DSS Complete PDF

5/8/2012
Data & Information
The Business School

University of Kashmir
Definitions
Fact statement of some element of truth about a subject matter or a domain.
Example: milk is white, sun rises in east

Intelligence capacity to acquire, store, improve and apply knowledge
Experience what we have done and what has happened in past in a specific
area of work
Common sense natural ability to sense, judge or perceive situations ; grows
stronger over time

Memory ability to store and retrieve relevant experience at will, is part of
intelligence
Learning is knowledge or skill that is acquired by instruction or study
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Knowledge. Information once analyzed, understood, and explained is
knowledge or foreknowledge (predictions or forecasts).
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Data, Information,
and Systems
Data vs. Information
Data
A given, or fact; a number, a statement, or a picture
Represents something in the real world
The raw materials in the production of information
Information
Data that have meaning within a context
Data in relationships
Data after manipulation

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Data, Information,
and Systems
Data Manipulation
Example: customer survey

Reading through data collected from a customer survey with
questions in various categories would be time-consuming and
not very helpful.
When manipulated, the surveys may provide useful

information.
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WHY INFORMATION SYSTEMS?
What Is an Information System?
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What Is an Information System?
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Data, Information,
and Systems
Generating Information
Computer-based ISs take data as raw material, process it,
and produce information as output.
Figure 1.1 Input-process-output

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Data, Information,
and Systems
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Figure 1.2 Characteristics of useful information
Activities in an Information System
INPUT
PROCESS
FEEDBACK
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OUTPUT
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Example of Information
Needed by a Shopkeeper
Daily sales account
List of low stock items to be re-ordered

List of overstock items
Long overdue payments
Profit and loss account
Used to streamline day to day operations called Operational

information
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needed by a Shopkeeper (Contd)
Slow or fast moving items
Reliable supplier of items

Sales trends
Used to improve profitability of shop called Tactical information
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needed by a Shopkeeper (Contd)
Whether to stock different varieties of items
Whether to diversify
Whether to start a new branch in a different locality
Whether to start an e-shop
Information to expand business and explore new opportunities

Known as Strategic Information
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Types of Information
Strategic : Needed for long range planning and directions.

This is less/unstructured.
Tactical : Needed to take short range decisions to improve
Profitability and Performance.
Operational : Needed for day to day operations of the organization.
Eg: Daily Sales, Billing.
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SYSTEM
System as a group of interrelated components working together toward a
common goal by accepting inputs and producing outputs in an organized

transformation process.
Such a system has three basic interacting components or functions:
Input: Involves capturing and assembling elements that enter the system to be
processed. For example, raw materials, energy, data, and human effort must be
secured and organized for processing.
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SYSTEM
Processing: Involves transformation process that converts input into output.
Examples to these are manufacturing process, the human breathing process,

etc.
Output: Involves transferring elements that have been produced by
transformation process to their ultimate destination, Examples to these are

finished products, human services and management information that must be
transmitted to their human users.
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System
System
Input
Process
Output
Feedback and Control

Environment
Fig. Showing Elements of a System

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System
A system with feedback and control components is sometimes called a
cybernetic system, that is, a self-monitoring, self-regulating system.

Feedback: It is data about the performance of a system. It is actually
measured in terms of the outcome to that of the predefined objectives

set out at the beginning of the process.
Control: It involves monitoring and evaluating feedback to determine
whether a system is moving toward the achievement of its goal.
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System Characteristics
A system does not exist in a Vacuum; rather, it exists and function in an
environment containing other systems

If a system is one of the components of a larger system, it is then
referred to as a subsystem, and the larger system is its environment.

The system that has the ability to change itself or its environment in
order to survive is an adaptive system
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Types of System
A large system can be split or decomposed into smaller subsystems
up to a certain level
The decomposition of a system into subsystems can be in a serial
form or it could be in a matrix form

In a serial system processing, the entire output of a subsystem is the
input to the next subsystem and so on.

In the matrix arrangement the different outputs go to different sub-
systems. A subsystem receives more than one input from other

subsystems.
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Types of System
If the process of input transformation is not visible and
understandable then we say that the system is a black box and

the process is not transparent
Most of the systems can be viewed in a hierarchical structure.
Breaking the system in a hierarchical manner provides a way to

structured systems analysis. It gives a clear understanding of the
contribution of each subsystem in terms of data flow and
decisions, and its interface to the other subsystems.
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Types of System
The systems can be classified in different categories based on the
predictability of its output and the degree of information exchange

with the environment.
Deterministic- when the inputs, the process and the outputs of a
system are known with certainty. In a deterministic system, you can
predict the output with certainty.
Probabilistic- when the output can only be predicted in

probabilistic terms. The accounting system is deterministic while
the demand forecasting system is a probabilistic one.
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Types of System
If a system is functioning in isolation from the environment, then the
system does not have any exchange with the environment nor is it
influenced by the environmental changes. Such a system is called a
closed system.
If the system has exchange with the environment and is influenced by
the environment then it is called an open system.

All kinds of accounting systems, viz., cash, stocks, attendance of
employees are closed systems. Most of the systems based on rules

and principles are closed systems.
The systems which are required to respond to changes in the
environment, such as marketing, communication and forecasting are
open systems
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Types of System
Specify in the inputs, processes, and outputs of the following
systems. Determine what is required for each system to be
efficient and effective.

Post Office
Elementary school
Grocery store
Farm
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Types of System
Organization
Inputs
Processes
Outputs
Post Office
Letters mailed
Delivery of mail
Mail delivered
School
Students
Teaching
Graduating
students
Food products
Stocking, selling
Grocery Store
Farm
Feedstock, seeds, Animals and

fertilizer
plants
growing
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Food sold to
customers
Food delivered to
market
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System
List possible kinds of feedback for the systems in the previous question.
Post Office: Customers' complaints, average days for a delivery, cost,
percent of lost mail

School: Students' complaints, achievement on national tests, success
in job placement
Grocery store: Customer feedback on quality, quantity, percent of
theft and waste, etc.

Farm: Quality of output sold to market
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Information Systems
Information system consists of physical and non-physical components
working together
A computer combines with a software program may constitute an

information system, but only if the program is designed to produce
information that helps an organization or person to achieve a specific
goal.
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Information Systems
Management Information System (MIS) Computer-based or manual system
- transforms data into information to support the decision making.
MIS can be classified as performing three functions:
(1) To generate reports - for example, financial statements, inventory status

reports, or performance reports needed for routine or non-routine
purposes.
(2) To answer what-if questions asked by management. For example,
questions such as "What would happen to deposits if the bank increases
interest rates?" can be answered by MIS.
(3) To support decision making. This type of MIS is appropriately called
Decision Support System (DSS).
-DSS attempts to integrate the decision maker, the data base, and the
quantitative models being used.
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Information Systems?
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Major Business Functions
Sales and marketing
Manufacturing
Finance
Accounting
Human resources
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MIS in Marketing
Marketing Management Information Systems:
It supports managerial activity in the area of product
development, distribution, pricing decisions, promotional

effectiveness, and sales forecasting.
It mainly relies on external sources of data like competitors
and customers.
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MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
Sales and Marketing Systems
Major functions of systems:

Sales management, market research, promotion, pricing, new
products
Major application systems:

Sales order info system, market research system, pricing
system
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Sales and Marketing

Systems
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MIS in Manufacturing
Manufacturing Management Information Systems:
Inventories are provided just in time to reduce costs of
warehousing huge inventories .
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Manufacturing and Production Systems

Scheduling, purchasing, shipping, receiving, engineering, operations

Materials resource planning systems, purchase order control systems,
engineering systems, quality control systems
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MIS in Finance
Financial Management Information Systems:
It provides financial information to all financial managers
within an organization including the chief financial officer.

The chief financial officer analyzes historical and current
financial activity, future financial needs, and monitors and
controls the use of funds over time using the MIS
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Financing and Accounting Systems

Budgeting, general ledger, billing, cost accounting

General ledger, accounts receivable, accounts payable,
budgeting, funds management systems
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MIS in HR
Human Resources Management Information Systems:
These systems are concerned with activities related to
workers, managers, and other individuals employed by the

organization.
It includes, work-force analysis and planning, hiring,
training, and job assignments.
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Human Resource Systems

Personnel records, benefits, compensation, labor relations,
training

Payroll, employee records, benefit systems, career path
systems, personnel training systems
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Key Elements of An Organization

People: Managers, knowledge workers, data workers,
production or service workers

Structure: Organization chart, products, geography
Operating procedures: Standard operating procedures (SOP,
rules for action)
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IT/Tools for Managers
Hardware: Physical equipment
Software: Detailed preprogrammed instructions

Storage: Physical media for storing data and the software
Communications Technology: transfers data from one
physical location to another

Networks: link computers to share data or resources
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IS & Organizations
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TOWARD THE DIGITAL FIRM
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Information Sytems
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Major Types of Systems

Executive Support Systems (ESS)
Decision Support Systems (DSS)

Management Information Systems (MIS)
Knowledge Work Systems (KWS)
Office Systems
Transaction Processing Systems (TPS)
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Transaction Processing Systems (TPS)

Operational Level :
Basic business systems that serve the operational level
A computerized system that performs and records the daily
routine transactions necessary to the conduct of the business
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Knowledge Work Systems (KWS)
Knowledge level
Inputs
Design specs
Processing :
Modeling
Outputs
Designs, graphics
Users
Technical staff and professionals
Example: Engineering work station
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Management Information System (MIS)
Management level
Inputs
High-volume data
Processing :
Simple models
Outputs
Summary reports
Users
Middle managers
Example: Annual budgeting
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Decision Support System (DSS)

Management level
Inputs
Low/High volume data
Processing :
Interactive
Outputs
Decision analysis
Users
Professionals, Staff
Example: Forecasting
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Executive Support System (ESS)

Strategic level
Inputs
Aggregate data
Processing :
Interactive
Outputs
Projections
Users
Senior managers
Example: 5-year operating plan
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Management Information Systems 8/e

Chapter 2 Information Systems in the Enterprise
ENTERPRISE APPLICATIONS
Business Processes and Information Systems
Business processes
Manner in which work is organized, coordinated, and focused to produce
a valuable product or service
Concrete work flows of material, information, and knowledgesets of

activities
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Unique ways to coordinate work,
information, and knowledge
Ways in which management chooses
to coordinate work
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Information systems help organizations

Achieve great efficiencies by automating parts of processes
Rethink and streamline processes
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Examples of Business Processes
Manufacturing and production: Assembling product, checking

quality, producing bills of materials
Sales and marketing: Identifying customers, creating customer

awareness, selling
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Examples of Business Processes
Finance and accounting: Paying creditors, creating financial

statements, managing cash accounts
Human Resources: Hiring employees, evaluating performance,

enrolling employees in benefits plans
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Cross-Functional Business Processes

