CHAPTER 9 : ENABLING THE ORGANIZATION - DECISION MAKING

Reasons for the growth of decision-making information systems

• People need to analyze large amounts of information
• People must make decisions quickly
• People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions
• People must protect the corporate asset of organizational information

·         Model – a simplified representation or abstraction of reality

·         IT systems in an enterprise

TRANSACTION PROCESSING SYSTEMS

Moving up through the organizational pyramid users move from requiring transactional information to analytical information

• Transaction processing system - the basic business system that serves the operational level (analysts) in an organization
• Online transaction processing (OLTP) – the capturing of transaction and event information                                                                              using technology to (1) process the                                                                                                     information according to defined business rules,                                                                               (2) store the information, (3) update existing information to reflect the new informatio
• Online analytical processing (OLAP) – the manipulation of information to create business                                                                intelligence in support of strategic decision making

DECISION SUPPORT SYSTEMS

• Decision support system (DSS) – models information to support managers and business professionals during the decision-making process
• Three quantitative models used by DSSs include:

1.      Sensitivity analysis

2.      What-if analysis

3.      Goal-seeking analysis

Interaction between a TPS and a DSS

EXECUTIVE INFORMATION SYSTEM

• Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
• Interaction between a TPS and an EIS

ARTIFICIAL INTELLIGENCE

• Intelligent system – various commercial applications of artificial intelligence
• Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

–     Advantages: can check info on competitor

Four most common categories of AI include:

–     Expert system

–     Neural Network

–     Genetic algorithm

–     Intelligent agent

 DATA MINING

·         Data-mining software includes many forms of AI such as neural networks and expert systems

·         Common forms of data-mining analysis capabilities include:

–     Cluster analysis

–     Association detection

–     Statistical analysis

CLUSTER ANALYSIS

·         Cluster analysis – a technique used to divide an information set into mutually exclusive groups such that the members of each group are as close together as possible to one another and the different groups are as far apart as possible

·         CRM systems depend on cluster analysis to segment customer information and identify behavioral traits

ASSOCIATION DETECTION

·         Association detection – reveals the degree to which variables are related and the nature and frequency of these relationships in the information

–     Market basket analysis – analyzes such items as Web sites and checkout scanner information to detect customers’ buying behavior and predict future behavior by identifying affinities among customers’ choices of products and services

STATISTICAL ANALYSIS

·         Statistical analysis – performs such functions as information correlations, distributions, calculations, and variance analysis

–     Forecast – predictions made on the basis of time-series information

–     Time-series information – time-stamped information collected at a particular frequency