Business Information System PDF

WE Business information system in your career Computer Information System in daily life Organization use information system to reduce costs gaincompetitive advantage in marketplace information system plac...

WE Business information system in your career Computer Information System in daily life Organization use information system to reduce costs gaincompetitive advantage in marketplace information system places we experience computer POS Grocery store supermarket or ATM C Bank E Service VAEU Why do Business invest in IT Investments in InformationTechnology will result in superiorreturns productivity increases outputinput Revenue increases when we expense we getprofit Superiorlong term strategic positioning note Revenueexpenditure will repeat like salary capital expenditure onlyone time like rebuilding Revenue cost profit tocost Aprofit lead time the time to get the productafter ordering New Business Mod elseto makesomethingthenprovide it to make money diference on the Traditional New Model  perspectives on InformationSystems OPT Example DimensionsofFedExtrakingSystem Organizational producefortracking package managing inventory provideinformation Managment Monitorservicelevel cost Technology network bar codescanner Handheldcomputers Business Drivers of Information Systems StrategicBusiness Objectives Businessfirminvest in informatio 1 Operational excellence system to achieve 2 New product services businessmodel 3 Customer supplierintimacy 4 Improved decision making 5 Competitive advantage 6 Survival Operational excellence efficiency improvement to attainhigherprofitability Carrefour'sRetailsystem links suppliers to stores for superiorreplenishmentsystem I Cost A profit improvement to gain more profit  New products services businessmodels Business Model Describehow company produce deliver sell product to help create information system technology a majorenabling tool for new product services business Example NETFLIX Customer Supplierintimacy Servingcustomerwell customerreturn A revenue profit Example Highend hotels use computers tohelptrack customer preference to provide it Improveddecision making without accurateinformation Overproduction underproduction Misallocation of resources poor responsetimes competitive advantage Deliver betterperformance Charge less for superior products responder to customers suppliers inrealtimeCrespondefaster Example Apple Survival informationtechnology is a necessity ofbusiness Business need information technology to survive Industry level change Example Citibank introduce ATM  what is information system System set ofcomponent that work together start with input result in output Input process output after feedback you can either change theprocess or the input information system Set of interrelated components Collect process store I distribute information Support decision making coordination control closed system is IPOsystem with feedback Open system is IPO system withoutfeedback  Major Component of informationsystem Data Rawfact its theinputtothesystem two sources to Data Internal Sales record personalrecords External Source are customerscompetitors suppliers goverment labor populationeconomic conditions Wemake desicoons based on the information nottheData Database Heart of Information system collection ofall relevantdataorganizedin a seriesof integratedfiles with computerized database easytoaccess use Process purposeofprocess is to produceusefultype ofinformation for decisionmaking thatinclude widerange of models to support all level of decision making Information consists of factsthathavebeen analyzed by the process more useful fordecisionmaking Quality of Information determined by its usefulness to users it's usefulness determine success of the information system fortheinformation to beuseful it should have qualities like Timeliness Intergationwithotherdata information Consistency accuracy Relevance Verifiability validity Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 6 Foundations of Business Intelligence: Databases and Information Management Copyright © 2020 Pearson Education Ltd. Learning Objectives 6.1 What is a database, and how does a relational database organize data? 6.2 What are the principles of a database management system? 