CHAPTER 9 : ENABLING THE ORGANIZATION - DECISION MAKING

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

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

  

TRANSACTION PROCESSING SYSTEMS (TPS)

•  Transaction processing system - the basic business system that serves the operational level (analysts) in an organization. 
•  A transaction processing systems (TPS) is an information processing system for business transactions involving the collection, modification and retrieval of all transaction data.
• Transaction processing systems consist of computer hardware and software hosting a transaction-oriented application that perform the routine transactions necessary to conduct business.
• Examples, include systems that manage sales order entry, airline reservations, payroll,employee records, manufacturing and shipping.

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 information.

Online analytical processing (OLAP) - the manipulation of information to create business intelligence in support of strategic decision making.

 DECISION SUPPORT SYSTEMS (DSS)

• A computer-based information system that supports business or organizational decision-making activities.
• DSS serve the management, operations and planning levels of an organization (usually middle management) and help people make decisions about problems that may be rapidly changing and not easily specified in advance.
• Three quantitative models used by DSS include sensitivity analysis, what-if analysis and goal-seeking analysis.

1. Sensitivity analysis - the study of the impact that changes in one (or more) parts of the model have on other parts of the model. Example : What will happen to the supply chain if a stunami in Sabah reduces holding inventory from 30% to 10%?
2. What-if analysis - checks the impact of a change in an assumption on the proposed solution. Example : Repeatedly changing revenue in small increments to determine it effects on other variables.
3. Goal-seeking analysis - finds the inputs necessary to achieve a goal such as a desired level of output. Example : Determine how many customers must purchase a new product  to increase gross profits to $5 million.

 EXECUTIVE INFORMATION SYSTEMS (EIS)

• A decision support system (DSS) used to assist senior executives in the decision-making process. 
• It does this by providing easy access to important data needed to achieve strategic goals in an organization.
• An EIS normally features graphical displays on an easy-to-use interface. 
• Executive information systems can be used in many different types of organizations to monitor enterprise performance as well as to identify opportunities and problems.
• Most EIS offering the following capabilities :

1. Consolidation - involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information. Example : Data for different sales representatives can be rolled up to an office level. Then state level, then a regional sales level.
2. Drill-down - enables users to get details, and details of details, of information. Example : From regional representatives at each  office.
3. Slice-and-dice - looks at information from different perspectives. Example : One slice of information could display all product sales during a given promotion, another slice could display a single product's sales for all promotions.

• Digital dashboard

 

ARTIFICIAL INTELLIGENCE (AI)

• 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 computer

• The ultimate goal of AI is the ability to build a system that can mimic human intelligence.

Four most common categories of AI include :

• Expert system - computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems. Example : Playing Chess.
• Neural Network - attempts to emulate the way the human brain works. Example : Finance industry uses neural network to review loan applications and create patterns or profiles of applications that fall into two categories - approved or denied.

      * Fuzzy logic - a mathematical method of handling imprecise or subjective information.
         Example : Washing machines that determine by themselves how much water to
          use or how long to wash.

•  Genetic algorithm - an artificial intelligent that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem. Example : Business executives use genetic algorithm to help them decide which combination of projects a firm should invest. 

• Intelligent agent - special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users.

               * Multi-agent systems
               * Agent-based modeling

•  Example : Shopping bot : Software that will search several retailer's website and provide a comparison of each retailer's offering including price and  availability.

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 and statistical 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.
• Example : Consumer goods by content, brand loyalty or similarity.

• 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.
• Example : Maytag uses association detection to ensure that each generation of appliances is better than the previous generation.

• 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.
• Example : Kraft uses statistical analysis to assure consistent flavor, color, aroma,texture and appearance for all of its lines of foods.

CHAPTER 8 : ACCESSING ORGANIZATIONAL INFORMATION - DATA WAREHOUSE

HISTORY OF DATA WAREHOUSE

• In the 1990's executives became less concerned with the day-to-day business operations and more concerned with overall business functions.
• The data warehouse provided the ability to support decision making without disrupting the day-to-day operations, because :

         *Operational information is mainly current - does not include the history for better decision
           making.
         *Issue of quality information
         *Without information history, it is difficult to tell how and why things change over time.

