Business Process Transformation with Decision Modeling

Transcription

1 Business Process Transformation with Decision Modeling How Decision Management Simplifies Business Processes and Improves Results Organizations looking to transform their business can create simpler and more agile processes, and more flexible business applications, by externalizing and improving decisions. Organizations cannot change more quickly than their processes and systems when these are hard to change organizations cannot react quickly or effectively to new opportunities, new regulations or new challenges. Making decisions explicit and managing them in concert with processes ensures an effective separation of concerns and a more streamlined business. CONTENTS Decision-Led Process Transformation Building A Decision Management Capability Conclusion Decision modeling results in: Simpler and more agile processes. More flexible business applications. Increased capacity for change. Improved organizational alignment. Leading organizations are building an internal Decision Management capability modeling the relevant operational decisions that drive the results they seek, replacing decision logic hardcoded within business applications or modeled in business processes with independent Decision Services, and applying advanced analytics to improve these decisions. And they close the loop, ensuring that business results continually improve. Resulting performance improvements are impressive: Error-free daily updates to pricing rules. 95% automation of pension fund updates. 98% time reduction to implement regulations. Companies adopting Decision Management report game changing cultural impacts, driving the process innovation needed for the adoption of adaptive, agile and analytic technologies that are essential for leveraging big data and meeting the needs of today's businesses and the social and mobile consumers they serve Decision Management Solutions 1

2 Decision-Led Process Transformation Simpler and More Agile Processes An important part of Business Process Management is understanding your as-is processes to see how your business is truly operating. This understanding improves visibility and allows optimization of the process the creation of an effective to-be process. Most, if not all, business processes require decisions to be made: claims must be approved or rejected, cross-sell offers must be selected, and product discounts must be calculated. Explicitly modeling the decisions that happen in your business process ensures that the as-is model is closer to reality. When a business process must handle multiple scenarios, modeling the decisionmaking in a process using only gateways and tasks can become very complex. Decision Management replaces a nest of gateways with a single, explicit decision task. Decision Management clarifies the behavior of the process, makes it easier to see if the process or the decision must change, and allows for changes in the decision-making approach to be independent from process change. Figures 1 and 2 show a process before and after Decision Management has been applied. The before version shows creeping complexity. As more conditions and exceptions are added the process becomes increasingly complex. With an explicit decision-making activity Determine Applicant Risk the process is much simpler and will remain so even as new conditions are added. Figure 1: Before Decision Management Figure 2: After Decision Management Decision Management also increases the rate of straight through processing and reduces the number of process instances that wait while items are put on worklists or in queues. Decision Management marries explicit decisions and process management to keep transactions moving with only exceptions ending up on worklists or in an inbox. Capturing the know-how of experts in explicit decision logic using decision modeling, and making it widely available, focuses scarce expert resources on exceptions and high-value cases and customers. Graphical decision models make it 2017 Decision Management Solutions 2

3 easier to communication and collaborate on requirements and outcomes. Staff can then focus on value-add activities that require their expertise, adding further value. Figure 3: Decision Model Source: DecisionsFirst Modeler Figure 3 is the Determine Applicant Risk decision model for the above example. Decision modeling provides a framework that teams across an organization can use. It provides a common language between business analysts, architects, business owners, IT professionals and analytic teams. Decisions are more easily tied to performance measures and to the business goals. This makes it easier to focus teams where they will have the highest impact and to measure results. The number of exceptions can also be systematically reduced over time by developing new rules as process execution is observed observing process performance, identifying new rules to handle particular cases, and automating those rules results in continuous improvement and process optimization. Some process models today are developed using the Business Process Model and Notation (BPMN) standard published by the Object Management Group. The Decision Model and Notation (DMN) standard has been designed to work alongside BPMN, providing a mechanism for modeling the decision-making represented in a Task within a process model. DMN need not be used with BPMN but it is highly compatible with BPMN. More Flexible Business Applications Business applications are rich sources of functionality for new and extended processes. Modern business applications like ERP and CRM are service-enabled, using a service-oriented architecture and exposing critical functionality as reusable services. Business Process Management focuses on rapidly automating or improving a process by integrating this functionality. When bringing application functionality into processes, Decision Management ensures that the behavior of these functions is accessible to business users so they can change it, and so that it can be shared between multiple processes and applications Decision Management Solutions 3

