Unit 3: Decision support system

Definition of system
A business intelligence (BI) system is a collection of tools, technologies, and
processes that collect, store, analyze, and present data to provide business
stakeholders with actionable insights. These insights can then be used to
improve decision-making, optimize processes, and ultimately drive business
success.

 Here's a breakdown of the key components of a BI system:

1. Data Sources
2. Data Management
3. Data Analysis
4. Data Visualization
5. Infrastructure
6. Governance and Security
7. People and Processes

1. Data Sources:
• Internal data: This includes data from various internal systems like CRM,
ERP, marketing automation, and financial systems.

• External data: This includes data from market research reports, social media,
and industry publications.

• Big data: This refers to large, complex datasets that require specialized tools
and technologies for analysis.

2. Data Management:
• Data warehousing: This involves storing and managing large volumes of
historical and structured

data in a centralized repository optimized for querying and analysis.

• Data lakes: This involves storing large volumes of diverse data, including
structured, semi-
structured, and unstructured data, in a flexible repository ideal for exploration
and discovery.

• Data integration: This involves extracting data from various sources,

transforming it into a standardized format, and loading it into the data
warehouse or data lake.

3. Data Analysis:
• Online Analytical Processing (OLAP): This technology allows users to
analyze multi-dimensional data, drill down into specific areas of interest, and
analyze trends and patterns.

• Data mining: This involves using statistical and machine learning techniques
to extract hidden patterns and insights from large datasets.

• Predictive analytics: This uses historical data and statistical models to predict
future trends and events.

4. Data Visualization:
• Dashboards: These provide a real-time overview of key performance
indicators (KPIs) and other critical business metrics, often using charts, graphs,
and maps.

• Reports: These provide detailed insights into specific areas of the business,
often including tables, graphs, and text analysis.

• Data storytelling: This involves using data visualizations and narratives to

communicate insights and recommendations in a clear and compelling way.

5. Infrastructure:
• Hardware: This includes servers, storage devices, and network infrastructure
needed to support the BI platform.

• Software: This includes the BI software itself, as well as any additional tools
needed for data integration, analysis, and visualization.

• Cloud computing: Many organizations are turning to cloud-based BI solutions

for greater flexibility, scalability, and cost-efficiency.
6. Governance and Security:
• Data governance: This ensures the accuracy, consistency, and security of data
throughout its lifecycle.

• Data security: This protects sensitive data from unauthorized access, use,
disclosure, disruption, modification, or destruction.

7. People and Processes:

• Business users: These are the people who use BI tools to access and analyze
data to make better decisions.

• BI professionals: These are the people who design, develop, and maintain the
BI platform and ensure its effective use throughout the organization.

• Business processes: BI tools and insights need to be integrated into existing

business processes to ensure data-driven decision-making becomes a part of the
organizational culture.

In essence, a BI system is not just a set of tools, but a complete ecosystem for
transforming raw data into valuable business intelligence. By effectively
utilizing the various components of a BI system, organizations can unlock the
true power of data and achieve significant competitive advantage.

Representation of the decision-making process

Business intelligence (BI) plays a crucial role in representing the
decision-making process by transforming data into actionable insights.

 Here's how BI supports different stages of the decision-making

process:
Stage 1: Problem Identification and Definition
Stage 2: Information Gathering and Analysis
Stage 3: Evaluation and Alternatives Development
Stage 4: Decision Making and Implementation
Stage 5: Learning and Improvement
Stage 1: Problem Identification and Definition
• Data analysis: BI tools help identify trends, patterns, and anomalies within
data that might signal problems or opportunities requiring decisions.

• Visualization: Dashboards and reports visually represent key metrics and

trends, allowing decision makers to quickly grasp the situation and identify
areas needing attention.

• Benchmarking: Comparing performance against industry benchmarks or

historical data helps identify areas of improvement and potential problems.

Stage 2: Information Gathering and Analysis

• Data extraction and integration: BI tools gather relevant data from various
sources, including internal systems, external data feeds, and big data
repositories.

• Data cleansing and transformation: Cleaning and preparing data ensures its
accuracy and consistency, allowing for reliable analysis.

• Data mining: Advanced techniques like predictive analytics and machine

learning uncover hidden patterns and insights within data, providing valuable
information for decision-making.

