Assignment 4
Anger HU
CH09.pptxCHAPTER NINE
ENABLING THE ORGANIZATION
1
CLASSROOM OPENER
THE WORLD IS FLAT VIDEO
The MIT website offers a video lecture by Thomas Friedman. Try showing the video to your students or assign it as homework. Friedman is an entertaining speaker and your students will enjoy his lecture.
http://video.mit.edu/watch/the-world-is-flat-30-9321/
LEARNING OUTCOMES
Explain the importance of decision making for managers at each of the three primary organization levels along with the associated decision characteristics
Classify the different operational, managerial, and strategic support systems, and explain how managers can use them to make decisions & gain competitive advantage
Describe artificial intelligence and identify its five main types
2
A detailed review of the learning outcomes can be found at the end of the chapter in the textbook
MAKING ORGANIZATIONAL BUSINESS DECISIONS
Managerial decision-making challenges
Analyze large amounts of information
Apply sophisticated analysis techniques
Make decisions quickly
3
What is the value of information?
The answer to this important question varies depending on how the information is used
Ask your students why two people looking at the exact same pieces of information could extract completely different value from the information
Ans: One way that people can extract different value from similar information is by the information technology tools they use to analyze the information
Also, people’s personal experience and expertise will determine how they view and analyze information
Reasons for growth of decision-making information systems
People need to analyze large amounts of information—Improvements in technology itself, innovations in communication, and globalization have resulted in a dramatic increase in the alternatives and dimensions people need to consider when making a decision or appraising an opportunity.
People must make decisions quickly—Time is of the essence and people simply do not have time to sift through all the information manually.
People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions—Information systems substantially reduce the time required to perform these sophisticated analysis techniques.
THE DECISION-MAKING PROCESS
The six-step decision-making process
Problem identification
Data collection
Solution generation
Solution test
Solution selection
Solution implementation
4
In-class critical thinking activity.
Applying this process to a real life type scenario/business – Use a sample business to answer questions and follow the 6-step process (Each student is the CEO of one of these company’s struggling with some processes in the business): examples; a coffee shop, a wholesale warehouse, an accounting firm, a gas & oil company, etc.
Problem Identification –
What are the key problems affecting the business?
What are the customer saying about the service and the product?
What is the root cause of any decline in revenue, or production time?
Data Collection –
Why are certain processes falling short?
And what are the immediate steps the company can take to adjust the current processes to improve them?
Who are you listening to, are they actual or rumor complaints?
What departments are struggling?
Solution Generation –
What are some of the solutions you have for improvement?
What are some of the solutions your management team has?
How will you go about collecting all the best solutions?
Solution Test –
Are these solutions long-term or short-term solutions?
What are some of the cost factors associated with the solutions?
Does your team like the solution or are they going to sabotage it because they are unhappy with the decision made?
Solution Selection –
As the executive leader of the company are you comfortable with the decision you made?
How are you going to take a strong lead on this decision without alienating yourself?
Solution Implementation -
Evaluate and track how the solution is working?
Is it achieving the results that you wanted?
Is the results are poor, what steps do you need to take to adjust?
As the leader for the company, how will you appropriately change the solution direction without upsetting the environment or flow of the employees and production?
THE DECISION-MAKING PROCESS
5
In-class critical thinking activity.
Applying this process to a real life type scenario/business – Use a sample business to answer questions and follow the 6-step process (Each student is the CEO of one of these company’s struggling with some processes in the business): examples; a coffee shop, a wholesale warehouse, an accounting firm, a gas & oil company, etc.
Problem Identification –
What are the key problems affecting the business?
What are the customer saying about the service and the product?
What is the root cause of any decline in revenue, or production time?
Data Collection –
Why are certain processes falling short?
And what are the immediate steps the company can take to adjust the current processes to improve them?
Who are you listening to, are they actual or rumor complaints?
What departments are struggling?
Solution Generation –
What are some of the solutions you have for improvement?
What are some of the solutions your management team has?
How will you go about collecting all the best solutions?
Solution Test –
Are these solutions long-term or short-term solutions?
What are some of the cost factors associated with the solutions?
