Defining and Applying a Decision-Centric Approach
The myriad of day-to-day decisions that can make the biggest difference in business are those that directly impact the customer. Decisions pertaining to eligibility, engagement, product offerings, underwriting, and many others are critical components of customer retention and profitability. Regardless of whether these decisions are made entirely by humans, machines, or a combination of both working collaboratively, these can be the key to achieving operational objectives.
As we delve more deeply into the Fourth Industrial Revolution, businesses are dabbling in digital transformation efforts to include machine learning, data science, AI, RPA, and other related technologies. These initiatives are premised on the notion that investment in these areas will improve business outcomes and reduce operational costs. In truth, there is often a gap between technological innovation and the realities of day-to-day decision-making on the front lines.
A decision-centric approach is essential in this regard, as it enables innovative problem-solving at those ‘moments of truth’, while also improving operational efficiency.
People, Rules, Data and Processes must be combined in order to empower users to make the right decision at the right time.
Only then can the true power of advanced technologies (i.e. AI, Data Analytics, Machine Learning, RPA and etc.) come into play.
Decision Model
Using a decision centric approach, the reasoning and dependencies behind each business decision are clarified. The Decision Requirement Diagram (DRD) below shows an example of a car premium calculation.
In this example, each blue box represents a decision to be executed. Each decision in this model could be implemented using a different technology, such as Analytics, AI, Machine Learning, Business Rules, and so on. The decision hierarchy models the relationship and dependencies between decisions before reaching a final outcome.
OODA Loop — Decision Cycle
The end-to-end view and management of decisions is essential when it comes to governance. Both a framework and platform that supports the full decision-cycle is crucial. Using the observer-orient-decide-act (OODA) decision cycle, a decision centric approach becomes capable of supporting explicitly defined decisions at the precise moment in time when these are needed most.
The OODA Loop may be explained as follows:
Observe: Observing and taking into account new information about our changing environment and competition. Connecting and accessing data and information in the moment, which can be incomplete and imperfect. What is important, what can be ignored and how do you establish these facts quickly?
Orient: Orientation shapes the way we observe, the way we decide and the way we act. It brings perspective into the information that has been gathered in order to create a context for decision-making. The goal of orientation is to create a more accurate model of reality with which to make better decisions and take better actions.
Decide: Models the decisions to be made in the business moment, explicitly defined business decisions, their relationships and dependencies. By executing the decisions, the results are created and ready for the next part.
Act: Allows actions to be taken based on decision outcomes. A decision might have multiple answers, therefore testing, optimizing and creating new data for the cycle as input to Observe is part of the Act.
While promoting organizational efficiency, the decision-centric approach allows organizations to successfully execute customer-centric processes with the ultimate goal of providing true competitive differentiation.
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Conclusion
A decision-centric approach is essential for companies who wish to respond to dynamic marketplace changes quickly and effectively. It enables the organization to not only learn, but also to adapt quickly to changes in business strategy and operational practices. As such, it is a critical part of any business agility toolset. It provides essential feedback loops and maintains consistency in decision-making across the board. Whether these decisions are supported by AI, Machine Learning, Business Rules, and some other technological approach, it provides a framework that places decisions into the context of ‘business moments’. As such, the decision-centric approach allows organizations to flourish via:
- Business Agility: consecutive decision loops designed to attain competitive advantage by responding to changes and market conditions effectively and efficiently.
- Customer Centricity: rapid business adaptations that respond to market dynamics in a highly personalized manner.
- Business Alignment: continuously delivering and innovating iteratively based on business objectives.
