Decision leaders are those companies that are committed to excellence in managing operational decisions in order to improve business performance. These are also companies that have made commitments to build the proper infrastructure to support decision management. Decision management is a discipline that draws attention to the way companies think about the quality of their decisions.
Would like to warn managers against being seduced into believing that optimal business performance is achieved by maximizing profits. Improved business performance is only fully realized when leaders recognize and address the importance of key business metrics and begin viewing their company as not profit maximizing but profit seeking.
Three techniques can be used to develop this view:
1. Adaptive Control is a software tool used to facilitate experimentation and learning by enabling business leaders to test new decisions in real-world operating environments.
2. Decision Models are analytic techniques that evaluate conflicting trade-offs driven by real-world constraints.
3. Decision Yield is a business framework for categorizing and evaluating business benefits.
Decision management, from a technology perspective, is also a class of technology products that take algorithms and run them inside IT systems. Many decision management technologies continuously perform analytics inside IT systems to support the automation of decisions. In some circumstances, analytics serve as a guide for an individual to make a business decision. Other times, decisions and actions are completely automated. An array of decision management technology exists to facilitate the deliberate, systematic, and scientific management of operational decisions, and there are a number of characteristics of decision management that have proven most effective in creating a competitive advantage.
The companies that best use decision management rely on an executive champion who takes a systematic approach to decisions, integrates experimentation, and adds human creativity to the business model. Leaders should approach the decision-making process as a journey, one that is based on discovery and contains building blocks leading to greater levels of sophistication and success.
In order to invest in decision management, there are three key steps that must be taken by an organization–each step requires different levels of technology, sophistication, and commitment:
1. Develop a Rules-Based System. This step is intended to automate high-volume operational decisions in order to make decisions consistent and increase control. A basic rules-based decision process can assist a company in executing policies and procedures quickly and consistently.
2. Incorporate a Predictive Analytics Model. Introducing a predictive analytics model into an operating environment can mathematically evaluate trade-offs among conflicting objectives while also executing decisions. Such a model captures the decisions that were made for a particular customer, what actions were taken, the corresponding consumer behavior, and the impact on profitability.
3. Connect Decisions across Multiple Dimensions of the Business. As a company standardizes and automates processes across product lines and geographical locations, it should move to more sophisticated decision models to apply adaptive control in more decision making areas.
The most successful businesses learn from customer interactions in order to improve their processes and results. There are three characteristics that companies of this caliber share:
1. These companies are systematic and quantitative. Analytics gives decision makers more precise ways to compare multiple business objectives, such as profit per customer and growth in market share, but being systematic and quantitative is more than just using automation to make better decisions; it is also about managing a company’s decision yield more effectively.
2. Companies that excel at decision management are always learning and improving, and everything that happens is seen as an opportunity to learn, refine, improve, and move on.
3. The best performing companies are bold and creative. Best Buy, which used customer segmentations to change its store formats. When proposed, it was a revolutionary idea; when implemented, it was highly successful.
In most circumstances, decision makers are concerned about multiple business objectives, which are often conflicting. Analytic tools give decision makers more precise ways to compare multiple and competing business objectives. These tools can enable a company to improve its service propositions while decision management can help it continually gain and retain new customer knowledge. If a company is growing fast, analytics can accelerate its growth. In this way, analytics is important to making customer services more effective.
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