Introduction to the Decision Model - Larry Goldberg

Introduction to The Decision
Model
Larry Goldberg
May 24th, 2011

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com

Who is KPI?

Services
Experience FirstSTEP
Service to create
unambiguous, and complete
Financial Services Requirements
Insurance
Thought Leader KPISTEP
Service to perceive, organize
Healthcare and manage Business
Processes and Rules with
The Decision Model Decision Models
Business Logic Framework linking Government
Business with Technology
STEPment
Utilities Mentoring of clients to
Business Process Management
Business Decision Management achieve self-reliance with
Business Rule Management Transportation Center of Excellence
Publications Enterprise Architecture
Training & Certification
Business Analysis Telecommunication
Requirements
Testing Energy

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com 2

Agenda
• Current State: Business Rules
• The Decision Model Bottom Up
• The Decision Model Top Down
• Impact on Business Analysis
• FirstSTEP – A Requirements Framework
• Technology to Enable Decision Management
• Real World Testimony & Case Studies
• The Ways We Can Help
• How to Learn More

“Big Ball of Mud”
Foote & Yoder

Software
Systems


Separation of Concerns
Component Based Application Architecture
Ken Orr

Security Workflow Transaction Business rules
Component Component Component

Presentation Base
Component Application
Business
Reporting/BI Database
Logic
Component Component

What happens to
business logic today?


Business All Too Familiar?
Logic Is this Acceptable?
Business Rule Documentation

Business Process Model


Business
Logic Does this look better?

Business Process Model
Decision Shape

How


Business
Logic Where did the business rules
go?

Decision Model

What
Rule Family

Rule Family Table

Atomic Logic Statement

Agenda

Definition of Business Logic
Business Logic is the means by which the business derives
conclusions from conditions.

The simplest case is the evaluation of a single
condition, leading to a single conclusion.

Condition Conclusion
Person credit rating is Person likelihood of
less than 650 defaulting on a loan is
high


What is an Atomic Piece of
Business Logic?
• One and only one conclusion fact type, such as:
– Person likelihood of defaulting on a loan
– Claim’s eligibility for payment
– Student’s eligibility for financial aid packages
• As many conditions as needed, even zero
• All conditions ANDed together
• No Ors, ELSEs, BUTs, OTHERWISEs (these have
created the chaos in current systems!)


Why are Atomic Pieces Good?

• Ultimate simplicity
• Everyone reduces conditions and conclusions to
exactly the same pieces
• Rigorous principles lead to assembling the pieces
in one and only one way
• Easy to SEE errors and omissions
• Extremely easy to validate and maintain
• Extremely easy to implement in technology


The Rule Family is a Two
Dimensional Table
Multiple Logic Statements that Look Like This:
Person < 650 A Person Is Unstable A Person Is High Person Is High
Credit N Employment N Other Likelihood of
Score D History D Loans Defaulting on a
Amount Loan

Become Two Dimensional Tables called Rule Families Like This:
Conditions Conclusion
Person Credit Score Person Employment Person Other Loans Person Likelihood of
History Amount Defaulting on a Loan
Is less than 650 Is Unstable Is High Is High
Is greater than 720 Is Low
Is less than 720 Is Unstable Is Low Is Medium

Rule Families are Tables that Conform to Rigorous Principles


Simple Rule Family

“A person who has a credit score below 650, an unstable employment history and a
high Other loans assessment is highly likely to default on a loan.”


We start by discovering the conclusion in the sentence or paragraph


Simple Rule Family



We see that the conclusion is “A person is highly likely to default on a loan”


Simple Rule Family


Person Likelihood of
Defaulting on a Loan
is High

We recast the conclusion into a conclusion fact type: Person Likelihood of Defaulting on a
Loan, and we assign it a value of “High”


Simple Rule Family


is High

Next we look for conditions that cause us to reach that conclusion


Simple Rule Family


is High

We see that a “person who has a credit score below 650” is one of the conditions that lead to the
conclusion


Simple Rule Family


Person Credit Score Person Likelihood of
Is less than 650 is High

We recast “Person Credit Score” into a fact type, and we assign an operator “is less than” and
value “650” to it in this row


Simple Rule Family


Person Credit Score Person Likelihood of
Is less than 650 is High

We identify the next condition leading to the conclusion


Simple Rule Family


Person Credit Score Person Employment Person Likelihood of
History Defaulting on a Loan
Is less 650 is Unstable is High
than

We recast Person Mortgage Situation into a fact type, add a new column for this new header,
and we assign the value “Poor” to this row


Simple Rule Family


History Assessment Defaulting on a Loan
Is less than 650 is Unstable is High is High

We identify a “high Other loans assessment” as the third condition leading to the conclusion


Where Do We Get the Condition Values?

