Implementing analytics? You need decision modeling and business rules

1. Implementing Analytics? You Need Decision Modeling and Business Rules JamesTaylor, CEO

2. 1 2 3 4 5 6 AGENDA The power of analytics Challenges in analytics Introducing business rules Integrating business rules and analytics Decision Management Wrap Up

3. ©2009-2017 Decision Management Solutions 3 The one slide you need Analytics have great potential to improve day to day operations Challenges include Business value gap Engaging the business and IT Deployment A business rules management system (BRMS) is an ideal platform for analytics Decision Management ties analytics and business rules together in an effective decision model framework

6. ©2009-2017 Decision Management Solutions 6 And that power is operational How do I… prevent this customer from churning? convert this visitor? acquire this prospect? make this offer compelling to this person? identify this claim as fraudulent? correctly estimate the risk of this loan? It’s not just about “aha” moments It’s about making better operational decisions

14. Analytics improves operations but… Power of analytics is in improving operations Specifically operational decisions Which means : Focus on actions not predictions Minimize the time to impact Engage analytics, IT, and business teams Handle monitoring and compliance ©2009-2017 Decision Management Solutions 14

16. Introducing business rules

17. What are business rules? “… a directive intended to influence behavior.” “… a formal expression of knowledge or preference, a guidance system for steering behavior (a transaction) in a desired direction.” “… statements of the actions you should take when certain business conditions are true.” ©2009-2017 Decision Management Solutions 17

20. public class Application { private Customer customers[]; private Customer goldCustomers[]; ... public void checkOrder() { for (int i = 0; i < numCustomers; i++) { Customer aCustomer = customers[i]; if (aCustomer.checkIfGold()) { numGoldCustomers++; goldCustomers[numGoldCustomers] = aCustomer; if (aCustomer.getCurrentOrder().getAmount() > 100000) aCustomer.setSpecialDiscount (0.05); } } } Unmanageable business rules ©2009-2017 Decision Management Solutions 20

21. Decision Service A Business Rules Management System After Smart (Enough) Systems, Prentice Hall June 2007. Fig 6.6 Design Tools Rule Management Applications Rule Engine Operational Database Rule Repository Production Application Validation and Verification Testing Deployment ©2009-2017 Decision Management Solutions 21

22. Manageable business rules Smart (Enough) Systems, Prentice Hall June 2007. Fig 4.3 If customer is GoldCustomer and Home_Equity_Loan_Value is more than $100,000 then college_loan_discount = 0.5% If member has greater than 3 prescriptions and prescription’s renewal_date is less than 30 days in the future then set reminder=“email” If patient’s age is less than 18 and member’s coverage is “standard” and member’s number_of_claims does not exceed 4 then set patient’s coverage to “standard” ©2009-2017 Decision Management Solutions 22

23. ©2009-2017 Decision Management Solutions 23 Rule Sheets Set of rules that share common action(s) Sequence does not matter Typically exhaustive and exclusive Sometimes called a decision table, rule family Name Condition Attribute 1 Condition Attribute 2 Condition Attribute 3 Action Attribute 4 Rule 1 > 2 < 3 =6 Rule 2 <=2 >=3 =12 Rule 3 <=2 <3 True =13 Rule 4 <=2 <3 False =14 Rule 5 >2 >=3 True =10 Rule 6 >2 >=3 False =2

24. ©2009-2017 Decision Management Solutions 24 Decision Table Set of rules that return a single result Look up tables, comparing attribute values Sequence does not matter Typically exhaustive and exclusive Attribute 2 Single Family with no children Family with children Attribute1 < 10 1 2 3 11 – 20 2 4 6 21 – 40 3 5 7 41 – 99 4 6 8 >= 100 5 6 9

25. ©2009-2017 Decision Management Solutions 25 Decision Tree Set of rules that select a goal from a set Divides into increasingly fine grained groups Often a powerful thinking tool Typically exhaustive and exclusive Existing Customer? Long term customer? Grandfather Issue change Price quoted Retract quote Issue warning Y N Y N Y N

26. ©2009-2017 Decision Management Solutions 26 A list of rules representing a rule set AdjustIncome RuleSet (newApplicant) Name: Six months or less on the job if newApplicant’s monthsInCurrentJob is less than or equal to 6 then decrement newApplicant’s income by 5600 Name: About 1 year if newApplication’s monthsInCurrentJob is between 6 and 13 then increment newApplicant’s income by 1000 Name: Greater than 1 year if newApplicant’s monthsInCurrentJob is greater than 12 then increment newApplicant’s income by 2500 Name: Computer Total Income if newApplicant is married and newApplicant’s spousalIncome is greater than 0 then newApplicant’s totalIncome is equal to newApplicant’s income plus newApplicant’s spousalIncome else newApplicant’s totalIncome is equal to newApplicant’s income Name: Minimum Income if newApplicant’s totalIncome is less than 40000 then newApplicant is not eligible Smart (Enough) Systems, Prentice Hall June 2007. Fig 6.3