Transcend boundary between sales, marketing, manufacturing, and
research and development
Group employees from different functional specialties to a complete
piece of work
Example: Order Fulfillment Process
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Enterprise Applications
Enterprise systems
Supply chain management systems
Customer relationship management systems
Knowledge management systems
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Traditional View of the Systems
Within the business: There are functions, each having its uses of
information systems
Outside the organizations boundaries: There are customers and

vendors
Functions tend to work in isolation
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Figure 2-13
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Benefits of Enterprise Systems

Firm structure and organization: One organization
Management: Firm-wide knowledge-based management processes

Technology: Unified platform
Business: More efficient operations and customer-driven business
processes
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Challenges of Enterprise Systems

Difficult to build: Require fundamental changes in the way the
business operates
Technology: Require complex pieces of software and large

investments of time, money, and expertise
Centralized organizational coordination and decision
making: Not the best way for the firms to operate
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Supply Chain Management (SCM)
Close linkage and coordination of activities involved in buying,
making, and moving a product
Integrates supplier, manufacturer, distributor, and customer logistics
time
Reduces time, redundant effort, and inventory costs
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Supply Chain
Network of organizations and business processes
Helps in procurement of materials, transformation of raw materials
into intermediate and finished products
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Limitations:
Inefficiencies can waste as much as 25% of companys operating costs
Bullwhip Effect: Information about the demand for the product gets
distorted as it passes from one entity to next
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Helps in distribution of the finished products to customers
Includes reverse logistics - returned items flow in the reverse direction
from the buyer back to the seller
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How Information Systems Facilitate Supply Chain Management
Decide when, what to produce, store, move

Rapidly communicate orders
Communicate orders, track order status
Check inventory availability, monitor levels
Track shipments
Plan production based on actual demand
Rapidly communicate product design change
Provide product specifications
Share information about defect rates, returns
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Supply chain planning system: Enables firm to generate forecasts for

a product and to develop sourcing and a manufacturing plan for the
product
Supply chain execution system: Manages flow of products through

distribution centers and warehouses
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Collaborative Commerce
Uses digital technologies to enable multiple organizations to
collaboratively design, develop, build, move, and manage products
Increases efficiencies in reducing product design life cycles, minimizing
excess inventory, forecasting demand, and keeping partners and

customers informed
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Industrial Networks
Private Industrial Networks

Web-enabled networks
Link systems of multiple firms in an industry

Coordinate transorganizational business processes
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Customer Relationship Management (CRM)
Manages all ways used by firms to deal with existing and potential new
customers
Business and Technology discipline

Uses information system to coordinate entire business processes of a firm
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Provides end-to-end customer care
Provides a unified view of customer across the company
Consolidates customer data from multiple sources and provides
analytical tools for answering questions
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Knowledge Management Systems

Creating knowledge
Discovering and codifying knowledge
Sharing knowledge
Distributing knowledge
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The End
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Management Information Systems
Feasibility Study
Three types of feasibility :
Technical Feasibility
Economical Feasibility
Operational Feasibility
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Technical Feasibility
H/W
I/P, O/P, Communication, Storage
S/W
Database, OS, Languages
Application -
System Packages, Management Science Models
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Economical Feasibility
Costs
Sytems/Programmes, Operations, H/W, S/W
Savings
Operating Expenses, Clerical Personnel,
Tangible
---- Reduction in Production Cost
Intangible
---- Customer Satisfaction
Equipment
Benefits
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Operational Feasibility
Management
Operating Management
Middle Management
Top Management
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Reports of MIS
Periodic Scheduled Reports.
Exception Reports.
Demand Reports and Responses.
Push Reporting.
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Information Technology and MIS

Information Technology is defined as that branch of computer science
that includes:
Hardware.
Software.
Communication Technology.
Storage systems and
Other Information processing technologies.
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Computer Hardware------The physical equipment
Secondary storage
Communication
Devices
Magnetic disk
Optical disk
Magnetic tape
Central
Processing Unit
Buses
Primary Storage
Input Devices
Output Devices
Keyboard
Printers
Computer mouse
VDT
Touch screen
Plotters
Source data automation
Audio output
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Computer Software
Computer
Software
Application
Software
General purpose
Application
Programs
System
Software
Application-Specific System Management System Development

Programs
Programs
Programs
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Communication Technology
Communications technology allows systems to transfer data from one location to
another for the transmission of voice, data, images, sound and even video. It can
take the form of : Wired transmission: The transmission media can be
Twisted pair cable.

Coaxial cable.
Fiber-optic cable.
Wireless transmission: This includes:-
Microwave Transmission.
Satellite Transmission.
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Using Communication Technology for Business

Solutions
The Internet is revolutionizing communications by providing a
worldwide network linking business, government, and scientific and

educational organizations to individuals. Internet use falls into several
major areas, including:
Electronic mail/ Voice mail.
World Wide Web.

Chat.
Electronic Data Interchange.
Electronic Commerce.
Mobile Commerce.
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Using Communication Technology for Business Solutions
Intranets
These help organizations in creating richer, more responsive information

environments in which members of an organization can exchange
ideas, share information and work together on common projects and
assignments regardless of their physical location.
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Using Communication Technology for Business Solutions
Extranets
These are privately owned networks that are extended to
authorized users outside the company e.g. authorized buyers,
retailers, distributors, customers. They are often used for
collaborating with other companies for:
1. Supply Chain Management.

2. Customer Relationship Management.
3. Product design and development.
4. Training efforts.
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Enterprise application architecture presenting an overview of the major

cross-functional enterprise applications and their interrelationships.
Sourcing. Procurement
Internal Business Processes.

Customer Relationship
Management.
Marketing. Sales. Service
Partners
Enterprise Resource Planning.
Partner Relationship Management.
Supply Chain Management.
Selling. Distribution.
Knowledge Management.
Collaboration. Decision Support.
Employees
Suppliers
Customers
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Supply Chain Management
It is a cross-functional inter-enterprise system that uses information
technology to help support and manage the links between some of

companys key business processes and those of its suppliers, customers
and business partners.
The goal of SCM is to create a fast, efficient and low-cost network of
business relationships, or supply chain, to get a companys products

from concept to market.
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Enterprise Resource Planning
Integrated cross-functional software that re-engineers manufacturing,
distribution finance, human resources and other basic business process
of a company to improve its efficiency, agility, and profitability.
It focuses on the companys internal aspects giving them an integrated
real-time view of its core business processes.
Simply the technological backbone of e-business.
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Customer Relationship Management
A cross-functional e-business application that integrates and automates
many customer serving processes in sales, direct marketing, account

and order management, and customer service and support.
CRM systems create an IT framework of web-enabled software and
databases that integrates these processes with the rest of a companys

business operations.
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Knowledge Management
Organizing and sharing the diverse forms of business information
created within an organization. Includes managing project and

enterprise document libraries, discussion databases, intranet website
databases, and other types of knowledge bases.
Different phases of a knowledge management system (KMS).
Capturing/Acquisition of data/information
Transformation of Info. into Knowledge
Knowledge Storage
Disseminating/Sharing of Knowledge
Figure
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Capturing/Acquisition of Data/Information
Various technologies that can help in capturing of information
are:
Document Management System:
Document management system keeps track of masses
of data and information, which is stored in a secure file

vault where its integrity is guaranteed and all changes to it,
is monitored, controlled, and recorded providing far easy
and faster access to all the documents. It takes care of

creating, storing, editing, and distributing documents.
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Database
Database is a collection of data organized to serve many
applications efficiently by centralizing the data and minimizing

redundant data. It is a computerized record keeping system that stores,
maintains, and provides access to information.
Database Management System (DBMS) is simply the software

that permits an organization to centralize data, manage them
efficiently, and provide access to the stored data by applications

programs. The DBMS acts as an interface between application
programs and the physical data files.
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Data Warehouse
An integrated collection of data extracted from operational,

historical and external databases and cleaned, transformed and
cataloged for retrieval and analysis to provide business intelligence for

business decision making.
Search Engines
These are huge databases of web page files that have been
assembled automatically by machine.
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Useful technologies for this phase of the knowledge management process

include:
Multidimensional Data Analysis: Another term for multidimensional
data analysis is Online Analytical Processing (OLAP), which is a function

of business intelligence software that enables a user to easily and
selectively extract and view data from different points of view.
OLAP tools structure data hierarchically the way managers think of

their enterprises, and also allows business analysts to rotate that data,
changing the relationships to get more detailed insight into corporate
information.
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Data mining or Knowledge Discovery in Databases (KDD) provides an
organization with highly tangible benefits in the area of analysis. Data
mining is the nontrivial extraction of implicit, previously unknown,

and potentially useful information from data. This encompasses a
number of different technical approaches such as clustering, data
summarization, learning classification rules, finding dependency net

works, analyzing changes, and detecting anomalies.
Data mining software tools find hidden patterns and relationships in
large pools of data and infer rules from them that can be used to
predict future behavior and guide decision-making.

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Transformation of Info. into Knowledge contd.
Decision Support Systems (DSS)
These are a specific class of computerized information system that

supports business and organizational decision-making activities.
Artificial Intelligence (AI)
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Info/Knowledge Storage
Knowledge repositories are widely recognized as key components of
most knowledge management systems. Once knowledge is captured, it

must be stored in a knowledge repository. A knowledge repository is a
collection of both internal and external knowledge.
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Info/Knowledge Dissemination
The final phase is effectively communicating the captured "knowledge."
In fact, knowledge is not truly captured. Instead, what is captured is

information that is more easily transformed into knowledge by the
recipient. The key technologies that can be used for dissemination are:
E-mail
Teleconferencing, Data-conferencing
Videoconferencing
Groupware, and
Intranets.
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Decision Making
2009
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DECISION MAKING
System is a collection of objects such as people, resources,
concepts, and procedures intended to perform a function or
to serve a goal.
Closed systems are totally independent.

