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How to build
                       Decision
                    Management
James Taylor
                       Systems
       CEO


               Decision Discovery
Your presenter – James Taylor
 CEO of Decision Management Solutions
 Works with clients to improve their
 business by applying analytic technology
 to automate & improve decisions
 Spent the last 9 years developing the
 concept of Decision Management




                                         © Decision Management Solutions, 2011   1
Decision Management
  Systems Introduced
A changing world
                                     Changing Scale



Changing Expectations




                 Changing Interactions
                                         ©2011 Decision Management Solutions   3
What are Decision Management Systems?

     Agile




                 Analytic




                                     Adaptive


                            ©2011 Decision Management Solutions   4
Decision Management Systems…

   Keep the             Are
  decision in       transparent
    mind              and agile

     Are
                     Test, learn,
  predictive
                    and improve
 not reactive
                        ©2011 Decision Management Solutions   5
3 Steps to Decision Management


                       Discover
                       Build
                       Improve




                          ©2011 Decision Management Solutions   6
Decisions
Decisions




            Making choices or
            selections and taking
            action

                   ©2011 Decision Management Solutions   8
Different kinds of decisions


 Strategic Decisions
 • Few in number, large impact
 • Should we acquire this company or exit this market?

 Tactical Decisions
 • Management and control, moderate impact
 • Should we re-organize this supply chain, change risk management approach?

 Operational Decisions
 • Day-to-day decisions that affect one transaction or customer
 • Best offer for this customer ?How risky is this loan? Is this claim fraudulent?



                                                        ©2011 Decision Management Solutions   9
Suitable decisions



  Repeatable          Non trivial


  Measurable
                     Candidate for
   business
                      automation
    impact
                         ©2011 Decision Management Solutions   10
Operational decisions are key




                            ©2011 Decision Management Solutions   11
Decisions implement strategy




                           ©2011 Decision Management Solutions   12
Decisions are the focal point for risk




                     Risk is not acquired in
                     “big lumps” but one
                     transaction at a time




                               ©2011 Decision Management Solutions   13
Decisions maximize customer value




                          ©2011 Decision Management Solutions   14
Decisions scale for large impact


                                        Strategic
                                        Decision
                                        Tactical
                                        Decision
                                   Operational
                                    Decision



                             ©2011 Decision Management Solutions   15
Different types of operational decision



   Eligibility   Validation        Calculation



     Risk          Fraud        Opportunity



                              ©2011 Decision Management Solutions   16
Three kinds of analytic decisions


    Risk         Fraud Opportunity




                            ©2011 Decision Management Solutions   17
Discovering Decisions
A simple process

      Age<21                                 No Class I or II sports

                                                                                  Accept low-risk applicant



                                                        Class II sport
               Previous Heart Attack,
               Existing Cancer                                                                                                  Decline high-risk
                                                                                                                                   applicant

      21<=Age<50




                                                          Class I sport


                                                                                      Process medium-risk
                Good Medical Record                                                        applicant




      Age>50                                                           1 or fewer Claims                      Multiple Claims

                             New Customer

                                                                                                                 …




                                            Long-standing Customer




                                                                                                       ©2011 Decision Management Solutions          19
The same process with a decision



                               Low risk
                                              Process low-risk
                                                 applicant


                               Medium risk


         Determine applicant                 Process medium-risk
               type                               applicant


                               High risk


                                              Process high-risk
                                                 applicant




                                                             ©2011 Decision Management Solutions   20
Candidate decisions
 Determine if a customer is eligible for a benefit
 Validate the completeness of an invoice
 Calculate the discount for an order
 Assess the risk of a transaction
 Select the terms for a loan
 Choose which claims to Fast Track

 These are decision words
    The system must answer a question each time
                                    ©2011 Decision Management Solutions   21
Target decision-making on KPIs

                          Strategy defines KPIs



                        KPIs measure operations



                    Operational decisions affect KPIs



                     The link between decisions and
                              KPIs is critical
                              ©2011 Decision Management Solutions   22
Decision to KPI mapping
                               KPIs impacted by improvement in decision

                               Customer   Customer   Losses           Retention           KPI 5
                               Churn      Service                     Budget
                                          Calls

What retention offer should
be made?                          ↑          ↑          ↓                    ?
What initial price should be
offered?                          ↑                                                           ↑
Should an intervention call
be made?                                     ↓                              ↓
Decision 3
                                                         ?
…


                                                        ©2011 Decision Management Solutions       23
Define decisions
 Name                         Repeatability
                                                      One-off                       Continuous
 Description                  Measurability
                                                      Poor                             Specific

                              Time to value
 A question                                           Immediate                        Delayed

 A defined set of allowable   Degrees of
 answers                      Freedom                 Few                                Many

                              Value Range
 Any other results to be                              Narrow Gap                     Wide Gap

 returned with the answer     Timeliness
                                                      Slow                           Real-Time

                              Volume
 Key facts like volume,                               Few                                Many

 complexity, latency


                                              ©2011 Decision Management Solutions        24
Decompose the decisioning
 What is required to make decision?
  Guidelines, policy documents
  Human expertise
  Regulations
  Existing system logic
  Data describing the case
  External reference data
  The results of other decisions




                                   ©2011 Decision Management Solutions   25
Decision decomposition example
                                        Can this customer buy this                                                                                                                           What is the price of this
                                                  service?                                                                                                                                           service?


