Introduction to the Decision Model - Larry Goldberg

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com

Introduction to The Decision Model

Larry GoldbergMay 24th, 2011

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com 2

Who is KPI?

Publications

Thought LeaderThe Decision Model

Business Logic Framework linking Business with Technology

Business Process ManagementBusiness Decision Management

Business Rule ManagementEnterprise Architecture

Business AnalysisRequirements

Testing

ServicesFirstSTEP

Service to create unambiguous, and complete

Requirements

KPISTEPService to perceive, organize

and manage Business Processes and Rules with

Decision Models

STEPmentMentoring of clients to

achieve self-reliance with Center of Excellence

Training & Certification

ExperienceFinancial Services

Insurance

Healthcare

Government

Utilities

Transportation

Telecommunication

Energy


Agenda

• Current State: Business Rules • The Decision Model Bottom Up• The Decision Model Top Down• Impact on Business Analysis• FirstSTEP – A Requirements Framework• Technology to Enable Decision Management• Real World Testimony & Case Studies• The Ways We Can Help• How to Learn More


“Big Ball of Mud”Foote & Yoder

SoftwareSystemsSoftwareSystems


Separation of ConcernsComponent Based Application Architecture

Ken Orr

Security Component

Workflow Component

Transaction Component

Presentation Component

Base Application

Reporting/BI Component

Database Component

BusinessLogic

BusinessLogic

What happens tobusiness logic today?

Business rules

© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com© 2010 Knowledge Partners International LLC ●www.kpiusa.com ● www.thedecisionmodel.com 6

BusinessLogic

BusinessLogic

Business Rule Documentation

Business Process Model

All Too Familiar? Is this Acceptable?


BusinessLogic

BusinessLogic

Business Process ModelDecision Shape

How

Does this look better?


BusinessLogic

BusinessLogic Where did the business rules

go?

What

Decision Model

Rule Family

Rule Family Table

Atomic Logic Statement


Agenda



Definition of Business Logic

Business Logic is the means by which the business derives conclusions from conditions.

The simplest case is the evaluation of a single condition, leading to a single conclusion.

Person likelihood of defaulting on a loan is high

Person credit rating is less than 650

Condition Conclusion


What is an Atomic Piece of Business Logic?

• One and only one conclusion fact type, such as:– Person likelihood of defaulting on a loan– Claim’s eligibility for payment– Student’s eligibility for financial aid packages

• As many conditions as needed, even zero• All conditions ANDed together• No Ors, ELSEs, BUTs, OTHERWISEs (these have

created the chaos in current systems!)


Why are Atomic Pieces Good?

• Ultimate simplicity• Everyone reduces conditions and conclusions to

exactly the same pieces• Rigorous principles lead to assembling the pieces

in one and only one way• Easy to SEE errors and omissions• Extremely easy to validate and maintain• Extremely easy to implement in technology


The Rule Family is a Two Dimensional Table

Conditions ConclusionPerson Credit Score Person Employment

HistoryPerson Other Loans Amount

Person Likelihood of Defaulting on a Loan

Is less than 650 Is Unstable Is High Is High

Is greater than 720 Is Low

Is less than 720 Is Unstable Is Low Is Medium

PersonCredit Score

< 650 PersonEmployment History

Is Unstable PersonOther Loans Amount

Is HighAND

AND

AND

AND

PersonLikelihood of Defaulting on a Loan

Is High

Multiple Logic Statements that Look Like This:

Become Two Dimensional Tables called Rule Families Like This:

Rule Families are Tables that Conform to Rigorous Principles


Simple Rule Family

“A person who has a credit score below 650, an unstable employment history and a high Other loans assessment is highly likely to default on a loan.”

Conditions Conclusion

We start by discovering the conclusion in the sentence or paragraph


Simple Rule Family


We see that the conclusion is “A person is highly likely to default on a loan”



Simple Rule Family


We recast the conclusion into a conclusion fact type: Person Likelihood of Defaulting on a Loan, and we assign it a value of “High”

Conditions ConclusionPerson Likelihood of Defaulting on a Loanis High


Simple Rule Family


Next we look for conditions that cause us to reach that conclusion



Simple Rule Family


We see that a “person who has a credit score below 650” is one of the conditions that lead to the conclusion



Simple Rule Family


We recast “Person Credit Score” into a fact type, and we assign an operator “is less than” and value “650” to it in this row

Conditions ConclusionPerson Credit Score Person Likelihood of

Defaulting on a LoanIs less than 650 is High


Simple Rule Family


We identify the next condition leading to the conclusion

Conditions ConclusionPerson Credit Score Person Likelihood of

Defaulting on a LoanIs less than 650 is High


Simple Rule Family



HistoryPerson Likelihood of Defaulting on a Loan

Is less than

650 is Unstable is High

We recast Person Mortgage Situation into a fact type, add a new column for this new header, and we assign the value “Poor” to this row


Simple Rule Family


We identify a “high Other loans assessment” as the third condition leading to the conclusion


HistoryPerson Other Loans Assessment


Is less than 650 is Unstable is High is High


Where Do We Get the Condition Values?

