This whitepaper delves into insight about using decision management to your competitive advantage. It has a strong business analytics focus with regard to different industries.

1. IBM Software IBM Analytical Decision Management
Business Analytics
Decisions that drive
success
Using decision management as a competitive
advantage
Decision management is a highly effective approach for optimizing
Contents: and automating transactional decisions at the point of impact to
consistently maximize outcomes for the organization. Supported by
2 Organizational decision types predictive analytics, rules, scoring and optimization techniques, it offers
3 Making better decisions organizations the ability to empower employees and systems on the
front lines with automated recommended actions in real-time – so they
5 Decision management optimizes and can make the right decision each time.
automates decisions
6 The path to decision management One of the bigger challenges for organizations competing in this
paradigm is how to utilize data more effectively in decision making.
7 Conclusion
A business manager may have access to voluminous reports and
dashboards to monitor business conditions, but the critical step of
using that information to guide business processes and customer
interactions is usually a manual process, sluggish in its response to
changing conditions. Organizations that wish to gain a competitive
advantage must find a better way.
The better way involves creating a robust system that automatically
manages decisions. It is made up of five key elements:
• Business rules help with decision logic and flow.
• Predictive models connect data to a future state.
• Access to disparate types of data – including structured,
unstructured and social media data – provides insight.
• Simulation enables you to test it in the back office sandbox
before trying it with customers.
• Optimization helps your organization maximize profits
and minimize costs.

2. IBM Software IBM Analytical Decision Management
Business Analytics
For example, consider how vending machines work. The Organizational decision types
vendor must decide what to put in the machines, what to Before exploring how to optimize decisions, it’s essential to
charge, how much change to load in the machine and how understand what types of decisions are made in organizations,
to capture feedback. A good decision system uses analytics and which people or processes carry out those decisions. From
to integrate all of these decisions into business processes; a broad perspective, there are three primary organizational
it enables people and systems, and ties strategy to execution. decision types: strategic, operational and transactional.
IBM’s version of such a decision system is called IBM
Analytical Decision Management. Although the people who typically make certain types of
decisions are listed in Figure 1, it’s important to note that
there is crossover between roles. It’s not unusual for a person
at any level of an organization to make a strategic, operational
or transactional decision.
Decision type Definition Examples Decision makers
Strategic Often sets the long-term direction for • “We will lower our fraud rates by • C-level executives
an organization. Could be an objective 10 percent in the next six months.” • VPs
or an initiative which results in guidelines • “We must increase cross sell to meet • Line-of-business managers
from which operational decisions are our sales targets.”
made. • “We will acquire Company A to
complement our capabilities and
expand market coverage.”
Operational Includes the formation of policies or • “Insurance claims greater than $5000 • Business managers
processes. They are driven by the will be sent to the special investigative • Systems managers
need to establish efficient, repeatable, unit for review.” • Business analysts
scalable processes using accurate • “Seasonal items will be stocked at the
and timely information. front of the store.”
• “We will offer customers a discount
when products A, B and C are
purchased together.”
Transactional Commonly “front line” actions that • “You’ll receive your claim check in • Customer service representatives
apply a policy, process or rule set to a seven days.” • Financial services representatives
specific case. These types of decisions • “While I have you on the phone, can • Branch managers
lend themselves to automation and I interest you in …” • Salespeople
make outcomes more consistent and • “Would you like fries with that?” • Automated systems such as website
predictable. They require accurate recommendation engines
information and often real-time
information for peak effectiveness.
Figure 1: Organizational decision types.
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3. IBM Software IBM Analytical Decision Management
Business Analytics
Making better decisions In most organizations, however, decisions are not optimized
Consider the multitude of strategic, operational and or automated in ways that establish data-driven business
transactional decisions that define your business. Some of strategy as the foundation for action. For instance, a C-level
these decisions, such as determining strategic initiatives, do executive may task a business manager with increasing the
not lend themselves to automation. But there are thousands sales of value-added services. The business manager then calls
of other daily decisions that can be automated and optimized upon a professional analyst to determine the best services to
for significant – and measurable – financial benefit. offer customers when they call. The analyst uses data mining
and statistical analysis to determine relationships between
For example, what if an insurance firm were able to accurately products and services. The business manager and analyst
predict which claims were likely to be fraudulent and then conduct a multi-step process for identifying the best
automatically send those to its special investigative unit? offer for a “typical” caller. But because callers are individuals
This would allow the firm to accelerate the payment of valid with unique needs and expectations, targeting a “typical”
claims for a positive impact on productivity, competitiveness caller often misses the mark – resulting in a lost sales
and the bottom line. opportunity or even an adverse reaction from an otherwise
satisfied customer.
