Enterprise Decision Management - a Weblog

Jack van Hoof had a great article today - How to implement a loosely coupled process flow (EDA). A great illustration of how to use a decision service to loosely couple. I have blogged about SOA/EDA and EDM before and there was a great session at EBRC on this topic. I think being event-driven and decision-centricis important in the world in which we find ourselves and that decisions can be the glue between services, events, processes and legacy applications. If you are not already subscribed to Jack's blog, you should be. He's worth reading.

Technorati Tags: business rules, CEP, decision service, EDA, EDM, enterprise decision management, event processing, event-driven architecture, loosely-coupled

I saw this article over onBI Review - Evidenced-Based Management - Business Wisdom, Part 2.A good article that summarizes some of the key principles from the book (which Ireviewed here and highly recommend). A focus on evidence based management means both using BI/data mining to understand what's going on and using enterprise decision management or EDM to make sure that your systems reflect the best evidence you have. In particular the principles of adaptive control are critical to learning and improving while still acting with the data you have.

Technorati Tags: adaptive control, EDM, enterprise decision management, evidence-based

Montgomery Research have just published this "thought-leadership" white paper "Smart-Enough Customer Decisions"written by yours-truly. In it I discuss how smart-enough customer decisions can improve results for all concerned. This is based on the material in Smart (Enough) Systems.

Technorati Tags: best next action, customer decisions, customer experience, Customer Service, customer-centric, MRI, Smart (Enough) Systems, smartenoughsystems, Montogmery Research

(by Guest Blogger, Gib Bassett)

On June 25 (2007), I saw this news posting on DM Review's website � IBM and KANA Study Shows Untapped Potential for US Financial Services Web Sites to Better Serve Clients, and was intrigued to see to what extent Enterprise Decision Management (EDM) concepts were mentioned. It's been a long time now that web-based customer service capabilities have been promoted as a timelier, lower cost method of maintaining and growing customer relationships than other options, but what is interesting is that the study, titled Service Done Right: Why Great Online Customer Service Matters More than Ever, shows cultural and generational factors driving many financial institutions to take web based customer service much more seriously:

The study, commissioned by IBM and KANA Software, Inc., comes at a time when financial institutions are looking for new ways to improve the customer experience for established customers and a growing population of younger customers that increasingly interact with businesses through e-mail, chat and the Web.

In the past, web based self service was typically all about the business; take advantage of this new technology to lower our costs, retain our clients by allowing them to find responses themselves more quickly, and perhaps even up or cross sell to them in a somewhat captive forum. Now, the tables appear to be turning as technically sophisticated youth increasingly expect the same level of interactivity and usability in self service websites as they find in text messaging mobile phones and video games.

As I suspected, there are number of issues cited in the study addressable via EDM technologies such as business rules management systems (BRMS). Consider this:

Financial services firms ready to implement new self-service channels face significant application integration challenges due to complex IT infrastructures that are siloed and run on multiple platforms from different vendors, each with unique data types and interfaces. As a result, integrated online channel development - including new Web 2.0 technologies such as instant messaging and blogs - is most often piloted versus rapid implementation across the enterprise.

BRMS driven by EDM concepts are ideal solutions to this problem. By virtue of their ability to run in heterogeneous environments, separate and manage the simple and complex rules underpinning customer service policies from disparate systems, and deploy real time decisions to any interaction channel, these BRMS can help financial institutions rapidly move from a pilot to an enterprise scale solution. Given the following facts cited from the report, based on interviews with 72 top companies, it looks as if quite a few firms stand to benefit:

Ninety-five percent of Web sites did not provide answers to basic questions such as 1) What do you charge for canceling a check?; 2) Can I make an insurance claim online?; and 3) Can you buy and sell shares on the London Stock Exchange for me?

EDM compliant BRMS enable business users to maintain policies governing questions such as these, the answers to which likely vary from customer to customer � so it’s no simple HTML editing project.

Sixty-seven percent of firms did not provide satisfactory answers via e-mail and only six percent offered the ability to escalate inquiries to e-mail or telephone channels.