Open systems dependent on their environment.
System effectiveness is the degree to which goals are achieved.
System efficiency is a measure of the use of inputs (or resources)
to achieve outputs.
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Decision making is a process of choosing among alternative

courses of action for the purpose of attaining a goal or goals.
Simons 4 Phases of Decision Making
(1) intelligence
decision making
problem solving
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(2) design
problem solving
(3) choice
decision making
(4) implementation
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Simplification/Assumption
Reality
INTELLIGENCE PHASE
Organizational objectives
Search and scanning
Data collection
Problem identification
Problem ownership
Problem classification
Problem statement
Problem statement
Validation of the model
DESIGN PHASE
Formulate a model
Set criteria for choice
Search for alternatives
Predict and measure outcomes
Alternatives
Success
Verification, testing of proposed solution
Implementation
of solution
CHOICE PHASE
Solution to the model
Sensitivity analysis
Selection of best alternative (s)
Plan for implementation
Solution
Failure
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1. Intelligence phase
Scan the environment
Analyze organizational goals (e.g. Inventory Management, Job
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Selection, lack or an incorrect web presence)

Collect data (Monitoring & analyzing)
Identify problem
Categorize problem
Programmed (repetitive & routine) ---Scheduling of employees,
inventory level etc
Non-programmed (Unstructured) --- Merger & Acquisitions
Decomposed into smaller parts
Assess ownership and responsibility for problem resolution
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2. Design phase
Formulate a model
Set criteria for choice (Are we willing to take High risk
or we prefer low risk approach)
Search for alternatives
Predict and measure outcomes (E.g. Profit
Maximization)
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3. Choice phase
Each alternative must be evaluated
Sensitivity analysis (determines robustness of any given alternative)
Selection of best alternative (s)
Plan for implementation
solution - set of values for the decision variables in a selected alternative
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4. Implementation phase
Putting a recommended solution to work
Vague boundaries which include:
Dealing with resistance to change
User training
Upper management support
The problem is considered solved after the recommended solution to the
model is successfully implemented.
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Source: Based on Sprague, R.H., Jr., A Framework for the Development of DSS. MIS Quarterly, Dec. 1980, Fig. 5, p. 13.
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Decision Support Systems

Intelligence Phase
Automatic
Data Mining
Expert systems, CRM, neural networks

Manual
OLAP
KMS
Reporting
Routine and ad hoc
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Design Phase
Financial and forecasting models

Generation of alternatives by expert system
Relationship identification through OLAP and data mining

Use of KMS
Business process models from CRM, RMS, ERP, and SCM
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Choice Phase
Identification of best alternative
Identification of good enough alternative

What-if analysis
Goal-seeking analysis
May use KMS, GSS, CRM, ERP, and SCM systems
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Implementation Phase
Improved communications
Collaboration
Training
Supported by KMS, expert systems, GSS
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TYPES OF DECISIONS
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TYPES OF DECISIONS
Decisions are categorized along two dimensions:-
The nature of the decision to be made
The scope of the decision itself
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TYPES OF DECISION
On the basis of the nature of the decision:-
1)Structured decision:-Its the one for which a well defined decision making
procedure exists.
2)Unstructured decision:- it is the one for which all the three decision phases
are unstructured.
3)Semi structured decision:- In this type one or two phases are structured and
the others are not.
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On the basis of scope of the decision itself.
1.
Strategic Decision:- It is the one which effects the entire organization or a

major part of it for a long period of time
2.
Tactical Decision:- It effects how a part of the organization does business

for a limited time in the future.
3.
Operational Decision:- It is the one which effects a particular activity

currently taking place in an organization but either has a little impact on
the future.
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Combination of various types of Decisions

Structured /operational
Structured / tactical
Structured/ strategic
Semi-structured/ operational.
Semi-structured/ tactical
Semi-structured / strategic
Unstructured/ operational
Unstructured/ tactical
Unstructured/ strategic
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Structured/Operational: Decide how to cut a log into boards in order
to minimize wastage.
The intelligence phase is trivial; if a log arrives at mill, it must be cut .
The design phases likewise fixed; the products that the mill produces
and hence the acceptable types of cuts.
The choice phase can be optimized mathematically because the value of
each potential board is known from business consideration and the

number of boards that can be operated via each communication of cuts
is a problem.
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Structured /Tactical: Choosing the way in which to depreciate
corporate assets.
Resource allocation problems that can be solved by linear
programming methods are also in this category.
Structured /Strategic: Deciding weather or not to proceed with an
R&D project on the bases of projected ROI
A plant location decision could be in this category if the only factors in

decisions are quantifiable, such as transportation costs of known raw
materials from known locations and of known products to known
markets.
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Semistructured/Operational: Deciding to accept or reject an applicant
to a certificate course(one month).
Semitructured /Tactical: Choosing an insurance company for an
employee health program. Cost per employee is an important and
objective factor in this decision. Intangible factors include acceptability

of a company to the employee population and the relative importance
of different benefits: is 100 percent hospitalization coverage with Rs.

500 deductible amount better or worse than 80 percent coverage with
no deductible?
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Semitructured /Strategic: Deciding whether or not to enter a new
market. Sales projections, marketplace growth data, development cost

estimates and marketing expenses forecasts can combine to provide a
profit-and-loss forecast. However there are countless factors that could
make it totally worthless. Judgment of experienced managers is

needed for the final step.
Unstructured/Operational: Dealing with a machine breakdown. There
is no set procedure what to do while awaiting repairs. The decision is

operational because the way a company deals with one machine failure
need not set a precedent for the next.
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Unstructured /Tactical: Hiring decisions typically fall into this area,
especially if the job to be filled is above level where aptitude and

ability tests can be relied on as performance indicators.
Unstructured/Strategic: Deciding how to respond to an unfriendly
takeover proposal made by a competitor. The action can have a long

term impact on the entire firm.
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Decision Support Frameworks

Type of Control
Type of Decision:
Operational Control
Managerial Control
Strategic Planning
Structured
Accounts receivable,
Budget analysis, short-
Investments, warehouse
(Programmed)
accounts payable, order term forecasting,
locations, distribution
entry
personnel reports
centers
Semistructured
Production scheduling,
Credit evaluation,
Mergers and
inventory control
budget preparation,
acquisitions, new
project scheduling,
product planning,
rewards systems
compensation, QA, HR
policy planning
Unstructured
Buying software,
Negotiations,
R&D planning,
(Unprogrammed)
approving loans, help
recruitment, hardware
technology
desk
purchasing
development, social
responsibility plans
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The components of the quantitative model
result variable indicate how well the system performs
decision variables describe the alternative course of action
uncontrollable variables or parameters are not under the

control of the decision maker
Uncontrollable
variables
Decision variables
Mathematical
relationships
Result variables
intermediate result variables reflect intermediate outcomes

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Examples of the Components of Models.

Area
Financial investment
Marketing
Manufacturing
Decision
Result
Uncontrollable
Variables
Variables
Variables and Parameters
Investment alternatives and
Total profit
Inflation rate
amounts
Rate of return (ROI)
Prime rate
How long to invest
Earnings per share
Competition
When to invest
Liquidity level
Advertising budget
Market share
Customers' income
Where to advertise
Customer satisfaction
Competitors' actions
What and how much to
Total cost
Machine capacity
produce
Quality level
Technology
Inventory levels
Employee satisfaction
Materials prices
Use of computers
Data processing cost
Computer technology
Audit schedule
Error rate
Tax rates
Compensation programs
Accounting
Legal requirements
Transportation
Shipments schedule
Total transport cost
Delivery distance
Regulations
Services
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Staffing levels
Customer satisfaction
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Demand for services
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Example
Company makes special purpose computers.
Decision to be made: how many computers should be produced next month?
Two types of computers are considered: T1, T2.
They require different days of labour, different costs for material.
Uncontrollable
variables
constraints on labour
and budget
Decision variables
X1 = NofT1
X2 = NofT2
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Mathematical
relationships
Maximise profit
subject to constraints
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Result variables
Total profit
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Principle of choice is a decision regarding the acceptability of a

solution approach.
Normative models
chosen alternative is the best of all possible alternatives
suboptimisation
optimisation models
Descriptive models describe things as they are, or as they are

believed to be.
no guarantee a solution is optimal
simulation
Generating alternatives
automatically by the model
by using heuristics
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Predicting the outcomes of alternatives

1. Decision making under certainty
Decision maker knows exactly what the outcome of
each course of action will be - deterministic environment.
2. Decision making under risk
Each alternative has several possible outcomes,
each with a given probability of occurrence
- probabilistic or stochastic decision situation.
3. Decision making under uncertainty
Several outcomes are possible for each course of action,
their probabilities are not known.
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Measuring outcomes
The value of the an alternative is judged in terms of
goal attainment.
Scenario describes the decision and uncontrollable variables

and parameters for a specific modelling situation.
Of special interest are:
the worst possible scenario
the best possible scenario
the most likely scenario
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Search
Analytical techniques
mathematical formulae
algorithm: step-by-step search process
Blind search
complete enumeration
incomplete search
Heuristic search (derived from the Greek word for discovery)
rules guide the search process
Normative models:
analytical techniques
complete, exhaustive enumeration
Descriptive models:
blind search
using heuristics
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Evaluation
Multiple goals
Today's management systems want to achieve
multiple goals simultaneously.
Goals are usually partially or totally conflicting.
Sensitivity analysis
Checks the impact of a change in the input data or parameters
on the proposed solution (the result variable)
1. Automatic sensitivity analysis
tells the range within which an input variable or parameter
can vary without impact on the proposed solution
one change at a time
2. Trial and error
some input data are changed
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What-if-analysis
What will happen to the solution if an input variable or
a parameter is changed?
e.g. what will happen to the total inventory cost if the cost of
carrying inventories increases by 10%?
Goal seeking analysis
Computes the amount of inputs necessary to achieve a desired level
of an input (goal).
e.g. How many nurses are needed to reduce the average waiting time
of a patient in the emergency room to less than 10 minutes.
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Literature:
1. (a) Decision Support Systems and Intelligent Systems, Fifth Edition
E.Turban, Jay Aronson,
Prentice Hall, 1998.
(b) Decision Support Systems and Expert Systems,
Management Support Systems, E.Turban, Fourth Edition,
Prentice Hall, 1995.
2. Knowledge-based Decision Support Systems, With Applications
in Business, 2nd Edition, M. Klein, L. Methlie,
Wiley, 1995.
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SUMMARY
Systems are composed of inputs, outputs, processes, and
decision makers.
A model is simplified representation or abstraction of reality.

They can be iconic, analog, or mathematical.
Decision making involves four major phases: intelligence, design,
choice, and implementation.
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Models
A model is a simplified representation or abstraction of reality.
1. Iconic model is a physical replica of a system.
2. Analog model gives a symbolic representation of reality,
behaves like the real system but does not look like it.
3. Mathematical (quantitative) models use mathematical relationships

Benefits:
compression of time
easy model manipulation
low cost of the analysis
cost of making mistakes is less than mistakes on real system
can model risk and uncertainty
a very large number of solutions can be analysed
enhance learning and training
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3. Optimisation
model generates an optimal solution
Limitations:
works if the problem is structured and deterministic
4. Heuristics
Informal knowledge of how to solve problems efficiently and
effectively, how to plan steps in solving a complex problem,
how to improve performance, and so forth.
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Modelling Process
Example: How much to order for the grocery?

