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Brainstorm - Smarter Simpler More Agile Processes
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Brainstorm - Smarter Simpler More Agile Processes

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An overview of how decision management and the use of business rules can make processes smarter, simpler and more agile.

An overview of how decision management and the use of business rules can make processes smarter, simpler and more agile.

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  • When all you have is a hammer, everything looks like a nailOnly thinking about process can be dangerous- The systems you are integrating are pretty dumb and hard to change- Many processes rely on people to provide intelligence The rules that help control a process are not the same as decision rules The rate of change of decisions is often different, and higher, than that of processes Decisions can be shared across processes and systems and so require different management
  • Process management and decision management are different – they have different intentions, different outcomes, different techniques and different technology
  • Just to bring this home, here’s an example of an underwriting process to show where the decisions might be.
  • As we are talking about decisions it is worth remembering that all decisions matter, as Peter Drucker noted. Not just the big, strategic decisions of your executives but the day to day decisions that drive your business.After all, people react to your organization’s decisions, especially decisions made by front-line systems and staff, as though they are both personal and deliberateYou should make sure they are
  • First, decisions. When we wrote the book this was an area where we wrote a lot more than we had expected – when you think about decisions all the time you get used to identifying them and focusing on them but it is challenging initially.We are not talking about strategic decisions here – should we do business in Alaska, say – but on the decisions that relate to specific individuals, customers, members. These customer treatment decisions can and should be identified, externalized and managed.There are a number of different ways to find these decisions and the four most common are:Micro decisionsOrganizations do not realize how many they makeEvery strategic decision has many operational consequencesEach customer interaction can be many decisionsManual decisionsHidden under manual processesDecisions that are being taken every day by front-line staffConflicting decisionsDifferent parts of your organization treat customers differentlyA longer time horizon might drive a different decisionDecisions are made inconsistentlyMissing or default decisionsDecisions that you do not think you can take and so you do the same thing every timeThe policy was set a long time ago and was never updatedFred has a great example of this with the AmEx website which you will see later
  • Here’s an example from a retailer to illustrate my point. They wanted to get members who bought only within a single category to start buying in multiple categories.They created a number of test groups and then used their traditional approach to target some in each group. These mailings were designed in the traditional way – find a segment, figure out a message and a compelling cross-sell, send a letter. They got a pretty typical result – just under 1%In parallel they conducted a separate campaign designed by focusing in on the operational decision of what to send THIS customer. The cross-sell offer was targeted to the micro-segment that a particular customer was in, the messaging was targeted using rules, prices and location information was selected for that customer etc. The results for this personalized campaign are better This represents a 2000% improvement in response rates. The customers in the personalized campaigns also had larger baskets too so the results were better by even more than 2000%By drilling down from their strategic objective – increasing basket size by expanding the range of products purchases – to the specific operational decisions that impact customers they got tremendous results.
  • In this case a manufacturer wanted to provide an automated diagnostic system for its products.All business rules are entered and managed directly by engineers who understand the symptoms, problems, and products. No IT resources are required to make updates, so changes and improvements are made quickly and inexpensively.Five months to build rather than 30 monthsROI 10 to 20x hard-coding rules
  • Analytics simplify data to amplify its valuePredictive Analytics turn uncertainty into usable probability
  • The challenge often faced is that the analytic insight must be delivered to systems and manual processes, people with policy and procedural manuals, before it can be truly put to work. All too often the process for doing that is broken, because it passes through PowerPoint or Word or something similar or simply painfully slow. I remember talking to an online travel site’s IT team once and asking them about modeling. Oh yes, they said, our business users paid for a response model. When we asked to see it they showed us a PowerPoint presentation. That’s nice we said, where’s the model? They said “It’s described in the PowerPoint”. That meant the IT department had to find where to apply it, and there were several spots, figure out how to code the model and link it to the data actually available in the operational environment and then re-test and confirm everything. Months later the model was in production. Somehow I doubt the business got the return it was expecting on that modeling investment….To put analytics to work we need a new approach.
  • In this example an insurance company implemented a risk-based underwriting decision service for use across its systems.In the first year an eight-point reduction in combined ratio Resources are applied more effectively, because manual review of clearly unacceptable and clearly acceptable risks eliminatedUnderwriters focus more on book management and agent performance.People in the underwriting department manage the rules and don’t compete for IT resources.Risk management is more effective and pricing is more accurate, because the number of pricing tiers increased four to eight times.
  • One of the challenges with decisions is that they take time to play out – the results may not become obvious for some time. So, if we take a population and take a decision about how to treat them we will only see the results that generates if we wait for some period of time – perhaps until they are next due for a check up or a renewal, perhaps sooner. By the time the results are clear, however, it is way too late to gather any new data about what might have worked better.To address this we do not treat everyone exactly the same. We take our main approach – called the champion – and apply it to most of our population. We also create a number of challengers – alternatives – and apply them to a small percentage of the population. Now as time passes we are also collecting information about how these alternatives would have worked. If one works better, we can make that the new champion and then apply it to all subsequent decisions.Better yet, we can make it the champion and develop new challengers and repeat the process. Ensuring that we always have challengers running allows us to constantly verify our approach and continuously improve it.
  • It is particularly easy to see how failing to identify explicit decisions over complicates a business processThis example is from IDS-Scheer and shows how using the usual branching and related structures of a process design can become terribly complex. Not only is this hard to read and use but any change to the decision making logic impacts the process design and adds complexityIn contrast the same process with the complexity of the decision encapsulated in a decision service is simpler, easy to manage and can now be changed independently of the decision logic.
  • Begin!

