business value

of robotics?
Would you be comfortable with a robot
performing surgery on you? Why or why not?
The robots being used by Ford Motor Co. are
contributing to a streamlining of their supply
chain. What other applications of robots can
you envision to improve supply chain
management beyond those described in the
case?

Real World Internet Activity

1.

Applications for robots are being explored in

every possible setting. Using the Internet,

See if you can find some examples where

robots have been used to improve a process,
reduce costs, or make the impossible possible.

Real World Group Activity

The

previous case in the chapter described the

development of a machine that could think
just like humans. Combined with advanced
robotics, such a machine could conceivably
perform most actions as well, or possibly
better, than humans. In small groups,
Discuss

how the combination of advanced AI and

robotics could be used to create business value.
What would we want such machines to be able
to do or not do?