Does your team like the solution or are they going to sabotage it because they are unhappy with the decision made?
Solution Selection –
As the executive leader of the company are you comfortable with the decision you made?
How are you going to take a strong lead on this decision without alienating yourself?
Solution Implementation -
Evaluate and track how the solution is working?
Is it achieving the results that you wanted?
Is the results are poor, what steps do you need to take to adjust?
As the leader for the company, how will you appropriately change the solution direction without upsetting the environment or flow of the employees and production?
DECISION-MAKING ESSENTIALS
Decision-making and problem-solving occur at each level in an organization
Making Business Decisions -
Understanding the way people makes decisions is critical to embrace. They way people make decisions is going to affect your business and the culture that is created there.
CLASSROOM ACTIVITY
Sheena Lyengar did her thesis work on “how people make decisions.” Great Ted.com talk to show your students http://www.ted.com/talks/sheena_iyengar_on_the_art_of_choosing.html
6
DECISION-MAKING ESSENTIALS
Operational decision making - Employees develop, control, and maintain core business activities required to run the day-to-day operations
Structured decisions - Situations where established processes offer potential solutions
OPERATIONAL
Operational Decision Making -
Employee Type: lower management, analysts, staff
Focus: Internal, functional
Time Frame: Short term, day-to-day operations
Decision Types: Structured, recurring, repetitive
MIS Type: Information
Metrics: Key performance indicators focus on efficiency
Examples:
How many employees are out sick?
How many products need to be made today?
What are next week’s production requirements?
How much inventory is in the warehouse?
How many problems occurred when running payroll?
Which employees are on vacation?
What are some examples of types of systems or activities at this level?
Payroll
Training & development
Accounts payable & receivable
Employee record keeping
Scheduling
Order processing
Order tracking
7
DECISION-MAKING ESSENTIALS
Managerial decision making – Employees evaluate company operations to identify, adapt to, and leverage change
Semistructured decisions – Occur in situations in which a few established processes help to evaluate potential solutions, but not enough to lead to a definite recommended decision
MANAGERIAL
Managerial Decision Making
Employee Type: Middle mgmt., managers, directors
Focus: Internal, cross-functional
Time Frame: Short term, daily, monthly, yearly
Decision Types: Semistructured, adhoc, reporting
MIS Type: Business Intelligence
Metrics: KPIs focusing on efficiency, and CSFs focusing on effectiveness
Examples:
Who are our best customers by region, by sales representatives, by product?
What are the sales forecasts for next month? How do they compare to actual sales for last year?
What was the difference between expected sales and actual sales for each month?
What was the impact of last month’s marketing campaign on sales?
What types of ad hoc or unplanned reports might the company require next month?
What are some examples of types of systems or activities at this level?
Sales management
Pricing & profitability
Contract analysis
Production costs
Sales analysis by region
Inventory
Audits
8
DECISION-MAKING ESSENTIALS
Strategic decision making – Managers develop overall strategies, goals, and objectives
Unstructured decisions – Occurs in situations in which no procedures or rules exist to guide decision makers toward the correct choice
STRATEGIC
Strategic Decision Making
Employee Type: Senior management, presidents
Focus: external, industry, cross company
Time Frame: Long term, yearly, multi-year
Decision Types: Unstructured, nonrecurring, one time
MIS Type: Knowledge
Metrics: CSFs focusing on effectiveness
Examples:
How will changes in employment levels over the next three years impact the company?
What industry trends are worth analyzing?
What new products and new markets does the company need to create competitive advantages?
How will a recession over the next years impact business?
What measures will the company need to prepare for due to new tax laws?
What are some examples of types of systems or activities at this level?
Sales trend forecasting
Budget forecasting
Profit planning
5-year forecast planning
9
SUPPORT: ENHANCING DECISION MAKING WITH MIS
Model – A simplified representation or abstraction of reality
Models help managers to
Calculate risks
Understand uncertainty
Change variables
Manipulate time to make decisions
10
Models can calculate risks, understand uncertainty, change variables, and manipulate time
Ask your students if any of them have ever worked with a DSS, EIS, or AI system? What types of models are they using today at their jobs or in their personal lives?