Even if powered by a Business Process Management (BPM) solution, processes such as these will again tend to vary by customer and be very difficult to maintain and change. BRMS employing an EDM approach separate the logic driving business processes and make it available to business users. Given the extent of the customer service problem and increasingly competitive markets, financial services firms should begin immediately evaluating an EDM solution lest the next report be about how poor web customer service has led to numerous customer defections.

I saw this article - U.S. Banks Not Meeting Customer Needs Online, According to Brulant Study- and it made me think about previous posts on the blog that might help some of these banks do exactly that - meet (or exceed) their customer needs online. First, they should think of their home page as a decision and not a page so that they can generate a personalized page for every customer. They should focus on growth decisionsand deliver more (and better) self-service. This meansbecoming more customer-centric (which means being decision-centric) and using EDM to build the bank of the future.

I also wrote about using EDM to respond to Tower Group's trends in financial services.

Technorati Tags: banking, customer experience, Customer Service, customer-centric, decision-centric, EDM, enterprise decision management, personalization

(Posted by Guest Blogger, Gib Bassett)

Thanks to my colleague and fellow guest blogger Ian Turvill, who recently passed me an article from Clickz.com titled “Reward Programs: Continuous Rewards and Business Rules” by Jack Aaronson. Mr. Aaronson raises some interesting points about a marketing tactic called continuous rewards, one of several reward schedule techniques marketers may use in their pursuit of improving customer loyalty. Marketing is often considered a soft science or a science with no science to it at all, but Mr. Aaronson uses famed psychologist B.F. Skinner’s reward schedule categories as the basis for his commentary. In case Skinner doesn’t ring a bell, you could say he’s a latter day Pavlov (surely you remember the salivating dog experiments from that required psych class you took in college?).

The point raised by Mr. Aaronson is that a continuous rewards schedule, as in offering free shipping on all orders, is among the least effective ways of garnering customer loyalty. That may be intuitive, but in the late 1990s, as Mr. Aaronson points out, Amazon.com and other online book sellers attempted to use this approach to increase sales. While it worked initially, it quickly lost its effectiveness due to the fact that, as a continuous reward, customers had no incentive to increase their frequency of purchase. Thus, most online book sellers stopped offering blanket free shipping. Once taken away and only offered on selective purchases, the reward was no longer seen as an incentive for the customer.

Mr. Aaronson says continuous rewards become business rules overtime, because an effective reward “occurs occasionally, is basically unexpected by the user, and is a competitive advantage” whereas a business rule “an ongoing part of how your business operates.” OK. But then he goes on to say:

“The problem with a continuous reinforcement schedule is over time it becomes a business rule. It always happens. It's always there, so it isn't special. It's simply how you do business. And when you remove the reward, you effectively change your business rules, which alienates customers in a much more extreme way than simply removing a promotion does.”

We could debate whether or not business rules are “special”, but what is not debatable is that there is nothing simple about business rules or their potential impact on company performance. In fact, Business Rules Management System (BRMS) vendors adopting an Enterprise Decision Management (EDM) approach have gone to great lengths to eliminate the rigidity described by Mr. Aaronson. By managing rules separately from operational systems and empowering business users to access and change them, this class of BRMS offers marketers the ability to avoid the continuous reinforcement schedule trap. Sort of like a savvy dog that doesn’t salivate when it hears the bell after the food is taken away.

(Posted by Guest Blogger, Gib Bassett)

Yesterday I noticed this headline on DM Review’s website, “IT and Business Managers Universally Out of Sync,” and was immediately reminded of how an Enterprise Decision Management (EDM) approach to business rules actually brings these two groups of people together to achieve a common objective. The benefits of Business Rules Management Systems (BRMS) are many, but I had never thought about them in the context of solving a larger corporate problem such as the effect of business/IT communication on technology adoption.

The article cites a recent study by Info-Tech Research Group and KnowledgeStorm that concludes “IT managers' 'tech talk' baffles business managers and fails to communicate IT imperatives” and it “…will impact IT adoption moving forward.” The study indicates that IT has an easier time selling initiatives to the business that are focused on operations or efficiencies, than those with a less technological connotation (like customer acquisition).