Transcript

  • 1. Using Business Rules to Make Processes Smarter, Simpler and More Agile James Taylor CEO Decision Management Solutions June 2009
  • 2. James Taylor  Independent consultant working with clients to : Find the right decisions to apply business rules, analytics Implement a decision management blueprint Maximize the value of existing technology investments  Passionate advocate of decision management  20 years experience in all aspects of software 2 © Decision Management Solutions, 2009
  • 3. The One Slide You Need  Current business conditions require smarter, simpler and more agile processes  Making business processes simpler, smarter and more agile requires managed, automated decisions  Business rules are the best platform for automated decisions  Analytics, not just your policies and expertise, must influence operational decisions  Decisions take time to play out so you must test and learn  Decision Management is the business discipline that best leverages business rules and puts analytics and optimization to work in every transaction 3 © Decision Management Solutions, 2009
  • 4. Businesses Are Facing Complex Challenges Real-time Days Timeliness Complex Straightforward Objectives Trade-Offs Local and simple Regulations Complex and global Very High Low Uncertainty Constant Every 3-5 Years Changes to Strategy Increasingly Well-Defined Decision-Making Complex Low High Operational Volume 4 © Decision Management Solutions, 2009
  • 5. Businesses Must Respond  Manage Uncertainty  Ensure Compliance  Improve Agility  Cut Costs  Resource Efficiency  Core Application Value 5 © Decision Management Solutions, 2009
  • 6. Business Process Management Delivers  Manage Uncertainty  Process simulation and impact analysis  Ensure Compliance  Run processes exactly as documented  Improve Agility  Easier workflow and processes changes  Cut Costs  Avoid coding changes to multiple applications  Resource Efficiency  Measure and adapt human workflow  Core Application Value  Share processes across the enterprise 6 © Decision Management Solutions, 2009
  • 7. But More Is Possible  Manage Uncertainty  Predict and test the future  Ensure Compliance  Demonstrate compliance in every action  Improve Agility  Give business users control with stable processes  Cut Costs  Lower maintenance costs and fewer manual reviews  Resource Efficiency  Focus people on higher value tasks  Core Application Value  Modularize and modernize 7 © Decision Management Solutions, 2009
  • 8. When All You Have Is A Hammer Everything Looks Like A Nail 8 © Decision Management Solutions, 2009
  • 9. These Things Are Not The Same Process Decision  Business users determine  Business users determine sequence actions  Based on business policies  Based on and services regulations, policies, expertise, a nalytics  Rapidly model, assemble, deploy, gov  Rapidly define and evolve the ern services behavior of a service  Reuse business processes  Reuse business rules across and services services  End-to-end visibility of  Visibility within critical business business process services 9 © Decision Management Solutions, 2009
  • 10. A Vessel Underwriting Example Gather Policy Application Data May include customer visits, collection of forms, etc. Validate Policy Completeness Triggers more data gathering process Triggers rejection steps Reject Bad process Applicants Conduct Physical Calculate risk and determine Inspections price, may trigger exception handling Underwrite Policy  Process Tasks  Decision Tasks Process Paperwork 10 © Decision Management Solutions, 2009
  • 11. Decision Management A business discipline that builds on existing systems and processes to create processes that: handle uncertainty support business objectives are flexible and business-led are compliant and easy to change are data-driven and constantly improve 11 © Decision Management Solutions, 2009
  • 12. Five Keys To Decision Management Predictive Analytics Business Rules and Optimization Operational Decisions Adaptive Control Decision Analysis and Simulation 12 © Decision Management Solutions, 2009
  • 13. Delivering Decision Management Decision Discovery Decision Services Decision Analysis 13 © Decision Management Solutions, 2009