• Starting with the first condition, we ask where its values come from: a web page or a file? Is it raw, stored data? Is it the result of execution logic?

• Person Credit Score comes from an outside service, simply raw data.• The value for Person Employment History is an internal judgment or

decision. It comes from evaluating other conditions, such as:– Person Years at Current Employer – Person Number of Jobs in the Past Five Years.

• What to do?




Is less than 650 Is Unstable Is High is High


Two Rule Families• We create another Rule Family, this one with conclusion column for

Person Employment History• This conclusion is known as an Interim Conclusion because it need

not be stored, it is a conclusion-in-flight (during execution)• This Rule Family comes to a conclusion about a Person Employment

History based on two conditions: Person Years at Current Employer and Person Number of Jobs in Past Five Years.

• These two Rule Families are naturally linked together with an “inferential relationship”

Conditions ConclusionPerson Years at Current Employer

Person Number of Jobs in Past Five Years

Person Employment History




Is less than 500 Is Unstable Is High is High


Decision Model Principles

• Structural Principles – Structural simplicity• Declarative Principles – Declarative structure• Integrity Principles – Optimal logical integrityThese Principles ensure that:

• The Decision Model is aligned with its business purpose

• There are no errors in its logic• It can execute in any technology (current and future)

The Principles introduce Normalization.


Agenda



Every Decision Model Starts with a Business Decision

“Business decision: a conclusion a business arrives at through business logic which is worth managing.”

The underlined words (Calculate, Estimate, Determine, Assess, Validate) are “Decision Words”

Fact Type Business Decision Claim Payment Amount Estimate the claim payment amount

Claim Payment Eligibility Determine Claim Payment Eligibility

Customer Likelihood of Loan Default Determine Customer Likelihood of Loan Default

Insurance Policy Renewal Method Determine insurance policy renewal method

Inventory Item Minimum Stock Level Assess the Inventory Item minimum stock level

Loan Prequalification Determine loan prequalification requirements for a customer

Person BMI (Body Mass Index) Calculate Person BMI

Vendor Performance Index Calculate the Vendor Performance Index


Determine Policy

Renewal Method Decision Model

Notation


Determine Policy


NotationPolicy Renewal Method

Policy Pricing Within BoundsPolicy Underwriting Risk

Manual Underwriting Indicator


Policy Renewal MethodPolicy Pricing Within Bounds

Policy Underwriting RiskManual Underwriting Indicator

Policy Pricing Within BoundsPolicy Discount

Policy Tier

Determine Policy


Notation





Policy Tier

Determine Policy


Notation


Pattern Policy Tier Policy Discount

Policy Pricing Within Bounds

1 ≤ 1 Is No2 ≤ 1.5 > 10% Is No2 ≤ 2 > 20% Is No2 ≤ 2.6 > 22% Is No2 > 1 ≤ 0% Is Yes2 > 1.5 ≤ 20% Is Yes2 > 2 ≤ 22 Is Yes1 > 2.6 Is Yes


PatternPolicy Underwriting

RiskPolicy Pricing Within

BoundsManual Underwriting

Indicator Policy Renewal Method 1 Is Nonstandard Is Manual Renewal Process2 Is No Is Manual Renewal Process3 Is On Is Manual Renewal Process4 Is Standard Is Yes is Off Is Automatic Renewal Process


Policy Underwriting RiskInsured Major Ownership Change

Insured Major Location Change Policy Annual Premium

Policy Discontinued Agent

Insured Major Ownership Change

Insured Minority StockholderInsured Majority Stockholder

Insured Board ChangeInsured CEO Change

Insured Major Location Change

Insured Location Zip-5 Insured Location Occupied Square Footage

Insured Location Construction

Policy Discount

Policy Grade Package Grade

Package Discount Location State Category

When is it Finished?How Big Are They?




Policy Tier

Determine Policy

Renewal Method


Agenda


Option 1

Option 2

Option 3:Rule Pattern

1 is Low is Good = "A"1 is Low is Bad = ?1 is High is Good = ?1 is High is Bad = ?