Stage 3: Evaluation and Alternatives Development

• Scenario planning: BI tools help model and simulate different scenarios based
on various assumptions, enabling decision-makers to evaluate potential
outcomes of different choices.

• Cost-benefit analysis: BI tools can calculate and compare the costs and
benefits associated with different decision alternatives, providing a data-driven
basis for evaluation.

• Risk assessment: BI tools can identify and quantify potential risks associated
with different alternatives, helping decision-makers make informed choices.
Stage 4: Decision Making and Implementation
• Collaborative decision-making: BI tools can facilitate collaboration by
providing a shared platform for accessing and analyzing data, enabling
stakeholders to contribute their insights and perspectives.

• Decision tracking and monitoring: BI tools can track the implementation of

decisions and monitor their impact, allowing for adjustments and course
corrections as needed.

• Performance reporting: BI tools provide regular reports on key performance

indicators (KPIs), allowing decision-makers to track progress and assess the
effectiveness of their decisions.

Stage 5: Learning and Improvement

• Data analysis: BI tools help analyze the outcomes of decisions, providing
valuable insights for future decision-making.

• Feedback loops: Integrating feedback from stakeholders and the environment

allows for continuous improvement of the decision-making process.

• Adaptive decision-making: BI tools enable organizations to adapt their

decision-making strategies based on new information and changing
circumstances, fostering agility and resilience.

Beyond these stages, BI also contributes to:

• Building a data-driven culture: Encourages data-based decision-making
throughout the organization.

• Promoting transparency and accountability: Provides a clear understanding of

the rationale behind decisions.

• Facilitating communication and collaboration: Enables stakeholders to share

data and insights effectively.

Overall, BI plays a vital role in modern decision-making by:

• Transforming data into actionable insights

• Supporting different stages of the decision-making process

• Promoting a data-driven culture

• Enabling informed and effective decision-making

As a result, BI has become an essential tool for organizations seeking to gain a

competitive edge and achieve their goals in today's data-driven world.

Rationality and problem solving

Business Intelligence (BI): A Crucial Tool for Rationality and Problem Solving
in Business Business intelligence (BI) plays a vital role in promoting rationality
and enhancing problem-solving capabilities within businesses.

 Here's how BI contributes to these two key aspects:

1. Promotes Rationality
2. Enhances Problem Solving

Promotes Rationality:
• Data-Driven Decisions: BI provides access to vast amounts of data, enabling
businesses to make informed decisions based on evidence and analysis rather
than intuition or guesswork. This reduces the influence of biases and emotions,
leading to more rational and objective decision-making.

• Improved Transparency and Visibility: BI tools offer dashboards and reports

that provide real-time insights into various aspects of a business. This
transparency allows leaders to identify patterns, trends, and anomalies, enabling
them to make better-informed decisions based on a comprehensive
understanding of their operations.

• Reduces Risk and Uncertainty: BI helps businesses anticipate potential risks

and identify opportunities through predictive analytics. This proactive approach
allows organizations to make informed decisions that mitigate risks and
capitalize on emerging trends.

• Promotes Fact-Based Communication: BI facilitates the use of data and

evidence to support arguments and proposals. This strengthens communication
within organizations and fosters a culture of rationality and objective decision-
making.
Enhances Problem Solving:
• Efficient Root Cause Analysis: BI tools allow businesses to drill down into
data and identify the root causes of problems. This targeted approach facilitates
the development of effective and sustainable solutions.

• Performance Measurement and Optimization: BI enables businesses to track

key performance indicators (KPIs) and measure the effectiveness of various
initiatives. This allows them to identify areas for improvement and optimize
their operations for better results.

• Scenario Planning and Simulation: BI tools can be used to create simulations

of different scenarios and predict potential outcomes. This empowers businesses
to make informed decisions about resource allocation, investment strategies,
and other critical areas.

• Collaboration and Knowledge Sharing: BI facilitates collaboration by

providing a shared platform for data access and analysis. This allows teams to
work together more effectively to solve problems and brainstorm solutions.

The decision-making process

Business Intelligence and the Decision-Making Process

Business intelligence (BI) plays a crucial role in enhancing the decision-making

process within organizations. By providing data-driven insights and
visualizations, BI empowers businesses to make informed choices that are more
likely to lead to success.