  • 14. ALL Decisions Matter “Most discussions of decision making assume that only senior executives make decisions or that only senior executives’ decisions matter. This is a dangerous mistake.” Peter Drucker 14 © Decision Management Solutions, 2009
  • 15. Decisions, Decisions, Decisions 15 © Decision Management Solutions, 2009
  • 16. Better Results From Operational Decisions 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Test Group 1 Test Group 2 Test Group 3 Blanket Personalized 16 © Decision Management Solutions, 2009
  • 17. Business Rules Drive Decisions Decision Regulations Policy History Experience Legacy Applications 17 © Decision Management Solutions, 2009
  • 18. Process Rules are Not Decision Rules  Flow control, routing  Analyst/IT ownership  Governed as part of Business the process  Lifecycle dependent Process on process lifecycle Rules Business Process Decision Point  Business decision making Tasks  Analyst/LOB Manager ownership  Governed by the business  Independent lifecycle Decision Rules After Gladys Lam, BRSolutions 18 © Decision Management Solutions, 2009
  • 19. Rules reduce IT costs Non-Programmers No IT resources to Manage Rules make updates 5 months ROI 10-20x not 30 months v hard coding 19 © Decision Management Solutions, 2009
  • 20. Analytics Have Power Customer Online Acquisition Campaign Retention Conversion Rates Response Fraud Wasted Crime Risk Spend 20 © Decision Management Solutions, 2009
  • 21. The Challenge Is To Put Analytics To Work 21 © Decision Management Solutions, 2009
  • 22. Straight Through Processing Eliminated many Underwriters manual reviews manage rules 8 Point Reduction in Combined Ratio Focus on book Improved risk management, agents management 22 © Decision Management Solutions, 2009
  • 23. Impact May Take Time to Play Out 24 © Decision Management Solutions, 2009
  • 24. Closing The Loops Information Evaluate Results Reaction Decision Update Refine Decision Rules, Models Action Business & Analytic Experts Simulate Create Impact Challengers Customer 25 © Decision Management Solutions, 2009
  • 25. Risk and Benefits Process without Decisions Process with Decisions  Decisions an afterthought  Decisions first class object  Decisions buried in process  Decisions linked not buried  Process becomes complex  New process is simplified  Inconsistency of rules likely  One version of rules  Decisions only evolve with  Independent process & process decision changes  Hard to share decisions  Decisions (and Decision Services) are reusable 26 © Decision Management Solutions, 2009
  • 26. Decisions Make Processes Simpler 27 © Decision Management Solutions, 2009
  • 27. Sometimes MUCH Simpler 28 © Decision Management Solutions, 2009
  • 28. Action Plan  Identify your decisions Hidden decisions, transactional decisions, customer decisions Decisions buried in complex processes Decisions that are the difference between two processes  Adopt decisioning technology Adopt business rules approach and technology Investigate data mining and predictive analytics Think about adaptive control  Think about Decisions and Processes Learn, understand and teach the difference Think about their independent lifecycles Manage them both equally 29 © Decision Management Solutions, 2009
  • 29. The One Slide You Need  Current business conditions require smarter, simpler and more agile processes  Making business processes simpler, smarter and more agile requires managed, automated decisions  Business rules are the best platform for automated decisions  Analytics, not just your policies and expertise, must influence operational decisions  Decisions take time to play out so you must test and learn  Decision Management is the business discipline that best leverages business rules and puts analytics and optimization to work in every transaction 30 © Decision Management Solutions, 2009
  • 30. More on Decision Management jtonedm.com decisionmanagementsolutions.com smartenoughsystems.com ebizq.net/blogs/ decision_management brcommunity.com/taylor.php james@decisionmanagementsolutions.com 31 © Decision Management Solutions, 2009