DATA WAREHOUSE FUNDAMENTALS

• Data warehouse - a logical collection of information - gathered from many different operational databases - that supports business analysis activities and decision-making tasks.
• The primary purpose of a data warehouse is to combined information throughout an organization into a single repository for decision-making purposes - data warehouse support only analytical processing.

DATA WAREHOUSE MODEL

•  Extraction, transformation, and loading (ETL) - a process that extracts information from internal and external databases, transforms the information using a common set of enterprise definitions, and loads the information into a data warehouse.
• Data warehouse then send subsets of the information to data mart.
• Data mart - contains a subset of data warehouse information 

MULTIDIMENSIONAL ANALYSIS AND DATA MINING

•  Relational Database contain information in a series of two-dimensional tables.

 

• In a data warehouse and data mart, information is multidimensional, it contains layer of columns and rows

             *Dimension - a particular attribute of information

• Cube - common term for the representation of multidimensional information.

•  Once a cube of information is created, users can begin to slice and dice the cube to drill down into the information.
• Users can analyze information in a number of different ways and with number of different dimensions.
• Data mining -  the process of analyzing data to extract information not offered by the raw data alone. Also known as "knowledge discovery'' - computer-assisted tools and techniques for sifting through and analyzing vast data stores in order to find trends, patterns and correlations that can guide decision making and increase understanding.
• To perform data mining users need data-mining tools

               *Data-mining tool - uses a variety of techniques to find patterns and relationships in large
                                                 volumes of informations. Eg : retailers can use knowledge of these
                                                 patterns to improve the placement of the items in the layout of a mail-
                                                 order catalog page or Web page.


INFORMATION CLEANSING OR SCRUBBING

• An organization must maintain high-quality data in the data warehouse.
• Information cleansing or scrubbing - a process that weeds out and fixes or discards inconsistent, incorrect or incomplete information.
• Occur during ETL process and second on the information once if is in the data warehouse.

 

BUSINESS INTELLIGENCE

• Business intelligence -  refers to applications and technologies that are used to gather, provide access, analyze data and information to support decision making effort.
• These systems will illustrate business intelligence in the areas of customer profiling, customer support, market research, market segmentation, product profitability, statistical analysis, and inventory and distribution analysis to name a few.
• Example : Excel, Access

CHAPTER 7 : STORING ORGANIZATIONAL INFORMATION

RELATIONAL DATABASE FUNDAMENTALS

• Information is everywhere in an organization.
• Information is stored in databases

               - Database = maintains information about various types of objects (inventory), events                                                (transactions), people (employees) and places (warehouses).

• Database models include :

1. Hierarchical database model - information is organized into a tree-like structure (using parent/child relationships) in such a way that it cannot have too many relationships.
2. Network database model - a flexible way of representing objects and their relationships.
3. Relational database model - stores information in the form of logically related two-dimensional tables.

ENTITIES & ATTRIBUTES

* Entity - a person, place, thing, transaction, or event about  which information is stored

• The rows in each table contain the entities
• In Figure 7.1 CUSTOMER includes Dave's Sub Shop and Pizza Palace entities

*Attributes (fields,columns) - characteristics or properties of an entity class

• The columns in each table contain the attributes.
• In Figure 7.1 attributes for CUSTOMER include Customer ID, Customer Name, Contact Name

KEYS & RELATIONSHIPS

Primary keys and foreign keys identify the various entity classes (tables) in the database.

• Primary key - a field (or group of fields) that uniquely identifies a given identity in a table
• Foreign key - a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among the two tables.

Potential relational database for Coca-Cola

RELATIONAL DATABASE ADVANTAGES

Database advantages from a business perspective include

• Increased flexibility
• Increased scalability and performance
• Reduced information redundancy
• Increased information integrity (quality)
• Increased information security

INCREASED FLEXIBILITY

*A well-designed database should :

• Handle changes quickly and easily
• Provide users with different views
• Have only one physical view

                *Physical view - deals with the physical storage of information on a storage device

• Have multiple logical views

                *Logical view - focuses on  how users logically  access information

INCREASED SCALABILITY & PERFORMANCE

*A database must scale to meet increased demand, while maintaining acceptable performance levels.

• Scalability - refers to how well a system can adapt to increased demands
• Performance - measure how quickly a system performs a certain process of transaction

REDUCED INFORMATION REDUNDANCY

• Databases reduce information redundancy.