6.3 What are the principal tools and technologies for accessing information from databases to improve business performance and decision making? Copyright © 2020 Pearson Education Ltd. What Is a Database? Database: – Collection of related files containing records on people, places, or things Entity: – Generalized category representing person, place, thing – E.g., SUPPLIER, PART Attributes: – Specific characteristics of each entity: ▪ SUPPLIER name, address ▪ PART description, unit price, supplier Copyright © 2020 Pearson Education Ltd. Databases and Transaction Processing Firms use the web to make information from their internal databases available to customers and partners. Middleware and other software make this possible – Web server – Application servers or CGI – Database server Web interfaces provide familiarity to users and savings over redesigning legacy systems. Copyright © 2020 Pearson Education Ltd. Figure 6.16 Linking Internal Databases to the Web Copyright © 2020 Pearson Education Ltd. Relational Databases Organize data into two-dimensional tables (relations) with columns and rows One table for each entity: – E.g., (CUSTOMER, SUPPLIER, PART, SALES) – Fields (columns) store data representing an attribute – Rows store data for separate records, or tuples Key field: uniquely identifies each record Primary key Copyright © 2020 Pearson Education Ltd. Establishing Relationships Entity-relationship diagram – Used to clarify table relationships in a relational database Referential integrity rules – Ensure that relationships between coupled tables remain consistent – Example of a one-to-many relationship Copyright © 2020 Pearson Education Ltd. Figure 6.2 A Relational Database Table Copyright © 2020 Pearson Education Ltd. Figure 6.3 The PART Table Copyright © 2020 Pearson Education Ltd. Figure 6.5 Sample Purchase Order Report Copyright © 2020 Pearson Education Ltd. Figure 6.6 The Final Database Design with Sample Records Copyright © 2020 Pearson Education Ltd. Figure 6.7 Entity-Relationship Diagram for the Database with Four Tables Copyright © 2020 Pearson Education Ltd. Database Management Systems (DBMS) Software for creating, storing, organizing, and accessing data from a database Separates the logical and physical views of the data – Logical view: how end users view data – Physical view: how data are actually structured and organized Examples: Microsoft Access, DB2, Oracle Database, Microsoft SQL Server, MySQL Copyright © 2020 Pearson Education Ltd. Figure 6.8 Human Resources Database with Multiple Views Copyright © 2020 Pearson Education Ltd. Operations of a Relational DBMS Select: – Creates a subset of all records meeting stated criteria Join: – Combines relational tables to present the server with more information than is available from individual tables Project: – Creates a subset consisting of columns in a table – Permits user to create new tables containing only desired information Copyright © 2020 Pearson Education Ltd. Figure 6.9 The Three Basic Operations of a Relational DBMS Copyright © 2020 Pearson Education Ltd. Figure 6.10 Access Data Dictionary Features Copyright © 2020 Pearson Education Ltd. Figure 6.11 Example of an SQL Query SELECT PART.Part_Number, PART.Part_Name, SUPPLIER.Supplier_Number, SUPPLIER.Supplier_Name FROM PART, SUPPLIER WHERE PART.Suplier_Number = SUPPLIER.Supplier_Number AND Part_Number = 137 OR Part_Number = 150; Copyright © 2020 Pearson Education Ltd. Figure 6.12 An Access Query Copyright © 2020 Pearson Education Ltd. Big Data Massive quantities of unstructured and semi-structured data from Internet and more – 3Vs: Volume, variety, velocity – Petabytes and exabytes Big datasets offer more patterns and insights than smaller datasets, e.g. – Customer behavior – Weather patterns Requires new technologies and tools Copyright © 2020 Pearson Education Ltd. Non-Relational Databases “NoSQL” Handle large data sets of data that are not easily organized into tables, columns, and rows Use more flexible data model – Don’t require extensive structuring Can manage unstructured data, such as social media and graphics E.g. Amazon’s Simple D B, MetLife’s Mongo D B Copyright © 2020 Pearson Education Ltd. Cloud Databases and Distributed Databases Relational database engines provided by cloud computing services – Pricing based on usage – Appeal to small or medium-sized businesses Amazon Relational Database Service – Offers MySQL, Microsoft SQLServer, Oracle Database engines Distributed databases – Stored in multiple physical locations – Google’s Spanner cloud service Copyright © 2020 Pearson Education Ltd. Blockchain Distributed database of transactions Operates on a network without central authority Maintains a growing list of records called blocks Once recorded, blocks cannot be changed Reduces cost of processing transactions and enhances security Copyright © 2020 Pearson Education Ltd. Figure 6.13 How Blockchain Works Copyright © 2020 Pearson Education Ltd. Business Intelligence Infrastructure Array of tools for obtaining useful information from internal and external systems and big data – Data warehouses – Data marts – Hadoop – In-memory computing – Analytical platforms Copyright © 2020 Pearson Education Ltd. Data Warehouses Data warehouse: – Database that stores current and historical data that may be of interest to decision makers – Consolidates and standardizes data from many systems, operational