Here's how BI improves decision-making:

1. Data-driven insights: BI replaces gut feeling with objective data, removing

biases and promoting evidence-based decision-making.

2. Improved understanding of the situation: BI provides a comprehensive

overview of key performance indicators (KPIs), trends, and patterns, enabling
better understanding of the business landscape.

3. Increased agility and responsiveness: BI allows businesses to identify and

react to problems and opportunities quickly, making them more adaptable to
changing market conditions.
4.Collaborative decision-making: BI facilitates collaboration by providing a
common platform for stakeholders to analyze data and reach consensus-driven
decisions.

5. Reduced risk and improved outcomes: By analyzing historical data and

forecasting trends, BI helps businesses identify potential risks and make
strategic decisions that improve the chances of success.

The BI-Decision-Making Process:

1. Define the problem or opportunity: Clearly identify the issue or opportunity
that needs to be addressed.

2. Identify relevant data: Determine the data needed to analyze the situation and
understand the problem better.

3. Collect and clean the data: Gather the required data from various sources and
ensure it is accurate and reliable.

4. Analyze the data: Utilize BI tools and techniques to analyze the data, identify
patterns, and extract valuable insights.

5. Develop insights and recommendations: Translate the data analysis into

actionable insights and recommendations for decision-making.

6. Communicate insights and recommendations: Share the findings with

stakeholders in a clear and compelling way to facilitate informed decision-
making.

7. Monitor and evaluate: Track the results of the decisions and evaluate their
effectiveness based on established KPIs.

Benefits of using BI for decision-making:

• Improved decision quality

• Increased efficiency and effectiveness

• Reduced costs

• Improved risk management

• Enhanced competitive advantage

• Increased stakeholder confidence

Challenges of using BI for decision-making:

• Data quality issues

• Difficulty extracting meaningful insights

• Lack of user adoption

• Difficulty integrating BI with existing systems

• Cybersecurity risks

Overcoming challenges and maximizing benefits:

• Implement data governance policies and procedures

• Invest in data quality initiatives

• Provide training and support to users

• Integrate BI with existing systems

• Implement robust security measures

• Foster a data-driven culture

Conclusion:
Business intelligence plays a vital role in empowering organizations to make
better decisions by providing data-driven insights and visualizations. By
implementing a robust BI strategy and addressing potential challenges,
organizations can leverage the power of BI to achieve significant business
success and gain a competitive edge.

Types of decisions
Business intelligence (BI) enables organizations to make data-driven
decisions by providing insights from various data sources.

 These decisions can be categorized into three main types:

1. Descriptive
2. Predictive
3. Prescriptive
1. Descriptive:
These decisions focus on understanding what happened in the past and why.
Descriptive analytics answers questions like:

• What were our sales figures last quarter?

• Which products are selling the most?

• Who are our most loyal customers?

• What marketing campaigns were most effective?

• How are we performing compared to our competitors?

Descriptive analytics helps organizations identify trends, patterns, and

relationships in their data. This information provides valuable context for
understanding the current state of the business and making informed decisions
about the future.

2. Predictive:
These decisions focus on forecasting what will happen in the future. Predictive
analytics uses historical data and statistical models to predict future trends,
customer behavior, and other outcomes. Examples of questions that predictive
analytics can answer include:

• What will our sales be next quarter?

• Which customers are most likely to churn?

• Which products are likely to be the most popular?

• What is the likelihood of a successful product launch?

• How will changes in the market affect our business?

Predictive analytics allows organizations to anticipate future events and take

proactive measures to maximize their chances of success. This can help them
avoid potential risks, optimize resource allocation, and capitalize on emerging
opportunities.
3. Prescriptive:

These decisions focus on recommending the best course of action. Prescriptive

analytics uses data and predictive models to suggest optimal solutions to
specific problems or challenges. Examples of questions that prescriptive
analytics can answer include:

• What actions should we take to increase sales?

• How can we reduce customer churn?
• What is the best way to allocate resources?
• What price should we set for a new product?
• How can we improve our marketing campaigns?

Prescriptive analytics provides actionable insights that help organizations make

the best decisions possible. This can lead to significant improvements in
operational efficiency, financial performance, and customer satisfaction.

