Implementing Corporate Strategy Using Business Decision Management

Abstract

 

Business Decision Management (BDM) is a powerful new discipline that enables business managers to gain control over the many thousands of (typically hidden) operational business decisions that are central to all the mission-critical activities and processes within their organisation.

Business managers can now directly, without lengthy IT intervention, able to enrich the business knowledge and business logic behind these business decisions. and, deploy these decisions operationally to gain sustained increases in shareholder value, increases in profitable revenues, with the potential for significant reductions in costs whilst minimising business risks and complying with government regulatory requirements.

This post will show how corporate strategic initiatives (also know as business transformation programmes) can be rapidly implemented using BDM. Also it will be shown how an organisation can implement a continuously improving feedback loop where the results from operational decisions are fed into the KPIs used by the Board to help steer their organisation and are then used to further improve their business decisions.

What is Business Decision Management?

A major challenge facing business today is how to harness the creative abilities and business knowledge of its employees to gain strategic advantages over its competitors that in turn result in significant increases in profitable sales and or reduction in business costs.
Central to this challenge are the many thousands of hidden operational business decisions that are executed daily within mission critical business processes. It is these operational business decisions that are central to all the sales, production and delivery activities that create all the wealth within an organisation.

Typically these individual operational decisions have been embedded within applications, programs and supporting technologies. The business managers who are tasked to manage and improve these business decisions do not have direct visibility on these decisions because they are written in IT languages that the business do not understand (e.g. Java, Cobol) or cannot even see because there is no available source code for most enterprise applications.

Because these operational business decisions have not been identified as strategic business assets and are not visible to the business in a language that the business managers can understand, enhance, modify and rapidly deploy; means that the business is often dependent on long IT development lifecycles, resulting in poor productivity and reduced business agility.

The ability to relate management objectives directly to business decisions and the ability of business managers to manage those business decisions against performance over time has created the new discipline of Business Decision Management (BDM).

Every operational business decision is powered by some business logic (business rules and or analytical reasoning) that is used to determine the decision. Furthermore a business decision can be considered the conclusion that a business arrives at through business logic – which the business is interested in managing.

It is these hidden operational business decisions that are executed many thousands of times every day with the corporate mission-critical business processes that are key to gain sustained increases in shareholder value, increases in profitable revenues with costs reductions whilst minimising business risks.

By giving the business managers direct control over these business decisions, without requiring a lengthy IT development cycle that promises to transform business operations and give significant competitive advantages to those companies who are early adopters of Business Decision Management.

This new discipline also promises dramatic opportunities for increased business agility and the ability to constantly improve the quality of business decisions in response to rapid changes in the business and regulatory environments.

A quick look at Business Decision Management modelling

It is useful to have a quick overview of the two modelling languages that can be used by the business to initially model business decisions and then refine and enhance them, over time, as required to reflect changes within their business environments.

The Decision Model (TDM)

In 2009 the seminal book “The Decision Model: A business logic framework linking business and technology” by Barbara von Halle and Larry Goldberg was published.

This book defined a graphical notation called “The Decision Model” that is easy to understand by business people as well as IT. Figure I shows the high-level structure of a decision model for a single decision.

Figure 1:  The Decision Model Overview

Figure 1: The Decision Model Overview

Assume that the business is an insurance company that wants to model and manage all the business logic used to determine comes up for renewal if it is to be processed manually or fully automated. The decision is called “Determine Policy Renewal Method” and is represented by a blue octagon shape. The green tablets show the high level logical structure of the dependant sub-decisions that are used to determine the business decision.

The green tablets are just special types of decision tables (also called Rule Families) that comply with certain rigorous principles. The data on a Rule Family shows the conditions and sub-decisions (conclusions) that must be determined before the decision can be determined.

So the 1st Rule Family, knows as the decision rule family, says that the decision “Determine Policy Renewal Method” depends on a sub-decisions called “Policy Pricing within Bounds” and “Policy Underwriting Risk” and some data that is stored in a database called “Manual Underwriting Indicator”. To determine the two sub-decisions one follows the inferential links to the Rule Families at the next layer down, and so on until there are no sub-decisions and only data from database to evaluate,

The sub-decisions (also known as Interim fact types) are identified by being between the first line and the second dashed-line and with raw data identified below the dashed line.