Ans: Many of your students have worked with a DSS and might not know it. Excel is a DSS. You can use many of the tools found in Excel, such as Scenario Manager, Goal Seek, Solver, and Pivot Tables to support DSS activities
SUPPORT: ENHANCING DECISION MAKING WITH MIS
Types of Decision Making MIS Systems
11
Decision support system (DSS) – models information to support managers and business professionals during the decision-making process
Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn
OPERATIONAL SUPPORT SYSTEMS
Transaction processing system (TPS) – Basic business system that serves the operational level and assists in making structured decisions
Online transaction processing (OLTP) - Capturing of transaction and event information using technology to process, store, and update
Source document – The original transaction record
12
Transactional Information – encompasses all of the information contained within a single business process or unit of work, and its primary purpose is to support the performing of daily operational or structured decisions.
Transaction processing system (TPS) - basic business system that serves the operational level and assists in making structured decisions.
Online transaction processing (OLTP) – capturing of transaction and event information using technology to process, store, and update.
Source Documents – Using systems thinking, the inputs for a TPS or the original transaction record.
Analysts typically use TPS to perform their daily tasks
What types of TPS are used at your college?
Payroll system (Tracking hourly employees)
Accounts Payable system
Accounts Receivable system
Course registration system
Human resources systems (tracking vacation, sick days)
OPERATIONAL SUPPORT SYSTEMS
Systems Thinking View of a TPS
13
Create, read, update, and delete (CRUD) are the common processes associated with a TPS
Common inputs are source documents and outputs are reports
Ask your students why would a manager want to view a TPS in terms of systems thinking?
Systems thinking provides a holistic view of a system or an overview of a system
Viewing a system from end-to-end will provide a manager with a better view of opportunities and challenges associated with inputs, processes, and outputs
Feedback is critical and ensuring the appropriate metrics are associated is a key goal for many managers
MANAGERIAL SUPPORT SYSTEMS
Online analytical processing (OLAP) – Manipulation of information to create business intelligence in support of strategic decision making
Decision support system (DSS) – Models information to support managers and business professionals during the decision-making process
14
Analytical Information - Encompasses all organizational information, and its primary purpose is to support the performing of managerial analysis or semistructured decisions
Online analytical processing (OLAP) – Manipulation of information to create business intelligence in support of strategic decision making
Decision support system (DSS) – Models information to support managers and business professionals during the decision-making process
Analysts typically use TPS to perform their daily tasks – Ask your students what types of TPS are used at your college?
Payroll system (Tracking hourly employees)
Accounts Payable system
Accounts Receivable system
Course registration system
Human resources systems (tracking vacation, sick days)
MANAGERIAL SUPPORT SYSTEMS
Four quantitative models used by DSSs include
What-if analysis
Sensitivity analysis
Goal-seeking analysis
Optimization analysis
15
What-if analysis – checks the impact of a change in an assumption on the proposed solution
Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model
Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output
Optimization analysis - An extension of goal-seeking analysis, finds the optimum value for a target variable by repeatedly changing other variables, subject to specified constraints.
In a DSS, data is first queried and collected from the knowledge database
Results from the query are then checked and analyzed against decision models
Once checked against the decision models, the results are then generated for review to find a “best” solution for the situation
One national insurance company uses DSSs to analyze the amount of risk the company is undertaking when it insures drivers who have a history of driving under the influence of alcohol. The DSS discovered that only 3 percent of married male homeowners in their forties received more than one DUI. The company decided to lower rates for customers falling into this category, which increased its revenue while mitigating its risk.
CLASSROOM EXERCISE
Great Example of DSS
The Analyst™ is a diagnostic tool, now accessible online, that fills the gap between what you need and what busy, human doctors can offer. With less and less time to address a patient's individual needs and yet more and more research and other information to digest, incorrect and incomplete diagnoses are frequently made on this site they have a great diagram that compares The Analyst to a Doctor.
MANAGERIAL SUPPORT SYSTEMS
Systems Thinking View of a DSS
16
CLASSROOM EXERCISE
DSSs All Around
Break your students into groups and ask them to compare sensitivity analysis, what-if analysis, and goal-seeking analysis and to provide a business example of when they would use each type?