You could say that these types of firms represent the majority in their respective markets, and that a smaller percentage of more progressive IT organizations have less difficulty selling business centric initiatives. Moreover, you could say that the majority would like to emulate those more progressive IT organizations, but that is by far easier said than done.

A step in the right direction for these firms would be adopting an EDM approach to BRMS, which separates rules from operational systems and provides for collaboration between IT and business users in the maintenance of rules. Immediate benefits can include increased system performance and staff productivity, while longer term the growing relationship between IT and business users can make selling new IT initiatives easier.

Having just wrapped up the European Business Rules Conference (see my previous posts), I noticed that some misinformation was provided at EBRC around sequential and inferencing execution of business rules. Sadly the misinformation was provided by a vendor (who lacks inferencing capability in their product) in what was supposed to be an informational, rather than vendor-sponsored, session. In the interest of fair disclosure, I work for one of the vendors about whom the presenter deliberately misinformed his audience. So, what was it he said?

He essentially presented two lists of vendors - those supporting Rete or inferencing and those supporting sequential execution of rules. He asserted that sequential execution was ideal for 90% of problems while Rete was only ideal for 10%. Not only did he not support this assertion, he also implied that Rete-based products were also only ideal for 10% of problems. However, at least some of the vendors he labeled as "Rete vendors" support both Rete/Inferencing and sequential execution. The reverse is not true of the non-Rete vendors (including his own). Thus, even if he is right about Rete v non-Rete (which he is not, see below), he should have pointed out that the major vendors (Fair Isaac, ILOG etc) who support both Rete and sequential execution are ideal for 100% while those that only support sequential execution are ideal for just 90%. In other words, lacking Rete support, his product cannot support 10% of situations at all. Instead he mislead the audience into thinking they must pick either inferencing/Rete or sequential/non-Rete and that, I am afraid, is simply not true.

Having started by misleading his audience over the actual choice they had in terms of vendors, he then proceeded to mislead them in terms of the implementation approaches they have for rules. He tried to compare and contrast Rete/Inferencing execution and sequential/non-inferencing. Particular errors of fact included:

• Rete is only ideal for 10% of problems - UNKNOWN
• While many problems do not require inferencing, this is a simple assertion on his part not something for which any data exists
• Rete involves rules without context meaning you can get no overview - FALSE
• Rete vendors offer all the exploratory tools you need to avoid this problem
• Rete has low performance due to interpretation - FALSE
• Rete implementations from the leading vendors are compiled into memory for performance so this is simply not true.
• Rete has low scalability in the face of increasing facts, rules - FALSE
• The original Rete algorithm was intensely scalable in the face of additional rules, this being one of its most interesting features, and more recent implementations (such as Fair Isaac's Rete 3) are also highly scalable in the face of increasing facts
• Rete behavior / sequence difficult to predict - AMBIGUOUS
• This can be true for inferencing but the leading vendors offer debugging, trace and other tools to debug execution sequence. In addition, the use of inferencing to execute a ruleset means that the order in which rules were written or edited is immaterial, making for more stable behavior in rulesets with high rates of change (such as those being maintained by business users)
• Sequential execution conforms to a human way of thinking - FALSE
• This is only true of very dumb humans who, when faced with a checklist, are unable to use information from onequestion toadapt their subsequent question - the kind of intelligent questioning most professionals use. Sequential execution is completely mindless.
• Sequential is intuitive - FALSE for real-world situations
• No set of rules is intuitive once it becomes large. While sequential rulesets may be easier to understand for trivial numbers of rules, real-world applications with thousands of tends of thousands of rules require rule management regardless of execution mode. That's why the leading vendors, which list does not include his by any measure of market share or usage, focus on rule management capabilities
• Sequential offers significantly higher performance - FALSE
• Sequential, and modes like Blaze Advisor's compiled sequential, are only faster in terms of the total numbers of rules fired. However, sequential execution almost always implies that more rules must be executed as no algorithm is applied to see which rules might be relevant -it is much dumber about which rules to fire. Sequential is thus going to be faster if a high percentage of the rules are going to be worth executing and not when execution is sparse. That's why real products offer both sequential and inferencing/Rete execution modes.
• Sequential offers linear scalability - IRRELEVANT
• Testing of Blaze Advisor's inferencing and sequential modes shows them both to offer linear scalability. To imply that this is not a characteristics of Rete/inferencing is false.
• Sequential executions means that behaviorand sequence are easy to predict - FALSE in real-world situations
• Again he confuses the issue by talking only about small numbers of rules. When large numbers of rules are at issue, as they are in the kinds of real systems the major vendors build, behavior and sequence are hard to predict no matter which execution mode you pick and so rule management, testing tools based on xUnit, rule verification and validation,and scenario management are critical.