Person's DebtPerson's Employment

HistoryPerson's Credit

Rating

Process ModelDecision Rule Family TableDecision Model Diagram

The Decision Model Difference in Process Models

PersonDebt

PersonEmployment History

PersonCredit Rating


Simplify the Models, Improve the Solution, Now You Know How

Before After



Agenda



FirstSTEP

• A Framework• A Methodology

– Step 1: Validate Scope.– Step 2: Outline Models– Step 3: Visualize the target scope.– Step 4: Iterate & Complete the

Models.– Step 5: Repackage and Present a

Holistic Requirements Deliverable.


FirstSTEP Scope

• Use the framework* to create scope:

List of ThingsImportant to the Business

List of Processes that the Business Performs

List of Locations in whichthe Business Operates

List of Organizations importantto the Business

List of Events /CyclesSignificant to the Business

List of Business Goals/Strategies

Decisions

SWOTAnalysis

*The Zachman Framework is a copyright of John Zachman and Zachman International


Selection of Models

ConceptualData Model

Fact Type Glossary

Business Process Model

Business Use Cases

Network Diagrams

Logistic System

Context Diagram

Workflow Model

Governance Model

StateDiagram

Master Schedule

Event Sequence Diagram

Business Motivation Model

Decision Model

Visualization

*The Zachman Framework is a copyright of John Zachman and Zachman International


Application Visualization

• Business analysts, product managers & UE professionals assemble visualizations of possible solutions

• Business and IT stakeholders “test drive” & provide feedback in rapid, interactive explorations

• Discussions are more focused & engaging

• Visualization dramatically improves communication between business & IT


Decision

Business Motivation Model

Decision Model:business rules and

business logic

Process Model

Use Cases

SOA Components

Business Requirements & Test Cases

Vocabulary Models:Glossary/Semantic ModelLogical Data ModelObject Model

Enterprise

Business Unit

Function Function

Business Unit

Function

Organization Model


Agenda



What is Sapiens DECISION?Business Decision Management System:• Sapiens DECISION is an enterprise level Business Decision Management

System that implements The Decision Model

• Sapiens DECISION enables– Sharing of business logic throughout the enterprise and beyond– Complete separation of business logic– Business user empowerment – Traceability from the business objectives and motivations through to the

implementation– Comprehensive glossary support– Extensive testing capabilities– Full life cycle support

• Sapiens DECISION deploys The Decision Model to a BRMS (rules engine) for production execution and may include an integrated rules engine

44



Graphical Modeling

Rule Family Table

Development

Traceability, Audit & Impact

AnalysisEnforcement of Decision Model

Principles

Robust Glossary Function

Governance & Versioning

Reporting & Analytics

Enterprise Support

Testing & Automated Test

Case Generation

Connectivity

Sapiens DECISION Functionality

46


Graphical Modeling using theDecision Model Notation

Sapiens DECISION supports user-friendly creation and maintenance of graphical decision models

Enables business users to model decisions before having the detailed rule logic

47


Rule Family TablesRule Family Tables are created from the graphical model, allowing users to populate, manipulate and manage rule families

48


Robust Glossary FunctionGlossary of fact types and domains is automatically created from The Decision Model diagram for easy business user reference

49


Advanced Decision Model Methodologies in Sapiens DECISION• Sapiens DECISION incorporates the very latest Decision

Model methodologies on an exclusive basis:– ViewGroups – enable the enterprise to be fully modeled and

support customized views in unique business contexts– Glossary hierarchies – provide enterprise capability with

federated glossaries and both centralized and federated glossary management

– Decision Views – customized logic within decision models for specific purposes (e.g., customers, geography, regulatory regimes) while still sharing common logic

– Rule Family Views – reusability of customized logic across decision views

– List Fact Types – expand the flexibility of The Decision Model– Messaging – add unlimited messaging capability in the

deployment environment

50


Sapiens DECISION Roadmap 1

• Release 1 – Immediate Availability• Ready to build enterprise scale decision base:

– Internet-based Application– Enterprise capable– Source Documents– Decision View Support– Rule Family Build– Model checking – enforcing The Decision Model principles– Graphics support– Impact Analysis– Versioning– Audit– Governance– Security– Interface to deployment environments– Built in rules engine



• Release 2 – Available Q3 - Q4 2011• BDMM Level 4 Capability

– Enhanced Decision View support– Full Rule Family View support– Enhanced Rich Internet Interface– Process enabled governance– Business Change Document management– Whiteboard analysis– Cell Wizards– Rich Glossary Support – Communities– ViewGroups for business context– Enhanced impact analysis– Enhanced reporting– Advanced Query for complex searches and impact analysis– Enhanced Model checking– Automated deployment packaging– Enhanced Interfaces to deployment environments– Business Decision Messages– Decision Catalogue Printing



• Release 3 – Available Q2 2012• Beyond BDMM Level 4

– Inline testing and test script development– Enhanced Business Change Document management– Extended business context capability for mass customization– Business Communities– User defined objects and forms, with graphics support– Automated document parsing and analysis– Smart Business Decision messages– Enhanced Decision Catalog printing– User defined Interfaces to deployment environments– Automated generation of Decision Services– Integration with BPMS tools


Agenda



Real World Testimonial• “The Decision Model’s principles and normalization rules give us confidence

we can get repeatability and consistency amongst business analysts when performing rules analysis.