The Question: How much bread to stock each day?
1. Trial-and-error
experimentation on the real system
Not appropriate if:

too many alternatives to explore
the cost of making errors is very high
the environment keeps changing
2. Simulation
assume the appearance of the characteristics of reality
Problems:
no guarantee that the solution is optimal one
professional development
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Definition of DSS
DSS is an interactive computer-based systems, which help decision makers
utilize data and models to solve unstructured problems.
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Definition of DSS
Decision Support Systems (DSS) are a class of computerized information
systems that support decision-making activities. DSS are interactive

computer-based systems and subsystems intended to help decision makers
use communications technologies, data, documents, knowledge and/or

models to successfully complete decision process tasks.
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Components of DSS
Other computer
based systems
Data management
Internet, intranet,
extranet.
Model management
External models
Knowledge-based
subsystems
User interface
Manager (user)
Organizational KB
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Components of DSS
Data management subsystem
The data management subsystem includes a data base, which contains
relevant data for the situation and is managed by software call the database
management system (DBMS) .the data management subsystem can be
interconnected with the corporate data warehouse, a repository for
corporate relevant decision making data.
Model management subsystem

This is software package that includes financial, statistical, management
science, or other quantitative models that provide the system analytical

capabilities and appropriate software management. Modeling languages in
building custom models are also included, this software is often called a
model base management system (MBMS). This component can be
connected to corporate or external storage of models.
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Components of DSS
Knowledge based management subsystem
This subsystem can support any of the other subsystems or act as an
independent component. It provides intelligence to augment the decision

makers own. It can be interconnected with the organizations knowledge
depository, which is called the organizational knowledge base.

User interface subsystem
The user communicates with and commands the DSS through this
subsystem. The user is considered part of the system. Researchers assert that
some of unique contributions of DSS are derived from the intensive

interaction between the computer and the decision maker.
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THE DATA MANAGEMENT SUBSYSTEM

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Internal data
sources
External
data
Source
Finance
Marketing
Production
Extraction
Organizational
knowledge base
Personal
Other
Private personal
data
Decision support
database
Corporate data
warehouse
Query
Facility
Database management
System
oRetrieval
oInquiry
oUpdate
oReport generation
oDelete
Data directory
Interface
management
Model management
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Knowledge-based
subsystem
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THE DATA MANAGEMENT SUBSYSTEM

The data management subsystem is composed of the following elements:
DSS database
Database management system
Data directory.
Query facility.
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THE DATABASE
A database is a collection of interrelated data organized to meet the needs
and structure of an organization and can be used by more than one person
for more than one application
The data in the DSS database are extracted from internal and external data
sources, as well as from personal data belonging to one or more Users.
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DATA ORGANISATION
In small ad hoc DSS, data can be entered directly into models some times
extracted directly from larger databases.

In large organizations that use extensive data ,such as Wal-Mart, AT&T,
and United Air Lines data are organized in a data warehouse and used
when needed .
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EXTRACTION
To create a DSS database or a data warehouse it is often necessary to capture
data from several sources. This operation is called extraction.

It basically consists of importing of files, summarization, standardization,
filtration, and condensation of data.

The data for the warehouse are extracted from internal and external sources.
The extraction process is frequently managed by a DBMS.
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DATABASE MANAGEMENT SYSTEM

A database is created, accessed, and updated by a DBMS.
Most DSS are built with a standard commercial relational DBMS that
provides capabilities such as it captures or extracts data for inclusion in a

DSS database ,it updates (adds, deletes, edits, changes) data records and
files, retrieves data ,provides data security etc.
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THE QUERY FACILITY

Query facility is necessary to access, manipulate, and query data.
The query facility includes a special query language.

Important functions of DSS query system are selection and manipulation
operation (e.g., the ability to follow a computer instruction such as "Search

for a sales in zone B during June 2000 and summarize sales by salesperson").
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THE DIRECTORY
The data directory is a catalog of all the data in the database.
It contains data definitions and its main function is to answer questions
about the availability of data items, their source, and their exact meaning.
The directory is especially appropriate for supporting the intelligence phase
of the decision-making process by helping to scan data and identify problem

areas or opportunities.
It supports the addition of new entries, deletion of entries, and retrieval of
information on specific objects.
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General Functions of the DBMS

Data Definition
Provides a data definition language (DDL) that allows users to describe
the data entities and their associated attributes and relationships

Allows for the interrelation of data from multiple sources
Data Manipulation
Provides the user with a query language to interact with the database
Allows for capture and extraction of data
Provides rapid retrieval of data for ad hoc queries and reports
Allows for the construction of complex queries for retrieval and data
manipulation
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Data Integrity
Allows the user to describe rules (integrity constraints) to maintain the
integrity of the database

Assists in the control of erroneous data entry based on the defined integrity
constraints
Access Control
Allows identification of authorized users
Controls access to data various elements and data manipulation activities
within the database

Tracks usage and access to data by authorized users
Concurrency Control
Provides procedures for controlling simultaneous access to the same data
by more than one user

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Improved data sharing.

The DBMS helps create an environment in which end users have
better access to more and better-managed data. Such access takes it

possible for end users to respond quickly to changes in their
environment.
Transaction Recovery
Provides a mechanism for restart and reconciliation of the database in
the event of hardware failure

Records information on all transactions at certain points to enable
satisfactory database restart
Minimized data inconsistency.
Data inconsistency exists when different versions of the same data
appear in different places.

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Improved decision making.

Better-managed data and improved data access make it possible to
generate better quality information, on which better decisions are based.

Increased end-user productivity.
The availability of data, combined with the tools that transform data
into usable information, empowers end users to make quick, informed
decisions that can make the difference between success and failure in the
global economy.
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Structure of Model Management System

Models (model base)
Strategic, tactical, operational
Statistical, financial, marketing,
mgt. science, accounting etc
Model building blocks
Model directory
Model execution,
integration, and command
processor
Model base management

Modeling commands : creation
Maintenance: update
Database interface
Modeling language
Data management
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Interface management
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Knowledge
based
subsystem
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Functions of the MBMS

Creates models easily and quickly, either from scratch or from the building
blocks
Allows users to manipulate models so that they can conduct experiments
and sensitivity analyses ranging from what-if to goal seeking

Stores, retrieves and manages a wide variety of different types of models
in a logical and integrated manner

Accesses and integrates the model building blocks
Catalogs and displays the directory of models for use by several
individuals in the organization
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Functions of the MBMS

Tracks model data and application use
Interrelates model with appropriate linkages with the database and
integrates them within the DSS

Manages and maintains the model base with management functions
analogous to database management: store, access, run, update, link, catalog,
and query
Use multiple models to support problem solving
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Knowledge- based
subsystem
Model management
and MBMS
User Interface
Management System
(UIMS)
Language Processor
Input
Output
Action
Languages
Display
Languages
Printers, plotters
Users
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USER INTERFACE MANAGEMENT SYSTEM
Data management
and DBMS
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General Functions of the DSS Interface

Allows for interaction with the DSS in a variety of dialog styles
Accommodates the user with a variety of input devices
Presents data with a variety of formats and output devices
Gives user help capabilities, prompting, diagnostic and suggestion routines,
or any other flexible support.

Stores input and output data.
Provides support for communication between multiple DSS users
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General Functions of the DSS Interface

variety of formats included menu driven, question/answer, procedural
command language, or natural command language

Allows for detailed report definition and generation by the DSS user
Allows for the creation of forms, tables, and graphics for data output
Can provide multiple windows or views of the data to be available
simultaneously
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CHARACTERISTICS OF DSS
Support for decision makers mainly in semi-structured and unstructured
situations
Support is provided for various managerial levels, ranging from top
executives to line managers.

Support is provided to individuals as well as to groups.
DSS provides support to several interdependent or sequential decisions.
The decisions may be made once, several times or repeatedly.

DSS supports all phases of decision making process; intelligence, design,
choice and implementation.
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CHARACTERISTICS OF DSS
DSS attempt to prove the effectiveness of decision making rather than its
efficiency.
The decision maker has complete control over all steps of the decision
making process in solving a problem. A DSS specifically aims to support

and not to replace the decision maker.
A DSS usually utilizes models for analyzing decision making situations
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Benefits of DSS Use
Extend the decision-makers ability to process information and knowledge

Extend the decision-makers ability to tackle large-scale, time-consuming,
complex problems
Improve the time associated with making a particular decision
Improve the reliability of a particular decision process or outcome
Encourage exploration and discovery on the part of the decision-maker

Reveal new approaches to thinking about a particular problem space or
decision context
Generate new evidence in support of a particular decision or confirmation
of existing assumptions
Create a strategic or competitive advantage over competing organizations
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Limitations of DSS Use
DSSs doesnt contain distinctly human decision-making talents such
as creativity, imaginativeness, or intuition

The power of a DSS is limited by the computer system upon which it is
running, its design, and the knowledge it possesses at the time of its
use
Language and command interfaces are not yet sophisticated enough to
allow for natural language processing of user directives and inquiries
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DSS Classification
1.
Alters Output Classification (1980)
2.
Holsapple and Whinstons Classification
1. Text-oriented DSS
2. Database-oriented DSS
3. Spreadsheet-oriented DSS
4. Solver-oriented DSS
5. Rule-oriented DSS
6. Compound DSS
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Alters' Classification of DSS
File Drawer
Systems
Data Analysis
Systems
Analysis
Information
Systems
Suggestion
Models
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Representational
Models
Optimization
Models
Accounting
Models
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Alters Classification of DSS

Data-Driven DSS
Data-Driven DSS take the massive amounts of data available through the
company's TPS and MIS systems and collect from it useful information
which executives can use to make more informed decisions.
Data- Driven DSS emphasize access to and manipulation of large databases
of structured data
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Alters Classification of DSS

Model-Driven DSS
A second category, Model-Driven DSS (accounting and financial models,
representational models, and optimization models).

Model-Driven DSS emphasize access to and manipulation of a model.
Model-Driven DSS use data and parameters provided by decision-makers to
aid them in analyzing a situation, but they are not usually data intensive.
Very large databases are usually not needed for Model-Driven DSS.
Primarily used for the typical "what-if" analysis. That is, "What if we
increase production of our products and decrease the shipment time?"
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DSS Classifications
Holsapple and Whinstons Classification

1. Text-oriented DSS
2. Database-oriented DSS
3. Spreadsheet-oriented DSS
4. Solver-oriented DSS
5. Rule-oriented DSS
6. Compound DSS
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Holsapple and Winston Classification

TEXT ORIENTED DSS
Textually represented information that could have a bearing on decision.
Documents to be electronically created, revised and viewed as needed.
Information Technologies such as documents imaging, hypertext etc can be
incorporated into this type.

