DM – Page 10 – Column 2

BRF Day 2: Business Rules and Business Intelligence Make Great Bedfellows

David Straus of Corticon gave an engaging presentation about BR and BI, starting with the Wikipedia definitions about each, then characterizing BI as “understanding” and BR as “action” (not unlike my statement that BI in BPM is about visibility and BR in BPM is about agility). He started with the basic drivers for a business rules management system — agility (speed and cost), business control while maintaining IT compliance, transparency, and business improvement (reduce costs, reduce risk, increase revenue) — and went on to some generalized use cases for rules-driven analysis:

Analyze transaction compliance, i.e., are the human decisions in a business process compliant with the policies and regulations?
Analyze the effect of automation with business rules, i.e., when a previously manual step is automated through the application of rules
Analyze business policy rules change (automated or non-automated)

He walked through a simplified claims scenario, where the claims agent is not replaced with rules but still makes a decision in the process, but their decision is compared against a decision made by a rules system and any discrepancies are investigated. In other words, although there’s still a person making the decision in the process, the rules system is acting as a watchdog to ensure that their decisions are compliant with the corporate policy. After some time, there can be some analysis of the results to detect pattens in non-compliance: is it an individual agent that’s causing non-compliance, or a particular product, or are the rules not aligned with the requirements? In some cases, the policies given to the agents are actually in conflict, so that they have two different “right” answers in some cases; in other cases, agents may have information that’s just not represented in the rules. By modeling the policies in a business rules system, these conflicts can be driven out to establish integrity across the entire set of rules. This can also be used in cases where an organization just isn’t ready to replace a human decision with a business rules system, in order to validate the rules and compare them to the human decisions; this can establish some trust of the decisioning system that may eventually lead them to replace some of the human decisions with automated ones to create more consistent and compliant decisions.

David had a number of case studies for this combination of rules and analytics, such as investment portfolio risk management, where mergers and acquisitions in the portfolio holdings may drive the portfolio out of compliance with the underlying risk profile: information about the holdings is fed back through the rules on a daily basis to establish if the portfolio is still in compliance, and trigger a (manual) rebalancing if it is out of compliance.

By combining business intelligence (and the data that it’s based on) and business rules, it’s also possible to analyze what-if scenarios for changes to rules, since the historical data can be fed through the new version of the rules to see what would have changed.

He’s challenged the BI vendors to do this sort of rules-based analysis; none of them do it now, but it would provide a hugely powerful tool for providing greater insight into businesses.

There was a question from the audience that led to a discussion about the iterative process of discovering rules in a business, particularly the ones that are just in people’s heads rather than encoded in existing systems; David did take this opportunity to make a plug for the modeling environment in their product and how it facilitates rules discovery. I’m seeing some definite opportunities for rules modeling tools when working with my customers on policies and procedures.

BRF Day 1: Leveraging Predictive Modeling and Rules Management for Commercial Insurance Underwriting

For the last presentation today, I listened to John Lucker of Deloitte discuss what they’ve developed in the area of predictive pricing models for property and casualty insurance. Pricing insurance is a bit trickier than pricing widgets: it’s more than just cost of goods sold plus a profit factor, there’s also the risk factor, and calculating these risks and how they affect pricing is what actuaries do for a living. However, using predictive models can make this pricing more accurate and more consistent, and therefore provides insurance companies with a way to be more competitive and more profitable at the same time.

I know pretty much nothing about predictive modeling, although I think that the algorithms are related to the pattern recognition and clustering stuff that I used to do back in grad school. There’s a ton of recent books on analytics, ranging from pop culture ones like Freakonomics to the somewhat more scholarly Competing on Analytics. I’m expecting Analytics for Dummies to come out any time now.

Predictive modeling is used heavily in credit scoring — based on your current assets, spending habits and debt load, how likely are you to pay on time — and in the personal insurance business, but it hasn’t really hit the commercial insurance market yet. However, the insurance industry recognizes that this is the future, and all the big players are at least dabbling in it. Although a lot of them have previously considered this in order to just do more consistent pricing, what they’re trying to do now is have the predictive models integrate together with business rules in order to drive results. This is helping to reduce the number of lost customers (by providing more competitive pricing), reducing expenses (by providing straight-through processing), increasing growth (by targeting new business areas), and profitability (by providing more accurate pricing).

