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What is the difference between a good decision and a bad decision? Let's say – $25 billion. This is the difference between the best and the worst decision attributed to Warren Buffet. The best one – purchasing Coca-Cola shears – yielded $24,5 billion in return. The worst one, Dexter Shoes Company, cost him $443 million, yielded nothing, and cost him a great deal in potential shares of Berkshire Hathaway.
Today we'll talk on making quick, data-driven and profitable decision with business rules engines.
Key takeaways
- Companies leave 40% of profit on the table due to poor decisions.
- Decision rules engines partially automate decision-making, ensuring consistency and reducing human error.
- Decision management systems built around rules engines enable real-time decisions, crucial for responding to market changes swiftly.
- Implementing a decision rules engine improves operational efficiency and scalability.
Why smooth decision-making matters?
A 10-years long study on over 1,000 companies by Bain & Company found that companies that make and execute decisions quickly experience higher growth rates and returns.
On the other side, 40% of profits can be lost due to poor decisions, according to a study by Decision Design.
Decisions have to be quick
Imagine a crisis or a rapid shift in the business environment. Imagine the surrounding hustle, the stress, the nerves, multiple conceptions on how to handle things, disagreement, and so on. Imagine just the cost and time wasted during meetings. A McKinsey report indicates that slow decision-making can lead to significant wasted labor costs. For a typical Fortune 500 company, approximately 530,000 days of managerial time are lost annually due to ineffective decision processes, translating to around $250 million in wasted costs.
And now imagine all of it being taken care of beforehand.
This is how decision engines work.
Just like the saying that goes: "Be prepared for what you can predict, and be ready for everything".
Decisions should be the best possible
It's a truism, we know. We all want to make good decisions exclusively. But it's not always the case. And it's costly.
- Gartner estimates that poor operational decision-making compromises upward of 3% of profits,
- Poor decisions can lead to a 39% loss of customers, a 45% decline in employee retention and engagement, a 59% increase in business costs, and 44% less overall effectiveness.
Making proper data-driven decision is hard
Uninformed decisions are detrimental to your business.
There is hindsight bias, described by the legendary Daniel Kahneman. In short, we could describe it as: "If only I knew".
In business, there is no place for "know". We have data.
But having data is just a half of the work done. Analyzing data and making decision based on it, is another kettle of fish.
Research shows that companies waste $12,9 billion annually due to bad data. What's more, approximately 60% of businesses do not measure the impact of bad data, which can significantly affect their bottom line.
Force Therapeutics daily activity on their virtual care platform went up by over 140% during the pandemic. Which is why they decided to turn towards technology.
It takes time, knowledge, and decisiveness. What if you could have this out of the equation?
Benefits of Using a Decision Rules Engine
Implementing a business rules engine in the insurance and finance industries can yield numerous benefits.
Real-time decisions
Organizations must respond swiftly to changing market conditions and customer demands. A business rules engine facilitates this by partially automating decision-making processes, thereby reducing the time required to reach conclusions.
Enhanced accuracy
By consistently applying predefined rules, these engines mitigate the risk of human error and ensure that decisions are based on objective criteria. 84% of respondents in a Decision Design survey cited bias as a major factor leading to poor decisions.
Simplicity
Moreover, complex decision logic can be effectively managed through a business rule engine, allowing organizations to streamline operations and make informed decisions swiftly and reliably.
Enhanced Compliance and Governance
A decision rules engine ensures that all decisions comply with regulatory requirements and internal policies, reducing the risk of legal issues. It also provides a clear, traceable record of how decisions were made, which is invaluable during audits or regulatory reviews.
Consistency and Objectivity
By applying rules consistently across all decisions, the engine eliminates human bias, ensuring that decisions are fair and objective. This uniform approach across the organization enhances reliability and trust in decision-making processes.
Scalability and Flexibility
As your organization grows, the decision rules engine scales seamlessly to handle increasing decision volumes without requiring additional human resources. It also allows for quick updates or the addition of new rules, enabling the organization to adapt swiftly to new markets, products, or changes in the business environment.
Improved Customer Experience
By automating decision-making, the engine significantly reduces processing times, leading to faster approvals and responses. This efficiency boosts customer satisfaction. Additionally, it enables personalized decisions based on individual customer profiles, improving the relevance and quality of service.
Resource Optimization
Automating routine decisions frees up employees to focus on more strategic, value-added tasks, thereby enhancing overall productivity. This efficiency not only streamlines operations but also reduces the need for large decision-making teams, leading to significant cost savings.
Data-Driven Insights
The engine generates valuable insights into decision-making patterns and trends, helping refine business strategies and improve outcomes. It also identifies potential issues before they become critical, allowing for proactive management and better decision-making.
Future-Proofing
Integrating a decision rules engine prepares your organization to leverage future advancements in AI and machine learning, further enhancing decision-making capabilities. The engine’s flexibility also ensures that the organization can quickly adapt to market changes, disruptions, or new regulatory requirements, making it a critical tool for long-term success.
Best practices for integrating a decision rules engine into existing systems
Before integrating decision rules to your systems, you should:
- Assess Compatibility: Evaluate existing systems for compatibility with the decision rules engine to ensure seamless integration.
- Define Clear Objectives: Outline specific goals and how the engine will support your business process to streamline operations.
- Modular Approach: Implement the engine in phases, starting with non-critical systems, to minimize disruption.
- Data Mapping: Ensure proper data flow between systems by accurately mapping data inputs and outputs.
- Automated Testing: Regularly test rules execution to ensure accuracy and efficiency in decision-making.
- Continuous Monitoring: Monitor the system post-integration to manage rules and adapt to changing market demands.
Future Trends in Business Rules Engines: Adapting to Changing Market Demands
The next generation of these engines will likely focus on more dynamic and flexible frameworks that allow organizations to manage rules with greater agility, ensuring they can swiftly adjust to new conditions. These engines will increasingly leverage AI and machine learning to execute business rules more intelligently, enabling businesses to automate and optimize more complex processes.
Moreover, the integration of business rules engines with broader business process management systems will be critical. This integration will help organizations streamline operations, allowing them to execute decisions more efficiently and consistently across all business functions. As companies strive to keep pace with rapid changes, the ability to continuously adapt and enhance decision-making frameworks will be vital, making these engines indispensable tools for future business success.
Summary
Ready to transform your decision-making process? Request a use case for Higson and see how our decision rules engine can elevate your business operations.
