Building Smarter Systems With Decision Services

Building Smarter Systems with Decision Services Business Rules, Decision Management and making your systems smart (enough) James Taylor VP, Enterprise Decision Management Fair Isaac June, 2007

Why Smarter Systems? Decision-Making Boundaries Well-Defined Cross Channels / Geography / Departments Timeliness of Decisions Days Real-time / Point of Contact Level of Objectives Local / Simple Corporate Objectives / Trade-Offs Regulatory Constraints Static / Simple Dynamic / Complex Changes to Decision Strategy Every 3-5 Years Frequent Adjustments Value Creation Workforce Productivity Precision / Consistency / Agility / Cost / Speed Operational Volume Low / Manual High / Automated

Smarter Systems make more decisions People Not Made Embedded People Embedded Not Made New Before After Larger boxes represent more decisions, by volume

More and more decisions can be automated Complexity Value Automated Decisions Expert Decisions Manual Decisions

The basic process

Identify Decisions

Integrate Decision Services

Automate the decision with business rules

Empower the business to manage the rules

Analytically improve the rules

Add predictive insight

Optimise and adapt

Identify Decisions Identify dangerous driving Personalize online experience Take out home insurance Accept or reject a debit card Identify mobile phone fraud Recommend correct drugs and dosage

Integrate Decision Services Customers Employees Partners Suppliers IT Staff Business Expert

Automate the decision with business rules If (vehicle’s age is between 0 years and 8 years) and (policyholder’s age is between 21 years and 60 years) and (policyholder’s number_of_claims does not exceed 3) Then set policyholder’s case to “STANDARD” If order’s purchaseDate is earlier than January 1, 2004 then print(“Your purchase is no longer eligible for return”). If customer's debt exceeds customer’s assets then set the approval_status of customer’s application to Declined

Empower the Business to Manage the Rules

Rule maintenance must be:

A business function

Familiar

Integrated

Secure & controlled

So you business-types want to be able to change your business rules? I want to relax my underwriting policy I want to be able to promote a new product combination I need to add the new regulations

Analytically improve the rules Use: Find the relationships between customers Example : Sort customers into groups with different buying profiles. Operation : Analysis is generally done offline, but the results can be used in automated decisions – such as offering a given product to a specific customer Descriptive analytics can be used to categorise customers into different categories – which can be useful in setting strategies and targeting treatment.

Add predictive insight Use: Identify the odds that a customer will take a specified action Example : Will the customer pay me back on time? Will the customer respond to this offer? Operation : Models are called by a business rules engine to “score” an individual or transaction, often in real time Predictive analytics often rank-order individuals. For example, credit scores rank-order borrowers by their credit risk – the higher the score, the more “good” borrowers for every “bad” one.

Optimize and adapt Use: Design a ruleset that will deliver the right decisions to reach goals Example : Identify how much money to spend on each marketing channel to maximise sales in a given timeframe and budget Operation : Decision models are used offline to develop rules, which can then be deployed to operate in real time Decision Analytics maps the relationships between the data available, the decision itself, the outcomes of the decision and the business objective. It is ideal for balancing multiple objectives and constraints.

Enterprise Decision Management

Automate, Improve & Connect

Automate for speed and consistency

Improve targeting, relevance and results

Connect decisions across functions, channels, customer touchpoints

Enhance Business Performance

Increase customer profitability

Grow and strengthen customer relationships

Reduce fraud and credit risk

Lower costs of making decisions

ENTERPRISE DECISION MANAGEMENT is an approach that automates, improves & connects decisions to enhance business performance

Measure the Value of Decisions Reduce expenses needed to make decisions (Staff time, exception & investigation handling, …) COST Execute decisions and modify processes quickly SPEED Adapt dynamically to changing conditions AGILITY Ensure coherence across channels, business units and geographies CONSISTENCY Make more profitable and targeted decisions PRECISION Reduce expenses needed to make decisions (Staff time, exception & investigation handling, etc) COST Execute decisions faster – even in real time SPEED Adapt dynamically to changing conditions AGILITY Ensure coherence across channels, business units and geographies CONSISTENCY Make more profitable and targeted decisions PRECISION

