Why is current business intelligence insufficient for decision making?

Business domain has the characteristics for which the theories of NDM, SA, and mental model can be applied. Today’s companies operate in a turbulent business environment where different sectors interact with and affect each other. Walters, Jiang et al (2003) summarize in six internal business environment sectors (market research, product R&D, basic engineering, financial management, cost controls, and operational efficiency) and six external ones (market, technological, competitive, political/legal, economic, and socio-cultural). For the survival of the company, the executive needs to keep aware of each sector of the environment. Moreover, the speed and quality with which business decisions must be made has increased substantially with the trend of economy globalization. The complexity, uncertainty, dynamics, and time pressure of today’s business decision making show the potential of applying NDM theory to support business management.

An executive need rich SA and mental models for the success of business management, particularly at strategic level. SA is about knowing what is going on around the decision-maker. In business domain, the executive’s SA can be regarded as the perceived and understood information about the company, e.g. statistics of sales, marketing, product development, and competitors. As such the executive has the ability to anticipate the future events, seek opportunities, and identify threats. SA creates a big picture of the company within the manager’s mind and enables the manager to be capable of predicting the future and making decisions. Mental models reflect the executive’s past management experience. They provide the executive with the ability to simplify the complexity of business environments (Porac & Thomas 1990; Schwenk 1984). Mintzberg (1973) categorizes executives’ work into ten different roles and connects them with managers’ mental models. He finds that managers spend most of their time communicating with other people and thinking, by which their mental models are built based on their past experience. With rich and solid mental models, the executive can envision possible future business scenarios that may cause problems or bring opportunities and then make appropriate strategies to respond.

From information systems perspective, cognitive orientation can be taken into account in order to enhance the functionality of traditional BI systems. As the most promising BI application, OLAP-based ad hoc query and reporting is mainly pre-defined information representation. In the decision process, the executives are provided with information in the form of report, ad hoc analysis, or some so called knowledge which is pulled from data warehouse according to pre-defined queries, such as SQL sentences and multidimensional expressions (MDX). The emphasis is the manipulation of large volumes of both internal and external company data in terms of technology, rather than supporting executives’ decision making from cognitive perspective. In this research, we focus on supporting the executive to develop and enrich SA and mental models, and then eventually cognitively support decision making through information systems techniques.

References:

Mintzberg 1973, The nature of managerial work, Harper & Row, New York.

Porac, J.F. & Thomas, H. 1990, 'Taxonomic mental models in competitor definition', Academy of Management Review, vol. 15, no. 2, pp. 224-240.

Schwenk, C.R. 1984, 'Cognitive simplification processes in strategic decision-making', Strategic Management Journal, vol. 5, no. 2, pp. 111-128.

Walters, B.A., Jiang, J.J. & Klein, G. 2003, 'Strategic information and strategic decision making: the EIS/CEO interface in smaller manufacturing companies ', Information & Management vol. 40, no. 6, pp. 487-495