DMS, KMS, Content Mgt System, Business rule system
DATABASE ORIENTED DSS

In this type of DSS the database plays a major role in the DSS structure.
Strong report generation and query capabilities.
Data are organized in a highly structured format.
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SPREADSHEET ORIENTED DSS
Spreadsheet is a modeling language that allows the user to write models to
execute DSS analysis.

Tools- Statistical packages, linear programming package (Solver), financial
and management science models.

The most popular tools used are Excel and Lotus 1-2-3.
SOLVER ORIENTED DSS

A solver is an algorithmic or procedure written as a computer program for
performing certain computations for solving a particular problem type.

EOQ for calculating optimal ordering quantity or a linear regression routine
for calculating trend.

Excel, Lotus 1-2-3 and quatro pro can be used to develop such a system.
C++, Lingo etc

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RULE ORIENTED DSS
The knowledge component of DSS includes both procedural and inferential
(Reasoning) rules, often in an expert system, format.

Assignment Algorithm for Flight Scheduling
COMPOUND DSS
It is a hybrid system that includes two or more of the fine basic structures
explained above. It can be built by using a set of independent DSS, each

specializing in one area.
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Other DSS Classification
Personal
Group
Organizational
Custom VS Readymade
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DSS Classification
OTHER CLASSIFICATIONS OF DSS
INSTITUTIONAL DSS
Deal with decisions of a recurring nature. An institutionalized DSS can be
developed and refined as it evolves over a number of years because the DSS
is used repeatedly to solve identical or similar problems.
Portfolio Management
ADHOC DSS
Deals with specific problems that are usually neither anticipated nor
recurring. Adhoc decisions often involve strategic planning issues
sometimes management control problems.
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Knowledge-Driven DSS
Knowledge-Driven DSS
It suggest or recommend actions to managers.
These DSS are computer systems with specialized problem-solving
expertise.
The "expertise" consists of knowledge about a particular domain,
understanding of problems within that domain, and "skill" at solving some

of these problems.
A related concept is Data Mining. It refers to a class of analytical
applications that search for hidden patterns in a database.

Data mining is the process of searching through large amounts of data to
produce data content relationships.

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Document-Driven DSS
A new type of DSS, a Document-Driven DSS is evolving to help managers
retrieve and manage unstructured documents and Web pages.

The Web provides access to large document databases including databases
of hypertext documents, images, sounds and video.

Examples of documents that would be accessed by a Document-Based DSS
are policies and procedures, product specifications, catalogs, and corporate

historical documents, including minutes of meetings, corporate records, and
important correspondence.
A search engine is a powerful decision aiding tool associated with a
Document-Driven DSS.
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Communications-Driven and Group DSS

Group Decision Support Systems (GDSS) came first, but now a broader
category of Communications-Driven DSS or groupware can be identified.

It includes communication, collaboration and decision support technologies
that do not fit within those DSS types identified.

A Group DSS is a hybrid Decision Support System that emphasizes both the
use of communications and decision models.

A Group Decision Support System is an interactive computer-based system
intended to facilitate the solution of problems by decision-makers working
together as a group.
Groupware supports electronic communication, scheduling, document
sharing, two-way interactive video, White Boards, Bulletin Boards, and
Email.
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1. Impact on Structured Tasks, where standard procedures, decision
MIS
rules and information flows can be reliably Predefined.

2. Payoff Improvement in efficiency by reducing costs, turnaround
time , replacing clerical personnel or increasing their productivity.

Mgt. Sci / OR
1. Impact mostly on Structured problems (rather than tasks), in which
the objective, data and constraints can be prespecified.

2. Payoff generation of better solutions for general categories of
problems (e.g. inventory).

1. Impact is on decisions in which there is sufficient structure for
computer and analytic aids to be of value but where the managers

DSS
judgment is essential.
2. Payoff extending the range and capability of managers decision
process to help them improve

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19
3. Relevance for managers decision making indirect (e.g. by
MIS
providing reports and access to data.

4. MIS application is routine and done periodically.
Mgt. Sci / OR
3. Relevance for managers provision of detailed recommendation
and new methods handling complex problems.

4. Application are non-routine, as needed.
3. Relevance for managers creation of supportive tool, under their
DSS
own control..
4. Application are nonroutine, as needed.
Rafi A Khan
20
5/8/2012
The Business School
University of Kashmir
Rafi A Khan
Ancient
Collaboration at the organizational level
Could revolutionize collaboration and computing
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Helps organizations
Identify
Select
Organize
Disseminate
Transfer
Important information and expertise within the organizational

memory in an unstructured manner
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Knowledge
Understanding gained through experience or study
Know-how or familiarity with how to do something
Information that is contextual, relevant, and actionable
Accumulation of facts, procedural rules
Knowledge is INFORMATION IN ACTION
Actionable (relevant) information available in the right format, at
the right time, and at the right place for decision making
(TIWANA2000)
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Rafi
Knowledge
Fact statement of some element of truth about a subject matter or a domain.
Example: milk is white, sun rises in east.

Heuristics rule of thumb based on years of experience.
Example: strike on independence day in our state

Intelligence capacity to acquire, improve and apply knowledge.
Experience what we have done and what has happened in past in a specific
area of work
Common sense natural ability to sense, judge or perceive situations ; grows
stronger over time.

Memory ability to store and retrieve relevant experience at will, is part of
intelligence.
Learning is knowledge or skill that is acquired by instruction or study
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Knowledge Types
Explicit knowledge
Objective, rational
Policies, goals, strategies, papers, reports
Codified
Leaky knowledge
Tacit knowledge
Subjective, experiential learning

Highly personalized
Difficult to formalize
Sticky knowledge
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A Khan
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Knowledge Types
Shallow (surface) knowledge
Indicates minimal understanding of the problem area

Example If u dont have petrol in your car, the car wont
start
Deep knowledge
Indicates maximal understanding of the problem area

Example why dont a car starts when it has no petrol
(need to know various components of car)
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Knowledge Types
Descriptive data, information

Procedural how to do something
Reasoning policies or rules
Linguistic vocabulary or grammar
Presentation graphing
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Data, Information and Knowledge
INFORMATION
Processed
Relevant and
actionable
DATA
KNOWLEDGE
Relevant and actionable data
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A Khan
Khan
Rafi
Knowledge Management (KM)

A process of capturing, transformation, and diffusion of knowledge
throughout an enterprise so that it can be shared and thus REUSED
Helps organizations find, select, organize, disseminate, and transfer
important information and expertise
Transforms data / information into actionable knowledge to be
used effectively anywhere in the organization by anyone
5/8/2012 1:23:02 PM
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KM Objectives
Create knowledge repositories

Improve knowledge access
Enhance the knowledge environment
Manage knowledge as an asset
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KMS Manage
Knowledge creation through learning
Knowledge capture
Knowledge sharing and communication through
collaboration
Knowledge access
Knowledge use and reuse
Knowledge archiving
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Cyclic Model of KM
Create knowledge
Capture knowledge
Refine knowledge
Store knowledge
Manage knowledge
Disseminate knowledge
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Rafi
Cyclic Model of KM
Create Knowledge
5/8/2012 1:23:02 PM
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Khan
Rafi
Cyclic Model of KM
Create Knowledge
5/8/2012 1:23:02 PM
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Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
5/8/2012 1:23:02 PM
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
5/8/2012 1:23:02 PM
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
5/8/2012 1:23:02 PM
Refine
Knowledge
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
5/8/2012 1:23:02 PM
Refine
Knowledge
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Store
Knowledge
5/8/2012 1:23:02 PM
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Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Store
Knowledge
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RafiA
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Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Store
Knowledge
Manage
Knowledge
5/8/2012 1:23:02 PM
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Store
Knowledge
Manage
Knowledge
5/8/2012 1:23:02 PM
RafiA
A Khan
Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Disseminate
Knowledge
Store
Knowledge
Manage
Knowledge
5/8/2012 1:23:02 PM
RafiA
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Khan
Rafi
Cyclic Model of KM
Capture
Knowledge
Create Knowledge
Refine
Knowledge
Disseminate
Knowledge
Store
Knowledge
Manage
Knowledge
5/8/2012 1:23:02 PM
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A Khan
Khan
Rafi
Why Adopt KM
Cost savings
Better performance
Demonstrated success
Share Best Practices
Competitive Advantage
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Acquisition/
Capturing f
Information
Internal data
External data
Local data marts
Operational database
Human experts
Data extraction
/filtering
Data
warehouse
Transformati
on
Knowledge acquisition/extraction/
refinement
Storage
Knowledge repository
Dissemina
tion
Knowledge sharing/dissemination
Knowledge
acquisition
KM Methods, Technologies, and Tools
Email or messaging
Document management
Search engines
Enterprise information portal
Data warehouse
Groupware
Workflow management
Web-based training
Others
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5/8/2012
Knowledge Acquisition
Techniques
The Business School
University
of Kashmir
Rafi A Khan
Knowledge Acquisition
The following are main methods of knowledge acquisition :
Production Rule
Frames
Semantic Network
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Production Rules
IF-THEN
Independent part, combined with other pieces, to produce
better result
Model of human behavior
Examples
IF condition, THEN conclusion

Conclusion, IF condition
If condition, THEN conclusion1 (OR) ELSE conclusion2
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Frames
Organized structure of knowledge
Put related knowledge in one area called frame
A frame consists of slots representing a part of
knowledge
Each slot has a value in the form of data,
information, process and rules

Frame can be related to other frames
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Frames(Engine Overheating)
Slot :
Symptoms Value
Temp More than 80 deg
Water Boiling
Speed Retardation
Slot : Inspection
Value
Check Water Level
Oil in Engine
Carburetor
Slot :
Treatment Value
Stop Engine & Drain

Water
Start Engine & pour cold
Water
Increase oil level
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Adjust Carburetor
Semantic Networks
Graphical
depictions
Nodes and links
connecting nodes
Node represents an
Entity & link

represents
Association
Hierarchical
relationships
5/8/2012 1:23:02 PM
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A Khan
Khan
Rafi
Inferencing
Inferencing means deriving a conclusion based on statements
that only imply that conclusion.

