Week 12 - Decision Making

Lecture

Business Intelligence

Business intelligence enables the business to make intelligent, fact-based decisions.

Process:

• Data
  • Structured
    • Data in database
  • UnStructured (Most information exists as unstructured data)
    • e.g. e-mails, reports, web pages
• ETL
  • Extract data from multiple diverse data sources
    • e.g. Legacy system, External data source
  • Transform data to fit operational needs
    • Data quality
  • Load data into target data warehouse
    • One view of the corporate data
    • Allows end users to perform extensive analysis more efficiently
    • Allows a consolidated view of corporate data
    • Better quality data
    • More timely information
    • Enhanced system performance
    • Simplified data access
• OLAP
  • With the help of data warehouse, we can:
    • Visualize
    • Find pattern
  • Operations
    • Slicing
    • Dicing
    • Drill down
    • Roll up
    • Pivot

Four Key Components of a BI System

• Data warehouse containing both internal and external data
• Business analytic tools for manipulating, mining, and analyzing data
• A set of business performance indicators for monitoring and analyzing performance
• User interface

Decision Making

Readings

Decision-making process

• Identify the decision
• Gather relevant information
• Identify the alternatives
• Weigh the evidence
• Choose among alternatives
• Take action
• Review your decision & its consequence

An Overview of Decision-Making Models

Decision-Making Models

Rational Decision-Making Model

Establish a list of criteria used to evaluate their choices. However, people do not always know what they want.

Steps:

• Identify the problem
• Establish decision criteria
• Weigh decision criteria
• Generate alternatives
• Evaluate the alternatives
• Choose the best alternatives
• Implement the decision
• Evaluate the decision

Intuitive Decision-Making Model

Make decision based on intuition. Usually know what to do before they can explain.

Creative Decision-Making Model

This model is applied when the decision maker has to come up with an original and unique decision for a situation.

• Problem identification
• Immersion
• Incubation
• Eureka moments
• Finalization and action

Recognition-Primed Decision-Making Model

Consider only one option. Been applied when managers are under time pressure.

Common Decision-Making Traps

• Confidence bias
  • Overconfident, Blinded by past success
• Hindsight bias
  • The manager can blame the problem on the wrong person
• Anchoring bias
  • See what want to see leading insufficient information
• Escalation of commitment
  • Managers do not admit that his decision is a mistake
  • A wise manager is someone who not only knows how to make good decisions but also recognizes a bad one and has the courage to abandon it and embark on a new track.

Mastering Problem Solving and Decision Making

Rational Versus Organic Approach to Problem Solving

• Rational
  • Advantage
    • Gives a strong sense of order
    • Provides a common frame of reference from which people can communicate in the situation
  • Disadvantage
    • Take a long time
    • The world is chaotic
• Organic
  • The quality comes from the ongoing process of trying.
  • Advantage
    • Highly adaptable to understanding and explaining the chaotic changes that occur in projects and everyday life.
    • Suits the nature of people who shun linear and mechanistic approaches to projects.
  • Disadvantage
    • Provides no clear frame of reference around which people can communicate and measure progress toward solutions to problems.