In addition to these three main types, there are also hybrid approaches that
combine elements of descriptive, predictive, and prescriptive analytics. For
example, an organization might use descriptive analytics to understand what
happened in the past, use predictive analytics to forecast what will happen in the
future, and then use prescriptive analytics to recommend the best course of
action based on the combined insights.

Ultimately, the type of business intelligence used to support decision-making

depends on the specific needs and objectives of the organization. However, all
three types of BI can play a valuable role in helping organizations make better
decisions and achieve their goals.

Approaches to the decision-making process

Business intelligence (BI) plays a crucial role in enhancing decision-
making processes by providing data driven insights, automating tasks, and
improving overall efficiency.

 Here are several approaches to how BI can influence decision-

making:
1. Data-driven decision-making:
2. Automating tasks and processes
3. Improving collaboration and communication
1. Data-driven decision-making:

• Providing insights: BI tools analyze vast amounts of data to reveal patterns,

trends, and relationships that would be difficult to identify manually. This
empowers decision-makers with actionable insights based on solid evidence
rather than intuition or gut feeling.

• Predictive analytics: BI models can predict future trends and outcomes based
on historical data and current trends. This allows businesses to anticipate future
challenges and opportunities and make proactive decisions.

• Performance management: BI dashboards and reports provide real-time

visibility into keynperformance indicators (KPIs). This allows decision-makers
to track progress towards goals, identify areas for improvement, and make
adjustments as needed.

2. Automating tasks and processes:

• Automating data collection and analysis: BI tools can automate the process of
collecting, cleaning, and preparing data for analysis. This frees up time and
resources for decision-makers to focus on strategic thinking and action.

• Alerting and notifications: BI systems can automatically generate alerts and

notifications for specific events or changes in data. This allows decision-makers
to stay informed about critical issues and react quickly to potential problems.

• Streamlining workflows: BI tools can integrate with other business systems to

streamline workflows and improve process efficiency. This allows decision-
makers to access relevant information quickly and make informed decisions in a
timely manner.

3. Improving collaboration and communication:

• Shared data platform: BI systems provide a central platform for sharing data
and insights across different departments and teams. This improves
collaboration and communication between different stakeholders involved in the
decision-making process.

• Visualization tools: BI tools offer interactive dashboards and reports that allow
stakeholders to
visually explore data and understand complex information. This facilitates
communication and ensures everyone involved is on the same page.

• Real-time feedback loops: BI systems facilitate real-time feedback loops by

providing immediate insights into the impact of decisions. This allows decision-
makers to adjust their approach as needed and learn from past experiences.

Specific BI approaches for decision-making:

• Descriptive analytics: Analyzes historical data to understand what happened
and why.

• Diagnostic analytics: Dives deeper into the reasons behind specific events and
trends.

• Predictive analytics: Uses statistical models to forecast future outcomes and

trends.

• Prescriptive analytics: Recommends specific actions based on data analysis.

• Cognitive analytics: Uses advanced AI techniques to extract insights from

unstructured data, such as text, images, and audio.

Benefits of using BI in decision-making:

• Improved decision-making quality: Data-driven insights lead to better-
informed decisions that are more likely to be successful.

• Increased efficiency and productivity: Automating tasks and processes frees

up time and resources for more strategic activities.

• Reduced risks: Identifying potential problems early on through predictive

analytics helps mitigate risks and avoid costly mistakes.

• Improved collaboration and communication: Sharing data and insights fosters

better collaboration and communication between stakeholders.

• Enhanced competitive advantage: Data-driven businesses are better equipped

to adapt to changingmarket conditions and gain a competitive edge.

Conclusion:
Business intelligence plays a transformative role in modern decision-making
processes. By providing valuable insights, automating tasks, and improving
collaboration, BI empowers organizations to make better decisions, achieve
strategic goals, and ultimately achieve sustained success.

Evolution of information systems

Business Intelligence and the Evolution of Information Systems Business
intelligence (BI) has played a crucial role in the evolution of information
systems, transforming themfrom simple data storage and retrieval tools into
powerful platforms for data analysis and insight generation.

