Potential clients often ask: “why do businesses practice decision management: what’s the return on the investment?”
If your business systems make any kind of automated decisions that influence your operations (e.g., dynamic product pricing, shortlisting up-sell opportunities for a customer, liquidity aggregation, risk management) and you have any competitors, then you need to adopt business decision management as a matter of priority. It’s as simple as that. Here is a short guide to decision management.
It’s no longer a matter of choice. Enterprises that leave these decisions embedded in their IT infrastructure, or in the heads of their human staff who manage manual operations, will be vanquished by those who practice mature decision management and can easily out-manoeuvre them. In this article we define the top ten reasons why decision management really is a case of ‘do or die’.
What is an Operational Decision?
I’d like to make one thing clear first – by business decision we mean operational business decision. We are not referring to decisions of strategy or tactics made by CEOs in board meetings – should our company merge with XYZ Inc? Should we enter the Taiwanese bond market?
Rather, we are discussing the smaller, higher volume decisions your company needs to make every day: what category of risk should I assign to this position? In which other products would this customer be interested? Does this trade fee structure satisfy compliance regulations? Should I underwrite this loan and what interest rate should I charge this client?
These decisions may not seem as important as the strategic ones and, individually, they certainly don’t involve the same large sums of money, publicity or personnel. However they are more voluminous and their significance eventually adds up. Make a small mistake a thousand times and it’s a big mistake. Moreover, for many of your customers or internal departments they come to define your company and their outcomes will be interpreted as your company’s deliberate policy – whether are they are or not. Surely something of this importance warrants considered management?
Top Ten Reasons to Manage Your Decisions
Decision Management directly empowers:
- Separation of Business and IT Concerns – by separating your business decisions cleanly from your IT infrastructure, you can retain the former (as your IP, your advantage) whilst safely outsourcing the latter which is much more commoditised and offers less opportunity for competitive advantage and more chances for cost savings. For economy of scale, you then pool these decisions in one centralised location across your enterprise. This separate, centralised representation of business logic supports …
- Visibility of Business Logic – when captured and explicitly expressed in precise executable business English, business decisions can be seen and understood by all authorized personnel in the company, free from the idiosyncrasies of IT. This makes them a focus for: employee education, deep review and analysis, validation, innovation and even reuse – leading to greater cross-enterprise consistency, higher quality and less opportunity for fraud. This provides a vehicle for the…
- Capture of Executable Business Knowledge – the risk of losing precious business knowledge in the heads of employees who leave your company or retire is reduced. Much of their expertise can be preserved, expressed precisely in an executable format, checked for inconsistency and executed, as needed, millions of times per second within a decision management system. Once decisions are released from individual minds, they allow…
- Control of Business Logic – if your business decisions are externalised, your business SME team can manage and change them directly, rather than via your IT department. Once they are captured, decisions can be tested and SMEs can even experiment with improved decisions and innovations using copies of production data (within a non-production system!) to test them. This leads to…
- Consistent Business Alignment – with the business in control of decisions, their alignment with a defined, SMART business strategy (including compliance mandates) can be established and managed with a degree of rigour. Purposeful and considered evolution of the decisions can now begin. This leads to…
- Ongoing Measure of Effectiveness – once decisions have success criteria (related to the business alignment) associated with them, their effectiveness can be measured meaningfully. This constant measure of effectiveness makes them a focus for management attention, allows erroneous changes to be detected quickly and supports…
- Accountability – direct measurement of decision logic can be used as a basis for ‘big’ and ‘small’ traceability. Big traceability tells us which changes we’ve made have improved or degraded business performance. Small traceability allows having every outcome reached by a decision to be accompanied by an outcome justification (in terms of the current definition) which can be examined in hindsight. This can assist in meeting regulatory requirements.
- Delegation – you can cede defined subsets of your business decisions to other parties, even clients, giving them control over a part of the business as a billable service – a new business opportunity.
- Safe Agility – visibility, control and ability to measure the effectiveness of business decisions mean that they can be easily changed from an informed point of view, tested and released without the overhead of an IT release cycle. This means that change is likely to be much faster, safer and compliant with regulatory strictures, offering the promise of rapid evolution of business logic – vital in today’s commercial environment.
- Cost Savings – the higher quality of decisions (2), the retention of key business knowledge captured from the heads of SMEs (3), the ability to automate the execution of decisions in large volumes (3), the direct control by the business (4), better alignment to business goals (5), the quick detection of erroneous changes (6) and rapid evolution supported by safe agility (9) all yield considerable cost savings to the business.
The cost savings of point 10, the new business innovations offered by points 4 and 8 and the improved ability to meet ever changing regulations (7,9) are compelling reasons to start your journey to decision management today. If you’ve already started on your journey, check your maturity here and consider adopting The Decision Model.
The only alternative to business decision management is not managing your business decisions.