Chapter 2 DSS

2.1 Opening Vignette: Decision Modeling at HP Using Spreadsheets

2.2 Decision Making: Introduction and Definitions

Characteristics of Decision making

• We want to help decision makers make better decisions.

• Making better decisions does not necessarily mean making decisions more quickly.
• The fast-changing business environment often requires faster decisions, which may actually be
detrimental to decision quality. (Problem 1)

A Working Definition of Decision Making

Decision making is a process of choosing among two or more alternative courses of action for the
purpose of attaining one or more goals.

Important point:

A decision maker should not simply apply IT tools blindly. Rather, the decision maker gets support
through a rational approach that simplifies reality and provides a relatively quick and inexpensive
means of considering various alternative courses of action to arrive at the best (or at least a very good)
solution to the problem.

Decision Style and Decision Makers

DECISION STYLE is the manner by which decision makers think and react to problems. This includes the
way they perceive a problem, their cognitive responses, and how values and beliefs vary from individual
to individual and from situation to situation. As a result, people make decisions in different ways.
Although there is a general process of decision making, it is far from linear. People do not follow the
same steps of the process in the same sequence, nor do they use all the steps.

Examples: heuristic and analytic styles, autocratic versus democratic styles.

Why knowing Decision Styles is important?

For a computerized system to successfully support a manager, it should fit the decision situation as well
as the decision style. Therefore, the system should be flexible and adaptable to different users. The
ability to ask what-if and goal-seeking questions provides flexibility in this direction.

A Web-based interface using graphics is a desirable feature in supporting certain decision styles. If an
MSS is to support varying styles, skills, and knowledge, it should not attempt to enforce a specific
process. Rather, it should help decision makers use and develop their own styles, skills, and knowledge.
Section 2.2 Review Questions
1. Why is decision making so complex in today’s business environment?

Today’s business environment is extremely dynamic. While the decision is being made, changes may be
occurring in the decision-making environment. Those changes may invalidate the assumptions upon
which the decision is based. There is time pressure from these same changes in the decision-making
environment may affect decision quality by imposing time pressure on the decision maker. The fast-
changing business environment often requires faster decisions, which may actually be detrimental to
decision quality. The cost and expense of collecting information and analyzing a problem, with the
difficulty of determining when to stop and make a decision; possible lack of sufficient information to
make an intelligent decision; and conversely the possible availability of too much information
(information overload).

2. Identify similarities and differences between individual and group decision making.

Individual decision makers need access to data and to experts who can provide advice, while groups
additionally need collaboration tools.

• There are often conflicting objectives in a group decision-making setting, but not in an individual
setting.

• Groups can be of variable size and may include people from different departments or from different
organizations. Collaborating individuals may therefore have different cognitive styles, personality types,
and decision styles. Some clash, whereas others are mutually enhancing.

• Consensus can be a difficult political problem in group decision making which is not a problem in
individual decision making. For these and similar reasons, group decision making can be more
complicated than individual decision making.

3. Define decision style and describe why it is important to consider in the decision-making process

Decision style is the manner in which a decision maker thinks and reacts to problems. It is important to
consider it because different decision styles require different types of support.
2.3 Models
A model is a simplified representation or abstraction of reality. It is usually simplified because reality is
too complex to describe exactly and because much of the complexity is actually irrelevant in solving a
specific problem. Models can represent systems or problems with various degrees of abstraction. They
are classified, based on their degree of abstraction, as iconic, analog, or mathematical.

Iconic (Scale) Models

An iconic model, also called the scale model—the least abstract type of model—is a physical replica of a
system, usually on a different scale from the original. An iconic model may be three-dimensional, such as
a model of an airplane, a car, a bridge, or a production line. Photographs are two-dimensional iconic
models.

Analog Models

An analog model behaves like the real system but does not look like it. It is more abstract than an iconic
model and is a symbolic representation of reality. Models of this type are usually two-dimensional charts
or diagrams. They can be physical models, but the shape of the model differs from that of the actual
system. The following are some examples of analog models:

• Organization charts that depict structure, authority, and responsibility relationships

• Maps on which different colors represent objects, such as bodies of water or mountains

• Stock market charts that represent the price movements of stocks

• Blueprints of a machine or a house • Animations, videos, and movie

Mental Models

Decision makers sometimes develop mental models, especially in time-pressure situations (e.g., when
airplane pilots consider whether to fly). Mental models are descriptive representations of decision-
making situations that people form in their heads and think about. Their thought processes work
through scenarios to consider the utility of and risks involved in each potential alternative. Typically,
mental models are used when there are mostly qualitative factors in the decision-making problem.

Mathematical (Quantitative) Models

The complexity of relationships in many organizational systems cannot be represented by icons or

analogically because such representations would soon become cumbersome and using them would be
time-consuming. Therefore, more abstract models are described mathematically. Most DSS analyses are
performed numerically with mathematical or other quantitative models.
The Benefits of Models

An MSS uses models for the following reasons:

• Manipulating a model (changing decision variables or the environment) is much easier than
manipulating a real system. Experimentation is easier and does not interfere with the organization’s daily
operations.

• Models enable the compression of time. Years of operations can be simulated in minutes or seconds
of computer time.

• The cost of modeling analysis is much lower than the cost of a similar experiment conducted on a real
system.

• The cost of making mistakes during a trial-and-error experiment is much lower when models are used
than with real systems.

• The business environment involves considerable uncertainty. With modeling, a manager can estimate
the risks resulting from specific actions.

• Mathematical models enable the analysis of a very large, sometimes infinite, number of possible
solutions. Even in simple problems, managers often have a large number of alternatives from which to
choose.