4 For example, a core business application for order processing must be able to price products accurately. For an organization with lots of options or configurations, pricing can be very complex. If the pricing component is coded or managed using database tables, the degree of flexibility and the ability of the business users to define new pricing models, or new configuration options that require different pricing, will be limited. Decision modeling enables us to model our business by dividing it into concrete parts that are understandable to business people without being too detailed. It also helps us not to lose sight of the overall picture of the process while delving deep into the details of business rules. Process Director, Tax Authority Furthermore, if this component is embedded in a new process such as one designed to help customers price out and consider various options as part of a move to selfservice, say, then the flexibility and agility of this new process will be compromised. It won t matter how easy it is to change the lists of products that a customer sees or how easy it is to change the process, the pricing model will act as a drag or limiting factor no change can be made faster than the pricing model can be recoded. The agility and flexibility of the process, and of the underlying business applications, is constrained by the flexibility of the components being shared. Yet the components of a business application most useful to business processes are often decision-making components such as pricing engines, product configurators or eligibility determinations. More importantly, decision making components change often they are among the most dynamic parts of the application. Decision Management ensures that decision making components are flexible. Because they can be shared service, this also increases the agility of both the processes that use it and the applications that include it. Increased Capacity for Change Organizations cannot change more quickly than their systems when systems are hard to change organizations cannot react quickly or effectively to new opportunities, new regulations or new challenges. Manual processes are no better as updating policy manuals and retraining staff is time-consuming and expensive. Business users like BPM software because it allows them to change their workflow easily it increases the capacity for change of the process. Decision Management further increases this capacity as business changes often involve updates to business decisions to pricing, eligibility or risk assessment decisions, for example. These decisions are often the most dynamic part of a process Decision Management Solutions 4

5 Figure 4: Repeated Pricing Updates For example, a company s pricing rules are likely to change far more often than its orderto-cash process as shown in Figure 4. If business users can only change the process, then they will not be able to respond to the far more numerous pricing changes without changing the process, an unnecessary step. Adding Decision Management enables business users to control processes and the critical decisions within them. This increases the capacity for change built into a process and allows for a stable process even when decisionmaking is constantly changing and evolving. Explicitly identifying decisions and describing the logic behind them allows this logic to be managed and updated separately from the process itself, dramatically increasing the agility of an organization. Improved Alignment Given the importance of systems and processes to today s organizations, business performance improves when business and IT professionals are aligned. Processes and systems are aligned when the business and IT have a shared understanding of the workflow and the logic in a system. They are aligned when the business has an appropriate level of access and control of their systems. A focus on decisions with Decision Management enables this alignment. The Power of Decision Management Companies adopting Decision Management report game changing cultural impacts. Simpler processes, more flexible business applications, an increased capacity for change and improved business alignment Decision Management enhances Business Process Management to deliver greater value to the business. Decision Management focuses on the decisions at the heart of your business processes. Decision Management makes them explicit and gives the business control over how those decisions are being made. Decision Management drives the process innovation needed for the adoption of adaptive, agile and analytic technologies that are essential for leveraging big data and meeting the needs of today's businesses and the social and mobile consumers they serve Decision Management Solutions 5

6 Building A Decision Management Capability Companies adopting Decision Management use Decision Discovery to find the relevant operational decisions that drive the results they seek. They replace decision logic hardcoded within business applications or modeled in business processes with independent Decision Services built using a Business Rules Management System (BRMS). They apply advanced analytics to improve the decisions. And they close the loop with Decision Analysis, ensuring that business results constantly improve. Decision Discovery Decision Discovery starts by determining which operational decisions matter most to your organization. Which decisions are most relevant to the business strategies your executive team has put at the top of its agenda? Which decisions could have the strongest impact on the business drivers and measures being used to chart progress toward those goals? These are the decisions where Decision Management will deliver the biggest and quickest pay-off for your business. Identifying these decisions shows you where to focus your efforts and streamlines the project. Decision Management is a proven approach for reducing implementation time and costs. What used to be one week of requirements work was done in a few hours with decision management. Lead Business Analyst, North American Insurance Company The next step in Decision Discovery is to separate these critical operational decisions from your business processes and IT systems. Describing and visualizing previously hardcoded or embedded decisions as separate, discrete decision processes using decision modeling with the Decision Model and Notation (DMN) standard helps business stakeholders understand and take ownership of how decisions are currently being made. It also enables decision-making to be explicitly linked to key performance indicators and other metrics. With improved clarity around which decisions drive results, how they re being made and their impact on performance, you can now determine what changes to decisionmaking will be required to improve any given measure Decision Management Solutions 6