               *Redundancy- the duplication of information or storing the same information in multiple                                             places.

• Inconsistency is one of the primary problems with redundant information.

INCREASED INFORMATION INTEGRITY (QUALITY)

Information integrity - measures the quality of information

Integrity constraint - rules that help ensure the quality of information.

• Relational integrity constraint
• Business-critical integrity constraint

INCREASED INFORMATION SECURITY

-Information is an organizational asset and must be protected.

-Databases offer several security features including :

• Password - provides authentication of the user
• Access level - determines who has access to the different types of information
• Access control - determines types of user access, such as read-only access

DATABASE MANAGEMENT SYSTEMS

• Database management systems (DBMS) - software through which users and application programs interact with a database.

DATA-DRIVEN WEB SITES

• Data-driven Web sites - an interactive Web site kept constantly updated and relevant to the needs of its customers through the use of a database.

DATA-DRIVEN WEB SITE BUSINESS ADVANTAGES 

• Development
• Content Management
• Future Expandability
• Minimizing Human Error
• Cutting Production and Update Costs
• More Efficient
• Improved Stability

DATA-DRIVEN BUSINESS INTELLIGENCE 

• BI in a data-driven Web site

INTEGRATING INFORMATION AMONG MULTIPLE DATABASES

INTEGRATION - allows separate systems to communicate directly with each other.

• Forward integration - takes information entered into a given system and sends it automatically to all downstream systems and processes.
• Backward integration - takes information entered into a given system and sends it automatically to all upstream systems and processes.

CHAPTER 6 : VALUING ORGANIZATIONAL INFORMATION

ORGANIZATIONAL INFORMATION

• Information is everywhere in an organization.
• Employees must be able to obtain and analyze the many different levels, formats and granularities of organizational information to make decisions.
• Successfully collecting, compiling, sorting and analyzing information can provide  tremendous insight into how an organization is performing.
• Levels, formats and granularities of organizational information

THE VALUE OF TRANSACTIONAL & ANALYTICAL INFORMATION

• Transactional information verses analytical information

THE VALUE OF TIMELY INFORMATION 

• Timeliness is an aspect of information that depends on the situation

           Real-time information = immediate, up-to-date information
           Real-time system = provides real-time information in response to query requests


THE VALUE OF QUALITY INFORMATION

• Business decisions are only as good as the quality of the information used to make the decisons.
• You never want to find yourself using technology to help you make a bad decision faster.
• Characteristics of high-quality information include :

          ACCURACY = Are all the values correct? For example, is the name spelled correctly? Is                   the dollar amount recorded properly?

          COMPLETENESS = Are any of the values missing? For example, is the address                               complete including street,city,state and zip code?

           CONSISTENCY  = Is aggregate or summary information in agreement with detailed                          information. For example, do all total fields equal the true total of the individual fields?

           UNIQUENESS = Is each transaction, entity, and event represented only once in the                            information? For example, are there any duplicate customers?

           TIMELINESS = Is the information current with respect to the business requirements?
           For example, is information updated weekly, daily or hourly?

UNDERSTANDING THE COSTS OF POOR INFORMATION

• The four primary sources of low quality information include :

1. Online customers intentionally enter inaccurate information to protect their privacy.
2. Information from different systems have different entry standards and formats.
3. Call center operators enter abbreviated or erroneous information by accident or to save time.
4. Third party and external information contains inconsistencies,inaccuracies and error.

• Potential business effects resulting from low quality information include :

               - Inability to accurately track customers.

               - Difficulty identifying valuable customers

               - Inability to identify selling opportunities 

               - Marketing to non existent customers

               - Difficulty tracking revenue due to inaccurate invoices

               - Inability to build strong customer relationships

UNDERSTANDING THE BENEFITS OF GOOD INFORMATION

• High quality information can significantly improve the chances of making a good decision.
• Good decisions can directly impact an organization's bottom line.

CHAPTER 5 : ORGANIZATIONAL STRUCTURES THAT SUPPORT STRATEGIC INITIATIVES

ORGANIZATIONAL STRUCTURES

• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages.
• Ethics and security are two fundamental building blocks that organizations must base their businesses upon.