This evolution can be understood through three distinct phases:

Phase 1: Data Warehousing and Reporting (1980s-1990s)

Phase 2: Online Analytical Processing (OLAP) and Data Mining (2000s)

Phase 3: Big Data, Cloud Computing, and AI (2010s-present)

Phase 1: Data Warehousing and Reporting (1980s-1990s)

• Focus: Centralized data storage in data warehouses for historical analysis.

• Technologies: Relational database management systems (RDBMS), data

warehousing platforms, and basic reporting tools.

• Impact: Improved data accessibility and enabled historical analysis, but

limited to simple reporting and lacked real-time insights.

Phase 2: Online Analytical Processing (OLAP) and Data Mining

(2000s)
• Focus: Interactive analysis of multi-dimensional data to identify trends and
patterns.

• Technologies: OLAP cubes, data mining tools, and early BI platforms.

• Impact: Enabled deeper analysis of complex data sets and provided insights
for improved decision making.

Phase 3: Big Data, Cloud Computing, and AI (2010s-present)

• Focus: Handling massive volumes of diverse data (big data) and leveraging
cloud computing and AI for real-time insights and predictive analytics.
• Technologies: Cloud-based data platforms, big data analytics tools, machine
learning algorithms, and natural language processing.

• Impact: Enabled real-time insights, predictive capabilities, and personalized

experiences, driving significant business value.

This evolution has been driven by several key factors:

• Technological advancements: Increased computing power, storage capacity,

and new software applications.

• Growing data volume and complexity: Explosion of data from various sources,
including social media, IoT devices, and sensor networks.

• Increased demand for data-driven insights: Businesses need data to make

informed decisions and gain a competitive edge.

BI has had a profound impact on information systems by:

• Improving data accessibility and quality: Facilitating data integration from

different sources and ensuring data accuracy and consistency.

• Empowering data analysis: Providing tools and techniques for data

exploration, analysis, and visualization.

• Enabling real-time insights: Offering real-time dashboards and reports to

monitor key performance indicators and respond to changing conditions.

• Personalizing user experiences: Tailoring products, services, and marketing

messages based on individual customer preferences and behavior.

Looking ahead, the evolution of BI is expected to continue with the

following trends:

• Increased adoption of AI and machine learning: AI will automate data analysis

tasks and generate more accurate and insightful predictions.

• Democratization of data and analytics: BI tools will become more user-

friendly, allowing everyone in the organization to access and analyze data.

• Focus on augmented analytics: AI will assist users in data analysis, providing

guidance and recommendations.
• Integration with other business applications: BI will integrate seamlessly with
other business applications, like CRM and ERP, for a more holistic view of the
business.

In conclusion, BI has been a driving force in the evolution of information

systems, transforming the way businesses collect, manage, and analyze data. As
technology continues to evolve, BI will play an even more critical role in
helping organizations succeed in today's data-driven world.

Definition of decision support system

In the context of Business Intelligence (BI), a Decision Support System
(DSS) is a computer-based information system that provides users with tools
and data analysis capabilities to support decision-making.

Here are some key characteristics of a DSS:

1. Focus on decision-making:

2. Interactivity and flexibility:

3. Support for different decision styles:

4. Integration with other systems:

5. User-friendly interface:

1. Focus on decision-making: Unlike BI systems that primarily focus on

reporting and data analysis, DSS systems are designed to help users make
informed decisions by providing relevant information and insights.

2. Interactivity and flexibility: DSS systems are interactive, allowing

users to explore data, analyze it from different perspectives, and build models to
simulate various scenarios. This flexibility allows them to tailor their analysis to
specific problems and decision-making needs.

3. Support for different decision styles: DSS can cater to different

decision styles, ranging from structured, data-driven decisions to unstructured,
intuitive decisions. They provide tools and functionalities that support both
quantitative and qualitative analysis.

4. Integration with other systems: DSS can integrate with other systems,
such as data warehouses, CRM
systems, and ERP systems, to access and analyze relevant data from various
sources. This ensures users have a comprehensive view of the information
needed for decision-making.

5. User-friendly interface: DSS systems should be user-friendly and

intuitive, allowing users with varying levels of technical expertise to access and
utilize their features effectively.

Types of DSS(decision support system):

There are different types of DSS, each with its own strengths and weaknesses,
depending on the specific decision-making needs:

There are 4 types DSS:

1.Model-driven DSS

2. Data-driven DSS

3.Knowledge-driven DSS

4.Communication-driven DSS

• Data-driven DSS: These systems focus on providing quantitative data and

analysis to inform decisions.