He talked about how the nature of targeting insurance products is moving towards micro-segmentation, such as finding the 18-year-old male drivers who aren’t bad drivers or the roofing companies with low accident rates, then selling to them at a better price than most insurance companies would offer to a broader segment, such as all 18-year-old male drivers or all roofers. He didn’t use the words long tail, but that’s what he’s talking about: this is the long tail of insurance underwriting. There’s so much data about everything that we do these days, both personal and business, that it’s possible to do that sort of micro-segmentation by gathering up all that data, applying some predictive modeling to extract many more parameters of the data than would have been done in a manual evaluation, and develop the loss predictive model that allows a company to figure out whether you’re a good risk or not, and what price to charge you in order to mitigate that risk. Violation of privacy? Maybe. Good insurance business? Definitely.

The result of all this is a segmented view of the market that allows a company to decide which parts they want to focus on, and how to price any of those parts. Now it gets really interesting, because now these models can be fed into the business rules in order to determine the price for any given policy: a non-negotiable price, much like Saturn does with its cars. This disintermediates both the agents and the underwriters in the sales process, since all of the decisions about what risks to accept and how to price the policies is automated based on the predictive models and the business rules. Rules can even be made self-optimizing based on emerging trends in the data, which I discussed in my presentation this morning, although this practice is not yet mainstream.

Lucker’s message is that business rules are what leverages the power of the predictive models into something that makes a difference for a business, namely, improving business processes: reducing manual processes and associated costs, enhancing service and delivery channels, targeting sales on profitable niches (that long tail), and improving point-of-sale decision-making at an agency.

He ended up describing a top-down approach for designing business rules, starting with organizational strategy, decomposing to the functional areas (business operations, sales, customer service, distribution), then developing the business rules required to help meet the objectives of each of the areas.

BRF Day 1: How Many Business Rule Analysts Does It Take to Change a Lightbulb?

Seriously, that was the name of Giovanni Diviacchi’s session that I attended this afternoon, which looked at his experience as a business analyst at both Freddie Mac and Fannie Mae (the two big government-backed mortgage companies in the US). He had a number of good pointers on how to extract rules from the business and document them in a way that will be properly implemented by the developers.

They developed a “business action language” for the business analysts to communicate with the developers in an unambiguous way, including statements such as “present” (i.e., >0 and not null), “mutually exclusive”, “is required”, and my personal fave, “read my mind”.

He pointed out that the old axiom “rules are meant to be broken” is true even for business rules, in that you can’t ever plan for all the ways in which a rule might need to be overridden; he discussed one case of a woman who was born prior to 1936, never worked and never had a Social Security Number, which meant having to override the rule that SSN is required for a mortgage. There’s a lot that can be learned from this one example: I see so many rules embedded directly in applications — especially web applications — that make some assumptions that aren’t necessarily true, such as assuming that all people have a US address.

I often work through issues of policies, procedures and processes with my customers, and it was interesting to hear his comments on the relationship between policies and rules. He said that if the policies are well-written, the rules pretty much write themselves, and by spending more time on the policy behind the rules, you end up with a better set of rules. That definitely caused an “aha” moment for me in my emerging role as an evangelist for business rules in a BPM world, and will help to form some of my ideas on how all these things come together.

BRF Day 1: Ron Ross keynote

After a brief intro by Gladys Lam, the executive director of the Business Rules Forum, the conference kicked off with a keynote from Ron Ross, the driving force behind this event and a big name in the business rules community. A couple of things are distracting my attention from his talk: I’m up directly after him, and I’m presenting in this room, which is the main (read: big) conference hall. Let me make my ever-present complaint about passworded wifi in the meeting room and no free wifi or wired internet in the hotel, since I know that my regular readers would be disappointed without that news from the front lines. 🙂

Ron and I have exchanged email over the years, but this is our first opportunity to meet face-to-face; I’ll also have the chance to meet James Taylor and a few others who I only know from afar. Today, Ron’s talking about the shift from business rules to enterprise decisioning. This is the first business rules conference that I’ve ever attended, which means that most of the attendees likely know a lot more about the subject matter than I do, and most of the sessions will be new material for me.

Ron predicted that no one will be talking about SOA at a major conference in 15 years, but they will be talking about business rules or decisioning; I certainly agree with the first point, and the second makes a lot of sense.

When he said “we want our business processes to be smarter”, it was like music to my ears, and a direct lead-in to my presentation. He talked about three trends in the decisioning space:

The shift from an exclusive focus on BPM to a balanced approach on enterprise decision management (EDM). He mock-grudgingly admitted that business processes are important, but pointed out that the “smarts” provided by business rules provides agility in the processes (which is exactly the point that I will be making in about 45 minutes — maybe the material here won’t be all that foreign after all).
The shift from an exclusive focus on data quality and accessibility to a balanced approach on decision deployment. This is the whole convergence of BI and BR into decisioning — again, a key point in my presentation. I think that Ron is scooping me! He included a great quote from Taylor and Raden’s new book, Smart Enough Systems: “Making information more readily available is important, but making better decisions based on information is what pays the bills.”
The shift from an exclusive focus on rules to a balanced approach on decisions. My key takeaway for this conference is figured out a good distinction between business rules and decisioning, since these terms seem to be used interchangeably in some cases; it seems that decisioning is about (not surprisingly) decisions, which in turn are based on business rules and some information about the current scenario.

