Decision Support and

Business Intelligence
Systems
(9th Ed., Prentice Hall)

Chapter 2:
Decision Making, Systems,
Modeling, and Support
 Learning Objectives
 Understand the conceptual foundations
of decision making
 Understand the need for and the nature
of models in decision making
 Understand Simon's four phases of
decision making:
 intelligence,
 design,
 choice, and
 implementation

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 Learning Objectives
 Recognize the concepts of rationality and
bounded rationality and how they relate
to decision making
 Differentiate between the concepts of
making a choice and establishing a
principle of choice
 Learn how DSS provide support for
decision making in practice
 Understand the systems approach

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 Decision Support Systems (DSS)

Dissecting DSS
into its main
concepts

Building successful
DSS requires a
through
understanding of
these concepts

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 Characteristics of Decision
Making
 Groupthink
 Evaluating what-if scenarios
 Experimentation with a real
system!
 Changes in the decision-making
environment may occur
continuously
 Time pressure on the decision
maker
Analyzing a problem takes
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
 Characteristics of Decision
Making
 Better decisions
 Tradeoff: accuracy versus speed
 Fast decision may be detrimental
 Areas suffering most from fast
decisions
 personnel/human resources (27%)
 budgeting/finance (24%)

 organizational structuring (22%)

 quality/productivity (20%)

 IT selection and installation (17%)

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Copyright improvement
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Inc. Publishing as Prentice Hall
 Decision Making
 A process of choosing among two
or more alternative courses of
action for the purpose of attaining
a goal(s)
 Managerial decision making is
synonymous with the entire
management process - Simon
(1977)
 e.g., Planning
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 What should be done? When? Where?
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 Decision Making and Problem
Solving
 A problem occurs when a system
 does not meet its established goals
 does not yield the predicted results,
or
 does not work as planned
 Problem is the difference between
the desired and actual outcome
 Problem solving also involves
identification of new opportunities
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 Decision Making and Problem
Solving
 Are problem solving and decision
making different? Or, are they the same
thing?
 Consider phases of the decision process
Phase (1) Intelligence
Phase (2) Design
Phase (3) Choice, and
Phase (4) Implementation
 (1)-(4): problem solving; (3): decision

making
 (1)-(3): decision making; (4): problem

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solving
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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

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allotment, and priority to each steps
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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, …

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 Model
 A significant part of many DSS and
BI systems
 A model is a simplified
representation (or abstraction) of
reality
 Often, reality is too complex to
describe
 Much of the complexity is actually
irrelevant in solving a specific
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 Types of Models
 Models can be classified based on
their degree of abstraction
Less
 Iconic models (scale models)

Analog models
abstraction


Degree of

 Mental Models

 Mathematical (quantitative) models

More

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 The Benefits of Models
 Ease of manipulation
 Compression of time
 Lower cost of analysis on models
 Cost of making mistakes on
experiments
 Inclusion of risk/uncertainty
 Evaluation of many alternatives
 Reinforce learning and training
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 Web is source and a destination for
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 Phases of Decision-Making
Process
 Humans consciously or sub
consciously 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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 Decision-Making: Intelligence
Phase
 Scan the environment, either
intermittently or continuously
 Identify problem situations or
opportunities
 Monitor the results of the
implementation
 Problem is the difference between what
people desire (or expect) and what is
actually occurring
 Symptom versus Problem
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 Timely identification of opportunities is
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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 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

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abstraction
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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
 Criterion is not a constraint
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 Decision-Making: The Design
Phase
 Risk
 Lack of precise knowledge
(uncertainty)
 Risk can be measured with probability
 Scenario (what-if case)
 A statement of assumptions about the
operating environment (variables) of a
particular system at a given time
 Possible scenarios: best, worst, most
likely, average (and custom intervals)
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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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 Solving the model versus solving the
 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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 New Technologies
to Support Decision Making
 Web-based systems
 m-Commerce
 PDA, Cell phones, Tablet PCs
 GSS with visual/immersive
presence
 RFID and other wireless
technologies
 Faster computers, better
algorithms, to process “huge”
amounts of
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 End of the Chapter

 Questions / Comments…

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