Using business rules to make processes simpler, smarter and more agile

Using Business Rules to Make Processes
Smarter, Simpler and More Agile

Session ID 1582
James Taylor
CEO
Decision Management Solutions
IBM IMPACT 2009 Conference
May 2009

James Taylor
 Independent consultant working with clients to :
Find the right decisions to apply business rules, analytics
Implement a decision management blueprint
Maximize the value of existing technology investments

 Passionate advocate of decision management
 20 years experience in all aspects of software

© Decision Management Solutions, 2009
2

The One Slide You Need
 Current business conditions require smarter, simpler and
more agile processes
 Making business processes simpler, smarter and more agile
requires managed, automated decisions
 Business rules are the best platform for automated
decisions
 Analytics, not just your policies and expertise, must
influence operational decisions
 Decisions take time to play out so you must test and learn
 Decision Management is the business discipline that best
leverages business rules and puts analytics and
optimization to work in every transaction
3

Businesses Are Facing Complex Challenges
Real-time
Timeliness
Days

Complex
Objectives
Straightforward
Trade-Offs

Regulations Complex and global
Local and simple

Very High
Uncertainty
Low

Constant
Changes to Strategy
Every 3-5 Years

Increasingly
Decision-Making
Well-Defined
Complex

High
Low
Operational Volume

4

Businesses Must Respond
 Manage Uncertainty

 Ensure Compliance

 Improve Agility

 Cut Costs

 Resource Efficiency

 Core Application Value

5

Business Process Management Delivers
 Manage Uncertainty  Process simulation and
impact analysis
 Ensure Compliance  Run processes exactly as
documented
 Improve Agility  Easier workflow and
processes changes
 Cut Costs  Avoid coding changes to
multiple applications
 Resource Efficiency  Measure and adapt human
workflow
 Core Application Value  Share processes across
the enterprise
6

But More Is Possible
 Manage Uncertainty  Predict and test the future

 Ensure Compliance  Demonstrate compliance in
every action
 Improve Agility  Give business users control
with stable processes
 Cut Costs  Lower maintenance costs
and fewer manual reviews
 Resource Efficiency  Focus people on higher
value tasks
 Core Application Value  Modularize and modernize

7

We Need Processes That Are
 Smarter
Learn from data
Learn through experimentation

 Simpler
Transparent and Demonstrably Compliant
Externalized decisions

 More Agile
Business-Driven
Process Agility AND Decision Agility

 And
Operational
Real-Time
Customer-Centric
8

These Processes Make More Decisions

Manual Not Made
Managed
Before

After Not Made
Manual
Managed

New
Larger boxes represent more decisions, by volume

Smart (Enough) Systems, Prentice Hall 2007

9

More And More Operational Decisions Can
Be Automated

Expert
Decisions

Value Manual Decisions

Automated
Decisions

Complexity
Smart (Enough) Systems, Prentice Hall 2007

10

When All You Have Is A Hammer

Everything Looks Like A Nail

11

These Things Are Not The Same

Process Decision
 Business users determine  Business users determine
sequence actions
 Based on business policies  Based on
and services regulations, policies, expertise, a
nalytics
 Rapidly model, assemble,
 Rapidly define and evolve the
deploy, govern services
behavior of a service
 Reuse business processes
 Reuse business rules across
and services
services
 End-to-end visibility of
 Visibility within critical business
business process
services
12

A Vessel Underwriting Example
Gather Policy
Application Data
May include customer
visits, collection of
forms, etc.
Validate Policy
Completeness
Triggers more data
Triggers rejection
gathering process
Reject Bad process
steps
Applicants

Conduct Physical
Inspections
Calculate risk and determine
price, may trigger exception
handling
Underwrite Policy
 Process Tasks
 Decision Tasks
Process
Paperwork
13

Decision Management
A business discipline that builds on existing
systems and processes to create processes
that:
handle uncertainty
support business objectives
are flexible and business-led
are compliant and easy to change
are data-driven and constantly improve

14

Five Keys To Decision Management

Predictive Analytics
Business Rules
and Optimization

Operational
Decisions

Adaptive Control
Decision Analysis
and Simulation

15

What Is A Decision Anyway?
 Decisions involve a choice, a selection of a course of action.
 Decisions are arrived at after some consideration
 Decisions ends uncertainty or dispute about something
 Decisions select from alternatives
 Decisions result in an action being taken, not just knowledge
being added to what’s known.

16

Delivering Decision Management

Decision Discovery

Decision Services

Decision Analysis

17

Decision Discovery
• Find and Prioritize
• Link to business objectives and measures
• Manage for reuse and consistency

Decision Services
• Define business rules for compliance
• Empower business owners for agility
• Analytically enhance for increased accuracy

Decision Analysis
• Measure then improve
• Simulate, test and learn
• Close the loop and optimize over time
18

Different Kinds Of Decisions
High
ECONOMIC IMPACT OF INDIVIDUAL DECISION
High-value,
low-volume
decisions

Medium-value,
medium-volume
decisions

Low-value, high-
volume decisions

Low
Low High
DECISION VOLUME
After Smart (Enough) Systems, Prentice Hall 2007
19

ALL Decisions Matter

“Most discussions of decision making assume
that only senior executives make decisions
or that only senior executives’ decisions
matter. This is a dangerous mistake.”