Every rule in knowledge base can be checked to see whether
its premise (principle) or conclusion can be satisfied by

previously made assertions.
This process can be done in two directions :
Forward
Backward
5/8/2012 1:23:02 PM
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A Khan
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Inference Techniques
Forward Chaining
Forward chaining is a data-driven approach . We start from available
information as it becomes available or from a basic idea, and then we try to
draw conclusions.
Backward chaining
Backward chaining is a goal-driven approach in which you start from an
expectation of what is going to happen (hypothesis) and then seek evidence
that supports (or contradicts) your expectation.
5/8/2012 1:23:02 PM
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Example
Investment Decision : Whether to invest in IBM Stocks
The following variables are used:
A= Have Rs.10,000
B= Younger than 30
C= Education at college level
D= Annual income of atleast Rs.40,000
E= Invest in securities
F= Invest in growth stocks
G= Invest in IBM stock (the potential goal)
The facts: we assume that an investor has Rs.10,000(that A is true) and
that she is 25 years old (B is true). She would like advice on
investing in IBM stock(yes or no for the goal).
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Example
The Rules:Our knowledge base includes the following five rules:
R1: IF a person has Rs10,000 to invest and has a college degree THEN she should
invest in securities
R2: IF a persons annual income is atleast Rs40,000 to invest and has a college
degree THEN she should invest in growth stocks

R3: IF a person is < 30 and is investing in securities THEN she should invest in
growth stocks
R4: IF a person is < 30 and >22 THEN she has a college degree
R5:IF a person wants to invest in growth stocks then the stock should be IBM
R1:
IF A and C, THEN E
R2:
IF D and C,THEN F
R3:
IF B and E, THEN F
R4:
IF B, THEN C
R5:
IF F, THEN G
RafiA
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Rafi
5/8/2012 1:23:02 PM
Forward Chaining
5/8/2012 1:23:02 PM
RafiA
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Rafi
Backward Chaining
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Rafi
The End
5/8/2012 1:23:02 PM
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Experts
Experts
Have special knowledge, judgment, and experience

Can apply these to solve problems
Higher performance level than average person
Faster Solutions
Recognize Patterns
Expertise
Task specific knowledge of experts

RafiA
A Khan
Khan
Rafi
Acquired from reading,
training,
practice
5/8/2012 1:23:02 PM
Expert System
Expert Systems: a computer application that employs a set of rules based
on human knowledge to solve problems that require human expertise
Information systems that solve problems by capturing knowledge for a
very specific and limited domain of human expertise are called expert
systems
For example, diagnosing a cars ignition system, classifying biological
specimen
5/8/2012 1:23:02 PM
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A Khan
Khan
Rafi
Common Expert System Architecture

User
User
Interface
Inference
Engine
Knowledge Base
User Environment
5/8/2012 1:23:02 PM
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Rafi
KBES
Knowledge based expert system (KBES) has three basic

components:
Knowledge base
User control mechanism
Inference Mechanism
5/8/2012 1:23:02 PM
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Rafi
User Interface
Design of the UI focuses on human concerns such as ease of use,
reliability and reduction of fatigue

Design should allow for a variety of methods of interaction
(input, control and query)

Mechanisms include touch screen, keypad, light pens, voice
command, hot keys
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A Khan
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Rafi
Knowledge Base
Contains the domain-specific knowledge acquired from the
domain experts
Can consist of all the theoretical foundations, facts, judgments,
rules, formulas, intuitions and experience

The success of an ES relies on the completeness and accuracy of
its knowledge base
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Inference Engine
Here, the knowledge is put to use to produce solutions

Interprets the knowledge available and performs logical
deductions in a given situation.

It is a strategy used to search through rule base
5/8/2012 1:23:02 PM
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Applications of Expert Systems

DENDRAL project
Applied knowledge or rule-based reasoning commands
Deduced likely molecular structure of compounds

MYCIN
Rule-based system for diagnosing bacterial infections

XCON
Rule-based system to determine optimal systems

configuration
Credit analysis
Ruled-based systems for commercial lenders

Pension fund adviser
5/8/2012 1:23:02 PM
RafiA
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Khan
Rafi
Applications
Finance
Insurance evaluation, credit analysis, tax planning, financial planning

and reporting, performance evaluation
Data processing
Systems planning, equipment maintenance, vendor evaluation, network

management
Marketing
Customer-relationship management, market analysis, product planning

Human resources
HR planning, performance evaluation, scheduling, pension management,

legal advising
Manufacturing
Production planning, quality management, product design, plant site

selection, equipment maintenance and repair
5/8/2012 1:23:02 PM
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Rafi
Benefits of Expert Systems

Increased outputs
Increased productivity
Decreased decision-making time

Increased process and product quality
Reduced downtime
Capture of scarce expertise

Flexibility
Ease of complex equipment operation
Elimination of expensive monitoring equipment
Operation in hazardous environments

Access to knowledge and help desks
5/8/2012 1:23:02 PM
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Rafi
Benefits of Expert Systems

Ability to work with incomplete, imprecise, uncertain data
Provides training
Enhanced problem solving and decision-making
Rapid feedback
Facilitate communications
Reliable decision quality
Ability to solve complex problems
Ease of knowledge transfer to remote locations
5/8/2012 1:23:02 PM
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Limitations
Knowledge not always readily available
Difficult to extract expertise from humans
Lack of end-user trust

Knowledge subject to biases
Systems may not be able to arrive at conclusions
5/8/2012 1:23:02 PM
RafiA
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Rafi
The End
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5/8/2012
The Data Warehouse

Department of Management Studies
University
Rafi Aof
Khan Kashmir
Objective
How operational data and decision support data differ
What a data warehouse is, how data for it are prepared, and how it is
implemented
What data mining is and what role it plays in decision support
What online analytical processing (OLAP) is
5/8/2012 1:23:02 PM
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The Need for Data Analysis

Managers must be able to track daily transactions to evaluate how the
business is performing
By tapping into operational database, management can develop strategies
to meet organizational goals

Data analysis can provide information about short-term tactical
evaluations and strategies
5/8/2012 1:23:02 PM
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Rafi
Operational Data vs. Decision Support Data

Operational Data
Mostly stored in relational database

Optimized to support transactions representing daily operations
DSS Data
Give tactical and strategic business meaning to operational data
Differs from operational data in following three main areas:

Time span
Granularity
Dimensionality
5/8/2012 1:23:02 PM
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Khan
Rafi
5/8/2012 1:23:02 PM
RafiA
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Rafi
5/8/2012 1:23:02 PM
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Rafi
The Data Warehouse

Integrated, subject-oriented, time-variant, nonvolatile collection of data
that provides support for decision making

Usually a read-only database optimized for data analysis and query
processing
Requires time, money, and considerable managerial effort to create
5/8/2012 1:23:02 PM
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Rafi
Characteristics of a Data Warehouse

Subject orientation: data is organized based on how the users refer to it.
Integrated: all inconsistencies regarding naming convention and value

representations are removed.
Non-volatile: data is stored in read-only format and do not change over
time.
Time Variant: data are not current but normally time-series.
Summarized: operational data are mapped into a decision-usable
format.
Large Volume: time-series datasets are normally quite large.
Not Normalized: DW data can, and often is, redundant.
Metadata: data about data is stored.
Data Sources: internal and external unintegrated operational systems.
5/8/2012 1:23:02 PM
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The Data Warehouse (continued)
5/8/2012 1:23:02 PM
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Rafi
The Data Warehouse (continued)
5/8/2012 1:23:02 PM
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Rafi
Dependent
Data Mart
Extract/Summarize Data
External
Data
OLAP tools
Operational
Database(s)
ETL Routine
(Extract/Transform/Load)
Data
Warehouse
Data Mining Tools
Ad-hoc Queries
Independent
Data Mart
Reporting Tools
Fig. Data warehouse process model

5/8/2012 1:23:02 PM
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Monitoring/
Data Warehousing Benefits
Increase in knowledge worker productivity
Supports all decision makers data requirements
Provide ready access to critical data
Insulates operation databases from adhoc processing
Provides high-level summary information
Provides drill down capabilities

Yields
Improved business knowledge

Competitive advantage
Enhances customer service and satisfaction
Facilitates decision making

Help streamline business processes
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266
The Data Mart

Data mart
Small, single-subject data warehouse subset

Each is more manageable data set than data warehouse
Provides decision support to small group of people
Typically lower cost and lower implementation time than data
warehouse
5/8/2012 1:23:02 PM
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Rafi
Twelve Rules that Define

a Data Warehouse
Data warehouse and operational environments are separated
Data warehouse data are integrated

Data warehouse contains historical data over long time horizon
Data warehouse data are snapshot data captured at given point in time
Data warehouse data are subject oriented
5/8/2012 1:23:02 PM
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Rafi

a Data Warehouse (continued)
Data warehouse data are mainly read-only with periodic batch updates
from operational data

No online updates allowed
Data warehouse development life cycle differs from classical systems
development
Data warehouse contains data with several levels of detail: current detail
data, old detail data, lightly summarized data, and highly summarized
data
Data warehouse environment is characterized by read-only transactions to
very large data sets
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Rafi

a Data Warehouse (continued)
Data warehouse environment has system that traces data sources,
transformations, and storage

Data warehouses metadata are critical component of this environment
Data warehouse contains a mechanism for resource usage that enforces
optimal use of data by end users
5/8/2012 1:23:02 PM
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Rafi
OLAP Activities
Generating queries
Requesting ad hoc reports
Conducting statistical and other analyses
Developing multimedia applications
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271
Online Analytical Processing

Advanced data analysis environment that supports decision making,
business modeling, and operations research

OLAP systems share four main characteristics:
Use multidimensional data analysis techniques

Provide advanced database support
Provide easy-to-use end-user interfaces
Support client/server architecture
5/8/2012 1:23:02 PM
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Rafi
Multidimensional Data Analysis Techniques

Data are processed and viewed as part of a multidimensional structure
Particularly attractive to business decision makers
5/8/2012 1:23:02 PM
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Rafi
OLTP vs OLAP
On-Line Transaction Processing
On-Line Analytical Processing
Time-critical
Small delays tolerable
In-place data update
Append only
Current data
Historical and current data
Functional transaction focus
Reporting (information
delivery) focus
Store details only
Store summary + details

(e.g. counts and aggregates)
Only keeps company internal data
5/8/2012 1:23:02 PM
Warehouse also keeps external data
RafiA
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Rafi
5/8/2012 1:23:02 PM
RafiA
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Rafi

(continued)
5/8/2012 1:23:02 PM
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Rafi
OLAP Architecture
5/8/2012 1:23:02 PM
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Rafi
OLAP Architecture (continued)
5/8/2012 1:23:02 PM
RafiA
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Rafi
OLAP Architecture (continued)

