decision camp 2014 - james taylor - decision management 101

Decision Management 101


Decision CAMP 2014


CEO of Decision Management Solutions

We work with clients to improve their business by identifying and modeling decisions, and applying business rules and analytic technology to automate & improve these decisions.

I have spent the last 12 years championing Decision Management.

Your Instructor – James Taylor

© Decision Management Solutions, 2014 2


The Power of Decision Management

Decision Discovery

Decision Services

Decision Analysis

Getting Started

Agenda




The Power of Decision Management


© Decision Management Solutions, 2014

Decision Management

Decision Management allows an organization to control, manage, and automate the repeatable decisions at the heart of its business by effectively applying business rules, analytics, and optimization technology

Decision Management: Increases accuracy

Increases consistency

Increases agility

Reduces decision latency

Reduces costs

It is a proven framework for implementing Business Rules Management Systems and Predictive Analytics

5


Manage Risk

Personalize communication

Detect fraud

Enforce policies and regulations

What Can Decision Management Do?

And more… 6 © Decision Management Solutions, 2014


Strategic Decisions

Tactical Decisions

Operational Decisions

Different Kinds of Decisions

7 © Decision Management Solutions, 2014



Repeatable decisions

Non trivial decisions

With a measurable business impact

That are candidates for automation

Suitable Decisions for Management



Operational Decisions Are Everywhere



Scale For Large Impact

Strategic Decision

Tactical Decision

Operational Decision

10



Straight Through Processing

Processes stop when decisions must be made

Process Process Process Human

Decision Human Decision

Automated Decisions

Straight Through Processing

Manage Rules & Handle Exceptions

A B C

A B C

New

11



Maximize Customer Value

1:1 Marketing

Personalization

Next Best Offer

Next Best Action

Micro Segmentation

All ways of saying “Make each decision about a customer uniquely about that customer”

12



Effectively Manage Risk

Risk is not acquired in “big lumps”

Risk is acquired one transaction at a time Supply chain risk when the

wrong supplier is selected

Credit risk when a bad loan is approved

Delivery risk when a commitment is made for stock not available

…

13



Many Enterprise Systems …

Report but don’t learn

Wait rather than act

Escalate rather than empower

Mindlessly consistent



Automate More Decisions

Complexity

Value

Automated

Decisions

Expert

Decisions

Manual

Decisions



Decision Management Systems


3 stages to better operational decisions

Delivering Decision Management


Identify the decisions that are most important to your operational success

Design and build independent decision services to automate these decisions

Create a “closed loop” between operations and analytics to measure results and drive improvement



Decision Discovery



Repeatable decisions

Non trivial decisions

With a measurable business impact

That are candidates for automation

Suitable Decisions for Management


Business Processes


Discovering Decisions

Business Intelligence

Brainstorm

KPIs

Micro and hidden Decisions


“… provide a common notation that is readily understandable by all business users... DMN creates a standardized bridge for the gap between the business decision design and decision implementation.”

OMG Specification – a peer to BPMN

Decision Management Solutions, IBM, Oracle, TIBCO, FICO, Escape Velocity, KUL, Model Systems, KPI, Visumpoint

Standard content finalized, approval expected Q4-2014

Use Cases

Modeling Human Decision-making

Modeling Requirements for automated Decision-making

Implementing automated Decision-making

Decision Modeling and Notation (DMN)



Decision Requirements Diagram


Information Knowledge

Decision

Increased Precision



Decision Modeling

Identify a Decision Question

Allowed Answers

What is required to make this decision? Information

Reference Data

Transaction Data

Knowledge

Guidelines, policy

Expertise

Regulations

Analytic Insight

The results of other decisions

Reuse decisions

Identify new decisions



Questions

Be specific with questions Subject

Timing

Scope or limitations

Avoid I, we

Questions that start “How”

Decision Good question Bad question

Customer

Retention

Which retention offer

should the company make

this customer when they

call to cancel their service?

How can we retain

this customer?

Supplier

Selection

Which of the company’s

approved suppliers should

be selected for this specific

parts order?

What supplier should

we use?

