Many organizations’ success or failure is determined by the decisions they make. Insurance companies must make good decisions about which claims to pay or what to charge for a policy. Health care organizations must decide if it is safe to discharge someone or give them a particular medication. Retailers must decide what to stock where and how to promote it to their customers. Telecommunication companies must decide if they want to retain a customer and what offer is most likely to succeed. Banks must decide whether to refinance a loan and what product to sell to make a customer more sticky.
When asked, most of these organizations would agree that these decisions are important, yet many are handicapped by manual approaches and by systems and approaches that are centered on irrelevant processes or functions:
- Critical decisions are left in the hands of relatively junior people because front-line systems are unable to make decisions or even recommendations. For example, a telco may be retaining too many unprofitable customers because the call center staff is making generic “save everyone” offers, even though the system knows who is profitable and who is not.
- There is no closed loop because systems are divided into operational ones, which push transactions through the steps in their business process, and analytical ones, which let them see how well the business is making its decisions. For instance, a retailer can see in the analytical system that a particular product is not moving as fast as expected, but people visiting the retailer’s website are still getting the offers determined by an overall marketing campaign.
- Unnecessary activities are performed because of a focus on processes rather than on decisions. Companies spend time and money executing a process before presenting information to a decision-maker. A bank, for instance, carries out a whole series of expensive checks on a property before presenting that information to a loan officer to approve a refinance, even if some of the facts gathered will not change the decision.
Becoming more decision-centric is critical if these organizations are going to take their business to the next level. Decision-centric organizations have four key characteristics:
1. They focus explicitly on decisions.
This may seem obvious, but it is often one of the biggest challenges organizations face. It is important to get executives and management to focus not just on strategic decisions but also on the tactical and operational decisions that happen every day. Thinking about “big decisions” is often what dominates discussions among managers and executives, but a decision-centric organization also focuses on decisions taken at the front line -- decisions about customers and transactions. Organizations and their relationships with customers are based on the quality of these frontline decisions, so they must become central to the conversation.
Focusing on decisions means identifying them, understanding them, modeling and designing decision-making approaches so everyone knows how the organization intends to make a decision. It also means tracking how well decisions worked out and linking this tracking of decision performance to overall business performance. It means understanding which decisions impact which business performance measures, which organizations own decisions and more.
2. They build decision management systems.
A decision-centric organization does not abdicate responsibility for every decision but builds decision management systems, which manage decisions critical to an organization. Sometimes these systems make unassisted decisions, sometimes they make recommendations or suggestions, but they always focus on decisions-making, not on data presentation. As I discussed in a previous column, decision management systems are agile, analytic and adaptive; building them generally involves business rules management and predictive analytic technologies, not just BI and reporting tools. (For a report on platform technologies, click here.) Use these decision management systems to simplify, streamline and standardize processes. Many business processes seem complex because they have decision-making embedded in them. All the little branches and gateways can be gathered up and replaced with a single, coherent decision.
3. They focus on decisions to become more current.
Many organizations think they have multiple processes because the decision-making embedded in them is different in each case. Extract and manage the decisions separately and the standard process becomes clear. Many standard processes are overwhelmed by hundreds of exceptions, but these exceptions are almost always regarding decision-making and could be managed by a decision management system. A focus on processes and decisions makes for simpler, smarter and more agile processes.
4. They use a focus on decisions to become more real time.
Many organizations are trying to become more event-driven, more real time. Having people making decisions in your processes limits where a real-time response can be provided. Organizations that focus on automating and systematizing their decisions can react in real time.
My experience is that a focus on decisions can help you design new ways to run your business, showing you how and where to apply advanced technologies, like business rules and predictive analytics. It can even help you think more effectively about BI and reporting. But to become a more decision-centric organization, you will have to actually focus on your decisions and begin with the decision in mind.
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