Sensitivity analysis – studies the impact on a single change in a current model. For example – if we continually change the amount of inventory we carry, how low can our inventories go before issues start occurring in other parts of the supply chain? This would require changing the inventory level and watching the model to see “how sensitive” it is to inventory levels.
What-if analysis – determines the impact of change on an assumption or an input. For example – if the economic condition improves, how will it affect our sales?
Goal-seeking analysis – solves for a desired goal. For example – we want to improve revenues by 30 percent, how much does sales have to increase and costs have to decrease to meet this goal?
MANAGERIAL SUPPORT SYSTEMS
Interaction Between a TPS and DSS
17
The TPS supplies transaction-based data to the DSS
The DSS summarizes and aggregates the information from the many different TPS systems, which assists managers in making informed decisions. Burlington Northern and Santa Fe Railroad (BNSF) regularly tests its railroad tracks
Each year hundreds of train derailments result from defective tracks
Using a DSS to schedule train track replacements helped BNSF decrease its rail-caused derailments by 33 percent
STRATEGIC SUPPORT SYSTEMS
Information Levels Throughout An Organization
18
The structure of a typical organization is similar to a pyramid
Organizational activities occur at different levels of the pyramid
People in the organization have unique information needs and thus require various sets of IT tools (see Figure)
At the lower levels of the pyramid, people perform daily tasks such as processing transactions
Moving up through the organizational pyramid, people (typically managers) deal less with the details (“finer” information) and more with meaningful aggregations of information (“coarser” information) that help them make broader decisions for the organization
Granularity refers to the extent of detail in the information (means fine and detailed or “coarse” and abstract information)
STRATEGIC SUPPORT SYSTEMS
Executive information system (EIS) – A specialized DSS that supports senior level executives within the organization
Granularity
Visualization
Digital dashboard
19
Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
Granularity - Refers to the level of detail in the model or the decision-making process
Visualization - Produces graphical displays of patterns and complex relationships in large amounts of data
Digital dashboard - Tracks KPIs and CSFs by compiling information from multiple sources and tailoring it to meet user needs
As digital dashboards become easier to use, more executives can perform their own analysis without inundating IT personnel with queries and request for reports
Why, according to Nucleus Research, is there a direct correlation between use of digital dashboards and a company’s return on investment (ROI)?
Digital dashboards, whether basic or comprehensive, deliver results quickly
The quicker employees have information, the quicker they can respond to problems, threats, and opportunities
CLASSROOM EXERCISE
Hod Lipson Demonstrates Cool Little Robots
Hod Lipson demonstrates a few of his cool little robots, which have the ability to learn, understand themselves and even self-replicate. At the root of this uncanny demo is a deep inquiry into the nature of how humans and living beings learn and evolve, and how we might harness these processes to make things that learn and evolve. Hod Lipson works at the intersection of engineering and biology, studying robots and the way they "behave" and evolve. His work has exciting implications for design and manufacturing -- and serves as a window to understand our own behavior and evolution.
STRATEGIC SUPPORT SYSTEMS
Interaction Between a TPS and EIS
20
Why would you need interaction between a TPS and EIS?
The EIS needs information from the TPS to help executives make decisions
Without knowing order information, inventory information, and shipping information from the TPSs, it would be very difficult for the CEO to make strategic decisions for the organization
STRATEGIC SUPPORT SYSTEMS
Most EISs offering the following capabilities
Consolidation
Drill-down
Slice-and-dice
Pivot
21
Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information
Drill-down – enables users to get details, and details of details, of information
Slice-and-dice – looks at information from different perspectives
Pivot – Rotates data to display alternative presentations of the data
Can you name a few different situations when you would use consolidation, drill-down, and slice-and-dice?