                                                                                                                                        Customer Profile


   Is the service available where
        this customer lives?
                                                                                                                                                                    Promotions

                                       Is there capacity on this                   Is the customer eligible for                                                                                      Pricing rules
                                               service?                                    this service?




Geographical Availability
                                                                                                                                Eligibility rules
                                          Capacity and Usage




                                                                                                                   Purchase propensity
     What is the best up sell/cross-
       sell for this customer?


                                              Is there an additional service?




                                                                                                                  What similar service is this
                                                                                                                   customer eligible for?
        Is there a compelling
        replacement service?




                                                                                                                                What services are similar to      Which services is the
                                                                                                                                   requested service?             customer eligible for?

                     Churn risk                                    Product hierarchy




                                                                                                                                                               ©2011 Decision Management Solutions                   26
Prioritization of decisions
 Difference between good and bad decisions?
 How many decisions a year?
 What spend is committed based on them?
 How well can you measure good v bad decisions?
 What’s it worth
 … and to whom?




                                ©2011 Decision Management Solutions   27
Learn More
Decision Management Systems
                                                     What if you could make your systems
                                                     active participants in optimizing your
                                                     business?
                                                     What if your systems could act intelligently
                                                     on their own?
                                                     Decision Management Systems can do
                                                     all that and more. This book shows
                                                     how to integrate operational and
                                                     analytic technologies to create more
                                                     agile, analytic, and adaptive systems.
                                                     Available October 20, 2011
For more information about this new release, visit   Discount Code: TAYLOR4389
www.ibmpressbooks.com/title/9780132884389
                                                                        ©2011 Decision Management Solutions   29
Check in for the other webinars
 How to Build Decision Management Systems
 Part 1 – Decision Discovery
   Recording will be available

 Part 2 – Decision Services
   October 27, 10am Pacific

 Part 3 – Decision Analysis
   November 29, 10am Pacific




                                 ©2011 Decision Management Solutions   30
Other opportunities to hear me speak
 SAS Forum Netherlands – October 5, Amsterdam
 Information Management 2011 – October 12, Copenhagen
 Predictive Analytics World – October 18, New York
 eMetrics – October 19, New York
 Information on Demand – October 24-26, Las Vegas
 Building Business Capability – October 31-November 1, Miami



                                        ©2011 Decision Management Solutions   31
Questions?
Begin with the Decision in mind


                          Discover
                          Build
                          Improve

                Find the decisions that
                matter to your business and
                model them
                             ©2011 Decision Management Solutions   33
Thank You
                James Taylor, CEO
james@decisionmanagementsolutions.com




                                        34

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Decision Management Systems Part One Decision Discovery

