DECISION MANAGEMENT

GROUP MEMBERS:

• ANUM AHMED• FARAH SIDDIQUI• ALIYAH KALEEM• RAMSHA ARIF

• MARYAM MEMON• RAFAY M. KAZMI

DECISION AND CHOICES…

RISKS AND GOOD DECISION MAKING…

COORDINATING ALL DECISIONS AND MAKING THE BEST DECISION IS CALLED DECISION

MANAGEMENT

SO WHO IS A GOOD DECISION MANAGER?Someone who improves the odds that the people he influences

will make decisions that influence the prosperity of the company.

The whole Decision Management Process is divided into 3 phases:

1. Decision Recovery2. Decision Services3. Decision Analysis

What purpose will Decision Management serve?The decisions would become: AuditableTransparentBusiness-DrivenRe-UsableReliableAdaptableFlexibleManageable

Boris points out: “If you don’t track the results of decisions you will never know what works and what does not”

IMPORTANCE OF DECISION MANAGEMENT

1) Organize complex decision-making and automate decisions

2) Ensure your decisions are consistent, fact-based and objective

3) Manage exceptions more effectively

4) Align decisions with both your customers' needs and your company's objectives for revenue/profit

5) Achieve the optimal trade-offs between customer requirements and resource constraints

6) Remove the inefficiency and risk in your decision making

7) Put your data resources to work for you in new and highly productive ways

8) Use scorecards and predictive models to enhance decision processes

9) Put decision making on your company's strategic business agenda

Enterprise Decision Management

An approach for automating and improving high-volume operational decisions, EDM develops decision services using business rules to automate those decisions, adds analytic insight to these services using predictive analytics, and allows for the ongoing improvement of decision making through adaptive control and optimization.

TOOLS FOR DECISION MANAGEMENT

“Neither your best guess nor your gut instinct is good enough anymore. Fortunately, with decision management, the technology and methodology now exist to help you reach a better conclusion.”

TOOLS FOR DECISION MANAGEMENT

1. Business Rules

2. Predictive Analytics

3. Adaptive Control

Business Rules

• Business rules describe the operations, definitions and constraints that apply to an organization.

• Business rules can apply to people, processes, corporate behavior and computing systems in an organization, and are put in place to help the organization achieve its goals.

Business Rules Are Everywhere

Experienced Personnel

RegulationsPolicy Manuals

Legacy Systems

MANAGED BUSINESS

RULES

Historical Data

Which Would Your Users Understand?

Smart (Enough) Systems, Prentice Hall June 2007. Fig 6.8

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);

If customer is GoldCustomer and Home_Equity_Loan_Value is more than $100,000 then college_loan_discount = 0.5%

College Loan Discounts

Current Discount =

Eligibility

Gold Customer and

Home Equity Loan more than $100,000

%

Categories of Business Rules

• Definitions of Business Terms• Structural Assertions• Constraints (Action Assertions)• Derivations

Predictive analytics•Predictive analytics encompasses a variety of techniques that analyze current and historical facts to make predictions about future events.

•It deals with extracting information from data and using it to predict future trends and behavior patterns.

More Sophisticated Analytics Improve Results

Decision OptimizationPredictive ModelingDescriptive Analytics

How do I use data to learn about my customers? Who are my best/worst customers?

How are those customers likely to behave in the future? How do they react to the myriad ways I can “touch” them?

How do I leverage that knowledge to extract maximum value from my marketing investments?

Knowledge - Description Action - Prescription

***

* ******** ******

** **

** *

** * *

***

**** ** *** *

****

****

***

**

# Samples

Response

Score

Margin

PrescriptionVolume

Total CallsCost

Cost ofGoods Sold

DistributionCost

Unit SampleCost

Total SampleCost

Net Revenueper Rx

Specialty

PreviousRx

CensusData

Region

Cost foreach call

CallPlan

Profit

Types of Predictive Analytics Descriptive Analytics:• Descriptive models quantify relationships in data in

a way that is often used to classify customers or prospects into groups.

• Descriptive models identify many different relationships between customers or products.

Descriptive Analytics - Improve RulesUse: Find the relationships between customersExample: Sort customers into groups with different buying profiles.Operation: Analysis is generally done offline, but the results can be used in automated decisions – such as offering a given product to a specific customer

**

*

**

** ***

*

***

**

*

*

*

* **

**

*

*

* **

**

*

*

***

**

** * *

***

*

* *

**

***

**Low-moderateincome, young

HighIncome High income,

low-moderate education

Moderate-high educationlow-moderate income

High

Moderate education,low income, middle-aged

Low education,low income

Education

Age

High

Predictive Modelling Predictive models analyze past performance to assess how likely a customer is to exhibit a specific behavior in the future in order to improve marketing effectiveness.