Optimized decisions: Automotive The problem with such an approach is that insightful business
input is not part of the process. In most organizations,
A major automobile manufacturer in the United States relies on IBM transactional decisions often need to be made in an instant.
Analytical Decision Management to help improve customer satisfaction
and its reputation for quality by reducing warranty costs. Since there is no time to process and analyze the staggering
volumes of ever-changing data, these decisions are often
Result: The company is identifying the root causes of part failures and based on a mix of corporate policy, experience and gut feel.
addressing any problems quickly and proactively.
There is no full-circle feedback to help determine which
scenarios lead to failure and which increase the possibility of
success, so inconsistent decision making within a department
or throughout the organization is likely. The situation is
compounded by the fact that business users and professional
analysts typically don’t speak the same language regarding
business issues requiring analysis. The business users focus on
the business processes involved, while the analysts typically
focus on the techniques needed to perform analytical tasks.
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4. IBM Software IBM Analytical Decision Management
Business Analytics
More significantly, the business manager has the power
Optimized decisions: Insurance to adjust priorities and processes in real time to optimize
A major insurer used IBM Analytical Decision Management to improve its decisions. The analyst uses the insightful input from the
service to customers by settling claims faster and keeping premiums low. business manager to fine tune the models for increased
To achieve this, the company needed to optimize operational efficiency and accuracy. Feedback from the results of the actual customer
find smarter ways to combat fraud.
interactions are then included to create a virtuous cycle,
Result: Employees were able to significantly improve customer service a closed loop system in which decisions grow more effective
by settling legitimate claims within an hour, which was more than 70 times with each iteration. Having a plaform for decisions is what
faster than before.
closes this loop.
This company also relied on IBM Analytical Decision Management to
enhance its ability to detect fraud, foiling a major crime syndicate and In this scenario, business strategy now drives the process.
saving $2.4 million in the first four months of operation.
The business manager holds the cards for timely input while
the analyst uses his technical skills to fine tune the results.
It’s an open environment in which customer interactions are
In contrast, some organizations use analytics to incorporate precisely anticipated and effective responses are planned.
business insights into their decisions to gain a competitive True business-based analysis becomes the link between the
advantage. For instance, when the business manager tasks “languages” of the analyst and business manager.
the analyst with finding the best services to offer callers,
decisioning technologies could be employed. The analyst Decision management optimizes
now has the capability to create predictive models that score and automates decisions
each customer in real time and build corresponding rules The concept that makes these advances possible is called
based upon business processes and regulations. Marrying decision management, and IBM’s offering in this space is
rules and models to gain the advantages of both is one of called IBM Analytical Decision Management. It employs
the strengths of IBM Analytical Decision Management. predictive analytics, localized rules, scoring and optimization
techniques to generate recommended actions, enhance
outcomes and solve specific business problems. It includes
all aspects of managing automated decision design and
deployment that an organization uses to manage its
interactions with customers, employees and suppliers.
In essence, decision management enables optimized decisions
to become part of the DNA of your business processes.
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5. IBM Software IBM Analytical Decision Management
Business Analytics
• Scoring – Decision management automates and applies
Optimized decisions: Retail scoring, and distributes scores throughout an organization.
A large apparel and home furnishing company in the United States used • Optimization – Decision management provides constraint-
IBM Analytical Decision Management to deliver the optimal response to based optimization techniques with the power and speed
each customer interaction, whether from point-of-sale, via its website or to solve large, real-world optimization problems comprised
from the customer call center. The company developed individualized
of millions of constraints and variables.
cross-sell and up-sell offers as well as more targeted promotions.
Result: The company increased website revenue through improved According to a published report by James Taylor, an expert
channel conversion and larger basket sizes.
who has written and consulted extensively on this topic,
“Decision management makes it possible, for the first time,
to use predictive analytics as an integral part of a real-time
Decision management is usually focused on high-value decision process.”1
decisions and implemented with the use of rule-based and
analytic model-based applications. So, although decision That’s a groundbreaking distinction for organizations that
management is relatively new, it is supported by proven have traditionally used historical data and static information
technologies. Here are a few examples of how decision as the basis for business decisions. Predictive analytics
management touches existing enterprise technologies: provides the insight to anticipate what customers will do
next, which are likely to leave for a competitor or respond
• Rules – Decision management uses rules designed by favorably to up-sell or cross-sell campaigns. Predictive
business users to represent operational policy. insights can identify areas of potential risk and fraud or
• Data management – Decision management uses the spot new and emerging market opportunities. Predictive
data stored in data warehouses and managed with master analytics can also help organizations proactively manage
data management technologies. resources to contain costs. Organizations that can automate
• Predictive analytics – Decision management employs and optimize decisions informed by predictive analytics
predictive models to provide real-time insight to have a significant advantage over competitors that cannot.
decision makers.