7 EXAMPLE Let s look at how Decision Discovery works to improve performance in customer retention. We identify three critical decisions impacting our retention rate: Decision of which customers to target for retention programs. Decision about what retention offer to make. Decision about how and when to make it. These decisions are currently embedded in the several different account management processes and systems used by various channels. Depicting them as separate decision models enables our customer management and customer marketing groups to see clearly that these retention decisions are currently being made using different criteria and data in different channels (and not in ways that can be justified by channel-specific characteristics). We also see that within a channel we are treating all customers targeted for renewal the same way. Linking decision data to revenue and profit metrics, it s clear that this one size fits all approach isn t helping us retain our most valuable customers. The outcome of Decision Discovery is an understanding of the current differences is our retention decision-making processes and awareness that they are driven by channel rather than customer value. Our aim is to switch that situation so that we re making retention decisions based on customer value consistently across all channels. Decision Services Having identified high-roi operational decisions and determined what you need to do to improve them, your next step is to design and build a Decision Service. Decision modeling is equally useful for decision support systems such as dashboards. Most dashboards are driven by user interface and information visualization requirements and by the underlying data models. A dashboard design based on decision modeling provides a logical structure for going beyond information presentation to include predictions and recommendations so users can progress from what happened? to what can happen? and what action can be taken? The Decision Service replaces the decision logic currently embedded in business processes and business applications. Decision services are built on a Business Rules Management System (BRMS) and generally deployed via a Service Oriented Architecture (SOA) to deliver decisions on-demand to business applications as shown in Figure 5. Decision Services generally do not update information they just answer questions and thus have minimal runtime impact on operational systems Decision Management Solutions 7

8 The building blocks of Decision Services are the business rules you need to drive and your decisions. Business rules comprise expertise, policies, regulations and even what might be considered tribal knowledge about how your organization does business. Decision modeling using DMN provides a framework for capturing this valuable know-how and making it explicit. The detailed decision logic itself can be included in the model based on business rules mined from software code, found in regulations and policy manuals or determined by interviewing experts. Figure 5: Decision Services Analytics can also be used: rule induction techniques find rules that represent customer behavior patterns; classification and regression techniques can generate decision trees capturing the rules being used for population segmentation. Business rules put decision logic that used to be buried in code into a language that everyone (analysts, IT, business users, and regulators) can understand. They re generally maintained in a common repository, accessible to and updated by both business and technical users. The ability to share and repurpose these building blocks substantially reduces the time and cost involved in development and maintenance. Shared understanding between business and IT builds organizational alignment and collaboration. Organizations that are developing their first Decision Services often move on to testing, simulation and deployment at this point. A best-in-class BRMS will provide easy tools that enable business users to validate their rules, simulate the impact of new rules and changes by comparing multiple What if? scenarios and, when 2017 Decision Management Solutions 8

9 satisfied, deploy into virtually any operational environment with almost push-button ease. At some point, however, most organizations want to enhance their Decision Service by incorporating predictive analytics into the decision making. Analytic models that predict customer behavior (response, revenue, profit, churn) increase precision in segmentation and targeting. For more on this, see our paper Putting Predictive Analytics to Work in Operations. EXAMPLE If we pick up our customer retention example again, our task at this point is to design and build an automated Decision Service that will serve all channels by delivering decisions to the operational systems already existing in those channels. These will be decisions about which customers we want to retain and, for each customer identified, what retention offer to make and how and when to make it. To do this we need to author the business rules that will drive the automated decision. The input for rule authoring includes content from policy manuals, decision logic extracted from our account management systems and knowledge amassed from interviews with our account management and channel experts. Our IT folks do some of the initial authoring, and link up with runtime data sources. These business rules are linked back to the original decision model so that impact analysis and the identification of the rules that need to change is straightforward. Business experts in our account management department do much of the refinement, however, using the decision model to find the business rules they need to change and running simulations in the BRMS to see how tweaking rules this way or that might affect our retention levels. While a consistent decision will be used by all channels, channel-specific rules will kick in when appropriate to make adjustments where necessary. The result is a decisionmaking approach under business control that is applied consistently every time, in every channel. Decision Analysis Once the Decision Service has been deployed it is easy to apply performance management techniques and technologies to monitor and measure it. This also allows you to continually improve decisions for increased value over time. Most companies set up a closed-loop system that captures data about decisionmaking approaches, decisions and outcomes and makes them available to the business for ongoing analysis. Typically there are two levels of analysis. The first is about decision performance. Decision outcomes are analyzed against the business drivers and metrics originally identified during the Decision Discovery process. Overall, has the new Decision 2017 Decision Management Solutions 9

