MGT300 Chapter 9

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

Transaction Processing Systems

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

😍 Transaction processing system - the basic business system that serves the operational level (analysts) in an organization 

😍 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

😍 Models information to support managers and business professionals during the decision-making process

😍Three quantitative models used by DSSs include:

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. Eg: What will happen to the supply chain if a tsunami 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. Eg: 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. Eg: Determine how many customers must purchase a new product to increase gross profits to $5 million

Executive Information Systems

😍 A specialized DSS that supports senior level executives within the organization

😍 Most EISs offering the following capabilities:

• Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information. Eg: Data for different sales representatives can be rolled up to an office level. Then state level, then a regional sales level.
• Drill-down – enables users to get details, and details of details, of information. Eg: From regional sales data then drill down to each sales representatives at each office.
• Slice-and-dice – looks at information from different perspectives. Eg: 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 – integrates information from multiple components and presents it in a unified display

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 competitor

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

😍 Four most common categories of AI include:

1. Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems. Eg: Playing Chess.
2. Neural Network – attempts to emulate the way the human brain works. Eg: 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. Eg: Washing machines that determine by themselves how much water to use or how long to wash.

     

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

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

• Multi-agent systems
• Agent-based modeling

Eg:  Shopping bot: Software that will search several retailer’s websites and provide a comparison of each retailers’s offering including prive 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
• Statistical analysis

Cluster 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

😍 Eg: Consumer goods by content, brand loyalty or similarity 

Association Detection

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

Statistical Analysis

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

THE END OF CHAPTER 9 💛

MGT 300 Chapter 8

Chapter 8 Accessing Organizational Information – Data Warehouse

WHAT IS DATA WAREHOUSE ?

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 layers 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 information. Eg: retailers can use knowledge of these patterns to improve the placement of 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

Contact information in an operational system

Standardizing Customer name from Operational Systems

Information cleansing activities

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

😍 Eg: Excel, Access 

💛 THE END OF CHAPTER 8

MGT300 Chapter 7

Chapter 7 Storing Organizational Information

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

•      Database -  maintain information about various types of objects (inventory), events (transactions), people (employees), and places (warehouses)

😍 Database models includes :

• 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
• Network database model - a flexible way of representing objects and their relationships
• 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 row in each table contain entities

😍 Attributes - characteristics or properties of an entity class

•     the colums in each table contain attributes

KEYS AND RELATIONSHIPS
😍 Primary key - a field (or group of fields) that uniquely identifies a given entity in table
😍 Foreign key - a primary key of one table that appears an attribute in another table and acts to provide a logical relationship among two tables

Relational Database Advantages

• 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 and 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 – measures how quickly a system performs a certain process or 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 SYSTEM

😍 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

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

😍  Building a central repository specifically for integrated information

THE END OF CHAPTER 7 💙

MGT300 Chapter 6

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

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 decisions
• You never want to find yourself using technology to help you make a bad decision faster\
• Characteristics of high-quality information include : 

          💛 Accurancy 

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

         💛 Completeness

         💛 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 represent only once in the information ? For example, are there any duplicate customers ?

         💛 Timeliness

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

Low quality information example

Understanding the Costs of Poor Information 

• Four primary sources / reasons of low quality information :

😞 

Online customers intentionally enter inaccurate information to protect their privacy

😞 Information from different systems have different entry standards and formats

😞

Call center operators enter abbreviated or erroneous information by accident or to save time

😞 Third party and external information contains inconsistencies, inaccuracies, and errors

• Potential business effects resulting from low quality information :

😟 Inability to accurately track customers

😟 Difficulty identifying valuable customers

😟 Inability to identify selling opportunities

😟 Marketing to nonexistent 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

THE END OF CHAPTER 6 💛

MGT300 Chapter 5

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) ~ 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

Average CIO compensation by industry

What concerns CIOs the most

   ❤ Chief Technology Officer (CTO) ~ responsible for ensuring the throughput, speed, accurancy, 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 Office (CKO) ~ responsible for collecting, maintaining, and distributing the organization’s knowledge

Skills pivotal for success in executive IT roles

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 and Security 

• Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful 

Ethics

😆 Principles and standards that guide our behaviour toward other people

😆 Privacy is a major ethical issue.

• Privacy - 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

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

THE END OF CHAPTER 5 💚

MGT300 Chapter 4

CHAPTER 4   MEASURING THE SUCCESS OF STRATEGIC INITIATIVES

Measuring Information Technology’s Success

• Key performance indicator – measures that are tied to business drivers
• Metrics – detailed measures that feed KPIs

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 sell-through increases.