• Business intelligence – Decision management monitors
success with reporting and analysis tools.
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6. IBM Software IBM Analytical Decision Management
Business Analytics
The business manager can then prioritize the actions
Optimized decisions: Banking that should be taken when particular conditions are met.
Decision management facilitates this with the balanced use
A large European bank used IBM Analytical Decision Management
to enhance its focus on customers. of locally-defined rules, system-created predictive models
and business objectives. Simulation of process outcomes,
Result: The organization increased product penetration and revenue including the results of operational decisions over time, helps
per customer, improved its time to market to attract new customers and
optimized customer satisfaction and retention. business people tweak how each decision will be handled.
Finally, organizations should make their optimal decision
patterns an integral, repeatable part of their business
The path to decision management processes. Decision management accomplishes this with its
Once you understand the types of decisions that take place interaction-centric deployment architecture. Deployment
in your organization and the kinds of decision management approaches, including real-time scoring and bulk scoring,
options available, you can begin building a decision ensure that best practices are embedded at the right time to
management infrastructure. Business managers should impact each interaction. Interactive questions help gather
first define their business challenges in the context of the important information at the point of decision to ensure
decisions that affect them; this is often called “decision proper outcomes.
discovery.” A decision management platform like IBM
Analytical Decision Management can then optimize the Implementing decision management makes operational
targeted decisions with decision-centric applications decisions deliberate, transactional business decisions more
developed for specific business problems. These applications personalized and ensures the consistency of decision
present information in terms with which business people processes while enabling flexibility within established
are familiar, and fold in predictive analytics in the context guidelines. It provides the ability to predict (and therefore
of the decisions that affect the problem. manage) outcomes to help generate better results with
every decision. With its closed loop reporting of results
and continual refinement of rules and predictive models,
decision management recommendations grow more
accurate and effective with every decision.
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7. IBM Software IBM Analytical Decision Management
Business Analytics
Conclusion About IBM Business Analytics
In our personal lives, many people already use technology to IBM Business Analytics software delivers actionable insights
automate some decisions, such as when to pay bills, or which decision-makers need to achieve better business performance.
podcasts or blogs to subscribe to. And “smart appliances” are IBM offers a comprehensive, unified portfolio of business
on the horizon – such as refrigerators that “know” you need intelligence, predictive and advanced analytics, financial
to buy more milk. It’s unlikely in the near future that we will performance and strategy management, governance, risk
have a device that automatically decides the wisest advice or and compliance and analytic applications.
course of action to take during challenging life situations.
But in the realm of business, proven technologies already exist With IBM software, companies can spot trends, patterns
that make automated, optimized decision-making a reality. and anomalies, compare “what if” scenarios, predict potential
threats and opportunities, identify and manage key business
Decision management is that highly effective, proven method risks and plan, budget and forecast resources. With these
for optimizing and automating your business decisions. deep analytic capabilities our customers around the world can
Supported by predictive analytics, it offers organizations better understand, anticipate and shape business outcomes.
the ability to move beyond reactive decisions to anticipate
which actions are most likely to create successful outcomes For more information
in the future. As a closed loop system that continually For further information, visit ibm.com/business-analytics.
incorporates valuable feedback into the decision-making
process, it’s an ideal approach for organizations that wish Request a call
to react instantly to changing conditions and maximize the To request a call or to ask a question, go to ibm.com/
benefit of every decision. And in a global marketplace in business-analytics/contactus. An IBM representative
which many traditional sources of competition have been will respond to your inquiry within two business days.
neutralized, it delivers a powerful capacity for outmaneuvering
competitors and executing insightful business strategies.
Find out how proven IBM SPSS technologies can help
your organization increase profitability, improve business
processes and build relationships with customers through
decision management. Go to ibm.com/spss.
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Produced in the United States
May 2012
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1 Information Management Special Reports, “Decision Management Applications,”
by James Taylor, May 2005.
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