Taking Control Of Business Optimal Operation Key Performance Indicator e.g. profitability time Operational Limit

An Example The evolution of a retention offer

Automate Decision

Apply rules

Segment customers

Predict risk, value

Optimise decision

X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Web http://www.f Email Call Center Mobile

Fair Isaac Helps Clients Create an Architecture for Enterprise Decision Management Customer Behaviour and Strategy Performance Analytic Development Rules Management Business Intelligence T R A N S A C T I O N E X E C U T I O N D E V E L O P M E N T & M A N A G E M E N T DECISION SERVICE Decision Request Decision Call Center C H A N N E L S ERP CRM BILLING SCM O P E R A T I O N A L S Y S T E M S Web Email Kiosk/ ATM Field Tele- marketing Direct Mail Store/ Branch Process Data, Rules and Analytics to Determine Best Decision Decision Analysis Data Warehouse

Blaze Advisor Awards and Kudos Blaze Advisor is the deepest rules platform Fair Isaac has the strongest multiplatform features “ ” Worldwide Revenue Leader 2005 Blaze Advisor 6.1 is a sophisticated rules management solution - well crafted and robust in functionality Users that choose Blaze Advisor as part of the Enterprise Decision Management (EDM) suite of products get far greater decision making capabilities with their rules management. “ ” ” “ “ ”

All The Pieces Decision Service .NET Decision Service Java Code Gen COBOL Decision Repository Deployment Manager

EDM Works Across Industries From the dot.com space to the call center, there’s broad potential for applying Fair Isaac’s analytic insight throughout the organization. Leveraging our strong partnership with Fair Isaac, we’re in the process of turning this potential into real-world results. Best Buy By integrating the Fair Isaac system with our legacy systems and technologies, we were able to isolate our highest ROI component and renovate it with the best value. California DMV “ ” ” “ You can’t say “we’ll get back to you in a couple of days”. Egg plc “ ” 2/3 of the world’s top 100 banks work with Fair Isaac 200+ retailers use Fair Isaac technology The Top 10 US P&C insurers use Fair Isaac technology

Fair Isaac Fair Isaac combines trusted advice, world-class analytics and innovative applications to help clients make smarter decisions Since 1956, we have helped companies apply analytics and automation to accelerate growth, reduce losses, prevent fraud and manage regulatory compliance We are ranked as the leader in business rules management and analytic applications

Action Plan

Identify EDM applications you already have

Identify the decisions that matter to your customers

Find the hidden decisions that matter

Think about who takes them now – a call centre worker, a manager with higher-value tasks to perform, a programmer writing code?

Think about how often you need to change these decisions and who should drive that decision

Think about what you would like to know about a customer before treating them – can you infer that from your data?

Where can you use EDM to improve your business?

Smart (Enough) Systems Prentice Hall, June 2007

A masterful presentation of an important new idea, Enterprise Decision Management (EDM). Like BPM, EDM is destined to provide a focal point where business minds and IT engineers can find common and very fertile ground to plan for success. There’s simply no alternative if you want your processes to be agile, adaptive and comprehensively compliant. R onald G. Ross Co-Founder, Business Rule Solutions, LLC

If your business needs to make quick, accurate decisions on an industrialized scale, you need to read this book. Thomas H. Davenport, Author of “Competing on Analytics”

James Taylor and Neil Raden are on to something important in this book – the tremendous value of improving the large number of routine decisions that are made in organizations every day. Dr. Hugh J. Watson, University of Georgia

This book shows how to use proven technology to make business processes smarter. It clearly makes the case that organizations need to optimize their operational decisions. It is a must-have reference for process professionals throughout your organization. Jim Sinur, Chief Strategy Officer, Global 360, Inc.

http:// www.smartenoughsystems.com

Things You Can Do