Is less than 650 Is Unstable Is High is High

• Starting with the first condition, we ask where its values come from: a web
page or a file? Is it raw, stored data? Is it the result of execution logic?
• Person Credit Score comes from an outside service, simply raw data.
• The value for Person Employment History is an internal judgment or
decision. It comes from evaluating other conditions, such as:
– Person Years at Current Employer
– Person Number of Jobs in the Past Five Years.
• What to do?


Two Rule Families
• We create another Rule Family, this one with conclusion column for
Person Employment History
• This conclusion is known as an Interim Conclusion because it need
not be stored, it is a conclusion-in-flight (during execution)
• This Rule Family comes to a conclusion about a Person Employment
History based on two conditions: Person Years at Current Employer
and Person Number of Jobs in Past Five Years.
• These two Rule Families are naturally linked together with an
“inferential relationship”
Person Years at Current Person Number of Jobs in Person Employment History
Employer Past Five Years

Is less than 500 Is Unstable Is High is High

Decision Model Principles

• Structural Principles – Structural simplicity
• Declarative Principles – Declarative structure
• Integrity Principles – Optimal logical integrity
These Principles ensure that:
• The Decision Model is aligned with its business
purpose
• There are no errors in its logic
• It can execute in any technology (current and future)
The Principles introduce Normalization.

Agenda

Every Decision Model Starts with a
Business Decision
“Business decision: a conclusion a business arrives at through
business logic which is worth managing.”

Fact Type Business Decision
Claim Payment Amount Estimate the claim payment amount
Claim Payment Eligibility Determine Claim Payment Eligibility
Customer Likelihood of Loan Default Determine Customer Likelihood of Loan Default
Insurance Policy Renewal Method Determine insurance policy renewal method
Inventory Item Minimum Stock Level Assess the Inventory Item minimum stock level
Loan Prequalification Determine loan prequalification requirements for a customer
Person BMI (Body Mass Index) Calculate Person BMI
Vendor Performance Index Calculate the Vendor Performance Index

The underlined words (Calculate, Estimate, Determine, Assess, Validate) are “Decision Words”


Determine
Policy
Renewal
Method Decision Model
Notation


Determine
Policy
Renewal
Notation
Policy Renewal Method
Policy Pricing Within Bounds
Policy Underwriting Risk
Manual Underwriting Indicator


Determine
Policy
Renewal
Notation

Policy Discount
Policy Tier


Determine
Policy
Renewal
Notation

Policy Underwriting Policy Pricing Within Manual Underwriting
Pattern Risk Bounds Indicator Policy Renewal Method
1 Is Nonstandard Is Manual Renewal Process
Policy Discount
Policy Tier 2 Is No Is Manual Renewal Process
3 Is On Is Manual Renewal Process
4 Is Standard Is Yes is Off Is Automatic Renewal Process

Policy Pricing
Within
Pattern Policy Tier Policy Discount Bounds
1 ≤ 1 Is No
2 ≤ 1.5 > 10% Is No
2 ≤ 2 > 20% Is No
2 ≤ 2.6 > 22% Is No
2 > 1 ≤ 0% Is Yes
2 > 1.5 ≤ 20% Is Yes
2 > 2 ≤ 22 Is Yes
1 > 2.6 Is Yes

Determine
Policy
Renewal
Method When is it Finished?
How Big Are They?

Policy Pricing Within Bounds Policy Underwriting Risk
Policy Discount Insured Major Ownership Change
Policy Tier Insured Major Location Change
Policy Annual Premium
Policy Discontinued Agent

Policy Discount Insured Major Ownership Change Insured Major Location Change

Policy Grade Insured Minority Stockholder Insured Location Zip-5
Package Grade Insured Majority Stockholder Insured Location Occupied Square Footage
Package Discount Insured Board Change Insured Location Construction
Location State Category Insured CEO Change


Agenda

Option 1
The Decision Model Difference in Process
Models

Option 2

Option 3: Person Conditions Conclusion
Credit Rating Rule Person's Employment Person's Credit
Pattern Person's Debt History Rating
1 is Low is Good = "A"
Person Person
1 is Low is Bad = ?
Debt Employment
History
1 is High is Good = ?
1 is High is Bad = ?

Decision Model Diagram Decision Rule Family Table
Process Model

Simplify the Models, Improve the
Solution, Now You Know How

Before After


Agenda

FirstSTEP

• A Framework
• A Methodology
– Step 1: Validate Scope.
– Step 2: Outline Models
– Step 3: Visualize the target scope.
– Step 4: Iterate & Complete the
Models.
– Step 5: Repackage and Present a
Holistic Requirements Deliverable.