He finished up with some pointers on where to think about applying decisioning in your business through a few use cases, such as creating “rules of record” for compliance purposes.

Like every other technology-specific conference (especially the BPM ones that I typically attend), this one has at the heart of it that its subject matter is the most important technology in an enterprise, and that herein lies the key to business perfection. I’m being a bit facetious, but we really do need to start getting a bit more cross-over between some of these conferences and technologies.

Business Rules Forum

I spoke briefly last week at the Forrester Technology Leadership Forum about BPM, BI and BR, and had a great response from a couple of the business rules vendors who were in attendance. I’ll be expanding on that topic in a few weeks at the Business Rules Forum in Orlando, where the conference focus this year is on enterprise decisioning, especially as it relates to BPM and BI. I’ll be talking about how BPM, BR and BI can be combined to make a process improvement platform that?s greater than the sum of its parts, by:

Separating the business rules from the business processes to provide greater agility. This allows rules to be modified independently of processes.
Adding business intelligence to business processes to provide greater visibility. This exposes process statistics to business stakeholders.

Organizations are embracing business process management to improve their business processes. However, automation of processes isn?t the whole picture: processes must be both agile and transparent to reap the full benefits of BPM, which makes business rules and enterprise decisioning important topics for BPM practitioners.

The Forum Conference has offered a 10% registration discount code to readers of my blog: enter the promotional code 7PGRSP on your registration for 10% off your conference fees. I don’t get a referral fee, this is just a favour to you as my readers.

You can get the full schedule and abstracts (and printable registration) here, and register for the conference here.

I’ll be around for most of the conference, so be sure to look me up if you’re there.

Forrester Day 2: The three B’s

I ended up skipping the session after mine at the end of the morning, but had some great hallway conversations with some of the business rules vendors who indicated that they think that I’m on track with what I’m saying about BPM and BR.

For the first of the afternoon sessions, I’m attending a panel discussion on the convergence of the three B’s — BI, BPM and BR — featuring Mike Gilpin (EA and application development), Boris Evelson (BI) and Colin Teubner (BPM). I covered a tiny bit of this topic in slides 22-24 of my presentation this morning, and will be doing a full-length presentation on this same topic at the Business Rules Forum next month in Orlando, so I’m interested to see if the Forrester analysts have the same thoughts on this subject as I do.

They start with the statement that “design for people, build for change” will drive the convergence of the three B’s. Interestingly, although a few people in the room stated that they use BPM and BI together, almost no one raised their hand to the combination of BPM and BR — a combination that I feel is critical to process agility. Gilpin went through a few introductory slides, pointing out that almost no business rules are explicitly defined, but are instead buried within processes and enterprise applications. He sees BI as driving effectiveness in businesses, and the combination of BPM and BR as driving efficiency.

Forrester will be publishing some reports about the convergence of the three B’s, and although there are some two-way combinations in vendor products now, there are no vendors that combine all three in a single product. I’m not sure that this is a bad thing: I don’t think that we necessarily want to see BR or BI become a part of BPM because it ultimately limits the usefulness of BR and BI. Instead, I see BR and BI as services to be consumed by BPM, with BI having the additional role of combining process execution statistics generated by the BPMS with other business data. An explicit question was asked about when to use the BR and BI included in the BPMS versus when to use a third-party best-of-breed BR or BI system; Teubner and Gilpin offered some guidelines for this as well as some examples of each situation, but it’s not completely clear if there’s a distinct boundary between when to use the BPMS’ in-built functionality versus the third-party specialist product.