Peter Drucker

20

Decisions, Decisions, Decisions

21

Better Results From Operational Decisions

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Test Group 1 Test Group 2 Test Group 3
Blanket Personalized

22

Types Of Operational Decisions
 Eligibility  Risk
“Is this person eligible for Risk is acquired one
this product/service” transaction at a time
Should be made A big gap between a
consistently every time. good decision and a bad
They are rules-based Analytics and rules

 Calculations  Opportunity
Mostly rules-based Customer-centric.
The rules are generally A small gap between
fixed and repeatable. good and bad decisions.
Calculations are often Analytics predict
embedded in code response and potential
23

What Are Operational Decisions For?
Event
2
Event Event
What
1 3
Step 1 Step 2
Next?

What
Next?

Should I
do this? ..or that?

24

Decision Discovery

Decision Services

Decision Analysis
25

Applications have evolved

User Interface
Browser

Process Logic
BPM

Data
Enterprise
Database

26

Evolution Completed

What is a decision service?

A self-contained, callable
service with a view of all
the conditions and actions
that need to be considered
to make an operational
business decision.
Logic
Decision Services
A service that answers a
business question for other
services and processes.

27

Decisions Remain In Sync With Market Changes
Conventional Approach Decision Management

Other Systems
CRM
CRM
System
Decision
System
Service

Other Systems
Infrequent code changes
Frequent code changes

Programmers Programmers

Frequent policy changes
Policy Changes

Businessusers
Businessusers
Smart (Enough) Systems, Prentice Hall June 2007. Fig 2.11

28

How People Make Decisions

Analysis of
Context Information

Expertise
and
experience
Pre-
conceptions
& biases

Policies and
regulations

29

The Decision Management Stack

Business Process Management

Decision Service

Optimization Adaptive
Control
Data Monitoring
Analytics
Simulation Decision
Business
Analysis
Rules

Platform

30

Building Decision Services

Predictive
Analytics

System
Decision
Service Business
Business Process
Data
Rules
Warehouse
Enterprise IT Infrastructure

Adaptive
Operational
Control
Data Store

Smart (Enough) Systems, Prentice Hall June 2007. Fig 5.1

31

Business Rules Drive Decisions

Decision Regulations
Policy

History

Experience
Legacy Applications

32

Why Manage Business Rules
Reduce Costs
• Fewer resources, less time to change decisions
• Lower fines, legal costs from bad decisions
• Reduced IT costs to implement decisions

Improve Decision Making
• Clear policies and procedures
• Consistently applied across channels, systems
• Increased accuracy from business users control

Business Agility
• More rapid response to business threats
• Fewer missed opportunities
• Faster time to market
33

Business Rules Management System
Decision Validation
Services
Testing
Validation
and
Verification

Decision
Deployment
Service Production
Rule
Application
Repository
Rule
Engine

Rule Execution
Server
Design Rule
Tools Management
Applications

Operational
Rule Team Database
Rule Studio Server

After Smart (Enough) Systems, Prentice Hall June 2007. Fig 6.6

34

Process Rules are Not Decision Rules

Flow control, routing

Analyst/IT ownership

Business
Governed as part of

the process
Process
Lifecycle dependent

Rules
on process lifecycle

Business Process

Decision Point
Business decision making

Tasks Analyst/LOB Manager

ownership
Governed by the business

Independent lifecycle


Decision Rules
After Gladys Lam, BRSolutions

35

Help the Business to Manage Decisions

I want to relax my
underwriting
policy

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

No…

36

Which Would Your Users Prefer?
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);
}
}
}

37

Or Maybe They Would Rather Use Word…

38

Rules reduce IT costs

Non-Programmers No IT resources to
Manage Rules make updates

5 months ROI 10-20x
v hard coding
not 30 months

39

Five Keys To Decision Management

Predictive Analytics
Business Rules
and Optimization

Operational
Decisions

Adaptive Control
Decision Analysis
and Simulation

40

Defining Analytics
 A process encompassing a range of techniques dealing with the
collection, classification, analysis, and interpretation of data to
gain insight, reveal patterns, anomalies, key variables and
relationships.
 Data-driven insight for better decisions