• Models enhance and reinforce learning and training.

• Models and solution methods are readily available on the Web.

• Many Java applets (and other Web programs) are available to readily solve models.

Advances in computer graphics, especially through Web interfaces and their associated object-oriented
programming languages, have led to an increased tendency to use iconic and analog models to
complement MSS mathematical modeling. For example, visual simulation combines all three types of
models. We defer our detailed discussion on models until Chapter 4.
Section 2.3 Review Questions
1. Describe the different categories of models.

Categories of models that can be useful in business include iconic (scale, physical) models, analog
models, mental models, and mathematical (quantitative) models. Other types of models, such as
fashion models or data models as used in system analysis and design, are not relevant to this
context but share the underlying concept of representing some aspect of a real system, having
advantages over it for a specific purpose and lacking features that would permit them to replace it.

2. How can mathematical models provide the benefits listed in the section?
The benefits listed in this section, with the applicability of mathematical models to each, are:

• Model manipulation (changing decision variables or the environment) is much easier than
manipulating the real system. Experimentation is easier and does not interfere with the daily
operation of the organization. Mathematical models describe their parameters in the form of
numbers on paper or data in a computer, which can be changed easily without affecting the
operation of the real system.
• Models enable the compression of time. Years of operations can be simulated in minutes or
seconds of computer time. The second part of this statement is specifically about mathematical
models. However, other types of models enable the compression of time as well. For example, a
mental model of which says “if I eat this food, I’ll get an allergic reaction” leads to the decision to
avoid it far more quickly, as well as less painfully, than tasting it would.
• The cost of modeling analysis is much less than the cost of a similar experiment conducted on a
real system. This is because a model is typically less expensive than a real system, the compression
of time reduces time-related costs such as personnel, and the business does not run the risk of
impaired operations while alternatives are investigated in the model.
• The cost of making mistakes during a trial-and-error experiment is much less when models are
used rather than real systems. This is because mistakes affect only the model, not the real system.
• The business environment involves considerable uncertainty. With modeling, a manager can
estimate the risks resulting from specific actions. Mathematical models allow a decision maker to
vary parameters (such as inflation rates, oil prices or demand growth) over as wide a range as
desired to reflect all future scenarios of interest.
• Mathematical models enable the analysis of a very large, sometimes infinite, number of possible
solutions. Even in simple problems, managers often have a large number of alternatives from which
to choose. This benefit is explicitly about mathematical models.
• Models enhance and reinforce learning and training. The operation of a mathematical model can
be observed and reviewed, variables changed to see the effects of the change, and mistakes
deliberately made to learn how to recover from them.
• Models and solution methods are readily available over the Web. Most models available over the
Web are mathematical models.
 • There are many Java applets (and other Web programs) that readily solve models. This is true of
mathematical models, but generally not of other types.

3. How can mental models be utilized in decision making involving many qualitative factors?
Mental models, which are typically used when a decision involves mostly qualitative factors, can
help frame the decision-making situation and can work through scenarios to consider the risks and
benefits of alternative decisions.

4. How can modern IT tools help synthesize qualitative and quantitative factors in decision making?
Modern information technology tools can present qualitative factors along with its analysis of
quantitative factors, so decision makers can consider both together and use the qualitative
information to guide them to the most useful quantitative analyses.

2.4 Phases of the Decision-Making Process

The decision-making process starts with the intelligence phase; in this phase, the decision maker
examines reality and identifies and defines the problem. Problem ownership is established as well.

In the design phase, a model that represents the system is constructed. This is done by making
assumptions that simplify reality and writing down the relationships among all the variables. The model
is then validated, and criteria are determined in a principle of choice for evaluation of the alternative
courses of action that are identified. Often, the process of model development identifies alternative
solutions and vice versa.

The choice phase includes selection of a proposed solution to the model (not necessarily to the problem
it represents). This solution is tested to determine its viability. When the proposed solution seems
reasonable, we are ready for the last phase: implementation of the decision (not necessarily of a
system). Successful implementation results in solving the real problem. Failure leads to a return to an
earlier phase of the process. In fact, we can return to an earlier phase during any of the latter three
phases.
Section 2.4 Review Questions

1. List and briefly describe Simon’s four phases of decision making.

Simon’s four phases of decision making are intelligence, design, choice, and implementation.
Intelligence consists of gathering information by examining reality, then identifying and defining the
problem. In this phase problem ownership should also be established. Design consists of
determining alternatives and evaluating them. If the evaluation will require construction of a model,
that is done in this phase as well. The choice phase consists of selecting a tentative solution and
testing its validity. Implementation of the decision consists of putting the selected solution into
effect. See Figure 2.1

2. Why is a fifth phase, evaluation, not necessary?

The authors of this book view monitoring as a manifestation of the intelligence phase, applied to the
implementation of a decision. Like any other intelligence phase, it may lead to a future decision. See
Figure 2.1 . In evaluating responses to this question, graders should be aware that students may
have learned to treat evaluation, or monitoring, as a separate phase in other courses or from other
sources.

3. What can cause a problem to exist in decision making?

A problem is a negative discrepancy between what is and what a decision maker feels should be.
This can result from a change in the decision maker’s expectations or from a change in the situation.
Expectations can be raised, creating such a discrepancy, by (for example) seeing how competitors
have improved their operations. The situation can change in many ways: higher costs, lower market
share, etc. See the MMS running case in the Online File W2.1

2.5 Decision Making: The Intelligence Phase

2.6 Decision Making: The Design Phase

2.7 Decision Making: The Choice Phase

2.8 Decision Making: The Implementation Phase

2.9 How Dec isions Are Supported