My message on this topic is that BR is the key to process agility, and BI is the key to process visibility as well as feeding back into BR in order to further increase agility. By using the BR and BI functionality within your BPMS, however, you’re typically not getting full BR or BI functionality, but some limited subset that the BPMS vendor has selected to implement. Furthermore, you can’t reuse that functionality outside the BPMS, and in the case of business rules, a change to the BPMS’ rules often requires retesting and redeploying the process models, and does not apply to in-flight processes. However, if you’re not sure if you need BI or BR (hint: you do), then using the in-built functionality in the BPMS gives you an easy-to-integrate and lower cost way to get started. Moving to a separate third-party business rules system gives you a couple of key advantages: you can reuse the same rules across different processes and across other applications in your enterprise, and changes to the rule impacts in-flight processes since the rule is not executed from the BRE until that point in the process is reached. Moving to a separate third-party business intelligence system also provides the advantage of being able to analyze the process data in the context of other business data, and potentially feed back the results of complex analytics to inform the business rules, that in turn drive the business processes. The bottom line: BR and BI are used for many applications in the enterprise that are not explicitly process-related, or combine data from many systems of which the BPMS is just one source. For example, although there are processes embedded within your ERP system, your BPMS may not have direct access to all the information that’s in those processes and hence the BI that’s part of your BPMS can’t (easily) include that data in its analytics and reporting; a general-purpose BI platform may be much more suited to combining your BPMS statistics with your ERP statistics.

A lot of the conversation in this session, which was very interactive with the audience members, was around whether to use converged products versus separate products. It’s not a completely simple answer, and I’ll definitely be thinking about the use case boundaries between converged and separate products before I show up at the Business Rules Forum to continue this discussion.

Evelson and Teubner will be publishing an initial paper in this area in the next few weeks, using the concepts that they’ve presented here today, but see it as a springboard for more discussion in this area rather than an end-point.

Forrester Day 1: John Rymer

John Rymer, who I’ve read before on business rules topics, talked to us about why we should care about business rules software; Forrester’s position is that business rules are a key enabler of design for people, build for change.

He started with definitions of business rules and a business rules platform, then went on to state that business rules are an alternative to conventional programming: with business rules you don’t have to translate business terms into geek speak, and you don’t have to specify every possible combination of rules works. The implications are that business people are most likely to get what they need since they can actually understand the “language” in which the rules are written, and more complex problems can be more easily solved with much less time required to change systems. Software can even adapt based on the results of the rules; BPM is just one example of this, but business rules can be applied in the same way in other types of software.

Rymer showed how business rules can be applied in the areas of the “perfect storm” that Connie Moore mentioned this morning as causing the transformation that’s underway now: design evolution (rules add adaptation to context and design), process evolution (rules enable decisioning, auto processes, closed loops), workforce evolution (business people contribute to rules) and software evolution (rules enable global policies for SOA, service selection). He went on with a great list of how organizations benefit from business rules:

Create applications that adapt; automate decision in response to business conditions
Create applications that change quickly; one set of business rules for all applications rather than having the rules spread through a number of different applications and code sets
Tackle the next automation frontier, decisions; capture the wisdom of the experts in rules where possible
Put analysis to work through automation: take action using business rules and BPM

He gave some good examples from financial services, showing how business rules have been applied to core tasks such as credit scoring and underwriting, then expanded to areas such as fraud detection and call center programs.

He highlighted that business rules allow organizations to divide change management responsibilities, where business people take responsibility for maintaining the more volatile rules and processes, whereas IT remains responsible for maintaining the core rules and processes.

He ended up addressing the issues of why business rules haven’t really caught on; I see so little acceptance of this with many of my financial services customers and I’m not surprised, although it seems strange that a technology that can offer so much benefit is being ignored by so many companies. The top reason for not implementing business rules? “We don’t do things that way”, that is, they like to write their rules in Java code instead. He also cited lack of standards, high product cost (which I still don’t think is more than writing and maintaining that Java code), lack of participation from the big vendors, and a still-shifting landscape as other reasons for resistance to business rules.

Like Rymer, I believe that business rules will be a significant part of any agile organization. In some cases, organizations already have business rules software but it’s hidden away in one department, but you need to pull it out of the closet and put it to work. Forrester has a Wave (product comparison) for business rules, but he admitted that it’s a bit out of date; it sounds like a new one might be coming out shortly.

Business Rules Forum schedule

The schedule for the Business Rules Forum in October in Orlando has been posted, and I’m speaking on Tuesday, in the first breakout session following the opening keynote.

I’ll be talking about how business process management, business rules and business intelligence all come together to create both agility and visibility into business processes. Although they’ve listed my session as being for an IT audience, there will be plenty here for the business side as well.

Smart (Enough) Systems

James Taylor of Fair Isaac has co-written a book with Neil Raden called Smart (Enough) Systems, and it releases this week. I had the pleasure of receiving an advance copy a couple of months back, and wrote a brief review that might be included somewhere buried in all that small text at the beginning of the book that no one ever reads. 🙂

The subtitle of the book is “how to deliver competitive advantage by automating hidden decisions”, and it highlights how it’s critical to embody more intelligence in today’s business decision-making and have consistent, automated decisioning built into business processes in order to remain agile and competitive in today’s fast-moving market. They take you through the core concepts of enterprise decision management (EDM), dive into the underlying technologies, then address how to integrate EDM into your business processes to create your own Smart (Enough) Systems.