Once the high-level structure of decision has been formulated then the individual business rules can be identified and added to the appropriate Rule Family table as shown in Figure 2. Each row with a Rule Family represents a single rule that complies to the TDM 15 principles that introduce normalisation concepts similar to the first, second and third normal forms of the relational model.

 

Figure 2    Decision Model showing Rule Families

Figure 2 Decision Model showing Rule Families

Practical experience has shown that after a little training that the business can understand the decision logic modelled using The Decision Model (TDM), including creating and modifying decision models.

With the right technology tools TDM decision models can be converted into executable code that can be deployed within, for example, business rule engines as decision services that are consumed by business process models running in process engines.

Decision models can also be converted to any type of code, such as Java or COBOL. This code can be executed without a business rules engine because all the inference links are contained within a decision model, eliminating the need for a “rete” engine that is normally used within a rules engine to determine the next rule that should be executed.

The OMG Decision Model and Notation (DMN)

The OMG Decision Model and Notation standard, currently in beta but expected to be formally realised in 1st Quarter 2015, extends The Decision Model in many ways including:

  • Modelling other forms of decision logic such as Analytical models, probabilistic and mathematical logic as well as logic based on decision tables using a graphical notation known as Business Knowledge Model object (see Figure 3)
  • The ability to model complex decision relationships between decisions, input data, and sources of knowledge known as a Decision Requirements Diagram and a linkage to BPMN process models.
  • Defines a formal logic expression language called FEEL with a precise execution semantics
  • Defines formal execution semantics for DMN decision models.
DMN-01

Figure 3 The OMG Decision Model & Notation (DMN) Standard

Which is the better language, TDM or DMN? It depends on the types of decision logic the decisions uses. If you are looking to use analytics-based decisions or integrate analytics with “decision tables” decision logic then use DMN. Also if you are looking to model the inter-relationships between decisions then use DMN.

TDM is best used when decisions can be modelled using “decision table” decision logic because of the rigour of the 15 TDM principles. However because of the many other advantages of the DMN (modelling analytical decisions as well as “decision table” logic) it is possible to integrate both the DMN and TDM into one composite model, where TDM rigour is added to the DMN (See Figure 4).

Figure 4 Comparing TDM with DMN (c) LuxMagi

Strategic Corporate Planning – Balanced Scorecard and Strategy Maps

It so happens that many large companies and government organisations use visual modelling languages for strategic corporate planning. Known as Balanced Scorecards (BSC) and Strategy Maps (SM), these business friendly visual languages can be used with the visual business friendly BDM languages (TDM and DMN) to produce significant business agility in corporate planning and implementation.

However first let us get a quick overview of how balanced scorecards and strategy maps are used to help senior management conduct corporate strategic planning and initiate strategic initiatives.

Figure 5  Linking Strategy with Business Decision Management

Figure 5 Linking Strategy with Business Decision Management

It used to be the case that organisations only had their monthly and quarterly results to use for corporate planning.

However it has in recent times, become clear that in order to be successful an organisation should translate their vision and strategy into four perspectives (see Figure 5) and for each perspective the following questions are posed by senior management:

  • Financial Perspective
    To succeed financially how should we appear to our shareholders/stakeholders? What are the objectives, measures, targets and initiatives that we need to implement?
  • Customer Perspective
    To achieve our vision how should we appear to our customers?  What are the objectives, measures, targets and initiatives that we need to implement?
  • Internal Business Processes Perspective
    To satisfy our shareholders and customers what business processes must we excel at?  What are the objectives, measures, targets and initiatives that we need to implement?
  • Learning and Growth Perspective
    To achieve our vision how will we maintain our ability to change and improve?  What are the objectives, measures, targets and initiatives that we need to implement?

Now in order to populate the Balance Scorecard senior management uses another visual modelling language called a Strategy Map. See Figure 6.