Preventative

Action

What is the prioritized list

of preventative actions for

this quality team on this

line today?

What preventative

action should the

quality team take?



Allowed Answers

Type Description Notes

Yes/No Yes or No Or True/False, 1/0 etc

Number A numeric value Often constrained to a value in a specific

range

Specific Value One of the values specified in a list For example Accept / Reject / Refer

Database value A value stored in a database Specify how to get the list of options -

products, pieces of content etc.

Other Generally a string or block of text Such as a custom script or personalized

email body

Structure A set of values each of which is of

one the allowed types

Some decisions involve the rolled-up

output of their component decisions.

Single Answer

List of Options

Structure with parts

Supporting Information Messages

Warnings

Notes

Explanations


Decision Requirements Diagram 1


Decision


Business Entities

Consider Reference data

Case or transaction data

Best Practices Stick to logical “clumps” of information

Business objects not technical ones

Could be one system or database, could be many

Each Input Data object can have a data structure

Input Data





Information


Decisions Involve Lots of Knowledge


Decision


This knowledge can be of various types External regulations

Internal policies

Expertise

Best Practices

Analytic Insight

Business Rules are found in Knowledge Sources

Consider What tells me what I must do?

What tells me what I should do?

What tells me what I can do?

What tells me what I will probably do?

What would help me do it better?

“If only we knew xyz we could make a more profitable decision”

Knowledge Sources





Knowledge



Finding Dependencies in Decisions

What information do you need to make a decision Is that information available in the environment

Or must it be determined by making another decision?

Is the decision “atomic” or could someone stop part way through it? If they could get part way through the decision, what are the

logical components of the decision? Where could you stop?

How does someone make the decision? As someone describes the decision they will likely, naturally,

describe it in pieces

Is the decision made differently (or not made) in certain circumstances Decisions that determine those circumstances are therefore

relevant




Increased Precision


Credit Limit Assignment

Credit Limit

Income

< $40,000 >= $40,000

Card Type

Standard $1,000 $2,000

Gold $1,500 $2,500

Applicant Risk

U

Applicant Age

Medical History Applicant Risk Rating

1 > 60

good Medium

2 bad High

3 [25..60] - Medium

4 < 25

good Low

5 bad Medium

Special Discount

Type of Order Web -

Customer Location US -

Type of Customer Wholesaler Retailer -

Special Discount % 10 5 0

F 1 2 3

DMN Decision Tables

Rules as rows

Rules as columns

Crosstab or “classic”



Simplifying Business Processes

Detailed requirements for business rules

Business understanding for analytic projects

Define Decision Service boundaries

Impact analysis

High level overview of decision-making

Improving Business Intelligence deliverables

Training decision-making staff

…

Multiple uses for Decision Models



Decisioning Complicates Processes




Explicit Decisions Simplify

Separating Decisions simplifies Processes

Modeling Decisions brings clarity


Process and Decision Models

Process Model Decision Requirements Decision Logic

Identifies decision tasks Links tasks to Decision Requirements

Models Specifies Decision Logic or business

rules for automated decisions




With Just a Bucket of Rules

How to manage sources?

How much detail for a given rule?

Who owns which rules?

How and where to document rules?

What are these rules for?

What is the right format for a rule?

How do we find the right metaphor for rules?


Decision requirements models break down complex, redundant, hard to manage rules

Each decision and sub-decision is described with simple, unique business rules

Source of rules and information shown

Dependencies are clear

Logical Modeling Helps Manage Rules

Documented sources

Coherent rule groups

Ownership, volatility



Stop Drowning People With Big Data



Decision

Analytics Data

Cut Through By Focusing on Decisions



Link Analytics Explicitly To Action


Identify decision to be improved

Uses a non-technical notation

Model can be built by business analysts



Define Decision Service Boundaries

Find the top most decision nodes that will be automated

Their sub-tree will be implemented in the decision service

Knowledge sources define the business rules or analytics to be implemented

Most information nodes will be data sources outside the decision services

Multiple phases can be defined



Impact Analysis



Decision Services


External Data

Big Data


Building Decision Services

Business Rules

Predictive Analytics


Performance Management

Enterprise Platform


Data Infrastructure

Application Context

Decision Service

Decision Analysis Business Rules


Optimization

Business Process Management

Event Processing Enterprise

Application



Decision Management In Context



Business Decisions Need Rules

Business decisions are

rich in business meaning

Business decisions require

collaboration Business

decisions are constantly changing


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);