10 Service moved the needle and by how much? Looking at each of your population segments, how have the business-rules-driven decisions affected results? Leading companies generally also use a process called champion-challenger, also sometimes called A/B testing. This is a systematic method of making changes to rules, predictive models or other elements of a decision and then testing this challenger alternative on a randomly selected small percentage of the production population. You then compare the results to those of the existing champion, which has been applied to the bulk of your population. If the challenger results are better, you then promote it to become the new champion and roll it out across the rest of the population except for another small percentage where you test another challenger. And on and on it goes, incrementally improving value over time. The second level of Decision Analysis you need to do is around fine tuning the Decision Service to operational conditions. This involves collecting data on throughput, response time, cost (e.g., for external data) and other basic statistics. In customer acquisition, for instance, how many decisions are being made to approve, reject or refer applications? Too many rejections will impact revenue. Too many approvals can raise risk to unacceptable levels. Too many referrals can overwhelm staff doing manual reviews. A good BRMS will enable business managers to quickly modify rules, scoring thresholds or other elements to adjust for variable staffing levels and other operational realities. EXAMPLE Finishing up with our customer retention example, decision monitoring and analysis tells us that our Decision Service is having an overall positive impact on two key metrics: Customer retention has improved by 5%, and annual revenue per retained customer has jumped by 2%. Looking at these metrics as well as response rates within each segment, we see that some of our targeted retention programs are proving more effective than others. Results in one segment, in particular, are lagging. Using simulation tools, we try several What if? changes to our decision rules. For the best of these scenarios, the simulation projects a very strong uptick in both response and retention rates. We test this change on a small percentage of our population before rolling the changes out to the entire segment Decision Management Solutions 10

11 A Note on Decision Modeling Figure 6: Example Decision Model Source: DecisionsFirst Modeler There is an emerging consensus that a Decision Requirements Model is the best way to specify decision-making. Decision Requirements Models can and should be developed in an industry standard way using the Object Management Group s Decision Model and Notation standard. Adopting this industry standard gives users access to a broad community and a vehicle for sharing expertise more widely. Decision modeling is a technique in the International Institute of Business Analysts (IIBA) Business Analyst Body of Knowledge (BABOK ) v3. Today business analysts use a variety of techniques to accurately describe the requirements for an information system. However, current requirements approaches don t tackle the decision-making that is increasingly important in information systems. A detailed description of how to do decision modeling is described in our free white paper, Decision Modeling with DMN, available in the white paper section of our website. A Decision Requirements Model provides the needed structure for the implementation of a Business Rules Management Systems (BRMS), supporting iteration and agile development. Framing data mining and predictive analytics projects with a Decision Requirements Model links analytics to business results and helps ensure successful deployment. Understanding the decisions relevant to a dashboard or decision support environment structures knowledge and puts a premium on taking action. Decision Requirements Models are a common language across business, IT and analytic organizations improving collaboration, increasing reuse, and easing implementation Decision Management Solutions 11

12 Conclusion Decision-led process transformation is a powerful approach to business performance improvement. But how much improvement are we talking about? When companies use Decision Management to reduce the complexity of their business processes and improve agility, the results can be dramatic. For example, a truck manufacturer had a warranty claims process that took one week thanks to the complexity of the warranty arrangements with suppliers. Replacing this manual process with one based on a BPM system, Decision Management and a Business Rules Management System reduced the time to process a claim from one week to just 6 hours. Other companies have achieved similarly impressive results: 99% auto adjudication of claims (up from 20%). 50% reductions in managerial oversight. Error-free daily updates to pricing rules. 95% automation of pension fund update requests. 98% reduction in time to implement regulations. Organizations can t change more quickly than their processes and systems when these are hard to change organizations cannot react quickly or effectively to new opportunities, new regulations or new challenges. Making decisions explicit and managing them in concert with processes ensures an effective separation of concerns and a more streamlined business Decision Management Solutions 12

13 References This white paper can be found at decisionmanagementsolutions.com along with links to other materials and on-demand webinars. Debevoise, Tom and Taylor, James (2014). The MicroGuide to Process and Decision Modeling in BPMN/DMN: Building More Effective Processes by Integrating Process Modeling with Decision Modeling. International Institute of Business Analysts. Business Analyst Body of Knowledge Object Management Group. Decision Model and Notation (DMN) Specification 1.0, Current version at Taylor, James (2011). Decision Management Systems A Practical Guide to Using Business Rules and Predictive Analytics. IBM Press. Taylor James with Raden N, Smart (Enough) Systems: How to Deliver Competitive Advantage by Automating Hidden Decisions. (New York: Prentice Hall: 2007) About Decision Management Solutions Decision Management Solutions specializes in helping organizations design, build and implement decision-centric, action-oriented systems and processes using decision management. We help clients improve business processes, effectively manage business rules projects, frame predictive analytics efforts, and ensure decision support systems and dashboards are action-oriented. We offer a wide range of resources, training and consulting to help you build your decision management capability. Our collaborative decision modeling software, DecisionsFirst Modeler, is based on the Decision Model Notation (DMN) standard. Contact Us If you have any questions about Decision Management Solutions or would like to discuss engaging us we would love to hear from you. s works best but feel free to use any of the methods below. info@decisionmanagementsolutions.com Phone : Fax : Decision Management Solutions 13