SMap-Final-Medium

Figure 6: A Strategy Map Template

Strategy maps describe the logic of the strategy. It shows the objectives for the critical processes and the intangible assets required to support them and link the objectives, using cause-and-effects links. Whereas the balanced scorecard translates the strategy map objectives into measures and targets and specifies a set of action programs (strategic initiatives) and resources to enable the targets for all the measures to be accomplished.

To see how strategy maps works let’s assume that your company is a financial services company, say a bank and that analysis has shown that it is taking a very long time for new customers request for registration to be processed by your organisation.

It is taking days for a potential customer to register and clear all your internal verification processes and that you are losing potential customers to your competitors who have faster on-boarding processes. Figure 7 shows a simplified strategy map to improve customer on-boarding and how business decision management can be used to accelerate the implement of an initiative.

STP-Final-Medium

Figure 7 Strategic Initiative Meets BDM

First examine the simplified strategy map (Figure 7), which is given a theme name “Operating Efficiency” and look at the “cause and effect” objectives across the four perspectives:

  • In the Learning and Growth Perspective we start with training the staff on the use of Business Decision Management so that they understand how to model the business logic behind operational business decisions that are going to be discovered as part of this initiative.
  • Next in the Internal Business Processes Perspective, using the training from (1) the business is able to identify business processes that will be impacted by “Straight Through Processing” (STP). This is done by examining all the processes looking for decision points and removing the hidden decisions and associated business logic from the business processes into groups of decision models. These identified business decisions and associated business logic modelled and enhanced and then fully automated and deployed as decision services which are then consumed by the simplified business processes. Using the decisions with the enhanced business logic will reduce the need for manual and review processes leading significant reduction in processing times.
  • The increased processing speed will impact three objectives at the Customer and Financial perspectives as follows
    (a) Fewer staff will be required for manual reviews of on-boarding cases passed for review
    (b) Faster processing – because of the new STP enhanced business processes
    (c) Lower customer service costs – resulting in ability to charge lower fees for processing due to the increased productivity of the decision enhanced business processes.
  • The faster processing and lower service costs will lead to more customers leading to higher revenues (this is part of the company’ growth strategy)
  • The fewer required staff will lead to lower operational costs leading to higher profitability (this is part of the company’ productivity strategy).

Now the above strategy map feeds into the linked balanced scorecard for this theme which we can see in the right hand part of Figure 7 as follows:

  • The statement of what the strategy must achieve is identified namely “Reduce customer on-boarding times”.
  • How success in achieving the strategy will be measured and tracked is identified with two measures, STP rate and Customer on-boarding time
  • Next the level of performance or rate of improvement that is required is identified, namely 90% of new customer registrations must be completed within 60 minutes – a significant improvement of the previous time of days.
  • Not shown – but very important is the time allowed for the targets to be met.
  • Finally, the key action programs required to achieve the objectives is identified. In this case it is just one initiative called “Customer STP On-boarding Initiative”
Implementing Strategic Initiatives using Business Decision Management

In order for Business Decision Management to be successfully implemented within an organisation the following capabilities and technologies should be present:

  • A graphical modelling language that enables business decisions to be identified and all associated business decision logic identified or created and modified by the business – in a language that they can understand. These models are known as decision models.
  •  The business should be permitted to use business friendly names for the data that they want to use in their decision models. This enables the business to be able to create decision logic using the business friendly names rather than use IT names. However the use of a glossary is required to map these business friendly-names into the fact or object models known to IT. This mapping is done by IT concurrently with the creation of decision models by the business.
  • While the business is modelling the business decisions, IT can be busy re-designing business processes (using BPMN) to eliminate from process models any business logic that has been embedded within process models from previous process design efforts. IT should then work with the business to define the BPMN rule tasks that will consume the decision models created by the business – deploying them as decision services within business rules engines or other technologies – such as COBOL programs.
  • Ideally, the business should be able to link the business decisions to all the strategic initiatives that they impact and that these business decisions should also be linked to the key performance indicators (measures). The results from the execution of individual or related groups of business decisions should be trackable on the corporate’s Balanced Scorecards KPIs.
  • Once the business has completed the modelling and testing of the decision models two things can now happen:
    • The decision models can be handed over to IT to manually convert into code that can run in any technology and deployed as decision services = that will be consumed by business process engines. Also IT will ensure that the business results, from the execution of each business decision, are logged and stored in the corporate data warehouse. The logged data can be used to drive key performance indicators dashboards. Managers will now have the data to verify the effectiveness of each decision model, which they can now iteratively refine as required.
    • Alternatively if the technology exists the decision models are automatically converted into code (including logging capabilities outlined above) that can be executed and deployed as decision services without a lengthy IT development cycle. In reality some intervention is always needed by IT. However with the deployment of Continuous Integration and Deployment technologies the business can make, modify and deploy their decision models
Integrated Decision Model