}

}

}


Business Rules Can Be Opaque



Business Rules Management Systems



Elements of a BRMS

Decision Service

Testing and Debugging

Technical Rule Management

Non-technical Rule

Management

Impact Analysis

Data Management

Verification and Validation

Deployment

Rule

Repository



Insight

Information

Data

Data, Information, Insight



Usage Scenarios

Confirm or validate expert

rules

Automatically discover patterns

in data

Identify segments or groups with

similar behavior

Predict trends or likely future

behavior


Data Management

Data Preparation

Data Visualization

& Analysis

Model Monitoring

Model Validation

Modeling

Deployment

Model Repository


Elements Of An Analytic Workbench

Rule Repository

Operational Data Store

Decision Service



Decision Analysis



Four Main Drivers Of Change

New regulations or policies

Changes to business

goals

Changes in underlying

data

Overall decision

performance



An Environment For Improvement

• My rules, in context • Only allow changes that make sense

• No unnecessary information

Business User Rules Management

• Rapidly see business impact of changes • Design impact and execution impact • More than testing

Impact Analysis

• Swapset analysis for comparison

• Simulation and what - if analysis • Business performance comparison

Alternatives Assessment

• Model performance monitoring

• Self learning models • Managed model refresh

Analytic Models Management


Decision Models link Business Performance to Execution

Improve Business Performance

Improve Cross-Sell

A

Total Number of

Orders

Most Recent Order

Total Orders last 12

months

Lifetime Order Total

Customer Status

1 >= 5 < 90 days > $10,000 - Gold

2 >=10 < 180 days > $20,000 - Gold

3 >= 20 < 360 days > $40,000 - Gold

4 - < 180 days - > $1,000,000 Gold

5 - - - > $2,000,000 Gold

Gold Customer Determination




Getting Started


Identify your decisions Decisions that matter to customers

Transactional, operational decisions

Decisions that drive your business KPIs

Hidden and micro decisions

Model Decisions Decision and Process Models help clarify requirements

Decision Requirement Models capture Information and Knowledge

Decision Requirement Models decompose decision-making for clarity

Decisions first, rules second Model decisions before writing rules

Work top-down to reveal context

Iteratively extend the model, write the rules, develop the analytics, repeat

Key to Success - Focus On Decisions




Key to Success - Technology Blueprint

Adopt a Business Rules Management System Approach and technology

Management and governance

Change the relationship between business and IT

Integrate Data Mining and Predictive Analytics Data Mining for rules

Predictive reporting

Executable analytics

Make Decision Services part of your architectural approach

Performance Management

Enterprise Platform


Data Infrastructure

Application Context

Decision Service

Decision Analysis Business Rules


Optimization

Business Process Management

Event Processing Enterprise

Application




Key to Success - Three Groups

Business

Decision



Additional Resources

Technologies Available for

Decision Management

Decision Management

Overview

BPMN and DMN

Modeling

DecisionsFirst Modeler

http://decisionmanagementsolutions.com/book

http://decisionmanagementsolutions.com/decision-management-technology



Wrapping Up

Thanks for attending the class

If you have any questions please email us: [email protected]

[email protected]

Lots of additional content on our website, blog, twitter: decisionmanagementsolutions.com

decisionmanagementsolutions.com/blog

@decisionmgt

More about DecisionsFirst Modeler decisionmanagementsolutions.com/decisionsfirst-modeler

mailto:[email protected]

mailto:[email protected]

http://www.decisionmanagementsolutions.com/

http://www.decisionmanagementsolutions.com/blog

http://www.twitter.com/decisionmgt

http://www.twitter.com/decisionmgt

http://decisionmanagementsolutions.com/decisionsfirst-modeler




decision camp 2014 - james taylor - decision management 101

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