FirstSTEP Scope
• Use the framework* to create scope:

List of List of List of List of List of List of
Things Processes Locations Organizatio Events Business
Important that the in which ns /Cycles Goals/Strat
to the Business the important Significant egies
Business Performs Business to the to the Decisions
Operates Business Business
SWOT
Analysis

*The Zachman Framework is a copyright of John Zachman and Zachman International

Selection of Models

Conceptual Business Network Workflow Master Business
Data Model Process Diagrams Model Schedule Motivation
Fact Type Model Logistic Governance Model
Glossary Business System Model Event Decision
Use Cases Sequence Model
Context State Diagram
Diagram Diagram

Visualization

*The Zachman Framework is a copyright of John Zachman and Zachman International

Application Visualization

• Business analysts, product
managers & UE professionals
assemble visualizations of
possible solutions
• Business and IT stakeholders
“test drive” & provide feedback
in rapid, interactive explorations
• Discussions are more focused &
engaging
• Visualization dramatically
improves communication
between business & IT


Organization Model
Business Enterprise

Motivation Business Business
Unit Unit
Model
Function Function Function

Vocabulary Models:
Glossary/Semantic Model
Decision
Logical Data Model
Object Model
Use Cases

Decision Model:
business rules and
business logic

Process Model

Business
Requirements & Test
Cases
SOA Components


Agenda

What is Sapiens DECISION?
Business Decision Management System:
• Sapiens DECISION is an enterprise level Business Decision Management
System that implements The Decision Model

• Sapiens DECISION enables
– Sharing of business logic throughout the enterprise and beyond
– Complete separation of business logic
– Business user empowerment
– Traceability from the business objectives and motivations through to the
implementation
– Comprehensive glossary support
– Extensive testing capabilities
– Full life cycle support

• Sapiens DECISION deploys The Decision Model to a BRMS (rules engine)
for production execution and may include an integrated rules engine

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com 44 44

Sapiens DECISION Functionality

Testing &
Rule Family
Automated Test
Table
Case
Development
Generation
Graphical Reporting &
Modeling Analytics Connectivity

Robust Traceability,
Audit & Impact Governance &
Glossary
Analysis Versioning
Function
Enforcement of
Decision Model Enterprise
Principles Support

46

Graphical Modeling using the
Decision Model Notation
Sapiens DECISION supports user-friendly creation and
maintenance of graphical decision models
Enables business users to model decisions before having the
detailed rule logic

47

Rule Family Tables
Rule Family Tables are created from the graphical model, allowing
users to populate, manipulate and manage rule families

48

Robust Glossary Function
Glossary of fact types and domains is automatically created from
The Decision Model diagram for easy business user reference

49

Advanced Decision Model
Methodologies in Sapiens DECISION
• Sapiens DECISION incorporates the very latest Decision
Model methodologies on an exclusive basis:
– ViewGroups – enable the enterprise to be fully modeled and
support customized views in unique business contexts
– Glossary hierarchies – provide enterprise capability with
federated glossaries and both centralized and federated
glossary management
– Decision Views – customized logic within decision models for
specific purposes (e.g., customers, geography, regulatory
regimes) while still sharing common logic
– Rule Family Views – reusability of customized logic across
decision views
– List Fact Types – expand the flexibility of The Decision Model
– Messaging – add unlimited messaging capability in the
deployment environment
© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com 50 50

Sapiens DECISION
Roadmap 1
• Release 1 – Immediate Availability
• Ready to build enterprise scale decision base:
– Internet-based Application
– Enterprise capable
– Source Documents
– Decision View Support
– Rule Family Build
– Model checking – enforcing The Decision Model principles
– Graphics support
– Impact Analysis
– Versioning
– Audit
– Governance
– Security
– Interface to deployment environments
– Built in rules engine


Sapiens DECISION
Roadmap 2
• Release 2 – Available Q3 - Q4 2011
• BDMM Level 4 Capability
– Enhanced Decision View support
– Full Rule Family View support
– Enhanced Rich Internet Interface
– Process enabled governance
– Business Change Document management
– Whiteboard analysis
– Cell Wizards
– Rich Glossary Support – Communities
– ViewGroups for business context
– Enhanced impact analysis
– Enhanced reporting
– Advanced Query for complex searches and impact analysis
– Enhanced Model checking
– Automated deployment packaging
– Enhanced Interfaces to deployment environments
– Business Decision Messages
– Decision Catalogue Printing


