Challenges and opportunities in customer-led services James Taylor Fair Isaac Corporation

Enterprise Decision Management Enterprise Decision Management (EDM) is a systematic approach to automate and improve decisions across the enterprise. It allows businesses to: Make more profitable and targeted decisions PRECISION In the same way, over and over again CONSISTENCY While being able to adapt “on-the-fly” AGILITY

Enterprise Decision Management (EDM) is a systematic approach to automate and improve decisions across the enterprise.

It allows businesses to:

Agenda Customer-led services What are they Why are they going to happen Where are they going to happen Some examples Present Future Challenges with customer-led services Organizational Technological Ethical

Customer-led services

What are they

Why are they going to happen

Where are they going to happen

Some examples

Present

Future

Challenges with customer-led services

Organizational

Technological

Ethical

Characteristics of Customer-led Services Personalization Rewards Loyalty Analytic targeting Rules for policies, preferences Predictions of responses Channel Consistency Stronger customer relationships Customers preferred channels Customer value drives interaction Pricing Variable pricing Multiple pricing mechanisms Shared value established Empowerment Fewer approvals, faster decisions More response-oriented Third parties act like you Customers can self-serve http://www.f

Personalization

Rewards Loyalty

Analytic targeting

Rules for policies, preferences

Predictions of responses

Channel Consistency

Stronger customer relationships

Customers preferred channels

Customer value drives interaction

Pricing

Variable pricing

Multiple pricing mechanisms

Shared value established

Empowerment

Fewer approvals, faster decisions

More response-oriented

Third parties act like you

Customers can self-serve

Why Customer-led Services? Growing important of information in products Response to threats to traditional business from the explosion and prevalence of the Internet Price transparency Customer mobility and a lack of loyalty The Long Tail An opportunity to create competitive advantage from customer data

Growing important of information in products

Response to threats to traditional business from the explosion and prevalence of the Internet

Price transparency

Customer mobility and a lack of loyalty

The Long Tail

An opportunity to create competitive advantage from customer data

Adverse selection and micro-segmentation Price Risk Ideal Pricing Model Over/Under-priced segments

For what products will you see them? Information Insurance Banking Credit Mass-Customizable Clothing Electronics Long Tail Books Music Content Complexity Value Automated Decisions Expert Decisions Manual Decisions Manual Decisions

Information

Insurance

Banking

Credit

Mass-Customizable

Clothing

Electronics

Long Tail

Books

Music

Content

Current Example - Pay as you drive insurance Logical extension of micro-segmentation Use of a far broader range of variables and predictive analytics Precisely rate the risk presented by individual consumers. Static measures of risk Driver's age Driving history Commuting distance Dynamic measures Speed Time of day Location A pricing band for every single policyholder they serve

Logical extension of micro-segmentation

Use of a far broader range of variables and predictive analytics

Precisely rate the risk presented by individual consumers.

Static measures of risk

Driver's age

Driving history

Commuting distance

Dynamic measures

Speed

Time of day

Location

A pricing band for every single policyholder they serve

Current Example – Amazon.com

Getting closer with My amazon.com

Future Example - Personal online shopping Site reconfigures itself to suit me Explicitly through instructions (rules) Implicitly though analysis (analytics) Channels are integrated Email, IM, Mobile, Phone, Store(s), Mashups Choices and actions (or comments) in one affect the others Offers, pricing, shipment are dynamic Based on the specific purchase consideration Loyalty is rewarded If information is available that could improve my experience, it is used

Site reconfigures itself to suit me

Explicitly through instructions (rules)

Implicitly though analysis (analytics)

Channels are integrated

Email, IM, Mobile, Phone, Store(s), Mashups

Choices and actions (or comments) in one affect the others

Offers, pricing, shipment are dynamic

Based on the specific purchase consideration

Loyalty is rewarded

If information is available that could improve my experience, it is used

Current Example – Online Banking

Future Example - Personal banking The website does more than show my accounts It stops asking me to open accounts I have It stops asking for information for new accounts that it already has It makes recommendations on credit cards it does not just list them It feeds information about what I look at into offer models Pricing and offers are made in real time to suit me It makes it easy for me to do the things I always do And so on… Meanwhile… The ATM remembers you and reconfigures itself The IVR reconfigures based on wait times, status, past behavior … The monthly statement highlights out of pattern activities Branch staff make intelligent suggestions based on your recent behavior and the behavior of successful customers with a similar profile