If you want to solve real-world rules problems, pick a vendor that offers inferencing/Rete and sequential execution and understands that they are called Business Rules Management Systems for a reason.

Technorati Tags: business rules, EBRC, European Business Rules Conference, inferencing, Rete, Rete, rule management, sequential

(Posted by Guest Blogger, Ian Turvill.)

We are eager to spread the message of Enterprise Decision Management across the globe, and to this end, the CEO of Fair Isaac, Dr. Mark Greene, has been traveling extensively and meeting with many members of the foreign press.

Most recently, he has been in India, and his comments have been reported in a number of English-language newspapers there. I'm including a brief synposis of those reports below, and links to the original articles. If we have readers in India, and elsewhere in Asia (I'm not privy to James's most recent Feedburner statistics), we encourage you to comment on the state of the market for EDM-type solutions. We particularly ask for Indian-based bloggers to connect with us.

I encourage our other readers to review these articles, not to understand Fair Isaac's plans for corporate expansion, but more to see how technology markets such as India - such are expanding rapidly and whose role in outsourcing is critical to worldwide technology development - view the need for analytics and decision automation.

• The Economic Times reports that Enterprise Decision Management is expanding beyond its traditional home of banking, financial services, insurance into new areas, such as retail, healthcare, and telecommunications.
• The Economic also reports the EDM software market is estimated to be about $ 20 billion worldwide and growing at 10-12 percent annually.
• The Business Standard reports that Fair Isaac's desire to tap into the pool of talented software engineering talent in India will prompt to add 50-100 professionals to existing 300 employees in Bangalore...
• ...while Deepikaglobal.com explains that Fair Isaac plans to add a new sales and marketing facility in Mumbai

There are several other reports that reinforce these points, including:

• Mangalorean
• News Post India
• NewKerala.com

While this post might seem a little self-serving, it's very interesting to note that Google Trends consistently lists Bangalore as the location of the most search engine inquiries on Business Rules. So, encouraging greater sub-continental participation in this blog seems overall to be a very good idea.

(Posted by Guest Blogger, Gib Bassett)

The June 2007 issue of DM Review features an interview with business process management (BPM) vendor Metastorm CEO Bob Farrell, titled “Process Intelligence.” Given Metastorm’s focus on BPM it isn’t surprising that Mr. Farrell has a process centric view of the world. Rather surprisingly though, it seems their business is experiencing trends similar to those developing around Enterprise Decision Management (EDM). Recalling the definition of EDM, it is an approach that automates, improves and connects decisions to improve business performance, and one which treats decision logic as a manageable enterprise resource reusable by multiple applications in different operational environments. Similarly in the BPM space, customers are viewing processes as part of what is quite literally an “asset portfolio.” Consider this quote from Mr. Farrell:

“The progressive customers we've talked to look at how they manage an activity and support it with content, with structured data, with services, with a bunch of other things including human activities, all in one model. There are great companies out there doing this that haven't abandoned data management; they still view their data as an asset, but they view it as an asset among many assets within a structure of a process model.”

Although EDM is an approach, it also implies the use of specific technologies, such as Business Rules Management Systems (BRMS). With IT resources increasingly scarce, but with IT concerned with issues of oversight and integrity, BRMS’ which bring both business users and IT staff together to build and maintain rules applications are in high demand. Aside from these very legitimate reasons for adopting a BRMS that enable business uses and IT staff to work collaboratively, Mr. Farrell states quite astoundingly the following statistics that especially validates the reason to pursue rules projects with vendors that possess these capabilities:

“…you may have seen a study from Gartner that says 95 percent of all BPM projects have been deemed a success, versus 20 percent for all IT projects. The reason for that is that a BPM project isn't an IT project. So as much as IT people need to be involved, it's still a business-driven project, which will generate more success than failure.”

