Automated decisions can stop your losses

Late decisions, lost opportunities

In a former post on this blog I argued why Mr. Ferguson, Managing Director of Intelligent Business Strategies Limited, might have recommended a dangerous path for business intelligence, the path of Automated Decisions. However, at the network dinner later that day I ended up at the same table as Mr. Ferguson and thus had the opportunity to let him elaborate on the subject.

Mr. Ferguson argues that some business decisions in their nature take so long to carry out manually that it may inflict losses or otherwise put the organization at risk. For example, in a bank it may be determined in one department that a customer is unable to pay interest on his real estate loan. Thus, the bank should check its other engagements with this customer to make sure that his money shortage is taken into consideration when evaluating the overall risk. The customer may for instance have a credit card that must be blocked or somehow hindered from being further credited.

In one particular bank this evaluation process took six weeks. Thus, the bank would allow a customer to increase his debts several weeks after it was known that the customer might be unable to pay his debts.


Mike Ferguson at the Network Dinner in restaurant Påfuglen in Tivoli, Copenhagen

Advanced statistical algorithms

In that same discussion, Mr. Ferguson pointed out that by using a range of information about the customer such as historic transactions, current account statuses and demographics it is possible - thanks to advanced statistical algorithms - to make computers calculate probabilities of various scenarios or outcomes of the relationship. The algorithm will calculate the probability of a certain hypothesis, so if for example an employee in the bank needs to investigate whether certain conditions are met on a customer meaning his credit account should be blocked, then the algorithm can make a calculation of the probability that the employee will come to one conclusion or another - given the information available to the algorithm.

For example the algorithm could find that there is a 96% probability that a certain customer meets these criteria and the account should be blocked. Thus, it makes sense to allow the computer to make that decision if it can say with a certain confidence that the criteria are met.

Obviously there is a small risk that the criteria are not met and that the computer makes a wrong decision but this should be compared with the risk of human error. In fact, if an organization can document the level of human error then the algorithm can be programmed to make better decisions than humans. It is just a choice of the confidence level of the algorithm.
In cases where the algorithm cannot make a decision with the required confidence level the case will be left for manual handling by an employee.

Leave to computers what they can do better

Mr. Ferguson's point is that we should allow computers to make decisions that do not require human attention or that computers can do with a higher quality/faster than humans. When it comes to manufacturing it has long been accepted that machines usually produce a better quality than humans but maybe we yet have to accept that this idea can also be applied to decision making. A lot of science fiction has dealt with this idea and any one of us can probably mention at least one movie where this scenario runs out of control - think Terminator or Matrix.

But it is really ourselves who control what we leave to computers to decide. And in our constant race for improving production efficiency and service levels while maintaining and improving our quality of living it is important that we take the stress off humans by letting computers and other machines to do their part.

Automation and Lean BI

So, is automation of decisions "LEAN"? The immediate answer to this is "yes" because automation relieves humans of trivial work. Well, not trivial in the sense that it is easy to carry out manually but trivial in the sense that it can be automated and carried out by machines more efficiently than by humans.

However, there are also arguments against automation as a LEAN principle. If the number of decisions to be made is low then the effort of programming decision algorithms may not be justified by the benefits. This is fairly obvious. What may not be so obvious is that any type of automation makes the organization more "stiff" or fixed in its operations for two reasons:

1. automation takes longer to implement and change than manual processes
   
2. automation lowers the organizational awareness of the processes that are handled by machines. If all instances of a process are handled by a machine then there will be few humans who are familiar with the process. Thus, if the process breaks down or needs to be modified then there may be very few humans who actually know how to handle the processes manually. This will prolong the change process which means the organisation will react more slowly.
   

I shall not go deeper into this subject; automation and LEAN is also discussed elsewhere. I shall only conclude that automation is indeed LEAN if it can be justified by economics of scale and if it does not limit the organisation's flexibility severely.

Blog off - blog on: Tips from a newbie

You know the drill: You get an idea, you set goals, you prepare for execution, you execute and you follow up on the goals.

This is basically how I got into the world of blogging. Except for that important part: Prepare.

I pretty much jumped right into the execution phase (sounds familiar?) by setting up a basic blog account and starting to write.

The charm of this was - simplicity.

However, at a certain point one reaches the phase of follow up and this is where you will eventually realize whether your goals and preparation were properly in place. You ask yourself: Is this project a success or not? The rest you can figure out.

I realized that I wasn't able to measure the term "success" because I didn't set up mechanisms for measuring Key Performance Indicators in my project.

Hey, isn't that the sound of business intelligence?

No coincidence really, because BI is a formalization of activities that successful organizations have always done: Set goals, measure critical success factors and follow up, analyze discrepancies and opportunities and make informed decisions.

Writing a blog is no different although it may not be as mission critical as running a business.

Those of you considering a blog on your own may want to consider these things in your preparation:

1. You want to measure the number of readers of your blog. To do this you must install tracking scripts in your blog, e.g. from Google Analytics.
2. Readers can subscribe to your blog and thus read it passively, i.e. they do not visit your blog site. To measure this activity you may want to use Feedburner to track number of subscribers etc.
3. And not least: Read some of all the excellent blog literature out there
   

So this is my lesson learnt: Even blogs - however simple they may appear - require proper preparation.

Now I am back to the execution phase, where all the fun is. Writing blog articles!


/Nikolaj Henrichsen

Technology is the tool, people are the key and results are what matters

Microsoft is here at IM2008 as well, driving the message home that technology is not the solution in it self. Actually, technology is the barrier, simply because it is too difficult to work with technology, it is usually fragmented and almost always inflexible and when it is deployed departmentally, the business never gets the larger benefit of a complete view of the business.