I thoroughly enjoyed reading it, and James and I are trying to set up a time to have a more in-depth chat about it; stay tuned for that.

TUCON: BPM Evolution and Roadmap

At this point, it makes more sense to start labelling the posts by session title rather than presenter, since we’re getting into some pretty detailed breakout topics. This one was presented by Roger King, Director of BPM Product Strategy & Management at TIBCO, and Justin Brunt, product manager for iProcess.

Most of the technical people working TIBCO’s BPM group seem to be vestiges of the Staffware acquisition; many of them are still based in the UK, where the development is still done.

They started out with a review of what’s happened in the products in the past 12 months:

Business Studio 1.x, a standalone modelling and simulation product aimed at business analysts; the free downloadable version released in November already has more than 10,000 downloads. Modelling is done in BPMN, and XPDL is supported for import and export — necessary for even getting the models into the iProcess Suite for execution, since there is no shared model with the process execution environment. It also supports imports from Visio and ARIS. There’s some more advanced features as well: a hierarchical organization of business processes and associated assets; and process simulation with SLA indicators and reports.
iProcess Suite 10.5, with improved work queue performance and scalability to support more concurrent users, better performance for sorting and filtering (always slow with most BPM products) and faster startup time. It also included an enhanced web client based on General Interface, with GI or custom forms support and a number of other new functions.
iProcess Insight 2.0, the BAM product, which I reviewed in a post yesterday.

What’s coming in the near future:

Business Studio 2.0, with support for the full BPMN 1.0 specification and XPDL 2.0. I keep meaning to download Business Studio and do some comparative analysis with some of the other downloadable modelling products, but I may wait until version 2.0. I wrote about a few of the new features from Tim Stephenson talk yesterday, but here’s a recap. In the process analyst perspective: design patterns/fragments to speed design, refactoring, concept modelling with UML support, import/export of EPC/FAD from ARIS, and custom XSLT translations to XPDL. In the process architect perspective: service registry, native services such as email and database connectors, direct server deployment and version control
iProcess Suite core component support for some new platforms, including 64-bit Windows Server and Red Hat Linux; direct deployment from Studio to Engine (although it’s not clear if this is via a shared model or just automates the import/export process); and new audit trail entries. They’ve also simplified installation.
Web services capability, with support for WS security at the transport and SOAP layer, and support for withdraw actions and delayed release.

They went on to discuss a number of key themes in product development for this year and beyond.

They’re gradually migrating to a single modelling/design environment — Business Studio — although they’re still not quite there yet; this will provide a more consistent experience for both business and IT users of the design tools. This supports the move to full model-driven development by allowing for the easy integration of forms design into the Eclipse-based environment, which can in turn generate GI, JSP or other runtime forms for the updated iProcess web client. Business rules definition will be in the Eclipse-based design environment, although it’s not clear if they’re using a third-party BRE or have their own rules technology. The old modelling environment, Business Modeler, isn’t going away any time soon, but new feature development will focus on Business Studio so will encourage migration. Like most vendors using this tactic to get existing customers off an old product, I expect that they’ll hear grumbling about this for years.

The out-of-the-box web client will be simplified and made to look more like the familiar Outlook client, with improved performance. The UI will also be exposed as components and services to allow them to be included in custom applications or portals, and they’ll ship an out-of-the-box BPM portal using TIBCO’s portal platform to show how this can be used. There will be better MS-Office integration and an Eclipse-based desktop application.

They’re also going to provide a project collaboration portal for BPM projects, to allow people developing TIBCO BPM applications to collaborate. They’re also adding in some governance capabilities to help handle the lifecycle of BPM projects and assets.

King mentioned my presentation from yesterday directly, and commented that they’re going to be supporting more of the BPA tools for import soon, including Proforma. They’ve obviously identified that it’s important to be extremely open from both a standards and BPA support standpoint.

Next on the list is goal-driven BPM, or virtual processes, where there may be too many process alternatives to model explicitly and the optimal runtime process has to be generated based on process parameters and environmental factors. This sounds like fuzzy future stuff, but would be great if they can pull it off.

They’re also developing workforce management and more complex resource modelling for the purposes of business optimization.

There was a brief point at the end about preparing for the next generation of SOA, although no time to talk about what this means; I would have loved if this session had been a bit longer.