• In addition, the structural integrity of the Decision Model makes the technology implementation straightforward

• IT and Operations have agreed to use our decision model as business requirements for business logic changes – this will greatly speed up the change process

• In addition, the use of a COTS BRMS solution will allow us to take advantage of additional capabilities over time, such as enhanced testing and decision-warehousing capabilities.“

• From policy to automation reduced by 30% in time, while delivering 66% more changes

Mark Pettit, Freddie Mac, Operations Management Group, MIT IQIS, July 15, 2010


Project #1: 3 Months

Business Motivations– Increase customer satisfaction– Improve Data Quality– Reduce errors in critical

transaction– 98% error-free by Q4 2011– 100% error-free by 2012– Reduce risk of transactions

(delinquent contracts)– No way to measure before

because 98% rules were scattered across multiple systems

Challenges, Deliverables– Policies described error-free

conditions, had to discover error conditions

– “overloaded” fact types– Policies had logic errors– First Decision Model = 38 hours– Customized view = 5 hours– “High” complexity

• 12 Rule Families in first Decision View• 7 Rule Families in customized view• 24 fact types in all• Some fact type values not available

– 5 other decision models, one with 70 Rule Families

– Largest Decision View = 300 Rule Families, 44 pages


Project #2: Process Improvement

• Entire Project Completed in 3 Months• Updated Process Models• Decision Models:

– Number of Decision View: 40 (approx.)– Number of Rule Family Views: 700 (approx.)

• Glossary:– Total Number of Fact Types: 1,400 (approx.)– Number of Persistent Fact Types: 750 (approx.)– Number of Interim Fact Types: 650 (approx.)

• Built and tested custom rules engine and messaging system


Project #3: Process Improvements

• Before The Decision Model:– 200 transactions with errors 90 hrs– 200 transactions without errors 30 hrs

• After The Decision Model:– 200 transactions with errors 3 mins 30 secs (with

error messages and step by step instructions on how to correct each error)

– 200 transactions without errors 3 mins 30 secs


Project #3: How?

• There is no longer any room for misinterpretation of the Business Logic requirements

• The business logic is easy to understand and available for everyone to see

• The business logic can be updated without changing the process and visa versa

• Business logic can be changed in the system within two business days


Project #3: Statistics• 5 Decision Views

– 95 Rule Family Views • 10 Weeks

– Decision Views created in approximately 5 weeks• Included two iterations of validation• Iterative Improvements were added through the project based on analysis

– Decision Views were implemented in Code and tested in approximately 5 weeks

• New plans will reduce this time• Business rules engine will be ready to run as a service early next year

• 30-60 Hours of Testing– 2,200 test cases created in approximately 2 weeks– Most test cases were created in automated fashion– A new release takes 30 minutes to 2 hours to test


Agenda



(3 weeks)(3 weeks)

The Ways we can Help

Off-Site5 weeks

Off-Site5 weeks

On-1 weekOn-

1 weekOff-Site5 weeks

Off-Site5 weeks

On-1 weekOn-

1 week

KPISTEP Target Project

Skills and Knowledge TransferSkills and Knowledge Transfer

STEPmentPilot

Fixed priceTime boxed

Increment 2(3 Months)Increment 2(3 Months)

Increment n(3 Months)Increment n(3 Months)



Increment 1(3 Months)Increment 1(3 Months)


Environment for Managing Decisions

Training Certification Mentoring


Value Proposition

• Unambiguous, traceable and complete Requirements

• Most rapid approach to capturing business logic• Straight through processing from requirements

to automation• Significant simplification of business process• Innovative improvement in and governance of

business decisions, data quality and data transformation services

• Continuous change in an agile world


How to Learn MoreVisit www.kpiusa.com

• FREE PRIMER• Updated Events• Download White Papers• News

Become a member of the open LinkedinThe Decision Model Group

Read our articles and buy our books

Join our presentations

Contact uswww.enterprise-design.euwww.rulemanagement.comwww.TheDecisionModel.com

Try It Yourself:Ask for “free” Visio and Excel [email protected]

Discuss with us how to apply The Decision Model for your Requirement or Business Rules project.

Introduction to the Decision Model - Larry Goldberg

Technology

agenda current

decision model

decision model

requirements

business analysis

person employment

unstable employment

loans person