and transactional databases – Data can be accessed but not altered Data mart: – Subset of data warehouses that is highly focused and isolated for a specific population of users Copyright © 2020 Pearson Education Ltd. Hadoop Open-source software framework for big data Breaks data task into sub-problems and distributes the processing to many inexpensive computer processing nodes Combines result into smaller data set that is easier to analyze Key services – Hadoop Distributed File System (HDFS) – MapReduce Copyright © 2020 Pearson Education Ltd. Figure 6.14 Business Intelligence Technology Infrastructure Copyright © 2020 Pearson Education Ltd. Analytical Tools: Relationships, Patterns, Trends Once data is gathered, tools are required for consolidating, analyzing, to use insights to improve decision making – Software for database querying and reporting – Multidimensional data analysis (OL AP) – Data mining Copyright © 2020 Pearson Education Ltd. Online Analytical Processing (OLAP) Supports multidimensional data analysis, enabling users to view the same data in different ways using multiple dimensions – Each aspect of information—product, pricing, cost, region, or time period—represents a different dimension – E.g., comparing sales in East in June versus May and July Enables users to obtain online answers to ad hoc questions such as these in a fairly rapid amount of time Copyright © 2020 Pearson Education Ltd. Figure 6.15 Multidimensional Data Model Copyright © 2020 Pearson Education Ltd. Data Mining Finds hidden patterns and relationships in large databases and infers rules from them to predict future behavior Types of information obtainable from data mining – Associations: occurrences linked to single event – Sequences: events linked over time – Classifications: patterns describing a group an item belongs to – Clustering: discovering as yet unclassified groupings – Forecasting: uses series of values to forecast future values Copyright © 2020 Pearson Education Ltd. Text Mining Unstructured data (mostly text files) accounts for 80 percent of an organization’s useful information. Text mining allows businesses to extract key elements from, discover patterns in, and summarize large unstructured data sets. Sentiment analysis – Mines online text comments online or in email to measure customer sentiment Copyright © 2020 Pearson Education Ltd. Web Mining Discovery and analysis of useful patterns and information from the web – E.g. to understand customer behavior, evaluate website, quantify success of marketing Content mining – mines content of websites Structure mining – mines website structural elements, such as links Usage mining – mines user interaction data gathered by web servers Copyright © 2020 Pearson Education Ltd. Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 9 Achieving Operational Excellence and Customer Intimacy: Enterprise Applications Copyright © 2020 Pearson Education Ltd. Learning Objectives 9.1 How do enterprise systems help businesses achieve operational excellence? 9.2 How do supply chain management systems coordinate planning, production, and logistics with suppliers? 9.3 How do customer relationship management systems help firms achieve customer intimacy? 9.4 What are the challenges that enterprise applications pose, and how are enterprise applications taking advantage of new technologies? Copyright © 2020 Pearson Education Ltd. Enterprise Systems Enterprise resource planning (ER P) systems Suite of integrated software modules and a common central database Collects data from many divisions of firm for use in nearly all of firm’s internal business activities Information entered in one process is immediately available for other processes Copyright © 2020 Pearson Education Ltd. Figure 9.1 How Enterprise Systems Work Copyright © 2020 Pearson Education Ltd. Enterprise Software Built around thousands of predefined business processes that reflect best practices – Finance and accounting – Human resources – Manufacturing and production – Sales and marketing To implement, firms: – Select functions of system they wish to use – Map business processes to software processes ▪ Use software’s configuration tables for customizing Copyright © 2020 Pearson Education Ltd. Business Value of Enterprise Systems Increase operational efficiency Provide firm-wide information to support decision making Enable rapid responses to customer requests for information or products Include analytical tools to evaluate overall organizational performance and improve decision-making Copyright © 2020 Pearson Education Ltd. The Supply Chain Network of organizations and processes for: – Procuring materials – Transforming materials into products – Distributing the products Upstream supply chain Downstream supply chain Internal supply chain Copyright © 2020 Pearson Education Ltd. Figure 9.2 