Figure 8 Intergrating Decision Models with Business Process

 

The Corporate Challenges that are drivers for Business Decision Management

Organisations are facing a number of business challenges today which they must solve if they are to survive. These business challenges include:

  • Rapidly Changing Consumer Demand. Customers are today demanding highly tailored and personalised experience with the organisations that they interact. They are expecting personalised offers and solutions from self-service applications that know about them and the things that they would like to buy. If they do not get this experience they will move their business to a competitor organisation.
  • Increased Business Regulations. Organisations find that they need to expand into multiple global markets to maintain growth and are therefore faced with a massive wave of compliance regulations that are coming from foreign governments, national and regional regulatory authorities as well as multiple global organisations (such as Basel Committee on the Banking Supervision). These regulations must be understood and implemented so that the execution of all relevant business transactions can be compliant. Failure to be compliant can result in substantial fines that can cost the company $billions.
  • Rapidly Changing Competitive Environment. Today’s executive directors of established organisations are in constant danger of being eliminated by new upstarts that are re-writing the competitive landscape. To respond to these threats requires organisations to be highly adaptive and agile – creating new products, solutions and services within rapidly shrinking periods of time. If their human and IT resources fail to keep up with these changes in the competitive environment then the organisation is at risk of going out of business.
  • Business Process Re-Engineering. In order to meet the challenges identified above, the internal business processes need to be re-engineered. The problem is that the mission-critical corporate applications have their business knowledge and business decisions hard-coded in their application code.

It is now becoming clear to many organisations that the key differentiator between them and their closest competitor is their business knowledge and how it is created and managed; and. how business knowledge can be used to power the key business decisions that are required to meet to the corporate challenges identified above.

Those organisations that fail to transform themselves into a decision-centric organisation will lose out to their competitors, resulting in the loss of jobs and the destruction of shareholder value.

Decision Management Benefits

 

Decision Management offers the following benefits:

  • Significantly reduces the time and cost of change
    • The time taken to create, manage and deploy business logic reduced by between 30% – 70%
    • Testing of decisions and associated business logic reduced by 50% or move using new automated testing techniques
    • Minimised programming effort and time by the ability to automate the conversion of decision models into executable code for deployment as decision services.
  • Simplifies Business Processes
    • Extracting business decisions and associated business logic embedded within process models into separate decision models leads to a significant reduction in the size and complexity of process models.
    • Increased re-use of decision models between process models as shared decision services thereby reducing duplication and increasing assets efficiency
    • Significant reduction process model design changes caused by changes in business logic. Changes in business logic are easily made within the required decision model and typically have little or no impact on process models.
    • Improves straight-through processing by the automated execution of these Decision Models within technologies without requiring a lengthy IT development cycle – by using technology to convert decision models into executable code.
  • Corporate Strategic Governance over Mission-Critical Business Decisions
    • Gives the business the ability to link key Strategic Initiatives (SIs) with groups of operational business decisions (and associated business logic and process models) required to implement the SIs.
    • Decision Management gives the Board a powerful capability to track the ongoing progress of each SI.
    • The ability to link key operational business decisions or related groups of business decisions to key performance indicators so that the effectiveness of each business decision can be measured and fine-tuned as required.