Chapter 2 – section 2.1
• We are becoming more dependent on information systems because people need to analyse large amounts of information in a shorter amount of
time. They need it to make decisions quickly. They need it for sophisticated analysis techniques like modelling and forecasting to make good
decisions. They have to protect the corporate asset of organizational information
• A typical organization follows a pyramid structure, operational at the bottom, managerial in the middle, and strategic at the top of the pyramid.
o Operational: employees develop, control and maintain core business activities required to run day-to-day operations.
Operational decisions are considered STRUCTURED DECISIONS, which arise in situations where established processes offer
potential solutions. These decisions are repetitive in nature, they affect short-term business strategies.
These decisions include reordering, creating employee staging, and weekly production schedules are examples of routine
o Managerial: employees are continuously evaluating company operations to hone the firm’s ability to identify, adapt to, and leverage
change. Managerial decisions cover short and medium-range plans, schedules, budgets, policies, procedures and business objectives
for the firm. They also allocate resources and monitor the performance of organizational sub-units, including business units, divisions,
process teams, project teams, and other work groups. These types of decisions are considered semi-structured decisions.
Semi-structured decisions occur in situations in which established processes help to evaluate potential solutions, but not
enough to lead to a definite recommended decision.
o Strategic: at this level, managers develop overall business strategies, goals and objectives as part of the company’s strategic plan. They
monitor the strategic performance of the organization and its overall direction in the politival, economic and competitive business
environment. STRATEGIC DECISIONS ARE HIGHLY UNSTRUCTURED DECISIONS.
Unstructured Decisions occur in situations in which no procedures or rules exist to guide decision makers towards the correct
choice. They are infrequent, extremely important, and related to the long-term business strategy.
Transactional Data and analytical information
• Transactional data encompasses all the raw afcts contained within a single business process or unit of work, and their primary purpose is to
support performing daily operational tasks.
• Organizations use transactional data when performing operational tasks and routine decisions, such as analysing daily sales reports to determine
how much inventory to carry
• ANALYTICAL INFORMATION: encompasses all summarized or aggregated transactional data, its primary purpose is to support performing
o Also includes external information such as that obtained from outside market and industry sources.
o EXAMPLEs include trends, aggregated sales, product statistics and future growth projections.
• Two different types of processing occur in an organization with respect to transactional data and analytical information: online transaction
processing and online analytical processing.
• Online transaction processing (OLTP): the capturing of transaction and event data using information systems to process the ddata according to
defined business rules. And also store the data and aupdate existing data to reflect the new data entered.
o When you do this, you deal less with raw transactional details and more with meaningful aggregations of data. The information is
summarized and it allows employees to make broader decisions for the organization.
• Online analytical processing (OLAP): the analysis of summarized or aggregated information sourced from transaction processing systems data,
and sometimes external information from outside industry sources, to create business intelligence in support of analutical and strategic (non-
operational) decision making. • Business Intelligence: a broad, general term descriing information that people use to support their analytical and strategic decision-making efforts.
• Capabilities associated with OLAP:
o Consolidation: involves the aggregation of information and fefatures simple roll-ups to complex groupings of interrelated information.
o Drill-down: enables users to view details, and details of details, of information
o Slice-and-dice: the ability to look at information from different perspectives. One slice of information could display all product sales during
a given promotion. Another slice could display a single product's sales for all promotions.
• Data-mining tools apply algorithms to information sets to uncover inherent trends and patterns in data and information. Business analysts use data
mining to develop new business strategies to build models that, when exposed to new information sets, perform a variety of data analysis
Measuring Decision Success
• KEY PERFORMANCE INDICATORS (KPI): are the measures that are tied to business drivers. Performance metrics. Are composed of efficiency
and effectiveness metrics, and benchmarking-baseline metrics.
• Effectiveness and efficiency metrics: Efficiency and effectiveness metrics are two primary types of metrics. With information systems
o Efficiency IS metrics: measure the performance of the information system itself such as throughput, speed, and availability.
o Effectiveness IS metrics: measure the impact IS has on business processes and activities including customer satisfaction, conversion
rates, and sell-through increases.
Peter Drucker offers a helpful distinction between efficiency and effectiveness. Drucker states that managers “Do things right”
and/or “Do the right things.” Doing things right addresses efficiency—getting the most from each resource. Doing the right
things addresses effectiveness—setting the right goals and objectives and ensuring they are accomplished.
o Efficiency focuses on the extent to which an organization is using its resources in an optimal way, whereas effectiveness focuses on how
well an organization is achieving its goals and objectives
• Benchmarking – baseline metrics: Benchmarking is a process of continuously measuring system results, comparing those results to optimal system
performance (benchmark values), and identifying steps and procedures to improve system performance.
• Efficiency IS metrics focus on the information system itself. Below highlights the most common types of efficiency IS metrics:
o Throughput: the amount of information that can travel through a system at any point in time.
o Transaction speed: the amount of time a system takes to perform a transaction
o System availability: the number of hours a system is available for users.
o Web traffic: the number of page views, number of unique visitors, and average time spent viewing a web page.
o Response time: the time it takes to respond to user interactions such as a mouse click.
• Efficiency IS metrics are effective because of its usability, customer satisfaction, conversion rates, financial.
o Usability: ease with people perform transactions and/or find information. Like the degrees of freedom is a metric on the internet, which
measures the number of clicks required to find the desired information.
o Customer satisfaction: measured by benchmarks as satisfaction surveys, percentage of existing customers retained and increases in
revenue dollars per customer.
o Conversion rates: the number of customers an organization “touches” for the first time and persuades to purchase its products or
services. Like pop-up ads is a metric for evaluating the effectiveness of an ad. o Financial: such as return on investment (the earning power of an organization’s assets), cost-benefit analusis (the comparison of
projected revenues and costs including development, maintenance, fixed, and variable), and break0even analysis (the point at which
constant revenues equal ongoing costs)
TPS, DSS, AND EIS
• Transaction processing system (TPS): the basic business system that serves the operational level (clerks and analysts) in an organization. A TPS
performs OLTP and handles transactional data. The most common example of a TPS is an operational accounting system such as a payroll system
or an order-entry system. In terms of decision making, a TPS supports operational types of decisions such as how much