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76 Part I • Decision Making and Analytics: An Overview

• Outcomes (or results) may occur over an extended period. As a result, rev-
enues, expenses, and profits will be recorded at different points in time. To
overcome this difficulty, a present-value approach can be used if the results are
quantifiable.
• It is assumed that future data will be similar to historical data. If this is not the case,
the nature of the change has to be predicted and included in the analysis.

When the preliminary investigation is completed, it is possible to determine whether
a problem really exists, where it is located, and how significant it is. A key issue is whether
an information system is reporting a problem or only the symptoms of a problem. For
example, if reports indicate that sales are down, there is a problem, but the situation, no
doubt, is symptomatic of the problem. It is critical to know the real problem. Sometimes
it may be a problem of perception, incentive mismatch, or organizational processes rather
than a poor decision model.
Problem classification

Problem classification is the conceptualization of a problem in an attempt to place it in
a definable category, possibly leading to a standard solution approach. An important
approach classifies problems according to the degree of structuredness evident in them.
This ranges from totally structured (i.e., programmed) to totally unstructured (i.e., unpro-
grammed), as described in Chapter 1.

Problem Decomposition
Many complex problems can be divided into subproblems. Solving the simpler subprob-
lems may help in solving a complex problem. Also, seemingly poorly structured problems
sometimes have highly structured subproblems. Just as a semistructured problem results
when some phases of decision making are structured whereas other phases are unstruc-
tured, so when some subproblems of a decision-making problem are structured with
others unstructured, the problem itself is semistructured. As a DSS is developed and the
decision maker and development staff learn more about the problem, it gains structure.
Decomposition also facilitates communication among decision makers. Decomposition is
one of the most important aspects of the analytical hierarchy process. (AHP is discussed
in Chapter 11, which helps decision makers incorporate both qualitative and quantitative
factors into their decision-making models.)

Problem ownership
In the intelligence phase, it is important to establish problem ownership. A problem
exists in an organization only if someone or some group takes on the responsibility of
attacking it and if the organization has the ability to solve it. The assignment of author-
ity to solve the problem is called problem ownership. For example, a manager may
feel that he or she has a problem because interest rates are too high. Because interest
rate levels are determined at the national and international levels, and most managers
can do nothing about them, high interest rates are the problem of the government, not
a problem for a specific company to solve. The problem companies actually face is
how to operate in a high–interest-rate environment. For an individual company, the
interest rate level should be handled as an uncontrollable (environmental) factor to be
predicted.
When problem ownership is not established, either someone is not doing his or
her job or the problem at hand has yet to be identified as belonging to anyone. It is then
important for someone to either volunteer to own it or assign it to someone.
The intelligence phase ends with a formal problem statement.

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