Predictive Modelling– Add InsightUse: Identify the odds that a customer will take a specified actionExample: Will the customer pay me back on time? Will the customer respond to this offer? Operation: Models are called by a business rules engine to “score” an individual or transaction, often in real time

© Fair Isaac Corporation, reproduced with permission

170

190

210

230

Good Customer“Bad” Customer

Decision Modelling and Optimization

Decision models describe the relationship between all the

elements of a decision:

• The known data (including results of predictive models)• The decision • The forecast results of the decision — in order to predict the

results of decisions involving many variables. These models can be used in optimization, maximizing certain

outcomes while minimizing others.

Analytics To Optimize And AdaptUse: Design a ruleset that will deliver the right decisions to reach goalsExample: Identify how much money to spend on each marketing channel to maximise sales in a given timeframe and budgetOperation: Decision models are used offline to develop rules, which can then be deployed to operate in real time© Fair Isaac Corporation, reproduced with permission

# Samples

ResponseScore

Margin

PrescriptionVolume

Total CallsCost

Cost ofGoods Sold

DistributionCost

Unit SampleCost

Total SampleCost

Net Revenueper Rx

Specialty

PreviousRx

CensusData

Region

Cost foreach call

CallPlan

Profit

InputActionReactions / FactorsObjective

Adaptive ControlAdaptive Control is the ability to constantly measure and refine the approach taken to a decision within a system.

1. Some of these changes will come from changing business conditions that force a change in the approach being taken to the decision.

2. Mostly, however, it is a case of making a decision better and better over time to boost profits, reduce losses, or improve retention.

Impact May Take Time to Play Out

WHO TAKES THE DECISIONS???

The person who has more influence on everything of a company; THE MANAGER

Day in and day out, managers take actions, that tells how and how well the people around them decide. These actions collectively constitute DECISION MANAGEMENT.

Good decision management is very important for a company because:• It reduces the odds of disaster in a company•It also increases the chances of effective decisions.

To take an influential decision, decision management activities are required. However, some can be sorted usefully into four categories:

Influencing Specific Decision Supervising Decision Routine Shaping Decision Practices Providing Decision Resource

DRIVERS OF POOR DECISION MANAGEMENT

Research has shown that most of the managers failed to make effective decisions because of following drivers:

Driver 1: Failure to Recognize ResponsibilityDriver 2: Vague Appreciation for Decision Problems and ProcessesDriver 3: Ignorance of Natural Decision MakingDriver 4: Limited Awareness of Useful Principles

WHAT ARE DECISION DRIVERS?

They are determined by the business processes, industry, etc. Role of some decision drivers are mentioned below:

1. Mixed Mode ManufacturingDecision Driver: The manufacturing system.

2. Multi-Company and Multi-Plant FinancialsDecision Driver:•The ability to track the each division’s financials.•The ability to record and report plant profit and loss statements.•The ability to share purchased raw materials between divisions.

A “Decision Driver” is an idea, concept, or issue, that is both critical to the business and a uniquely differentiating feature between

software solutions under consideration.

WHY MANAGERS MAKE POOR DECISIONS??

Finkelstein has identified four internal biases that often lead to bad decisions:

1. Inappropriate Prejudgments2. Inappropriate Experience3. Self- Interest 4. Attachments

IMPLEMENTATION OF DECISION

• MAKING ACTION PLANS• ANALYZING• COMMUNICATING A DECISION• MONITOR PROGRESS• OVER COMING OBJECTIONS• RESULTS

MAKING ACTION PLANS

An analysis of the overall task, determining what actions need to be taken and the manner in which the decision shall be implemented.

ANALYZING

• The significant piece here is how you structure the decision. That is how you set the frame by the questions you ask.

DELEGATING A DECISION

Breaking each task into manageable chunks and delegating responsibility for planning to individuals within the team.

COMMUNICATING A DECISION

Once a decision is taken and planned, it needs to be relayed to the people who are directly or indirectly affected by it.

MONITOR PROGRESS

Your implementation will only be successful if you are monitoring your decision and its effects on your progress.

OVERCOMING OBJECTIONS

Decisions are likely to attract varying degrees of opposition, ranging from mild dissent to outright resistance. Rather than feeling aggrieved, opposition should be viewed as valuable part of decision-making.

RESULTS

Whether or not you achieved your goals, it is important to consider what you have learned from your experience: about yourself, about what you consider important.