Nike’s Supply Chain Copyright © 2020 Pearson Education Ltd. Supply Chain Management Inefficiencies cut into a company’s operating costs – Can waste up to 25 percent of operating expenses Just-in-time strategy – Components arrive as they are needed – Finished goods shipped after leaving assembly line Safety stock: buffer for lack of flexibility in supply chain Bullwhip effect – Information about product demand gets distorted as it passes from one entity to next across supply chain Copyright © 2020 Pearson Education Ltd. Figure 9.3 The Bullwhip Effect Copyright © 2020 Pearson Education Ltd. Supply Chain Management Software Supply chain planning systems – Model existing supply chain – Enable demand planning – Optimize sourcing, manufacturing plans – Establish inventory levels – Identify transportation modes Supply chain execution systems – Manage flow of products through distribution centers and warehouses Copyright © 2020 Pearson Education Ltd. Global Supply Chains and the Internet Global supply chain issues – Greater geographical distances, time differences – Participants from different countries ▪ Different performance standards ▪ Different legal requirements Internet helps manage global complexities – Warehouse management – Transportation management – Logistics – Outsourcing Copyright © 2020 Pearson Education Ltd. Demand-Driven Supply Chains: From Push to Pull Manufacturing and Efficient Customer Response Push-based model (build-to-stock) – Earlier SCM systems – Schedules based on best guesses of demand Pull-based model (demand-driven) – Web-based – Customer orders trigger events in supply chain Internet enables move from sequential supply chains to concurrent supply chains – Complex networks of suppliers can adjust immediately Copyright © 2020 Pearson Education Ltd. Figure 9.4 Push- Versus Pull-Based Supply Chain Models Copyright © 2020 Pearson Education Ltd. Figure 9.5 The Emerging Internet- Driven Supply Chain Copyright © 2020 Pearson Education Ltd. Business Value of Supply Chain Management Systems Match supply to demand Reduce inventory levels Improve delivery service Speed product time to market Use assets more effectively – Total supply chain costs can be 75 percent of operating budget Increase sales Copyright © 2020 Pearson Education Ltd. Customer Relationship Management Knowing the customer In large businesses, too many customers and too many ways customers interact with firm CRM systems – Capture and integrate customer data from all over the organization – Consolidate and analyze customer data – Distribute customer information to various systems and customer touch points across enterprise – Provide single enterprise view of customers Copyright © 2020 Pearson Education Ltd. Figure 9.6 Customer Relationship Management (CRM) Copyright © 2020 Pearson Education Ltd. Customer Relationship Management Software (1 of 2) Packages range from niche tools to large-scale enterprise applications More comprehensive packages have modules for: – Partner relationship management (PRM) ▪ Integrating lead generation, pricing, promotions, order configurations, and availability ▪ Tools to assess partners’ performances – Employee relationship management (ER M) ▪ Setting objectives, employee performance management, performance-based compensation, employee training Copyright © 2020 Pearson Education Ltd. Customer Relationship Management Software (2 of 2) CRM packages typically include tools for: – Sales force automation (SFA) ▪ Sales prospect and contact information ▪ Sales quote generation capabilities – Customer service ▪ Assigning and managing customer service requests ▪ Web-based self-service capabilities – Marketing ▪ Capturing prospect and customer data, scheduling and tracking direct-marketing mailings or email ▪ Cross-selling Copyright © 2020 Pearson Education Ltd. Figure 9.7 How CRM Systems Support Marketing Responses by Channel for January 2019 Promotional Campaign Copyright © 2020 Pearson Education Ltd. Figure 9.9 Customer Loyalty Management Process Map Copyright © 2020 Pearson Education Ltd. Operational and Analytical CRM Operational CRM – Customer-facing applications – Sales force automation call center and customer service support – Marketing automation Analytical CRM – Based on data warehouses populated by operational CR M systems and customer touch points – Analyzes customer data (OLAP, data mining, etc.) ▪ Customer lifetime value (CLTV) Copyright © 2020 Pearson Education Ltd. Figure 9.10 Analytical CRM Copyright © 2020 Pearson Education Ltd. Business Value of Customer Relationship Management Systems Business value of CRM systems – Increased customer satisfaction – Reduced direct-marketing costs – More effective marketing – Lower costs for customer acquisition/retention – Increased sales revenue Churn rate – Number of customers who stop using or purchasing products