Consolidation would occur when grouping multiple store sales together to get a total for the company
Drill-down would occur when digging into the numbers on the balance sheet or income statement, such as revenues broken down into individual product revenues for each store during different dates and times
Slice-and-dice would occur when users begin looking at information with different dimensions, similar to the cubes of information
Artificial intelligence (AI) – Simulates human intelligence such as the ability to reason and learn
Intelligent system – Various commercial applications of artificial intelligence
USING AI TO MAKE BUSINESS DECISIONS
22
At Manchester Airport in England, the Hefner AI Robot Cleaner alerts passengers
to security and nonsmoking rules while it scrubs up to 65,600 square feet of
floor per day. Laser scanners and ultrasonic detectors keep it from colliding with
passengers.
Shell Oil’s SmartPump keeps drivers in their cars on cold, wet winter days. It can
service any automobile built after 1987 that has been fitted with a special gas cap
and a windshield-mounted transponder that tells the robot where to insert the pump.
Matsushita’s courier robot navigates hospital hallways, delivering patient files,
X-ray films, and medical supplies.
The FireFighter AI Robot can extinguish flames at chemical plants and nuclear
reactors with water, foam, powder, or inert gas. The robot puts distance between
human operators and the fire.9
AI systems increase the speed and consistency of decision making, solve problems
with incomplete information, and resolve complicated issues that cannot be solved
by conventional computing. There are many categories of AI systems; five of the most
familiar are: (1) expert systems, (2) neural networks, (3) genetic algorithms, (4) intelligent
agents, and (5) virtual reality
CLASSROOM VIDEO
Something to Get Their Attention
Great clip to show student's the power of AI. http://www.metacafe.com/watch/445498/robotic_beer_launching_refrigerator
USING AI TO MAKE BUSINESS DECISIONS
Five most common categories of AI
1. Expert system – Computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems
2. Neural Network – Attempts to emulate the way the human brain works
Fuzzy logic – A mathematical method of handling imprecise or subjective information
23
Expert systems
Human expertise is transferred to the expert system, and users can access the expert system for specific advice
Most expert systems contain information from many human experts and can therefore perform a better analysis than any single human
Ask your students how expert systems could be used in the medical field
Neural networks
Neural networks are most useful for decisions that involve patterns or image recognition
Typically used in the finance industry to discover credit card fraud by analyzing individual spending behavior
USING AI TO MAKE BUSINESS DECISIONS
3. Genetic algorithm – An artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem
- Shopping bot – Software that will search several retailer websites and provide a comparison of each retailer’s offerings including price and availability
24
Genetic algorithms
Essentially an optimizing system, it finds the combination of inputs that give the best outputs
Intelligent agents
Used for environmental scanning and competitive intelligence
An intelligent agent can learn the types of competitor information users want to track, continuously scan the Web for it, and alert users when a significant event occurs
RivalWatch uses intelligent agents
Multi-Agent Systems: Agent-Based Modeling: a way of simulating human organizations using multiple intelligent agents, each of which follows a set of simple rules and can adapt to changing conditions
USING AI TO MAKE BUSINESS DECISIONS
4. Intelligent agent – Special-purpose knowledge-based information system that accomplishes specific tasks on behalf of its users
5. Virtual reality - A computer-simulated environment that can be a simulation of the real world or an imaginary world
25
Virtual Reality - Examples: games, cargo transport systems, complex adaptive systems
Virtual Workforce – Microsoft Headquarters example
Augmented reality – the viewing of the physical world with computer-generated layers of information added to it
Google Glass – A wearable computer with an optical head-mounted display
Virtual workplace – a work environment that is not located in any one physical space
Haptic interface – uses technology allowing humans to interact with a computer though bodily sensations and movements
CLASSROOM EXERCISE
Building Artificial Intelligence
The idea of robots and artificial intelligence is something that has captured people’s attention for years. From the robots in Star Wars to the surreal computer world in the Matrix, everyone seems to be fascinated with the idea of robots.
Break your students into groups and challenge them to build a robot. The robot can perform any function or activity they choose. The robot must contain a digital dashboard and enable decision support capabilities for its owner. Have the students draw a prototype of their robot and present their robot to the class. Have your entire class vote on which robot they would invest in if they were a venture capital firm.
LEARNING OUTCOME REVIEW
Now that you have finished the chapter please review the learning outcomes in your text
Be sure to review the learning outcomes included in the end-of-chapter material
26