TEN CARDINAL DECISION ISSUES AT CORPORATE LEVEL

DECISION MANAGEMENT IN CORPORATE CULTURE

HOW CORPORATE LEADERS MAKE TOUGH DECISIONS:

LADD KINGCerberus Consulting"I go home, sleep on it, and then discuss it over breakfast with my omniscient beagle, Nostradoggus."JOHN DINGEEWolfe Corp."I used to use a YES/NO spinner, but now I flip Penny, my executive assistant."DELILAH LEMONPoltroonics"I assemble a team of mybest people and follow their recommendation. That way I can fire someone if it goes wrong."

ISSUE DESCRIPTION1.NEED2.MODE

3.INVESTMENT

4.OPTIONS

5.POSSIBILITIES

6.JUDGEMENT

7.VALUE

8.TRADEOFFS

9.ACCEPTABILITY

10.IMPLEMENTATION

Why are we (not) deciding anything at all?Who (or what) will make this decision and how will they approach this task?What kinds and amounts of resources will be invested in the process of making this decision?What are the different actions we could potentially take to deal with this problem we have?What are the various things that could potentially happen if we took that action – things they care about?Which of the things that they care about actually would happen if we took that action?How much would they really care – positively or negatively – if that in fact happened?All our prospective actions have both strength and weaknesses. So how should we make the tradeoffs that are required to settle on the action we will actually pursue?How can we get them to agree to this decision and this decision procedure?That’s what we decided to do. Now, how can we get it done, or can we get it done, after all?

EDM ISSUES (AUTOMATED DECISION MANAGEMENT)

ENTERPRISE APPLICATIONS ARE“DUMB”• Enterprise Applications for decision management rely

on human intelligence.

• applications have been built around a mindset that automates the data collection and dissemination an organization requires and not much more – decisions are left to people.

Automation in EDM is:• Limited in scope, hard to figure, difficult to

verify.• severely limits the ability to attain straight

through processing in any but the most simple processes

• 24x7 operation requires 24x7 staffing• improving operational, high-volume

transactions with analytic insight is almost impossible

BENEFITS AND APPLICATIONS OF DECISION MANAGEMENT

•What the future holds is uncertain, but we are better off if we can convert this uncertainty to probability. •In today's competitive world there is little room for error, every organization wants to gain a competitive edge. •With so many tasks at hand and so many decisions to make, decision management provides much needed integration and regulation.

•According to recent research from Accenture, nearly half (40 percent) of major corporate decisions are based on the good 'ole gut. •All our processes are bound for failure if they are not followed by a relevant decision.•This includes any corresponding BI tools or CRM practices.•‘Someone once said that the definition of insanity was to do the same thing the same way and expect a different result.’

APPLICATIONS

Finance and Economics

•Business failure prediction•Credit risk assessment•Portfolio selection and management•Company mergers and acquisitions•Financial planning•Country risk evaluation•Regional economic policy specification

Marketing

•Customer satisfaction•Design of market penetration strategies•Retail evaluation

Human resources management

•Job evaluation•Personnel selection

• http://www.bus.umich.edu/FacultyResearch/Research/DecisionManagement.html

• Making decisions (essential managers), Robert heller.• Decision management, By J. Frank Yates, how to assure better decisions

in your company• Http://www.edmblog.com/weblog/2008/02/why-are-enterpr.html• http://www.laynetworks.com/IMPLEMENTING-A-DECISION.html

http://www.decision-making-confidence.com/how-to-implement-a-decision.html

• http://www.studygs.net/problem/problemsolvingV3.htm• http://www.businessweek.com/managing/content/nov2008/

ca20081114_461475.htm

"REFERENCES"

REFERENCES

•http://media.wiley.com/product_data/excerpt/60/07879562/0787956260.pdf

•http://www.businessweek.com/managing/content/nov2008/ca20081114_461475.htm

•http://clearselect.com/key_decision_driver.htm

•http://www.slideshare.net/jamet123/enterprise-decision-management-the-final-step-in-deconstructing-your-applications•http://www.slideshare.net/jamet123/business-rules-decision-management-and-smarter-systems?src=related_normal&rel=2296458•http://www.teradata.com/tdmo/v08n02/Viewpoints/EnterpriseView/Choices.aspx•http://www.idiomsoftware.com/ppts/IDIOM%20Business%20Rules%20Forum.pdf•http://www.businessrulesgroup.org/first_paper/br01c3.htm#s3b•http://www.spss.com/software/deployment/decision-management/•http://www.informit.com/blogs/blog.aspx?uk=Why-do-decision-services-need-adaptive-control•http://www.destinationcrm.com/Articles/Editorial/Magazine-Features/Decisions,-Decisions-53700.aspx•http://www2.sas.com/proceedings/sugi22/DATAWARE/PAPER126.PDF