27. Why manage business rules Improve Decision Making • Clear policies and procedures • Consistently applied across channels, systems • Increased accuracy from business users participation Business Agility • More rapid response to business threats • Fewer missed opportunities • Faster time to market Reduce Costs • Fewer resources, less time to change decisions • Lower fines, legal costs from bad decisions • Reduced IT costs to implement decisions ©2009-2017 Decision Management Solutions 27

28. Cross-channel coordination ensures that all relevant offers, including loyalty programs, are combined at the point of sale, with consistent pricing rules applied. ©2009-2017 Decision Management Solutions 28 Case: International retailer

29. Integrating business rules and analytics

30. 30 Different kinds of analytics Data Mining Who are my best/worst customers? How do I turn my data into rules for better decisions? Predictive Analytics How are those customers likely to behave in the future? How do they react to the myriad ways I can “touch” them? Knowledge - Description Action - Prescription Business Intelligence How do I use data to learn about my customers?What has been happening in my business? ©2009-2017 Decision Management Solutions * * * * **** ** * * ** * * * * * * * * * * * * * * * * * * * * ** * * ** * * *** * * * ** *** **

34. Existing Customer? Long term customer? Grandfather Issue change Price quoted Retract quote Issue warning * * * * * * * * ** * * ** * * * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * ** ** Low-moderate income, young High Income High income, low-moderate education Moderate-high education low-moderate income High Moderate education, low income, middle-aged Low education, low income Education High Descriptive analytics ©2009-2017 Decision Management Solutions 34

35. Predictive analytics Attribute 2 Single Family with no children Family with children Attribute1 < 10 1 2 3 11 – 20 2 4 6 21 – 40 3 5 7 41 – 99 4 6 8 >= 100 5 6 9 ©2009-2017 Decision Management Solutions 35

36. Scorecards are a powerful tool Years Under Contract 1 0 2 5 More than 2 10 Number of Contract Changes 0 0 1 5 More than 1 10 Value Rating of Current Plan Poor 0 Good 10 Excellent 20 Score Smart (Enough) Systems, Prentice Hall June 2007. Fig 5.4 30 ©2009-2017 Decision Management Solutions 36

37. Building Decision Services Smart (Enough) Systems, Prentice Hall June 2007. Fig 5.1 Production ProcessData Warehouse Operational Data Store Business Rules Business Analytics Decision Service Enterprise IT Infrastructure Adaptive Control Events ©2009-2017 Decision Management Solutions 37

39. Decision Management

40. Decision Management Ties analytics and business rules together in an effective decision model framework Models decision-making (DMN standard) Integrates with execution environment Builds on existing enterprise architecture ©2009-2017 Decision Management Solutions 40

41. ©2009-2017 Decision Management Solutions 41 Delivering Decision Management 3 stages to better operational decisions Identify the decisions (usually about customers) that are most important to your operational success Design and build independent decision services to replace decision points embedded in operational systems Create a “closed loop” between operations and analytics to measure results and drive improvement

42. Case: State dept of taxation Business challenges Solution Benefits Paper tax returns increased costs and slowed responses Information system silos Manual fraud detection and return review Single central taxpayer database Integrated system Sophisticated real- time predictive analytics Recovered millions of dollars from dubious tax returns Increased collection of unpaid taxes Decreased number of questionable returns Increased customer satisfaction ©2009-2017 Decision Management Solutions 42

43. Implementing Analytics Gets Results Actions not predictions Minimum time to impact Engage IT, Business Handle monitoring , compliance Decision Management ties analytics and business rules together in an effective decision model framework ©2009-2017 Decision Management Solutions 43

44. Wrap Up

45. ©2009-2017 Decision Management Solutions 45 The one slide you need Analytics have great potential to improve day to day operations Challenges include Business value gap Engaging the business and IT Deployment A business rules management system (BRMS) is an ideal platform for analytics Decision Management ties analytics and business rules together in an effective decision model framework

47. Decision Management Solutions Decision Management Solutions can help you Focus on the right decisions Implement a blueprint Define a strategy Learn more: Contact Us www.decisionmanagementsolutions.com info@decisionmanagementsolutions.com ©2009-2017 Decision Management Solutions 47

48. Thank you! James Taylor, CEO james@decisionmanagementsolutions.com www.decisionmangementsolutions.com