Sapiens DECISION
Roadmap 3
• Release 3 – Available Q2 2012
• Beyond BDMM Level 4
– Inline testing and test script development
– Enhanced Business Change Document management
– Extended business context capability for mass customization
– Business Communities
– User defined objects and forms, with graphics support
– Automated document parsing and analysis
– Smart Business Decision messages
– Enhanced Decision Catalog printing
– User defined Interfaces to deployment environments
– Automated generation of Decision Services
– Integration with BPMS tools


Agenda

Real World Testimonial
• “The Decision Model’s principles and normalization rules give us confidence
we can get repeatability and consistency amongst business analysts when
performing rules analysis.
• In addition, the structural integrity of the Decision Model makes the
technology implementation straightforward
• IT and Operations have agreed to use our decision model as business
requirements for business logic changes – this will greatly speed up the change
process
• In addition, the use of a COTS BRMS solution will allow us to take advantage of
additional capabilities over time, such as enhanced testing and decision-
warehousing capabilities.“
• From policy to automation reduced by 30% in time, while delivering 66% more
changes
Mark Pettit, Freddie Mac, Operations Management Group, MIT IQIS, July 15, 2010


Project #1: 3 Months

Business Motivations Challenges, Deliverables
– Increase customer satisfaction – Policies described error-free
conditions, had to discover error
– Improve Data Quality conditions
– Reduce errors in critical – “overloaded” fact types
transaction – Policies had logic errors
– First Decision Model = 38 hours
– 98% error-free by Q4 2011 – Customized view = 5 hours
– 100% error-free by 2012 – “High” complexity
– Reduce risk of transactions • 12 Rule Families in first Decision View
• 7 Rule Families in customized view
(delinquent contracts) • 24 fact types in all
– No way to measure before • Some fact type values not available
because 98% rules were – 5 other decision models, one with 70
scattered across multiple Rule Families
systems – Largest Decision View = 300 Rule
Families, 44 pages


Project #2: Process
Improvement
• Entire Project Completed in 3 Months
• Updated Process Models
• Decision Models:
– Number of Decision View: 40 (approx.)
– Number of Rule Family Views: 700 (approx.)
• Glossary:
– Total Number of Fact Types: 1,400 (approx.)
– Number of Persistent Fact Types: 750 (approx.)
– Number of Interim Fact Types: 650 (approx.)
• Built and tested custom rules engine and messaging
system

Project #3: Process
Improvements

• Before The Decision Model:
– 200 transactions with errors  90 hrs
– 200 transactions without errors 30 hrs
• After The Decision Model:
– 200 transactions with errors  3 mins 30 secs (with
error messages and step by step instructions on how
to correct each error)
– 200 transactions without errors  3 mins 30 secs


Project #3: How?
• There is no longer any room for
misinterpretation of the Business Logic
requirements
• The business logic is easy to understand and
available for everyone to see
• The business logic can be updated without
changing the process and visa versa
• Business logic can be changed in the system
within two business days


Project #3: Statistics
• 5 Decision Views
– 95 Rule Family Views
• 10 Weeks
– Decision Views created in approximately 5 weeks
• Included two iterations of validation
• Iterative Improvements were added through the project based on analysis
– Decision Views were implemented in Code and tested in
approximately 5 weeks
• New plans will reduce this time
• Business rules engine will be ready to run as a service early next year
• 30-60 Hours of Testing
– 2,200 test cases created in approximately 2 weeks
– Most test cases were created in automated fashion
– A new release takes 30 minutes to 2 hours to test


Agenda

The Ways we can Help

Skills and Knowledge Transfer
Training Certification Mentoring

Pilot KPISTEP Target Project STEPment

Increment 1 Increment 2 Increment n
(3 weeks) (3 Months) (3 Months) (3 Months) On- Off-Site On- Off-Site
1 week 5 weeks 1 week 5 weeks

Fixed price Fixed price Fixed price Fixed price
Time boxed Time boxed Time boxed Time boxed

Environment for Managing Decisions


Value Proposition
• Unambiguous, traceable and complete
Requirements
• Most rapid approach to capturing business logic
• Straight through processing from requirements
to automation
• Significant simplification of business process
• Innovative improvement in and governance of
business decisions, data quality and data
transformation services
• Continuous change in an agile world

How to Learn More
Visit www.kpiusa.com Become a member of
the open Linkedin
• FREE PRIMER The Decision Model
• Updated Events Group
• Download White Papers
• News

Read our articles Join our presentations
and buy our books

Contact us
www.enterprise-design.eu Try It Yourself:
www.rulemanagement.com Ask for “free” Visio and Excel Templates
www.TheDecisionModel.com lgoldberg@kpiusa.com
Discuss with us how to apply The Decision Model for your
Requirement or Business Rules project.


Introduction to the Decision Model - Larry Goldberg

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