or services from a company – Indicator of growth or decline of firm’s customer base Copyright © 2020 Pearson Education Ltd. Enterprise Application Challenges Expensive to purchase and implement enterprise applications – Multi-million dollar projects in 2018 – Long development times Technology changes Business process changes Organizational learning, changes Switching costs, dependence on software vendors Data standardization, management, cleansing Copyright © 2020 Pearson Education Ltd. Next-Generation Enterprise Applications (1 of 2) Enterprise solutions/suites – Make applications more flexible, web-enabled, integrated with other systems SOA standards Open-source applications On-demand solutions Cloud-based versions Functionality for mobile platform Copyright © 2020 Pearson Education Ltd. Next-Generation Enterprise Applications (2 of 2) Social CRM – Incorporating social networking technologies – Company social networks – Monitor social media activity; social media analytics – Manage social and web-based campaigns Business intelligence – Inclusion of BI with enterprise applications – Flexible reporting, ad hoc analysis, “what-if” scenarios, digital dashboards, data visualization Copyright © 2020 Pearson Education Ltd. Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 10 E-commerce: Digital Markets, Digital Goods Copyright © 2020 Pearson Education Ltd. Learning Objectives 10.1 What are the unique features of e-commerce, digital markets, and digital goods? 10.2 What are the principal e-commerce business and revenue models? 10.3 How has e-commerce transformed marketing? 10.4 How has e-commerce affected business-to-business transactions? 10.5 What is the role of m-commerce in business, and what are the most important m-commerce applications? Copyright © 2020 Pearson Education Ltd. E-Commerce Today E-commerce: Use of the Internet and web to transact business Began in 1995 and grew exponentially; still stable even in a recession Companies that survived the dot-com bubble now thrive The new e-commerce: social, mobile, local Move from desktop to smartphone Copyright © 2020 Pearson Education Ltd. Figure 10.1 The Growth of E-Commerce Copyright © 2020 Pearson Education Ltd. Why E-commerce Is Different (1 of 2) Ubiquity – Marketspace is virtual – Transaction costs reduced Global reach – Transactions cross cultural and national boundaries Universal standards – One set of technology standards: Internet standards Richness – Supports video, audio, and text messages Copyright © 2020 Pearson Education Ltd. Why E-commerce is Different (2 of 2) Interactivity Information density – Greater price and cost transparency – Enables price discrimination Personalization/customization – Technology permits modification of messages, goods Social technology – Promotes user content generation and social networking Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (1 of 8) (1) Ubiquity ▪ Internet/Web technology available everywhere: work, home, and so on, anytime. ▪ Effect: – Marketplace removed from temporal, geographic locations to become “marketspace” – Enhanced customer convenience and reduced shopping costs ▪ Reduces transaction costs – Costs of participating in market Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (2 of 8) (2) Global reach The technology reaches across national boundaries, around Earth Effect: ▪ Commerce enabled across cultural and national boundaries seamlessly and without modification. ▪ Marketspace includes, potentially, billions of consumers and millions of businesses worldwide. Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (3 of 8) (3) Universal standards – One set of technology standards: Internet standards – Effect: ▪ Disparate computer systems easily communicate with one another ▪ Lower market entry costs—costs merchants must pay to bring goods to market ▪ Lower consumers’ search costs—effort required to find suitable products Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (4 of 8) (4) [Media] Richness – Supports video, audio, and text messages – Effect: ▪ Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people. ▪ Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience. Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (5 of 8) (5) Interactivity – The technology works through interaction with the user. – Effect: ▪ Consumers engaged in dialog that dynamically adjusts experience to the individual. ▪ Consumer becomes co-participant in process of delivering goods to market. Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (6 of 8) (6) Information density – Large increases in information density—the total amount and quality of information available to all market participants – Effect: ▪ Greater price transparency ▪ Greater cost transparency ▪ Enables merchants to engage in price discrimination Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (7 of 8) (7) Personalization/Customization – Technology permits modification of messages, goods – Effect: ▪ Personalized messages can be sent to individuals as well as groups. ▪ Products and services can be customized to individual preferences. Copyright © 2020 Pearson Education Ltd. Characteristics of E-commerce (8 of 8) (8) Social technology – The technology promotes user content generation and social networking – Effect: ▪ New Internet social and business models enable user content creation and distribution, support social networks ▪ Many-to-many model Copyright © 2020 Pearson Education Ltd. Key Concepts in E-commerce – Digital Markets and Digital Goods in a Global Marketplace Internet and digital markets have changed the way companies conduct business Information asymmetry reduced Menu costs, search and transaction costs reduced Dynamic pricing enabled Switching costs Delayed gratification Disintermediation Copyright © 2020 Pearson Education Ltd. Figure 10.2 The Benefits of Disintermediation to the Consumer Copyright © 2020 Pearson Education Ltd. Digital Goods Goods that can be delivered over a digital network Cost of producing first unit is almost entire cost of product Costs of delivery over the Internet very low Marketing costs remain the same; pricing highly variable Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.) Copyright © 2020 Pearson Education Ltd. Types of E-commerce Three major types – Business-to-consumer (B2C) ▪ Example: Barnes and Noble.com – Business-to-business (B2B) ▪ Example: ChemConnect – Consumer-to-consumer (C2C) ▪ Example: eBay E-commerce can also be categorized by platform – Mobile commerce (m-commerce) Copyright © 2020 Pearson Education Ltd. E-commerce Business Models Portal E-tailer Content provider Transaction broker Market creator Service provider Community provider Copyright © 2020 Pearson Education Ltd. E-commerce Revenue Models Advertising Sales Subscription Free/Freemium Transaction fee Affiliate Copyright © 2020 Pearson Education Ltd. How Has E-commerce Affected Business-To Business Transactions? U.S. B2B trade in 2019 is $13.5 trillion – U.S. B2B e-commerce in 2018 is $6.3 trillion Internet and networking helps automate procurement Variety of Internet-enabled technologies used in B2B – Electronic data interchange (EDI) – Private industrial networks (private exchanges) – Net marketplaces – Exchanges Copyright © 2020 Pearson Education Ltd. Electronic Data Interchange (EDI) Computer-to-computer exchange of standard transactions such as invoices, purchase orders Major industries have EDI standards – Define structure and information fields of electronic documents More companies are moving toward web-enabled private networks – Allow them to link to a wider variety of firms than EDI allows – Enable sharing a wider range of information Copyright © 2020 Pearson Education Ltd. Figure 10.6: Electronic Data Interchange (ED I) Copyright © 2020 Pearson Education Ltd. New Ways of B2B Buying and Selling Private industrial networks – Private exchanges – Large firm using a secure website to link to suppliers and partners Net marketplaces (e-hubs) – Single digital marketplace for many buyers and sellers – May focus on direct or indirect goods – May be vertical or horizontal marketplaces Exchanges – Independently owned third-party Net marketplaces for spot purchasing Copyright © 2020 Pearson Education Ltd. Figure 10.7 A Private Industrial Network Copyright © 2020 Pearson Education Ltd. Figure 10.8 A Net Marketplace Copyright © 2020 Pearson Education Ltd. What Is the Role of M-commerce in Business, and What Are the Most Important M-commerce Applications? M-commerce in 2019 is 45 percent of all e-commerce Fastest growing form of e-commerce – Growing at 30 percent or more per year Main areas of growth – Mass market retailing (Amazon, eBay, etc.) – Sales of digital content (music, T V, etc.) – In-app sales to mobile devices Copyright © 2020 Pearson Education Ltd. Figure 10.9 Mobile Retail Commerce Revenues Copyright © 2020 Pearson Education Ltd. Location-Based Services and Applications Used by 74 percent of smartphone owners Based on G PS map services Geosocial services – Where friends are Geo advertising – What shops are nearby Geo information services – Price of house you are passing Copyright © 2020 Pearson Education Ltd. Other Mobile Commerce Services Financial account management apps – Banks, credit card companies Mobile advertising market – Google and Facebook are largest markets – Ads embedded in games, videos, and mobile apps 65 percent of online retailers have m-commerce websites Copyright © 2020 Pearson Education Ltd. Essentials of Management Information Systems Fourteenth Edition, Global Edition Chapter 11 Improving Decision Making and Managing Artificial Intelligence Copyright © 2020 Pearson Education Ltd. Learning Objectives 11.1 What are the different types of decisions, and how does the decision-making process work? 11.2 How do business intelligence and business analytics support decision making? 