The final question and answer of the interview was particularly pertinent, given EDM’s view that Decision Services blend the benefits of service oriented architecture (SOA), business rules and analytics to inject intelligence into operational systems � effectively creating “Smart Enough Systems”, which happens to be the title of a book by our Blog host James Taylor.

“DMR: Why do business process and business intelligence remain so disconnected?
BF: When you look at operational BI, you're running a process; you're collecting metrics and thinking about change. To me, that is process intelligence. We see performance management as something that can be driven on the back side of BPM very significantly. Records and case management, business rules; all these things are converging and need continuous improvement. All these things are core; they have to come together over time.”

Mr. Farrell describes here the not so distant future � intelligent processes. That is a tremendously self serving statement, but taken up a level to intelligent systems � abstracting to a level where rules and analytics govern BPM and other systems via SOA-compliant Decision Services -- holds even greater promise for enabling the kind of business agility at the heart of EDM.

Last session today at the EBRC was my pal Christian (from ILOG)talking about production rules - Production Rule Representation (PRR - no link yet but the BMI Domain Task Force is here) and Rule Interchange Format (RIF). Christian began by outlining two different use cases - one for RIF and one for PRR. His RIF use case was around mortgage processing. Rules for loan rates must ripple from wholesale lenders to lenders to brokers. RIF would work well here as it would allow a wholesale lender to pass a RIF document with its new rules out to people who could then use those rules in whatever rule engine they have. His PRR case was more general application development, especially when a platform has not been selected. Developers might be working on their object model while developers and analysts are trying to model rules (rules being a valid "model" for MDA of course). At this point the requirement is to identify rules, map them tothe classes they modify and reference and perhaps start definingconditions and actions for those. When a platform is selected,support for PRR by both the modeling tool and the business rules management system (BRMS) wouldallow those rules to be moved between the modeling and production environments.

• PRR is an OMGstandard to provide a formal, platform-independentmeta model for production rules, allowing them to become 1st class objects in UML, allow design-time interchangeand become part of the MDA.
• RIF is a W3C standard to provide an XML-based language for exchange of rules between execution environments - runtime persistence and interchange

Christian discussed PRR's support for inferencing and sequential execution of rules and its model to allow for extension of other kinds of rules (event-condition action for instance). The rules map to UML classes and Behaviors. Rules can be defined with any expression language but the standard contains a (non-normative)expression language based on the Object Constraint Language (OCL).He briefly discussed RIF as an interchange format, a subset of which supports the classes in PRR. Christian then walked through the meta model (which you can find here).

Here's a sneak peak of the PRR submission Christian discussed.

Technorati Tags: BRMS, business rules, EBRC, European Business Rules Conference, MDA, OMG, PRR, RIF, standard, UML, W3C

Last session at EBRC before today's high point (that would be my session), is Agility and Compliance require a combination of BPM/SOA, EDA and BRAby Jan Vanthienen, Leo Hermans and Wilfreid Lemahieu. They were missing Leo but got started anywayby defining agility as the ability to sense events and react effectively (I like Gartner's definition) and emphasized how important it is to stay compliant with regulations, introduce new products quickly etc. Agility can also impact all sorts of things so you must build-in agility. They defined compliance as the ability to prove you did something according to policy or rules - what I calldemonstrated compliance. Their assertion is that a stable architecture for agile compliance requires business rules, SOA and EDA in combination:

• You need business rules for agility - rules decide what to do with events for instance.
• You need BPM/SOA to deliver process agility - BPM/SOA is about executable processes compose services that reuse components where services are the reusable building blocks for processes andorchestration and choreography of processes are the focus.
• You need Event Driven Architecture (EDA) for agility - Events and event-responses also drive agility by providing very loose coupling (where BPM/SOA tends to more tightly couple services)

They referenced one of the best blogs on SOA/EDA (Jack van Hoof's) and his approach of discussing EDA and BPM/SOA in combination. Instead of all events triggering services, have them trigger processes that orchestrate various services and may, as part of that orchestration, trigger an event. EDA is many to many so combining with BPM allows a coordinated response and can eliminate complexity from the process definition. They walked through some examples that should be in their slides when they get posted.and they call this approach BECO - Business Event based COordination.