• Model-driven DSS: These systems employ models and simulations to

predict future outcomes and evaluate different scenarios.

• Knowledge-driven DSS: These systems leverage knowledge bases and

expert systems to provide insights and recommendations.
• Communication-driven DSS: These systems facilitate communication
and collaboration among decision-makers, allowing them to share information
and perspective.

Benefits of using a DSS:

• Improved decision-making: By providing relevant information and insights,
DSS can lead to more informed and effective decisions.

• Increased efficiency: DSS can automate tasks and streamline processes,

freeing up valuable time and resources.

• Reduced costs: DSS can help organizations identify and eliminate waste,
leading to cost savings.

• Improved collaboration: DSS can facilitate communication and collaboration

among decision makers, leading to better-coordinated decisions.

• Enhanced competitive advantage: By making better decisions based on

accurate data, organizations can gain a competitive edge.

Overall, DSS plays a crucial role in BI by empowering users to make informed

and effective decisions. By choosing the right type of DSS and utilizing its
features effectively, organizations can reap significant benefits and achieve their
strategic goals.

Development of a decision support system

Business Intelligence Development of a Decision Support System
(DSS)Developing a effective decision support system (DSS) using business
intelligence (BI) involves several key stages:

1. Define Business Requirements and Goals:

2. Analyze Existing Data and Systems:
3. Design the DSS Architecture:
4. Develop the DSS Functionality:
5. Implement and Deploy the DSS
6. Monitor and Evaluate the DSS:
7. Continuous Improvement and Maintenance:
1. Define Business Requirements and Goals:
• Identify key business challenges and opportunities.
• What decisions need to be supported?
• Who are the decision-makers?
• What information is needed to make informed decisions?

2. Analyze Existing Data and Systems:

• Identify existing data sources (internal and external).
• Evaluate data quality, consistency, and accessibility.
• Assess existing systems and tools for potential integration.

3. Design the DSS Architecture:

• Choose the appropriate DSS type based on decision needs (model-driven,
data-driven, or communication-driven).
• Design the data warehouse or data lake for data storage and management.
• Develop an ETL/ELT process for data extraction, transformation, and loading.

4. Develop the DSS Functionality:

• Create user interface and dashboards for data visualization and interaction.
• Develop models and algorithms for data analysis and prediction.
• Integrate with existing systems and tools for seamless data flow.

5. Implement and Deploy the DSS:

• Pilot the DSS with a limited group of users.
• Gather feedback and iterate based on user needs.
• Train users and provide ongoing support.

6. Monitor and Evaluate the DSS:

• Track usage metrics and key performance indicators (KPIs).
• Evaluate the impact of the DSS on decision-making and performance.
• Identify areas for improvement and innovation.
7. Continuous Improvement and Maintenance:
• Update data and models regularly to reflect changing conditions.
• Adapt the DSS to evolving business needs and priorities.
• Ensure security and data privacy are maintained.

Tools and Technologies:

• BI platforms (e.g., Tableau, Power BI, Qlik)
• Data warehousing and data lake solutions
• Data analysis tools (e.g., Python, R)
• Machine learning and artificial intelligence algorithms
• User interface and web development tools

Benefits of a BI-powered DSS:

• Improved decision-making based on data-driven insights
• Increased efficiency and productivity
• Reduced costs and improved resource allocation
• Enhanced competitive advantage
• Improved risk management and mitigation

Challenges and Considerations:

• Data quality and integration issues
• User adoption and training
• Security and data privacy concerns
• Cost and resource constraints
• Technological complexity

Examples of BI-powered DSS Applications:

• Financial institutions: Credit risk assessment, fraud detection, investment
analysis
• Retail industry: Inventory management, customer segmentation, marketing
campaign optimization
• Healthcare: Disease prediction, treatment optimization, resource allocation
• Manufacturing: Quality control, predictive maintenance, supply chain
management Overall, developing a BI-powered DSS requires careful planning,
execution, and ongoing maintenance. By focusing on business needs and user
requirements, organizations can leverage the power of BI to create effective
DSS solutions that drive improved decision-making and business success.