IT ROLES AND RESPONSIBILITIES

• Information technology is a relatively new functional area, having only been around formally for around 40 years.
• Recent IT-related strategic positions :

                - Chief Information Officer (CIO)

                - Chief Technology Officer (CTO)

                - Chief Security Officer (CSO)

                - Chief Privacy Officer (CPO)

                - Chief Knowledge Officer (CKO)

Chief Information Officer (CIO) - oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives.

Broad CIO functions include :

• Manager - ensuring the delivery of all IT projects, on time and within budget.
• Leader - ensuring the strategic vision of IT is in line with the strategic vision of the organization.
• Communicator - building and maintaining strong executive relationships.

Chief Technology Officer (CTO) - responsible for ensuring the throughput, speed, accuracy, availability, and reliability of IT.

Chief Security Officer (CSO) - responsible for ensuring the security of IT systems.

Chief Privacy Officer (CPO) - responsible for ensuring the ethical and legal use of information.

Chief Knowledge Officer (CKO) - responsible for collecting, maintaining and distributing the organization's knowledge.

THE GAP BETWEEN BUSINESS PERSONNEL AND IT PERSONNEL

• Business personnel possess expertise in functional areas such as marketing, accounting and sales.
• IT personnel have the technological expertise.
• This typically causes a communications gap between the business personnel and IT personnel.

IMPROVING COMMUNICATIONS

• Business personnel must seek to increase their understanding of IT.
• IT personnel must seek to increase their understanding of the business.
• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel.

ORGANIZATIONAL FUNDAMENTALS - ETHICS & SECURITY

• Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful.
• In recent years,  such events as the Enron and Martha Stewart, along with 9/11 have shed new light on the meaning of ethics and security.

ETHICS

Ethics  = the principles and standards that guide our behavior toward other people.

*Privacy is a major ethical issue.

Privacy  = the right to be left alone when you want to be, to have control over your own personal      possessions, and not to be observed without your consent.

Issues affected by technology advances :

• Intellectual property

= Intangible creative work that is embodied in physical form.

• Copyright

= The legal protection afforded an expression of an idea, such as a song, video game, and some types  of proprietary documents.

• Fair use doctrine

= In certain situations, it is legal to use copyrighted material.

• Pirated software

= The unauthorized use, duplication, distribution, or sale of copyrighted software.

• Counterfeit software

= Software that is manufactured to look like the real thing and sold as such.

*One of the main ingredients in trust is privacy.

*Primary reasons privacy issues lost trust for e-business

1. Loss of personal privacy is a top concern for Americans in the 21st century.
2. Among Internet users, 37 percent would be ''a lot'' more inclined to purchase a product on a Web site that had a privacy policy.
3. Privacy/security is the number one factor that would convert Internet researchers into Internet buyers.

SECURITY

• Organizational information is intellectual capital - it must be protected.
• Information security - the protection of information from accidental or intentional misuse by persons inside or outside an organization.
• E-business automatically creates tremendous information security risks for organizations.

CHAPTER 4 : MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

MEASURING INFORMATION TECHNOLOGY'S SUCCESS

• Key performance indicator - measures that are tied to business drivers.
• Metrics are detailed measures that feed KPIs.
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals.

EFFICIENCY AND EFFECTIVENESS

• Efficiency IT metric - measures the performance of the IT system itself including throughput, speed and availability.
• Effectiveness IT metric - measures the impact IT has on business processes and activities including customer satisfaction, conversion rates and self-through increases.

Efficiency IT metrics focus on technology and include :

• Throughput  

- The amount of information that can travel through a system at any point.

• Transaction speed 

 - The amount of time a system takes to perform a transaction.

• System availability 

 - The number of hours a system is available for users.

• Information accuracy 

 - The extent to which a system generates the correct results when executing the same transaction numerous times.

• Web traffic  

- Includes a host of benchmarks such as the number of page views, the number of unique visitors and the average time spent viewing a Web page.

• Response time  

- The time it takes to respond to user interactions such as a mouse click.

Effectiveness IT metrics focus on an organization's goals, strategies and objectives and include:

• Usability  

- The ease with which people perform transactions and/or find information.

• Customer satisfaction  

- Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained and increases in revenue dollars per customer.

• Conversion rates (actual buying)

- The number of customers an organization ''touches'' for the first time and persuades to purchase its products or services.