Benchmarking – Base lining metrics

• Bencmarking – a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and procedures to improve system performance

Example : E-Government Benchmark

Efficiency IT Metrics 

• Efficiency IT metrics focus on technology and include :

1. Throughput ~ amount of infomation that can travel through a system at any point
2. Transaction speed ~ amount of time a system takes to perform a transaction
3. System availability ~ number of hours a system is available for users
4. Information accurancy ~ the extent to which a system generates the correct results when executing the same transaction numerous time
5. Web Traffic ~ includes host of benchmarks such as the no of page view, no of unique visitors, average time spent viewing Web page
6. Response Time ~ time it takes to respond to user interactions such as a mouse click

Effectiveness IT Metrics

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

1. Usability ~ The ease with which people perform transactions and/or find information. A popular usability metric on the Internet is degrees of freedom, which measures the number of clicks required to find desired information.
2. Customer satisfaction ~ Measured by such benchmarks as satisfaction surveys, percentage of existing customers retained, and increases in revenue dollars per customer.
3. Conversion rates ~ The number of customers an organization “touches” for the first time and persuades to purchase its products or services. This is a popular metric for evaluating the effectiveness of banner, pop-up, and pop-under ads on the Internet.
4. Financial ~ Such as return on investment (the earning power of an organization’s assets), cost-benefit analysis (the comparison of projected revenues and costs including development, maintenance, fixed, and variable), and break-even analysis (the point at which constant revenues equal ongoing costs).

Interrelationships of Efficiency and Effectiveness IT Metrics

• Security is an issue for any organization offering products or services over the Internet

• It is inefficient for an organization to implement Internet security, since it slows down processing
• However, to be effective it must implement Internet security 
• Secure Internet connections must offer encryption and Secure Sockets Layers (SSL denoted by the lock symbol in the lower right corner of a browser)

Metrics for Strategic Initiatives 

✌ Web site metrics 

• Abandoned registrations ~ Number of visitors who start the process of completing a registration page and then abandon the activity.
• Abandoned shopping carts ~ 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 by the same visitor
• Unique visitors ~ Number of unique visitors to a site in a given time. This is commonly used by Nielsen/Net ratings to rank the most popular Web sites

✌ Supply Chain Management Metrics (SCM)

• 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. This measure can be viewed on an order or an order line level.
• Inventory replenishment 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 

• Measure user satisfaction and interaction, also include :

                ❤ sales metrics

                ❤ service metrics

                ❤ marketing metrics

Sales Metrics	Service Metrics	Marketing Metrics
~Number of prospective customers ~Number of new customers ~Number of retained customers ~Number of open leads ~Number of sales calls ~Number of sales call per lead ~Amount of new revenue ~Amount of recurring revenue ~Number of proposals given	~Cases closed same day ~Number of cases handled by agent ~Number of service calls ~Average number of service requests by type ~Average time to resolution ~Average number of service calls per day ~Percentage compliance with service-level agreement ~Percentage of service renewals ~Customer satisfaction level	~Number of marketing campaigns ~New customer retention rates ~Number of responses by marketing campaign ~Number of purchases by marketing campaign ~Revenue generated by marketing campaign ~Cost per interaction by marketing campaign ~Number of new customers acquired by marketing campaign ~Customer retention rate ~Number of new leads by product

✌ Business Process Reengineering (BPR) metrics

✌ Enterprise Resource Planning (ERP) metrics 

• BPR and ERP metrics is the balanced scorecard which enables organizations to measure and manage strategic initiatives.

THE END OF CHAPTER 4 👍👍

MGT 300 Chapter 3

Chapter 3 Strategic Initiatives for Implementing Competitive Advantages

Strategic Initiatives

• Organization 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 (SCM)
~ involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

• 4 basic components :

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

Wal-Mart and Procter Gamble (P&G) SCM

Effective and efficient SCM system 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

Effective and efficient SCM systems effect on Porter's Five Forces

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 enterprisewide 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 (BPR)

• 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
• Reengineering the Corporation - book written by Michael Hammer and James Champy that recommends seven principles for BPR

Example of BPR

Enterprise Resource Planning (ERP)

• ERP intergrates all departments and departments and functions throughout an organization into a single IT system.
• Keyword in ERP is "enterprise"

Sample data from a sales database

Sample data from an accounting database

• ERP system collect data from across an organization and correlates the data generating an enterprisewide view.

THE END OF CHAPTER 3 ❤❤