University Institute of Computing
Bachelor of Computer Applications/ Bachelor of
Computer Science
Subject Name: Business Intelligence
Code: 20CAT-353/SCT-353
Business Intelligence DISCOVER . LEARN . EMPOWER
Contents
This lecture is about foundation and technologies of Decision Making.
Fig 1. Foundation & technologies of Decision making
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So let’s understand What is Decision?
• Decision is a conclusion or resolution reached after consideration.
• In businesses decisions are taken to support organizational growth. The whole
fabric of management, i.e. its day to day operation is rightly built on managerial
decisions.
Fig 2. Decision power
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What is the Decision Making Process?
• Decision making is the process of making choices by identifying a decision,
gathering information, and assessing alternative resolutions.
• In an organizational context, it is worthwhile to note that decision making needs
the right kind of information, the complete information and the ability to make
sense of the information.
Fig 3. Decision making process
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Decision Making Process
Robert Frost wrote,
“Two roads diverged in a wood, and I—I took the one less
traveled by, and that has made all the difference.”
Trewatha & Newport defines decision making process as follows:,
“Decision-making involves the selection of a course of
action from among two or more possible alternatives in
order to arrive at a solution for a given problem”.
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How to Use the Decision Making Process in
Businesses?
7 Steps of the Decision-Making Process
• Identify the problem.
• Gather relevant information.
• Identify the alternatives.
• Weigh the evidence.
• Choose among the alternatives.
• Take action.
• Review your decision.
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Steps of the Decision-Making Process
Fig 4. Steps of Decision making process 7
Technologies in Decision Making
• The decision making tools help you to map out all the possible alternatives to your
decision, it's cost, as well as chances of success or failure. These applications
provide a useful way to make the right choice by simplifying the decision making
process and by drawing a diagram.
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Technologies in Decision Making
Following is a handpicked list of Top Decision Tools-
1) SWOT Diagram
2) Decision Making Diagram
3) Decision Matrix
4) Pareto Analysis
5) Cause and Effect or Ishikawa Diagram
6) Force Field Analysis
7) Strategy Map
8) Break-even analysis
9) Pugh Matrix
10) Ratio Analysis 9
SWOT Diagram
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
SWOT Diagram is an important management application that helps any
organization to assess its current situation. It works as a basic guide for
strategic planning.
Tool to create SWOT Diagram: Edraw Max
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SWOT Diagram
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Decision Making Diagram
Decision making diagrams are graphs that enable you to map out the
decision you have taken. It helps you to estimate actions based on the
outcomes and risks. You can use this diagram for planning team
strategy.
Tool to create Decision Making Diagram: Lucidchart
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Decision Making Diagram
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Decision Matrix
A decision matrix is a technique that contains values that helps you to
identify and analyze the performance of the system. The elements of a
decision matrix show results depend on specific criteria.
A decision matrix is also called: Pugh matrix, decision grid, selection matrix or
grid, problem matrix, problem selection matrix, opportunity analysis, solution
matrix, criteria rating form, criteria-based matrix
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Decision Matrix
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Pareto Analysis
Pareto Analysis is a method for decision-making. It is also known as
80/20 rule meaning, 20% of your activities will account for 80% of your
results. It is used for prioritizing possible changes by identifying the
problems and resolve them.
Tool to create Pareto Analysis: Visual Paradigm
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Pareto Analysis
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Cause and Effect or Ishikawa Diagram
Cause and Effect or Ishikawa Diagram shows the causes of a particular event. It can
be used for product design and to check its quality to identify possible factors
causing an overall effect. You can group causes into categories to find sources of
variation.
•Tool to create Cause and Effect or Ishikawa Diagram: SmartDraw
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Cause and Effect or Ishikawa Diagram
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Force Field Analysis
Force Field Analysis enables you to examine your project. It provides a
framework for looking at the factors that influence a particular situation.
This analysis helps you to understand the process of any organization in
a better way.
•Tool to create Force Field Analysis: SmartDraw
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Force Field Analysis
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Strategy Map
•Strategy map is a diagram that can be used to document strategic business goals.
This map is created during the planning process of business. It is used as a primary
material to check-in and review meetings.
•Tool to create Strategy: Cascade Strategy
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Strategy Map
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Break-even analysis
A break-even analysis helps you to determine at what stage a new business product
will be profitable. It's an economic calculation used to determine the number of
products or services you need to sell to cover your costs.