In this approach business rules are everywhere - preconditions, sequence constraints etc as well as decision services to group business rules and apply them to both EDA and BPM/SOA. This moves you to rules-based orchestration and ultimately rules-driven processes. Events tie in as they are often the most obvious and most appropriate to trigger rules and decisions.

They did a great job of tying all this together but I did not write all of it down - partly because their slides will be available and partly because I have blogged about how I see decisions, rules, processes and events come together in Business Rules, Business Decisions, Intelligent Processes, Enterprise Decision Managementand becauseI have also blogged about event processing, BPM, SOA and rules and how they all come together in various places:

• BPM, BPO, BI, CPM, SOA, EDA, CEP, BAM and .... EDM?
• EDA, SOA and Decisioning (again)
• Event-driven and decision-centric
• BPM in 2007 and beyond
• Nice article on Business Event Monitoring
• EDM and Business Activity Monitoring (BAM)
• Event Processing and Business Rules (and EDM)
• BPM-enabled SOA needs decision services

Technorati Tags: agility, BPMS, BRMS, business agility, business process, business rules, CEP, decision service, decision-centric, EBRC, EDA, EDM, enterprise decision management, European Business Rules Conference, event processing, SOA, event-driven architecture

Blogging live again from EBRC- this session is on AML Business Rules at PostFinance (part of Swiss Post) by Oliver K. Burnand who heads up compliance for PostFinance, the FSI within Swiss Post. Provides transaction processing as a public service, now almost all electronic with ATMs and debit. PostFinance is now a full retail bank including investments, payments, savings, retirement planning and so on. Customers are mostly private customers with low to medium assets and a small number of large companies/institutions. 3.2m accounts, so not very large. 800m transactions a year (2m/day with peaks up to 12m). Anti-Money Laundering (AML) is handled differently for PostFinance but many of the same rules.

AML has two particular areas - Know your Customers, Know your Transactions. PostFinance posts 80% by volume of transactions but very low assets per customer and manual supervision of transactions therefore not practical. PostFinance customers often pay into someone else's account in cash and this is unique to PostFinance. Indeed people can transfer cash to each other without either party having accounts, making "smurfing" particularly hard to detect.

For AML, had hoped to buy a package but ended up using a rules management system. Analytics are unusual in AML, unlike other kinds of fraud, as the number of money-laundering transactions is often too small for training. Rules are then critical and agility, being able to change those rules quickly, is also important. The rules are run in batch, for customer monitoring, transaction monitoring and occasional customer monitoring. Each kind of monitoring is designed to generate cases for subsequent follow-up. Identifying the cases is the job of rules:

• Transaction monitoring is transaction at a time, rules target specific thresholds and risky countries.
• Client monitoring assembles a profile from all the transactions related to a client in a period and rules look for patterns in transactions. Rules ensure that only one case can be generated per client
• Cluster monitoring handles customers without customers and uses rules and name matching algorithms (from digitized forms) to find clusters that looks suspicious.

Also applies rules to do customer risk analysis so as to categorize the customers. All the business rules are managed by business users, which can be hot-deployed to the system. Business users can run simulations to see what happens when rules are changed. The rules, shown in decision trees with audit trails, are very compliance friendly. The system they use allows decision trees only and these can call other decision trees to keep rules manageable. Although AML is very rule-centric, there is a need for peer groups to do the assessment. Data mining is then used to create more statistically significant groupings (something I talked about in the context of improving profits here). This moves the solution from just rules to a rules analytics model and closer, therefore, to what I would call enterprise decision management or EDM. This helped simplify the development of rules by replacing them with statistical models and provided a certain element of a self-adjusting system as the peer groups change over time.

I have blogged about rules and Anti-Money Laundering systems beforeand commented on the performance needs of this particular system, and the fact that mainstream business rules products like Blaze Advisor support the kind of sequential, high-performance execution this system required, herewhen they were written up by Forrester.

Technorati Tags: AML, business rules, customer data, data mining, European Business Rules Conference, fraud, know your customer, risk management, know your transaction