Designed to use both operational and data warehouse data
Defined as an advanced data analysis environment that supports decision
making, business modeling, and an operations research activities
In most implementations, data warehouse and OLAP are interrelated and
complementary environments
5/8/2012 1:23:02 PM
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Rafi
Multi Dimensional Data
5/8/2012 1:23:02 PM
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Khan
Rafi
Multi Dimensional Data
5/8/2012 1:23:02 PM
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Rafi
Drill Down & Roll Up
5/8/2012 1:23:02 PM
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Khan
Rafi
Drill Down & Roll Up
5/8/2012 1:23:02 PM
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Rafi
Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
5/8/2012 1:23:02 PM
July
August
Sept
RafiA
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Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
5/8/2012 1:23:02 PM
July
August
Sept
RafiA
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Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
July
August
Sept
Fruit
Fresh Produce
5/8/2012 1:23:02 PM
30
Vegetables 15
15
Dairy
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July
August
Sept
Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
July
August
Sept
30
Fruit
Fresh Produce
5/8/2012 1:23:02 PM
Vegetables 15
15
Dairy
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July
August
Sept
Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
July
August
Sept
30
Fruit
Fresh Produce
5/8/2012 1:23:02 PM
Vegetables 15
15
Dairy
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July
August
Sept
Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
July
August
Sept
30
Fruit
5/8/2012 1:23:02 PM
Fresh Produce
Vegetables 15
15
Dairy
21-30 sept
10-20 sept
1st-10 sept
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Rafi
July
August
Sept
Fresh Produce
60
82
63
59
Tinned Food
30
84
79
64
Toiletries
50
15
46
73
July
August
Sept
30
Fruit
Fruits
Fresh Produce
Vegetables 15
15
Dairy
Apples
Mangoes
Oranges
5/8/2012 1:23:02 PM
21-30 sept
10-20 sept
1st-10 sept
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July
August
Sept
Some Tools in the Marketplace

Data Warehousing
Microsoft SQL Server 2000 Data Transformation Service
Oracle 9i Warehouse Builder
IBM Red Brick Warehouse, and DB2
NCR/Teradata
SAS Data Warehousing (Warehouse Administrator)
OLAP
Cognos PowerPlay
Business Objects Analytics
Microstrategy 7i
Microsoft SQL Server 2000 Analysis Service
+ MDX query language for decision support
+ Microsoft Data Analyzer
Oracle 9i OLAP
Data Warehouse, OLAP, and Data Mining solutions are sometimes listed
under the title Business Intelligence (BI) software.
5/8/2012 1:23:02 PM
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Rafi
Knowledge Discovery in Databases (KDD)
Knowledge Discovery in Databases (KDD) is the automated discovery
of patterns and relationships in large databases.
Knowledge Discovery in Databases (KDD) as it is also known, is the

nontrivial extraction of implicit, previously unknown, and potentially
useful information from data.
KDD is the search for relationships and global patterns that exist in
large databases but are `hidden' among the vast amount of data, such
as a relationship between patient data and their medical diagnosis.

These relationships represent valuable knowledge about the database
and the objects in the database
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Khan
Rafi
Knowledge Discovery in Databases (KDD)

Selection:
Extraction of the data from a database that is relevant to the

data mining analysis.
Preprocessing:
Ensuring that values have a uniform meaning, eliminating

missing values in the data, and inaccurate (inconsistent) data.
Data Transformation:
Converting the data into a two-dimensional table and

eliminating unwanted fields so the results are valid.
Data mining:
The extraction of patterns from the data using by an

appropriate set of algorithms.
Interpretation:
The transformation of the identified patterns into knowledge

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KDD PROCESS
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Trends leading to Data Flood

More data is generated:
Bank, telecom, other business

transactions ...
Scientific data: astronomy,
biology, etc
Web, text, and e-commerce
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Big Data Examples

Europe's Very Long Baseline Interferometry (VLBI) has 16 telescopes, each
of which produces 1 Gigabit/second of astronomical data over a 25-day

observation session
storage and analysis a big problem
AT&T handles billions of calls per day
so much data, it cannot be all stored -- analysis has to be done on the

fly, on streaming data
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Largest databases in 2003

Commercial databases:
Winter Corp. 2003 Survey: France Telecom has largest decision-support

DB, ~30TB; AT&T ~ 26 TB
Web
Alexa internet archive: 7 years of data, 500 TB

Google searches 4+ Billion pages, many hundreds TB
IBM WebFountain, 160 TB (2003)

Internet Archive (www.archive.org),~ 300 TB
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From terabytes to exabytes to

UC Berkeley 2003 estimate: 5 exabytes (5 million terabytes) of new data
was created in 2002.

www.sims.berkeley.edu/research/projects/how-much-info-2003/
US produces ~40% of new stored data worldwide

2006 estimate: 161 exabytes (IDC study)
www.usatoday.com/tech/news/2007-03-05-data_N.htm
2010 projection: 988 exabytes
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Largest Databases in 2005
Winter Corp. 2005 Commercial Database

Survey:
1.
Max Planck Inst. for Meteorology ,

222 TB
2.
Yahoo ~ 100 TB (Largest Data

Warehouse)
3.
AT&T ~ 94 TB
www.wintercorp.com/VLDB/2005_TopTen_Survey/TopTenWinners_2005.asp
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Data Growth
In 2 years, the size of the largest database TRIPLED!
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Data Growth Rate

Twice as much information was created in 2002 as in 1999 (~30% growth
rate)
Other growth rate estimates even higher
Very little data will ever be looked at by a human
Knowledge Discovery is NEEDED to make sense and use of data.
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Machine Learning / Data Mining

Application areas
Science
astronomy, bioinformatics, drug discovery,

Business
CRM (Customer Relationship management), fraud detection, e-commerce,

manufacturing, sports/entertainment, telecom, targeted marketing, health care,
Web:
search engines, advertising, web and text mining,

Government
surveillance, crime detection, profiling tax cheaters,
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Application Areas
What do you think are some of the most important and

widespread business applications of Data Mining?
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Data Mining for Customer Modeling

Customer Tasks:
attrition prediction
targeted marketing:
cross-sell, customer acquisition
credit-risk
fraud detection
Industries
banking, telecom, retail sales,
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Customer Attrition: Case Study
Situation: Attrition rate at for mobile phone customers is around
25-30% a year!
With this in mind, what is our task?
Assume we have customer information for the past N

months.
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Customer Attrition: Case Study
Task:
Predict who is likely to attrite next month.
Estimate customer value and what is the cost-effective offer to
be made to this customer.
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Customer Attrition Results

Verizon Wireless built a customer data warehouse
Identified potential attires
Developed multiple, regional models
Targeted customers with high propensity to accept the offer

Reduced attrition rate from over 2%/month to under 1.5%/month (huge
impact, with >30 M subscribers)
(Reported in 2003)
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Assessing Credit Risk: Case Study

Situation: Person applies for a loan
Task: Should a bank approve the loan?

Note: People who have the best credit dont need the loans, and people
with worst credit are not likely to repay. Banks best customers are in the
middle
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Credit Risk - Results

Banks develop credit models using variety of machine learning methods.
Mortgage and credit card proliferation are the results of being able to
successfully predict if a person is likely to default on a loan

Widely deployed in many countries
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e-commerce
A person buys a book (product) at Amazon.com
What is the task?
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Successful e-commerce Case Study

Task: Recommend other books (products) this person is likely to buy
Amazon does clustering based on books bought:
customers who bought Advances in Knowledge Discovery and Data

Mining, also bought Data Mining: Practical Machine Learning
Tools and Techniques with Java Implementations
Recommendation program is quite successful
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Security and Fraud Detection - Case Study

Credit Card Fraud Detection
Detection of Money laundering
FAIS (US Treasury)

Securities Fraud
NASDAQ KDD system

Phone fraud
AT&T, Bell Atlantic, British Telecom/MCI

Bio-terrorism detection at Salt Lake Olympics 2002
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Data Mining and Privacy

in 2006, NSA (National Security Agency) was reported to be mining years
of call info, to identify terrorism networks

Social network analysis has a potential to find networks
Invasion of privacy do you mind if your call information is in a gov
database?
What if NSA program finds one real suspect for 1,000 false leads ?
1,000,000 false leads?
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Related Fields
Machine
Learning
Visualization
Data Mining and

Knowledge Discovery
Statistics
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Databases
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Statistics, Machine Learning and

Data Mining
Statistics:
more theory-based
more focused on testing hypotheses
Machine learning
more heuristic(experience-based techniques that help in
problem solving, learning and discovery)
focused on improving performance of a learning agent
also looks at real-time learning and robotics areas not part of
data mining
Data Mining and Knowledge Discovery
integrates theory and heuristics
focus on the entire process of knowledge discovery, including
data cleaning, learning, and integration and visualization of
results
Distinctions are fuzzy
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witten&eibe
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Data mining
Many Definitions
A short one
Search for Valuable Information in Large Volumes of Data.
A long one
Exploration & Analysis, by Automatic or Semi-Automatic Means,
of Large Quantities of Data in order to Discover Meaningful
Patterns & Rules.
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Data Mining
Data Mining is the step in the process of knowledge discovery in
databases, that inputs predominantly cleaned, transformed data, searches

the data using algorithms, and outputs patterns and relationships to the
interpretation/evaluation step of the KDD
Data mining is a process that uses a variety of data analysis tools to
discover patterns and relationships in data that may be used to make valid
predictions.
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Data Mining
Data Mining constitutes one step in the KDD process.
The transformed data is used in the data mining step. It is in this step that
the actual search for patterns of interest is performed.

The appropriate data mining algorithm (linear/logistic regression, neural
networks, association rules, etc.) for the data mining task (classification,
database segmentation, rule generation, etc) are applied.

It is necessary to remove redundant and irrelevant patterns from the set of
useful patterns. Once a set of good patterns have been discovered, they
then have to be reported to the end user. This can be done can be done
textually, by way of reports or using visualizations such as graphs,
spreadsheets, diagrams, etc.
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Data Mining
Data mining tools do the following:
Analyze data
Uncover problems or opportunities hidden in data relationships
Form computer models based on their findings
Use models to predict business behavior
Require minimal end-user intervention
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Data Mining (continued)
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Major Data Mining Tasks

Classification:
predicting an item class
Clustering:
finding clusters in data
Associations:
e.g. A & B & C occur frequently
Visualization:
to facilitate human discovery
Summarization:
describing a group
Deviation Detection: finding changes
Estimation:
predicting a continuous value
Link Analysis:
finding relationships
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Data Mining Tasks: Classification
Learn a method for predicting the instance class from

pre-labeled (classified) instances
Many approaches:
Statistics,
Decision Trees,
Neural Networks,
...
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Data Mining Tasks: Clustering
Find natural grouping of

instances given un-labeled data
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We want to know ...

Given a database of 100,000 names, which persons are the least likely to
default on their credit cards?

Which types of transactions are likely to be fraudulent given the
demographics and transactional history of a particular customer?

If I raise the price of my product by Rs. 2, what is the effect on my ROI?
If I offer only 2,500 airline miles as an incentive to purchase rather than
5,000, how many lost responses will result?