The website does more than show my accounts

It stops asking me to open accounts I have

It stops asking for information for new accounts that it already has

It makes recommendations on credit cards it does not just list them

It feeds information about what I look at into offer models

Pricing and offers are made in real time to suit me

It makes it easy for me to do the things I always do

And so on…

Meanwhile…

The ATM remembers you and reconfigures itself

The IVR reconfigures based on wait times, status, past behavior …

The monthly statement highlights out of pattern activities

Branch staff make intelligent suggestions based on your recent behavior and the behavior of successful customers with a similar profile

Challenges in developing customer-led services Organizational Design, deployment, lifecycle, innovation... Some banks now release hundreds of new products a month Price transparency and intra-P&L pricing Channel consistency Ending the separation between back and front office Ethical Data privacy Business mashups and privacy Cross-border regulations

Organizational

Design, deployment, lifecycle, innovation...

Some banks now release hundreds of new products a month

Price transparency and intra-P&L pricing

Channel consistency

Ending the separation between back and front office

Ethical

Data privacy

Business mashups and privacy

Cross-border regulations

Technology Challenges Process integration Third-party integration Integrating services into delivery processes and systems Deployment Software for defining, testing and executing rules, processes and strategies Analytics for predicting individual behavior and for identifying best actions to meet objective Analytics for analyzing and understanding individual and group behavior Acquire, access, deliver and manage data from internal and external sources DESCRIPTION Ownership Change management Auditing Legality Balance v choices Demographics Data Sources Privacy Real-time Issues Business Rules Predictive Analytics Descriptive Analytics Data Access & Management TECHNOLOGY

What rules look like 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 flight’s onTimeReliability is less than 75% then flight’s valueToMe is “Low”. If customer's debt exceeds customer’s assets then set the approval_status of customer’s application to Declined

Descriptive Models Identify Relations 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 models can be used to categorize customers into different categories – which can be useful in setting strategies and targeting treatment.

Predictive Models Calculate Risk Or Opportunity 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 models 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.

Bringing this all to bear Models Rules Analytic Models Business Rules Decision Service Data Request for Decision Decision Decision Analysis Customer Behavior and Strategy Performance Rule & Model Repository http://ww Call Center Web Email Telemarketing CHANNELS Direct Mail Store / Branch Kiosk / ATM Field ERP CRM OPERATIONAL SYSTEMS Billing SCM

Fair Isaac Corporation – Automating decisions for 50 years Founded in 1956 NYSE symbol: FIC Annual revenues over $800 million Market cap: Over $3 billion 3,000 employees Software engineers, PhDs, data analysts, consultants… Background in analyzing data, predicting outcomes, making decisions Credit scoring Customer acquisition / origination / management Risk assessment Fraud detection

Founded in 1956

NYSE symbol: FIC

Annual revenues over $800 million

Market cap: Over $3 billion

3,000 employees

Software engineers, PhDs, data analysts, consultants…

Background in analyzing data, predicting outcomes, making decisions

Credit scoring

Customer acquisition / origination / management

Risk assessment

Fraud detection

Closing Thoughts Consider customer-led service design Think about micro-segmentation Think about automation of decisions Read my Blogs Read my blog at http:// www.edmblog.com Read my (other) blog at http:// www.eizq.net/blogs/decision_management Subscribe to the blog(s) with RSS or email E-mail me [email_address] Ask me questions now!

Consider customer-led service design

Think about micro-segmentation

Think about automation of decisions

Read my Blogs

Read my blog at http:// www.edmblog.com

Read my (other) blog at http:// www.eizq.net/blogs/decision_management

Subscribe to the blog(s) with RSS or email

E-mail me

[email_address]

Ask me questions now!