Chapter 2 Decisions and Processes: Value Driven Business

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analytics
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science of fact-based decision making
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operational level
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employees develop, control, and maintain core business activities required to run the day-to-day operations
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structured decisions
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operational decisions. established processes offer potential solutions, made frequently, repetitive in nature. Affect short term business strategies. Ex: recording inventory, staffing schedules
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managerial level
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employees are continuously evaluating company operations to hone the firm’s abilities to identify, adapt to, and leverage change. middle mgmt, managers, directors.
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semistructured decisions
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few established processes help to evaluate potential solutions, but not enough to lead to a definite reconmmended decision. Ex: producing new products or changing employee benefits.
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strategic level
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managers develop overall business strategies, goals, and objectives as a part of the company’s strategic plan. Monitor the strategic performance of the organization and its overall direction in political, economic, and competitive business environment.
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unstructured decisions
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no procedures or rules exist to guide decision makers toward the correct choice. Infrequent, extremely important, and typically related to long-term business strategy. EX: enter a new market, or new industry
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project
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temporary activity a compnay undertakes to create a unique product, service, or result.
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metrics
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measurements that evaluate results to determine whether a project is meeting its goals.
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Critical success factors (CSFs)
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Crucial steps companies perform to achieve their goals and objectives and implement their strategies.
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Key Performance Indicators (KPIs)
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quantifiable metrics a company uses to evaluate progress toward critical success factors. More specific.
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market share
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Common external KPI. proportion of the market that a firm captures.
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return on investment (ROI)
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Common internal KPI. indicates the earning power of a project. Measured by dividing the profitability of a project by the costs
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best practices
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most successful solutions or problem solving methods that have been developed by a specific organization or industry. measuring MIS projects.
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Efficiency MIS metrics
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measure the performance of MIS itself such as throughput, transaction speed, and system availability.Using resources in an optimal way.
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Effectiveness MIS metrics
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measure the impact MIS has on business processes and activities, including customer satisfaction and customer conversion rates. how well a firm is achieving its goals.
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benchmarks
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baseline values the system seeks to attain
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benchmarking
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process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance.
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model
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simplified representation or abstraction of reality. Help managers calculate risk, understand uncertainty, change variables, and manipulate time to make decisions.
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transactional information
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encompasses all the information contained within a single business process or unit of work, and its primary purpose is to support the performance of daily operational or structured decisions. Ex: purchasing stock, making an airline reservation, withdrawing cash from ATM.
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online transaction processing (OLTP)
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capture of transaction and event information using technology to 1. process the info according to defined business rules, 2. store the information 3. update existing information to reflect new info
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transaction processing system (TPS)
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basic business system that serves the operational level (analysts) and assists in making structured decisions. Ex: operational accounting system such as payroll or an order-entry system.
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source documents
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original transaction records. Inputs for a TPS (transaction processing system)
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CRUD
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creating, reading, updating, deleting
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analytical information
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encompasses all organizational information and its primary purpose is to support the performance of managerial analysis or semistructured decisions. Ex: transaactional info and market and industry infor
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online analytical processing (OLAP)
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manipulation of information to create business intelligence in support of a strategic decision,
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Decision support systems (DSSs)
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model information using OLAP which provides assistance in evaluating and choosing among different courses of action. Ex; doctors may use to diagnose and treat patients. Insurance companies to gauge risk of providing insurance to drivers.
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What-If Analysis
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checks the impact of a change in variable or assumption of the model. What will happen if a there is a specific change in a variable?
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Sensitivity Analysis
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Special case of What-If. the Study of the impact on other variables when one variable is changed repeatedly Ex: repeatedly changing revenue in small increments to see its effect on other variables
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goal-seeking analysis
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finds inputs necessary to achieve a goal such as a desired level of output. Sets a target value and sees what is needed to reach that target. Ex: how many customers must purchase a new product to increase gross profits to $5 million.
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optimization analysis
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extension of goal-seeking analysis…finds the optimal value for a target variable repeatedly changing other variables subject to specified constraints
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executive information system (EIS)
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specialized DSS that supports senior-level executives and unstructured, long-term, nonroutine decisions, requiring judgement, evaluation, and insight. Do not have a right or wrong answer, only efficient and effective answers.
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Granularity
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refers to the level of detail in the model or the decision-making process. the greater “”, the deeper the level of detail or fineness of detail .
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visualization
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produces graphical displays of patterns and complex relationships in large amounts of data. Executive info systems use visualization to deliver specific key information to top managers at a glance, with little or no interaction with the system.
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digital dashboard
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supports visualization. Tracks KPIs and CSFs by compiling information from multiple sources and tailoring it to meet user needs. Potential features = 1. a hot list of KPIs, refreshed every 15 minutes. 2. running line graph of planned versus actual production for the past 24 hours. 3. table showing actual vs. forecasted product prices and inventories. 4. list of outstanding alerts and their resolution status. 5. graph of stock market prices.
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consolidation
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Capability of digital dashboard. Aggregation of data from simple roll-ups to complex groupings of interrelated information. Ex: data from different sales reps
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drill-down
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Enables users to view details, and details of details, of information. Reverse of consolidation. allows managers view monthly, weekly, daily or even hourly information.
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slice and dice
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ability to look at info from different perspectives. often performed along a time axis to analyze trends and find time-based patterns in the information.
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Artificial intelligence (AI)
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stimulates human thinking and behavior, such as the ability to reason and learn. Goal – mimic human intelligence.
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intelligent systems
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various commercial applications of artificial intelligence. Ex: sensors, software, and devices that emulate and enhance human capabilities, learn or understand from experience, make sense of ambiguous info, use reasoning to solve problems and make decisions effectively.
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Categories of AI Systems
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1. Expert systems 2. neural networks 3. genetic algorithms 4. intelligent agents 5. virtual reality.
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Expert systems
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computerized advisory programs that imitate the reasoning process of experts in solving difficult problems Ex: Play chess
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Neural Networks
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Artificial neural network. Emulates the way the human brain works . Analyze large amounts of information to establish patterns and characteristics . Ex: Credit card companies checking for fraud. Mainly used in financial industry.
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fuzzy logic
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mathematical method of handling imprecise or subjective information. Basic approach = assign values between 0 and 1 to vague or ambiguous info. 0= info not included. 1=inclusion or membership. Often combined with neural networks. used in washing machines to to determine how much water to use or how long to wash.
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genetic algorithm
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artificial intelligence system that mimics the evolutionary survival-of-the-fittest process to generate increasingly better solutions to a problem. Optimizing system. Finds combo of inputs that creates the best outputs. best suited to decisions that involve thousands, or millions of possible solutions. Ex: investment in companies in trading decisions.
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mutation
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process within a genetic algorithm of randomly trying combinations and evaluating the success (or failure) or the outcome.
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intelligent agent
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special-purpose knowledge-based information system that accomplishes specific tasks on behalf of its users. Usually have a graphical representation. Ex: shopping bot or environmental scanning and competitive intelligence. They can learn the types of competitor information users want to track, continuously scan the web for it, and alert the users when a significant event occurs.
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shopping bot
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software that will search several retailer websites and provide a comparison of each retailer’s offerings including price and availability.
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Purpose of artificial intelligence software
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1. learn how people-based systems behave. 2. predict how they will behave under a given set of circumstances 3. improve human systems to make them more efficient and effective
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biomimicry
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process of learning from ecosystems
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virtual reality
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computer simulated environment that can be simulation of the real world or an imaginary world
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augmented reality
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viewing of the physical world with the computer generated layers of information added to it.

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