If I emphasize ease-of-use of the product as opposed to its technical
capabilities, what will be the net effect on my revenues?

Which of my customers are likely to be the most loyal?
Data Mining helps extract such information
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Major Data Mining Characteristics and Objectives
Data are often buried deep
Client/server architecture
Sophisticated new tools--including advanced visualization tools
End-user miner empowered by data drills and other power query tools with
little or no programming skills
Often involves finding unexpected results
Tools are easily combined with spreadsheets, etc.
Parallel processing for data mining
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Difference between OLAP & Data Minig

OLAP is part of the spectrum of decision support tools. Traditional query and
report tools describe what is in a database. OLAP goes further; its used to
answer why certain things are true. The user forms a hypothesis about a
relationship and verifies it with a series of queries against the data. For
example, an analyst might want to determine the factors that lead to loan
defaults. He or she might initially hypothesize that people with low
incomes are bad credit risks and analyze the database with OLAP to verify
(or disprove) this assumption. If that hypothesis were not borne out by the
data, the analyst might then look at high debt as the determinant of risk. If
the data did not support this guess either, he or she might then try debt
and income together as the best predictor of bad credit risks.
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Difference between OLAP & Dataminig

OLAP analysis is essentially a deductive process.
The OLAP analyst generates a series of hypothetical patterns and
relationships and uses queries against the database to verify them or disprove
them.
It becomes much more difficult and time-consuming to find a good
hypothesis, when the number of variables being analyzed is in the dozens or

even hundreds? and analyze the database with OLAP to verify or disprove it.
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Difference between OLAP & Dataminig

Data mining , rather than verify hypothetical patterns, it uses the data itself to
uncover such patterns. It is essentially an inductive process.

For example, suppose the analyst who wanted to identify the risk factors for
loan default were to use a data mining tool. The data mining tool might
discover that people with high debt and low incomes were bad credit risks (as
above), but it might go further and also discover a pattern the analyst did not
think to try, such as that age is also a determinant of risk.
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Data mining Applications

Many organizations are using data mining to help manage all phases of the
customer life cycle, including acquiring new customers, increasing revenue

from existing customers, and retaining good customers.
Telecommunications and credit card companies are two of the leaders in
applying data mining to detect fraudulent use of their services.

Insurance companies and stock exchanges are also interested in applying
this technology to reduce fraud.
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Retail/Marketing
Identify buying patterns from customers
Find associations among customer demographic characteristics
Predict response to mailing campaigns
Market basket analysis

Retailers are making more use of data mining to decide which products to
stock in particular stores (and even how to place them within a store), as
well as to assess the effectiveness of promotions and coupons.
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Medicine
Characterise patient behaviour to predict office visits
Identify successful medical therapies for different illnesses
Medical applications are another fruitful area: data mining can be used to
predict the effectiveness of surgical procedures, medical tests or
medications.
Pharmaceutical firms are mining large databases of chemical compounds
and of genetic material to discover substances that might be candidates for

development as agents for the treatments of disease.
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Banking
Detect patterns of fraudulent credit card use
Identify `loyal' customers
Predict customers likely to change their credit card affiliation
Determine credit card spending by customer groups
Find hidden correlations between different financial indicators
Identify stock trading rules from historical market data
Companies active in the financial markets use data mining to determine
market and industry characteristics as well as to predict individual

company and stock performance.
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Insurance and Health Care
Claims analysis - i.e which medical procedures are claimed together
Predict which customers will buy new policies
Identify behaviour patterns of risky customers
Identify fraudulent behaviour
Transportation
Determine the distribution schedules among outlets
Analyse loading patterns

Analyse loading patterns
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Friday, July 18, 2008
A Khan
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Systems Development Life Cycle
Four phases
Planning
Analysis
Design
Implementation
Cyclical
Can return to other phases
Waterfall model
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Tools
Computer-aided software design tools
CASE tools- Oracle 9i developer suite, Rational rose,

Paradigm Plus
RAD design tools- Sybase power Designer. Oracle Internet
Development Suite, Rational RequisitePro
Code debugging methods -
Testing and quality assurance tools - Red Views WebLoad,
Load Runner, Rational RequisitePro, SilkPerformer
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Successful Project Management
Define requirements
Manage change
Get support from upper management
Establish timelines, milestones, and budgets based on realistic
goals
Involve users
Document everything
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Implementation Failures
Lack of stakeholder involvement
Incomplete requirements
Unrealistic expectations
Project champion leaves
Lack of skill or expertise
Inadequate human resources
New technologies
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Project Management Tools

Project management software can allow:
Collaboration among disparate teams

Resource and program management
Portfolio management
Web enabled
Analyses of project data
S/W Examples : Microsoft project, PlanView, ActiveProject
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Alternative Development Methodologies

Parallel Development
Multiple development on separate systems (Design & Implementation

Phases)
Database, Model base, UI and Knowledge can be developed in parallel
RAD
Quick development allowing fast, but limited functionality
Methods of RAD
Phased development
Sequential serial development (Break system into Pieces)
Prototyping ( Analysis, Design & Implementation repeatedly)
Rapid development of portions of projects for user input and
modification
Small working model or may become functional part of final
system
Throwaway prototyping
Pilot test or simple development platforms
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Tools
Computer-aided software design tools
CASE tools - Oracle 9i developer suite, Rational rose, Paradigm Plus

RAD design tools- Sybase power Designer. Oracle Internet Development
Suite, Rational RequisitePro

Code debugging methods Testing and quality assurance tools - Red Views WebLoad, Load Runner,
Rational RequisitePro, SilkPerformer
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DSS Prototyping
Short steps
Planning
Analysis
Design
Prototype
Immediate user feedback
Iterative
In development of prototype
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Successful Project Management
Define requirements
Manage change
Get support from upper management
Establish timelines, milestones, and budgets based on realistic
goals
Involve users
Document everything
A Khan
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Implementation Failures
Lack of stakeholder involvement
Incomplete requirements
Unrealistic expectations
Project champion leaves
Lack of skill or expertise
Inadequate human resources
New technologies
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RafiRafi
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Project Management Tools

Project management software can allow:
Collaboration among disparate teams

Resource and program management
Portfolio management
Web enabled
Analyses of project data
S/W Examples : Microsoft project, PlanView, ActiveProject
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Agile Development
Rapid prototyping used for rapidly changing requirements
Used for:
Unclear or rapidly changing requirements

Speedy development
Heavy user input
Incremental delivery with short time frames
Tend to have integration problems
Example : Extreme Programming (XP), Scrum, Crystal.
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DSS Prototyping
Advantages
Disadvantages
User and management

involvement
Short user-reaction
time(Feedback from user)
Short intervals between
iterations
Low cost & Short
development time
Improved user
understanding of system
Changing requirements
May not have thorough
understanding of benefits
and costs
Poorly tested
Dependencies, security,
and safety may be ignored
High uncertainty
Problem may get lost
Reduction in quality
Higher costs due to

multiple productions
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Change Management
Crucial to DSS
People resistant to change
Examine cause of change
May require organizational culture shift
Lewin-Schein change theory steps
Unfreeze
Create awareness of need for change
People support what they help create
Move
Develop new methods and behaviors
Create and maintain momentum
Refreeze
Reinforce desired changes
Establish stable environment
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DSS Technology Levels

DSS primary tools
Fundamental elements
Programming languages, graphics, editors, query systems

DSS generator (engine)
Integrated software package for building specific DSS
Modeling, report generation, graphics, risk analysis

These range from spreadsheets such as Excelperhaps with some addins or a more sophisticated generator such as MicroStrategys DSS
Architect.
Specific DSS
For some problem types there may be a commercially available package

that can be acquired and customized
DSS primary tools are used to construct integrated tools that are used to
construct specific tools
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DSS
Hardware
PCs to multiprocessor mainframes

Software
Involves multiple criteria

Develop in house, outsource, or buy off the shelf
Off the shelf software rapidly updated; many on market
Prices fluctuate
Different tools available
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DSS
Team developed DSS requires substantial effort to build and
manage
End user developed DSS
Decision-makers and knowledge workers develop to
solve problems or enhance productivity
Advantages
Short delivery time
User requirements specifications are eliminated
Reduced implementation problems
Low costs
Risks
Quality may be low
May have lack of documentation
Security risks may increase
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DSS
Microstrategy 8
Hyperion System 9 BI+

Business Object XI
Microsoft Biztalk server2004
IBM Websphere Commerce Suite
Oracle Daily Business Intelligence(DBI)
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5/8/2012

Data & Information

The Business School

Example: milk is white, sun rises in east

stronger over time

Knowledge. Information once analyzed, understood, and explained is

knowledge or foreknowledge (predictions or forecasts).

Data after manipulation

Example: customer survey

When manipulated, the surveys may provide useful

WHY INFORMATION SYSTEMS?

What Is an Information System?

What Is an Information System?

Computer-based ISs take data as raw material, process it,

and produce information as output.

Figure 1.1 Input-process-output

Figure 1.2 Characteristics of useful information

WHY INFORMATION SYSTEMS?

Activities in an Information System

WHY INFORMATION SYSTEMS?

Daily sales account

List of low stock items to be re-ordered

Used to streamline day to day operations called Operational

Slow or fast moving items

Reliable supplier of items

Used to improve profitability of shop called Tactical information

Whether to stock different varieties of items

Information to expand business and explore new opportunities

Strategic : Needed for long range planning and directions.

common goal by accepting inputs and producing outputs in an organized

Such a system has three basic interacting components or functions:

secured and organized for processing.

Examples to these are manufacturing process, the human breathing process,

transformation process to their ultimate destination, Examples to these are

Feedback and Control

Fig. Showing Elements of a System

cybernetic system, that is, a self-monitoring, self-regulating system.

measured in terms of the outcome to that of the predefined objectives

whether a system is moving toward the achievement of its goal.

environment containing other systems

referred to as a subsystem, and the larger system is its environment.

order to survive is an adaptive system

form or it could be in a matrix form

input to the next subsystem and so on.

systems. A subsystem receives more than one input from other

understandable then we say that the system is a black box and

Breaking the system in a hierarchical manner provides a way to

decisions, and its interface to the other subsystems.

predictability of its output and the degree of information exchange

Probabilistic- when the output can only be predicted in

the environment then it is called an open system.

employees are closed systems. Most of the systems based on rules

environment, such as marketing, communication and forecasting are

efficient and effective.

Feedstock, seeds, Animals and

percent of lost mail

theft and waste, etc.

A computer combines with a software program may constitute an

(1) To generate reports - for example, financial statements, inventory status

WHY INFORMATION SYSTEMS?

Sales and marketing

development, distribution, pricing decisions, promotional