The science of fact-based decision making
Decision Making Process (6 steps)
1) Problem identification
2) Data collection
3) Solution generation
4) Solution test
5) Solution selection
6) Solution implementation
Employees develop, control and maintain core business activities to run day to day operations. They make structured decisions.
Established processes that offer potential solutions. They are made more frequently and are almost repetitive in nature, they effect short term business strategies. Examples: Recording inventory and creating schedules.
Lower management, department managers, analysists and staff.
Focus: Internal, functional
Time: Short, day to day
Decision type: Structured, reoccurring and repetitive
MIS type: Info
Metrics: Key performance indicators focusing on efficiency. Example: How many employees are out sick?
Constantly evaluating company operations to hone the firms ability to identify, adapt to and change.
-Covers short to medium range plans, schedules and budgets along with policies, procedures and business objectives for the firm.
-Allocates resources and monitor’s performance of subunits.
Occurs in situations in which a few established processes help to evaluate potential situations.
Example: Decisions about producing new products
Managers develop overall business strategies, goals and objects as part of the company’s overall plan.
-Monitors strategic performance of the organization and its overall direction in the political, economic, and competitive business environment.
-Unstructured decisions are made. There are no rules or procedures to guide decision makers toward the correct choice. Example: The decision to enter a new market or new industry.
Temporary activity a company undertakes to create a unique product, service or result.
Measurements that evaluate results to determine whether a project is meeting its goals.
Critical Success Factors (one type of metric)
Crucial steps to achieve goals and objectives to implement their strategies.
Key Performance Indicators (one type of metric)
The Quantifiable metrics a company uses to evaluate progress toward critical success factors – more specific
-Can focus on external or internal measurements
Return on Investments
Internal KPI earning power of a project. It is measured by dividing the profitability of a project by the costs.
Efficiency and Effectiveness
Higher level metrics to measure MIS projects
Efficiency MIS Metrics
Measure the performance of MIS itself as throughput, transaction, speed and system availability
-Focuses on resources in an optimal way
Effectiveness MIS Metrics
Measure the impact MIS has on business processes and activities, including customer satisfaction and customer conversion rates.
-Focuses on how well a firm is achieving its goals and objectives
Baseline values the system seeks to attain
Process of continuously measuring system results, comparing those results to the optimal system performance (benchmark values) and identifying steps and procedures to improve system performance.
-Assesses how an MIS project performs over time
Simplified representation or abstraction of reality. Helps managers calculate risks, understand uncertainty, change variables and manipulate time to make decisions.
-Rely on models for computational and analytical routines. Example: Microsoft Excel
Encompasses all the info contained within a single business process or unit of work. Its primary purpose is to support the performance of the daily operational or structured decisions.
Example: Purchasing stocks, making a reservation
-Used when making structured decisions @ the operational level
Online Transaction Processing (OTP)
The capture of an event using technology 1) Process the info according to defined business rules 2) Store the info 3) Update existing info to reflect the new info
Transaction Processing System (TPS)
Basic business system that serves at the operational level (analsists) and assists in making structured decisions
Example: Accounting system (payroll)
The original transaction record – including time sheets, wage rates and employee benefit reports.
Encompasses all organizational information and it supports the performance of managerial analysis or semi-structured decisions
Examples: trends, sales, product stats and future growth predictions
Online Analytical Processing (OLAP)
The manipulation of information to create business intelligence in support of strategic decision making.
Decision Support System
Model info using OLAP.
-Enables high level managers to examine and manipulate large amounts of detailed data from different internal/external sources.
Example: Doctors may use it to diagnose patients
What if Analysis
Checks the impact of a change in a variable or assumption on the model
Special case of what if analysis – useful when users are uncertain about the assumptions made in estimating the value of certain key variables.
Goal Seeking Analysis
Find the input necessary to achieve a goal such as a desired level of output. It is the opposite of what if and sensitivity analysis.
Extension of goal setting analysis, finds the optimum value for a target variable by repeatedly changing the other variables, subject to specified constraints.
Executive Info System
Specialized DSS that supports senior level executives and infrastructure long term, non-routine decisions requiring judgment, evaluation and insight.
-Only efficient/effective answers – no right or wrong
Refers to the level of detail in the model or decision making process. The greater the granularity, the deeper the level of detail or fairness of data.
Process: What if, sensitivity, goal seeking, optimization
Output: Forecasts, simulations and Ad hoc reports
Produces graphical displays of patterns and complex relationships in large amounts of data
Tracks KPI and CSF by compiling info from multiple sources and tailoring it to meet users needs
-Delivers results quickly
Aggregation of data from simple rollups to complex groupings of interrated info
Enables users to view details and details of information
Slice and Dice
The ability to look at info from different perspectives
-Performed along a time axis to analyze trends and find time based patterns in the info
Various commercial applications of artificial intelligence. They include sensors and software
5 Categories of AI
1) Expert systems 2) Neutral networks 3) Genetic Algorithms 4) Intelligent agents 5) Virtual reality
Computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems.
Example: Playing Chess
Artificial neutral network that attempts to emulate the human brain works. It analyzes large quantities of info.
Example: Approved/denied applications
Mathematical method of handling imprecise or subjective data.
An artificial intelligence system that mimics the evolutionary survival of the fittest process to generate increasingly better solutions to a problem.
Process within a genetic algorithm of randomly trying combinations and evaluating the success or failure of the outcome.
A special purpose knowledge based info system that accomplishes specific tasks on behalf of its users
One of the simpliest examples of an intelligent agent. It is a software that will search several retailer websites and provide a comparison of each retailer offering including price and availability.