 Analytics simplify data to amplify its value

 Predictive Analytics turn uncertainty into usable probability

41

Analytics Have Power

Customer Online Acquisition Campaign
Retention Conversion Rates Response

Fraud Wasted Crime Risk
Spend

42

The Challenge Is To Put Analytics To Work

43

Data Mining - Improve Rules
High
High income,
Income
low-moderate education

Moderate-high education
Low-moderate
low-moderate income
income, young

Education
High

Moderate education,
low income, middle-aged

High

Low education,
low income

44

Predictive Analytics – Add Insight

Member renews
Member fails to renew

45

Straight Through Processing

Eliminated many Underwriters
manual reviews manage rules

8 Point Reduction in
Combined Ratio

Focus on book Improved risk
management, agents management

46

Optimization Makes Sense when
 Have interrelated choices – circular dependencies or a need to
change several variables at once
 Risk/reward trade-offs within a regulatory framework for instance
 Answer is not obvious and is more than a simple chain of
calculations
 Trying to minimize or maximize something

47

A mathematical process for finding the best
Optimization
decision for a well defined problem –
highest profit, lowest cost etc.

Decision
Variables
Constraints

Objective
function

Solver
Data Solution

Variable 1: xxx
Variable 2: yyy
…
48

Optimization and Rules
Business Modeling Team
Analysts Update Model
Update Rules

Rules Configure
Data Solver Results
Engine Model

49

Decision Discovery

Decision Services

Decision Analysis
50

Closing The Loops

Information

Evaluate
Results
Reaction Decision
Update Update
Decision Models

Action Business &
Analytic
Experts
Create Refine
Challengers Rules
Customer

51

Impact May Take Time to Play Out

52

Simulation

Constraints

Market
Conditions

Assumptions

53

Scenarios

54

Decisions Make Processes Simpler

55

Sometimes MUCH Simpler

56

Business Rules Make Processes More Agile
Act in an agile and
automated way Decide which
Acting Sensing events matter

Improve
collaboration

Communicating Strategizing

Communicate
between business
and IT
Deciding
Analyze and test
possible rules
Source: Gartner (April 2006) Smart (Enough) Systems, Prentice Hall June 2007. Fig 1.3

57

Analytics Make Decisions (and Processes) Smarter

 Automate Decision
 Apply rules
http://www.f

 Close the Loop
Web

 Segment customers
Call Centre

 Adaptive Control
Email
 Predict risk, value
 Optimize decision
Mobile

58

Risk and Benefits

Process without Decisions Process with Decisions
 Decisions an afterthought  Decisions first class object
 Decisions buried in process  Decisions linked not buried
 Process becomes complex  New process is simplified
 Inconsistency of rules likely  One version of rules
 Decisions only evolve with  Independent process &
process decision changes
 Hard to share decisions  Decisions (and Decision
Services) are reusable

59

Decision Services At The Center

60

“The essence of strategy is choosing to perform
activities differently than rivals do.”

Dr. Michael Porter, Harvard Business School

61

Consequences Of Decision Management

Business Control of Decisions

Externalization Control and Agility Integration Points
from Legacy in Business for Advanced
Applications Processes Analytics

Focus on Decisions

62

Some IBM Examples
Process Results

• Speed to market gain over 50%
Healthcare Claims
• Changes to business rules now implemented in
Processing
days
• Significant productivity gain on 1M+ claims
processed on a monthly basis
• 93% improvement for approval - 15 days to 1
Commercial Loan
• Cost savings from greater control & easier audits
Origination

• Better service - clear & consistent processing
Government Social
• Transparency & auditability
Benefits Eligibility
• Rapid response to changes in government
policies

63

Action Plan
 Identify your decisions  Adopt Business Rules
Decisions that matter to Approach and technology
customers Management and governance
Hidden decisions Change the relationship
Transactional decisions between business and IT

 Consider  Investigate Data Mining
and Predictive Analytics
Who takes them now
Data Mining for rules
What drives changes in them
Predictive reporting
What the context is for them
Executable analytics
 Assess
 Build Adaptive Control into
Change Readiness
your applications
Technology adoption
Organizational change
64

The One Slide You Need
 Current business conditions require smarter, simpler and
more agile processes
 Making business processes simpler, smarter and more agile
requires managed, automated decisions
 Business rules are the best platform for automated
decisions
 Analytics, not just your policies and expertise, must
influence operational decisions
 Decisions take time to play out so you must test and learn
 Decision Management is the business discipline that best
leverages business rules and puts analytics and
optimization to work in every transaction
65

More on Decision Management

jtonedm.com
decisionmanagementsolutions.com

smartenoughsystems.com

ebizq.net/blogs/
brcommunity.com/taylor.php
decision_management

james@decisionmanagementsolutions.com
66

Using business rules to make processes simpler, smarter and more agile

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (20)

Similar to Using business rules to make processes simpler, smarter and more agile

Similar to Using business rules to make processes simpler, smarter and more agile (20)

More from Decision Management Solutions

More from Decision Management Solutions (20)

Recently uploaded

Recently uploaded (20)

Using business rules to make processes simpler, smarter and more agile