Tool to create break-even analysis: Good Calculators
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Break-even analysis
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Pugh Matrix
Pugh Matrix is a diagram that is used to evaluate alternative solutions for business.
It helps you to determine which solutions are more valuable than the others. This
method does not require a massive amount of quantitative data.
•Tool to create Pugh Matrix: Psychologia
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Pugh Matrix
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Ratio Analysis
Ratio analysis is a term used for comparison of items available in the financial
statements of a business. It used to evaluate a number of problems with an entity,
like its efficiency of operation, and more.
•Tool to create Ratio Analysis: Finstanon
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Ratio Analysis
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Methodologies in Decision Making
Following are the methods for decision making:
• Multi-attribute: Consider a multi-attribute decision making problem with m
criteria and n alternatives. Let C1,.,Cm and A1,..,An denote the criteria and
alternatives, respectively. A standard feature of multi-attribute decision making
methodology is the decision table.
In the table each row belongs to a criterion and each column describes the
performance of an alternative. The score aij describes the performance of
alternative Aj against criterion Ci.
Multi-attribute decision making techniques can partially or completely rank the
alternatives: a single most preferred alternative can be identified or a short list of a
limited number of alternatives can be selected.
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Methodologies in Decision Making
• Cost benefit analysis: Cost-benefit analysis (CBA) is a worldwide used technique
in decision making. CBA evaluates the costs and benefits of the alternatives on
monetary basis.
• Pros and Cons analysis: Pros and cons analysis is a qualitative comparison method
in which good things (pros) and bad things (cons) are identified about each
alternative. Lists of the pros and cons are compared one to another for each
alternative. The alternative with the strongest pros and weakest cons is preferred.
• Maximin and maximax methods: The maximin method is based upon a strategy
that tries to avoid the worst possible performance. The alternative for which the
score of its weakest criterion is the highest is preferred. The maximin method can
be used only when all criteria are comparable so that they can be measured on a
common scale, which is a limitation
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Methodologies in Decision Making
• Conjunctive and disjunctive methods: The conjunctive method requires that an
alternative must meet a minimal performance threshold for all criteria. The
disjunctive method requires that the alternative should exceed the given threshold
for at least one criterion. Any alternative that does not meet the conjunctive or
disjunctive rules is deleted from the further consideration. These screening rules
can be used to select a subset of alternatives for analysis by other, more complex
decision making tools.
• Lexicographic methods: In the lexicographic method criteria are ranked in the
order of their importance. The alternative with the best performance score on the
most important criterion is chosen. If there are ties with respect to this criterion,
the performance of the tied alternatives on the next most important criterion will
be compared, and so on, till a unique alternative is found.
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Methodologies in Decision Making
The analytic hierarchy analysis: The basic idea of the approach is to convert
subjective assessments of relative importance to a set of overall scores. AHP is one
of the more widely applied multiattribute decision making methods. The
methodology of AHP is based on pairwise comparisons of the following type ’How
important is criterion Ci relative to criterion Cj?’ Questions of this type are used to
establish the weights for criteria and similar questions are to be answered to assess
the performance scores for alternatives on the subjective (judgmental) criteria
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Data-driven decision making
• This allows managers and executives to use techniques such as cost-benefit
analysis and predictive modeling to justify their decisions. It also enables lines of
business to build process automation protocols that can be applied to new
situations as they arise, obviating the need for each one to be handled as a unique
decision-making event.
• A systematic decision-making model reduces the possibility that the biases and
blind spots of individuals will result in sub-optimal decisions
• Data isn't infallible, which makes observing the business impact of decisions a
crucial step in case things go in the wrong direction
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References
• Fig 1.
https://lh3.googleusercontent.com/proxy/9xt1vkAEOCT1hXZgqX9m8TpKQc8Dc
Xah1cfZ6gqiEB9KwVoIy5CyDdBXpvaotpDeTXhvjxsFehcMUvWQgz9OfE
• Fig 2. https://i1.wp.com/Emotions-and-Decision-Making-Five-Steps-to-Improve-
Your-Process.jpg?resize=940%2C575&ssl=1
• Fig 3.
data:image/jpeg;base64,/xLgQlhcLJYtyKgBCjshAIVAZUsLjASxLhlSwuPKrYX
GAhAQAgEhQQAgGhAIulri5//Z
• Fig 4. https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Decision-
Making-Process-1.png
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Thank You
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