  • 1. How to build Decision Management James Taylor Systems CEO Decision Discovery
  • 2. Your presenter – James Taylor CEO of Decision Management Solutions Works with clients to improve their business by applying analytic technology to automate & improve decisions Spent the last 9 years developing the concept of Decision Management © Decision Management Solutions, 2011 1
  • 3. Decision Management Systems Introduced
  • 4. A changing world Changing Scale Changing Expectations Changing Interactions ©2011 Decision Management Solutions 3
  • 5. What are Decision Management Systems? Agile Analytic Adaptive ©2011 Decision Management Solutions 4
  • 6. Decision Management Systems… Keep the Are decision in transparent mind and agile Are Test, learn, predictive and improve not reactive ©2011 Decision Management Solutions 5
  • 7. 3 Steps to Decision Management Discover Build Improve ©2011 Decision Management Solutions 6
  • 9. Decisions Making choices or selections and taking action ©2011 Decision Management Solutions 8
  • 10. Different kinds of decisions Strategic Decisions • Few in number, large impact • Should we acquire this company or exit this market? Tactical Decisions • Management and control, moderate impact • Should we re-organize this supply chain, change risk management approach? Operational Decisions • Day-to-day decisions that affect one transaction or customer • Best offer for this customer ?How risky is this loan? Is this claim fraudulent? ©2011 Decision Management Solutions 9
  • 11. Suitable decisions Repeatable Non trivial Measurable Candidate for business automation impact ©2011 Decision Management Solutions 10
  • 12. Operational decisions are key ©2011 Decision Management Solutions 11
  • 13. Decisions implement strategy ©2011 Decision Management Solutions 12
  • 14. Decisions are the focal point for risk Risk is not acquired in “big lumps” but one transaction at a time ©2011 Decision Management Solutions 13
  • 15. Decisions maximize customer value ©2011 Decision Management Solutions 14
  • 16. Decisions scale for large impact Strategic Decision Tactical Decision Operational Decision ©2011 Decision Management Solutions 15
  • 17. Different types of operational decision Eligibility Validation Calculation Risk Fraud Opportunity ©2011 Decision Management Solutions 16
  • 18. Three kinds of analytic decisions Risk Fraud Opportunity ©2011 Decision Management Solutions 17
  • 20. A simple process Age<21 No Class I or II sports Accept low-risk applicant Class II sport Previous Heart Attack, Existing Cancer Decline high-risk applicant 21<=Age<50 Class I sport Process medium-risk Good Medical Record applicant Age>50 1 or fewer Claims Multiple Claims New Customer … Long-standing Customer ©2011 Decision Management Solutions 19
  • 21. The same process with a decision Low risk Process low-risk applicant Medium risk Determine applicant Process medium-risk type applicant High risk Process high-risk applicant ©2011 Decision Management Solutions 20
  • 22. Candidate decisions Determine if a customer is eligible for a benefit Validate the completeness of an invoice Calculate the discount for an order Assess the risk of a transaction Select the terms for a loan Choose which claims to Fast Track These are decision words The system must answer a question each time ©2011 Decision Management Solutions 21
  • 23. Target decision-making on KPIs Strategy defines KPIs KPIs measure operations Operational decisions affect KPIs The link between decisions and KPIs is critical ©2011 Decision Management Solutions 22
  • 24. Decision to KPI mapping KPIs impacted by improvement in decision Customer Customer Losses Retention KPI 5 Churn Service Budget Calls What retention offer should be made? ↑ ↑ ↓ ? What initial price should be offered? ↑ ↑ Should an intervention call be made? ↓ ↓ Decision 3 ? … ©2011 Decision Management Solutions 23
  • 25. Define decisions Name Repeatability One-off Continuous Description Measurability Poor Specific Time to value A question Immediate Delayed A defined set of allowable Degrees of answers Freedom Few Many Value Range Any other results to be Narrow Gap Wide Gap returned with the answer Timeliness Slow Real-Time Volume Key facts like volume, Few Many complexity, latency ©2011 Decision Management Solutions 24
  • 26. Decompose the decisioning What is required to make decision? Guidelines, policy documents Human expertise Regulations Existing system logic Data describing the case External reference data The results of other decisions ©2011 Decision Management Solutions 25
  • 27. Decision decomposition example Can this customer buy this What is the price of this service? service? Customer Profile Is the service available where this customer lives? Promotions Is there capacity on this Is the customer eligible for Pricing rules service? this service? Geographical Availability Eligibility rules Capacity and Usage Purchase propensity What is the best up sell/cross- sell for this customer? Is there an additional service? What similar service is this customer eligible for? Is there a compelling replacement service? What services are similar to Which services is the requested service? customer eligible for? Churn risk Product hierarchy ©2011 Decision Management Solutions 26
  • 28. Prioritization of decisions Difference between good and bad decisions? How many decisions a year? What spend is committed based on them? How well can you measure good v bad decisions? What’s it worth … and to whom? ©2011 Decision Management Solutions 27
  • 30. Decision Management Systems What if you could make your systems active participants in optimizing your business? What if your systems could act intelligently on their own? Decision Management Systems can do all that and more. This book shows how to integrate operational and analytic technologies to create more agile, analytic, and adaptive systems. Available October 20, 2011 For more information about this new release, visit Discount Code: TAYLOR4389 www.ibmpressbooks.com/title/9780132884389 ©2011 Decision Management Solutions 29
  • 31. Check in for the other webinars How to Build Decision Management Systems Part 1 – Decision Discovery Recording will be available Part 2 – Decision Services October 27, 10am Pacific Part 3 – Decision Analysis November 29, 10am Pacific ©2011 Decision Management Solutions 30
  • 32. Other opportunities to hear me speak SAS Forum Netherlands – October 5, Amsterdam Information Management 2011 – October 12, Copenhagen Predictive Analytics World – October 18, New York eMetrics – October 19, New York Information on Demand – October 24-26, Las Vegas Building Business Capability – October 31-November 1, Miami ©2011 Decision Management Solutions 31
  • 34. Begin with the Decision in mind Discover Build Improve Find the decisions that matter to your business and model them ©2011 Decision Management Solutions 33
  • 35. Thank You James Taylor, CEO james@decisionmanagementsolutions.com 34