Online tools are prevalent in the worlds most successful enterprises with almost 60 percent of managers in World Class enterprises, while less than 40 percent of more average “peer-to-peer” companies can access tools immediately where ever they are. This analysis was made by Hacknet.

As Platon, Microsoft wants to focus on the people in the processes. To do this, solutions needs to be focused on the results and the way to these results. Data is still important, technology is important, but it’s how people leverage data and technology that sets companies apart.

While Microsoft focuses on large enterprises Acinta uses Microsoft technology to deliver the results speedy, in real time and without the usual heavy investments in data warehouse and hardware upgrades. Acinta exploits SQL Server to deliver swift and on-time BI to companies with millions of rows of data at a fraction of the cost of other solutions.

Dashboards are vital in all solutions that handle large amounts of data. They are easy to understand and immediately usable. As Michael Borges mentioned in his keynote this morning, we need to measure how well we do, to make sure that we maintain focus.

Microsoft looks at BI in three different ways:

• Personal BI: Analyze your data and use it to work smarter. It is usable in small companies, but as soon as you need to share your data, you need other solutions.
• Team BI: Lets your team access data, the relevant dashboards, report data and maybe even run their own analysis
• Corporate BI: How does your company do in the market? Corporate BI paints the large picture and should ideally give you a direct reading of your companies pulse. But, special needs arise as well, because Corporate BI needs to reach the end-users in the organization. To do this and benefit from it, you need a thorough Information Strategy

Tying Microsoft’s products together makes it possible to do all this, scaling from the largest companies in the world down to SMB and even SOHO. The technological advances makes it possible today for smaller companies to get into BI without investing heavily in hardware and network upgrades – what we call Lean BI.

Lean BI is faster, simpler and better. Faster because LEAN BI accesses your data directly in the system where they belong, for instance in Microsoft Dynamics. It’s simpler because LEAN BI contains ready to use data models that will get you started doing BI within hours. And it’s better because there are fewer possibilities of errors in the simpler architecture.

With Microsoft and Acinta, you get a BI-solution in as little as half a day at a fraction of the cost of data warehouse BI. If you already have MS SQL-server and Microsoft Dynamics, you just need Acinta to get into lean BI

Michael Borges Kicks off IM2008.

Today and tomorrow we are visiting Platons IM2008 which is the largest Information Management (IM) in the Nordics. There are loads of very interesting speakers and some exciting keynotes ahead.

IM2008 started with a blast from the past and a short video of Borges fighting his way from the office to Scandic Hotel in the beautiful sunny Copenhagen.

Information strategy is the issue and more than 50 experts from Nordic businesses will cover their perspective on managing the flow of information and the development of the business.

The basic message of Michael Borges’ keynote speech was to stop and think. BI is developing extremely fast and today we need to think more holistic about our business. This goes for IM as well. We don’t need more isles of data and fragmented strategies will not be able to transform the company to a real information driven entity.

And the way to do it is to focus on the information strategy and make it a continuum: No surprises, no abrupt changes, but at a steady development of the company’s information and the use thereof.

Michael summarized the current issues in a short list of the 7 deadly sins within IM:

Seven Deadly sins of the Information strategy continuum

Sin #1. Wait for the silver bullet
Waiting for the final solution that will suddenly appear out of nowhere – IT WILL NOT HAPPEN. The need is there now and the challenge will only increase with time.
Nobody will provide a ”killer-app” that will fix all you problems just like that.

Sin # 2. Bite off more than you can chew
Focus ! But remember there are synergies that can be harvested through BI. And about 80 percent of data in any company is unstructured

Sin # 3. Choose a technology focus
Strategy is NOT choosing between Microsoft or SAS, and still 9 out of 10 think this choice is strategy. But it’s important to involve the business, and it may seem like a hassle, but this way we open up for the vast knowledge inherent to the company. But, this too have challenges because the existing organization does not work with the information strategy. Based on that companies can continue to establish the information strategy that comprises policies about how the company wants things to work.

Sin # 4. Allow a process vacuum
You need a transition strategy to get from where you are to where you want to be; it’s clearly not enough to define your goals – you need to think about how you get there. BI never ends; data grows and changes and we need to adapt our business and BI-systems accordingly.

Sin # 5. Ignore execution
“Vision without execution is day dreaming” as bill gates once said. You need to DO, thinking and wondering is clearly not enough. We need strategy yes, but we need to act on it. TIP: If you measure it, it will happen. This is very basic but if you don’t measure your progress, how will you know how to go forward: you don’t even know where you are. Build the program, govern the program, review the program, modify and then start over

Sin # 6. Make nobody accountable
You need someone to take charge of this, because your company needs the focus and this is NOT easy. Also, your company probably sports loads of different opinions on what is good and not so good and there will be wildly differing ideas on the right way for this to work. Make one person accountable – that is the way to push the company forward. And let formal power follow the accountability

Sin # 7. Make information the “be all – end all”
Information is never enough in it self; to get the value of information you need to process it and use it where its useful. And even tough data is extremely important, other parts ot the organization might not even think about the data. You need to be able to understand how the information is being used and what the people with the information prioritizes.

Have you committed a sin? Mr Borges invited anyone who had committed a sin to come to him and make a confession – under a wow of silence naturally.

/Nikolaj Henrichsen, Acinta.dk

Welcome to my new business intelligence blog

I have long thought about what good it is to write a blog and there can be many reasons for this. There are presumably people for whom the desire to write is so big that they need a place where they can break away.

As for my self the motivation is a little more - shall we call it - therapeutic. I do write in our business intelligence web site and in my electronic newsletter but both of these media have their scope and some thoughts simple fall outside. So I want to write those thougts here and I truly hope that they can be of any inspiration to you.

Feel free to write to me with your thougts and comments.


Best regards
Nikolaj Henrichsen