11.3 What is artificial intelligence (AI)? How does it differ from human intelligence? 11.4 What are the major types of AI techniques and how do they benefit organizations? Copyright © 2020 Pearson Education Ltd. Business Value of Improved Decision Making Possible to measure value of improved decision making Decisions made at all levels of the firm – Some are common, routine, and numerous – Although value of improving any single decision may be small, improving hundreds of thousands of “small” decisions adds up to large annual value for the business Copyright © 2020 Pearson Education Ltd. Table 11.1 Business Value of Enhanced Decision Making Example Decision Value Decision # of Annual Estimated Annual Maker Decisions Value to Firm Allocate support to most Accounts 12 $100,000 $1,200,000 valuable customers manager Predict call center daily demand Call Center 4 150,000 600,000 management Decide parts inventory level Inventory 365 5,000 1,825,000 daily manager Identify competitive bids from Senior 1 2,000,000 2,000,000 major suppliers management Schedule production to fill Manufacturin 150 10,000 1,500,000 orders g manager Copyright © 2020 Pearson Education Ltd. Types of Decisions Unstructured – Decision maker must provide judgment to solve problem – Novel, important, nonroutine – No well-understood or agreed-upon procedure for making them Structured – Repetitive and routine – Involve definite procedure for handling them so do not have to be treated as new Semi-structured – Only part of problem has clear-cut answer provided by accepted procedure Copyright © 2020 Pearson Education Ltd. Figure 11.1 Information Requirements of Key Decision-Making Groups in a Firm Copyright © 2020 Pearson Education Ltd. The Decision-Making Process 1. Intelligence – Discovering, identifying, and understanding the problems occurring in the organization 2. Design – Identifying and exploring various solutions 3. Choice – Choosing among solution alternatives 4. Implementation – Making chosen alternative work and monitoring how well solution is working Copyright © 2020 Pearson Education Ltd. Figure 11.2 Stages in Decision Making Copyright © 2020 Pearson Education Ltd. Figure 11.7 The Balanced Scorecard Framework Copyright © 2020 Pearson Education Ltd. Decision Support for Senior Management (2 of 2) Business performance management (BPM) – Management methodology based on firm’s strategies – Translates strategies into operational targets – Uses set of KPIs to measure progress toward targets ESS combine internal data with external – Financial data, news, etc. Drill-down capabilities Copyright © 2020 Pearson Education Ltd. Artificial Intelligence Techniques Artificial intelligence: Grand vision vs. narrow definition Evolution of AI – Big data databases – Reduction in the price of processors – Expansion in capacity of processors – Refinement and explosion of algorithms – Large investments in IT and AI Progress in image recognition and natural language – E.g.: Siri, Alexa, facial recognition Copyright © 2020 Pearson Education Ltd. What Are the Major Types of AI Techniques and How Do They Benefit Organizations? (1 of 5) Expert systems – Capture human expertise in a limited domain of knowledge – Express expertise as a set of rules in a software system – Knowledge base – Inference engine Copyright © 2020 Pearson Education Ltd. Figure 11.8 Rules in an Expert System Copyright © 2020 Pearson Education Ltd. What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(2 of 5) Machine learning – Computers improving performance by using algorithms to learn patterns from data and examples Neural networks – Find patterns and relationships in very large amounts of data – Sensoring and processing nodes – “Deep Learning” neural networks Copyright © 2020 Pearson Education Ltd. Figure 11.9 How a Neural Network Works Copyright © 2020 Pearson Education Ltd. What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(4 of 5) Natural language processing – Software that can process voice or text commands using natural human language Computer vision systems – Emulate human visual system to view and extract information from real-world images Robotics – Design and use of movable machines that can substitute for humans Copyright © 2020 Pearson Education Ltd. What Are the Major Types of AI Techniques and How Do They Benefit Organizations?(5 of 5) Intelligent Agents – Software programs that imitate humans and perform tasks on command – The agent uses a limited built-in or learned knowledge base – Accomplish tasks or make decisions on the user’s behalf, e.g. chatbots finding cheap fares, routing calls in a call center Copyright © 2020 Pearson Education Ltd.