• Financial  

- Financial return to the company. Such as return on investment, cost-benefit analysis and break-even analysis.

METRICS FOR STRATEGIC INITIATIVES

Metrics for measuring and managing strategic initiatives include :

1. Web site metrics
2. Supply chain management (SCM) metrics
3. Customer relationship management (CRM) metrics
4. Business process reengineering (BPR) metrics
5. Enterprise resource planning (ERP) metrics

*Web site metrics include :

• Abandoned registrations  = Number of visitors who start the process of completing a registration page and then abandon the activity.
• Abandoned shopping cards = Number  of visitors who create a shopping cart and start shopping and then abandon the activity before paying for the merchandise.
• Click-through = Count of the number of people who visit a site, click on an ad, and are taken to the site of the advertiser.
• Conversion rate = Percentage of potential customers who visit a site and actually buy something.
• Cost-per-thousand (CPM) = Sales dollars generated per dollar of advertising. This is commonly used to make the case for spending money to appear on a search engine.
• Page exposures = Average number of page exposures to an individual visitor.
• Total hits = Number of visits to a Web site, many of which may be the same visitor.
• Unique visitors = Number of unique visitors to a site in a given time. It can tell the visitors specific locations.

*Supply chain management (SCM) metrics :

• Back order  

- An unfilled customer order. A back order is demand (immediate or past due) against an item whose current stock level is insufficient to satisfy demand.

• Customer order promised cycle time  

- The anticipated or agreed upon cycle time of a purchase order. It is a gap between the purchase order creation date and the requested delivery date.

• Customer order actual cycle time  

- The average time it takes to actually fill a customer's purchase order. 

• Inventory replenishment(restock) cycle time   

- Measure of the manufacturing cycle time plus the time included to deploy the product to the appropriate distribution center.

• Inventory turns (inventory turnover)   

- The number of times that a company's inventory cycles or turns over per year. It is one of the most commonly used supply chain metrics.

*Customer relationship management (CRM) metrics

Customer relationship management metrics measure user satisfaction and interaction and incude

• Sales metrics
• Service metrics 
• Marketing metrics

*Business process reengineering (BPR) & Enterprise resource planning (ERP) metrics

• The balanced scorecard enables organizations to measure and manage strategic initiatives.

CHAPTER 3 : STRATEGIC INITIATIVES FOR IMPLEMENTING COMPETITIVE ADVANTAGES

Organizations can undertake high-profile strategic initiatives including :

• Supply chain management (SCM)
• Customer relationship management (CRM)
• Business process reengineering (BPR)
• Enterprise resource planning (ERP)

SUPPLY CHAIN MANAGEMENT

• Supply Chain Management (SCM) - involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.
• Four basic components of supply chain management include :

1. Supply chain strategy - strategy for managing all resources to meet customer demand.
2. Supply chain partner - partners throughout the supply chain that deliver finished products, raw materials and services.
3. Supply chain operation - schedule for production activities.
4. Supply chain logistics - product delivery process.

Effective and efficient SCM systems can enable an organization to :

• Decrease the power of its buyers
• Increase its own supplier power
• Increase switching costs to reduce the threat of substitute products or services
• Create entry barriers thereby reducing the threat of new entrants
• Increase efficiencies while seeking a competitive advantage through cost leadership

CUSTOMER RELATIONSHIP MANAGEMENT

• Customer Relationship Management (CRM) - involves managing all aspects of a customer's relationship with an organization to increase customer loyalty and retention and an organization's profitability.
• Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems.
• CRM is not just technology, but a strategy, process and business goal that an organization must embrace on an enterprise wide level.
• CRM can enable an organization to :

              - Identify types of customers

              - Design individual customer marketing campaigns

              - Treat each customer as an individual

              - Understand customer buying behaviors

CRM overview

BUSINESS PROCESS REENGINEERING

• Business process - a standardized set of activities that accomplish a specific task, such as processing a customer's order.
• Business process reengineering (BPR) - the analysis and redesign of workflow within and between enterprises.
• The purpose of BPR is to make all business processes best-in-class.

ENTERPRISE RESOURCE PLANNING

• Enterprise Resource Planning (ERP) - integrates all departments and functions throughout an organization into a single IT systems so that employees can make decisions by viewing enterprisewide information on all business operations.
• Keyword in ERP is "enterprise".