Computer based simulated environment that can be a simulation of a real or imaginary world.
-Fast growing area of artificial intelligence
Example: Virtual surgery
Viewing of the physical world with computer generated layers of info added to it.
“front office processes” product or service that is received by an organization’s external customer
Example: Fulfilling orders, communicating with customers, sending out bills and marketing info
“Back office processes” invisible to the customer but essential to the effective management of the business.
Example: Goal setting, day to day planning, giving performance feedback and rewards and allocating resources
Business Process Patent
Patent that protects a specific set of procedures for conducting a particular business activity.
Business processes such as manufacturing goods, selling products and producing services that make up the activities in a value chain.
Business Process Modeling or Mapping
The activity of creating a detailed flow chart or process map of work processes that shows inputs, tasks and activities in a structured process.
Business Process Model
Graphic description of a process that shows the sequence of process tasks.
Five Steps in the order to delivery business process
Step#1: Marketing (create campaign, check inventory)
Step#2: Sales (place an order, modify production, check credit)
Step#3: Operations management (manufacturing goods)
Step#4: Accounting and finance (deliver goods, bill customer)
Step#5: Customer service (support sale)
Customer Facing Process
1) Order Processing
2) Customer Service
3) Sales Process
4) Customer billing
5) Order shipping
Industry-Specific Customer Facing Processes
1) Banking – loan
2) Insurance – Claim
3) Government – Grant allocation
4) Hotel – Reservation
5) Airline – Baggage
Business Facing Processes
1) Strategic planning 2) Tactical planning 3) Budget forecasting 4) Training 5) Purchasing raw materials
As is process models
Represents the current state of the operation that has been mapped w/o any specific improvements or changes.
To be process models
Shows the results of applying change improvement opportunities to the current (as is model)
Layout that arranges the steps of a business process into a set of rows depicting the various elements.
Includes the tasks, activities and responsibilities required to execute each step in a business process.
Business Process Improvement
Attempts to understand and measure the current processes and make performance improvements accordingly.
The process of computerizing manual tasks, making them more efficient and effective and dramatically lowering operational costs.
Simplifies or eliminates unnecessary business steps
Occurs when resources reach full capacity and cannot handle any additional demands.
When a task or activity is unnecessarily repeated.
The time required to process an order.
Steps in Business Process Improvement
Document as is – establish measures – follow process –
measure performance – identify and implement improvements
Business Process Reengineering (BPR)
The analysis and redesign of workflow within and between enterprises.
Business Process Reengineering Model
Set project scope – study competition – create new processes – implement solution
Business Process Management (BPM)
Focuses on evaluating systems and improving processes that include both person – to – person workflow and system – to – system communication.
A common mistake that many managers tend to make is focusing on only one type of metrics because they are easier to measure. Which type of metrics do they focus on?
Efficiency MIS metrics
What captures transaction and event info using technology to 1) process the info according to defined business rules 2) store the info 3) update existing info to reflect the new info
Executives of a company deal less with details of the operational activities and deal more with the higher meaningful aggregations of info or “courser” info. What refers to the level of detail in the model?
Transaction processing systems are primarily used to automate business processes. Automation increases efficiency and effectiveness, while reducing head count which in turn reduces overall operational
Which of the following represents a business process you would find in the operations management department?
According to Peter Drucker, what are managers who do things right addressing?
Business process modeling or mapping, is the activity of creating a detailed flowchart or process map of a work process that shows its inputs, tasks, and activities in a ________ sequence.
Sarah Schin was recently hired by Bank West as the Global Director of HR. Her job duties include determining employment policies as well as overseeing all the hiring, firing and training of employees. What type of process does Sarah’s new job demonstrate
Online transaction processing (OLTP) is the capturing of transaction and event info using technology to ______
All of the above
Update existing info to reflect new info
Store the info
Process the info according to defined business rules
As a manager for your company some of your responsibilities include measuring metrics and overseeing company strategies. You observe some critical success factors and see large increases in productivity. What would you suspect would be the primary reason for the large increases in productivity?
Increases in effectiveness
Review the below list of key terms and determine which one typically occurs during managerial business process improvement.
What are the measurements that evaluate test results to determine whether a project is meeting its goals?
As the product manager for the eatery division of Whole Foods, Jerry is responsible for analyzing sales data to help him manage his team. Today Jerry is analyzing his data by looking at details, and details of details of info. Which of the following common digital dashboard capabilities is Jerry using to analyze his department’s success?
Anne-Marie Cole runs the sales division for a local auto insurance firm. One of her key duties is to calculate her company’s market share. When evaluating the prior year numbers, she found that her firm achieved total sales of $3 million and the entire industry had $30 million in sales. What is Anne-Marie’s current market share?
The structure of an organization is similar to a pyramid. The different levels require different types of info to assist with which of the following?
All of the above
Decision making, problem solving, opportunity capturing
Automating a business process that contains _____ or____ will magnify or amplify these problems if they are not corrected first
Jenny Welch works at a retail store selling sports equipment. Her daily tasks include opening the store, creating work schedules, processing payroll, overseeing sales and inventory, and training employees. At what level of the organizational pyramid would you categorize Jenny?
What are the three primary types of management info systems available to support decision making across the company levels
Transaction processing systems, decision support systems, executive information systems
The accounting and finance department performs processes such as creating financial statements, paying accounts payables, and collecting accounts receivables. What form of processes do these represent?
At which level of an organization do employees develop, control, and maintain core business activities required to run the day-to-day operations?
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