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The mechanisms of organisational decision-making

This is part 2 of the 3-part blog series discussing the use of decision modelling notation (DMN) in next best action marketing. In part 1, we examined the reasons for using DMN in Next Best Action (NBA) Marketing and decisioning in general. Here we will examine NBA in the context of the overall organisational decisioning hierarchy, before diving into the process of modelling next best action decisions next month in part 3.

Organisations can be viewed through the lens of decisions and processes. Decisions are made which set processes in motion. This “decision-process” relationship is recursive, with one decision leading to another. For example, the decision to “improve customer experience” will lead to many processes being put into action (for example, improve user interface for digital channels or obtaining more customer feedback) which leads to more decisions being made. Such decisions include:

  • How should we change the way we work?
  • What new capabilities are required? Can we use existing capabilities?
  • How do we update our governance process?

The organisational decision hierarchy

An organisation’s value is the accumulation of the decisions it makes and executes. The quality and speed of these decisions are a strong indicator of its performance.

A decision hierarchy can be categorised at three levels: strategic, tactical and operation. As organisations embrace digital, artificial intelligence and automated technologies the quantity of decision required to made grows exponentially at all levels.  The role of DMN is to improve the quality of the decisions made.

The Organisational Decision hierarchy

As mentioned above an organisation makes three types of decisions. The response latency is the time taken to yield the results of a decision. How successful was it in achieving its goals? This feedback is fundamental in gauging the KPI impact of performing the decision. The table below summarises the response latencies within each of the decision types:

Decisions table

Response latency times will continue to fall as artificial intelligence and automation is more widely incorporated into the decision-making process. Agile organisations make high-quality decisions faster than their competitors, because their organisational structures are geared towards optimised decision-making, as well as embracing AI and automation.

Using the example of the “improve customer experience” decision process described in the introduction, the initiation (and funding) of such an initiative starts at the “strategic decisions” level. Tactical decisions facilitate the planning and organisation of the process. Operational decisions transform the vision into reality. At every level, decisions are made, and acted upon. The following sections examine each stage in the pyramid.

Strategic decisions

These decisions steer the strategy, the direction, and ultimately the culture of the company. They are concerned with the whole environment in which the firm operates, the resources and the people who form the company and the interface between the two.

These decisions can be categorised as follows:

Strategic Decisions Table

Although these decisions appear ad-hoc and unstructured they can still be modelled using DMN. For example, the strategic decision to adopt “people centred marketing” follows the model shown below:

DMN Model

The KPI which underpins this example would include customer satisfaction and churn.

Mapping ad-hoc strategic decisions has several benefits:

  • Provides a framework which other decision makers can use to perform similar decisions
  • Transparency – Provides an audit trail of how decisions are made.
  • Encourages the measurement of the decision’s effectiveness
  • The model becomes part of the company’s Intellectual Property

Established companies usually have processes to validate strategies as part of their governance framework. These processes would have decision points (approve or decline, and why). These strategic decisions would then act as inputs into other strategic decisions, such as delivery and integration. For example, “is our delivery approach in line with the overall organisation strategy”? If yes, continue, if no, revise approach. In fact, strategic decisions will feed into every decision made at all levels.

Most decisions at this level are binary, i.e. either approve or decline. When these choice outcomes are combined you get a clear picture of the organisation’s strategy and culture. Digital music is a binary format (data essentially consisting of trillions of ‘0’s and ‘1’s.) When combined and transformed you hear a continuous flow of music. So too with the binary nature of strategic decisions. They steer the organisational path.  

Although Decision Modelling Notation is geared towards automated and repeatable decisions, the methodology applies to all decisions. DMN asks the question “What are the ingredients of this decision?” Even at a higher level there are types of decisions which are repeatedly performed.

  • “Should we acquire this organisation?”
  • “Should we invest in this software platform to become more competitive?”

After the decision is made additional rounds of governance are performed which require additional decisions to be made. A governance decision model is also required.

The model used to arrive at a decision would differ from company to company. Decision models at all levels would be part of the organisation intellectual property and competitive advantage.

Tactical decisions

Tactical decisions act within the constraints set by strategic decisions and are related to the medium-term (usually over a period of one week to a year) response rates. Tactical decision areas include marketing strategy, expense control, training planning, logistics management, etc.

Tactical Decisions Table

The scope to automate tactical decisions is higher than strategic decisions with numerous case management, human resource and workflow platforms performing these tasks and adding value. There are many ways to model tactical decisions with DMN, which can be implemented (i.e. auto-approvals for low-cost expenses or holiday requests during Christmas) or used as a “ways of working” guideline.

Decision Model Notation operates mainly in the operational decision domain, where the decisions have a greater impact on customer experience. “Is this customer eligible for this product?”. “What is the likelihood of this customer accepting this product?”. These are the types of operational decisions which need to be made millions of times per second.

Operational decisions are also performed millions of times per day. The marginal revenue achieved by such decisions will have a big impact on the bottom-line.

Next Best Action

An example of an operational decision model (above) examines the decision around what “next best action” the customer service agent should deploy for any given incoming call. Without assistance the agent’s own marketing knowledge and experience” would be used to determine the best course of action – cross-sell, up-sell or retention. The role of an AI-driven Next Best Action platform is to provide the best possible assistance to the agent. In addition, NBA would drive relevant and synchronised content in non-human assisted digital channels such as chatbots, mobile push-notification and e-mail.  

Governance

The DMN model is part of the overall governance structure. As such its development would be governed by the following factors (which would need to be agreed upon):

  • Engagement of stakeholders
  • Establishment of roles and responsibilities
  • Conflict resolution
  • Feedback and response handling

For example, all things being equal, should a particular customer be offered a cross-sell communication or a service communication? To resolve this potential conflict, the correct stakeholders need to be engaged and come to an agreement.

Note though that the higher the impact of a decision, the greater the need for oversight.

Summary

Decisions are indeed the backbone of an organisation’s success. Performing rapid and effective decisions ensures that organisation adapts to challenging situations and move forwards. Operational decisions are where DMN lives in this blog series. The millions of decisions performed at this level form the tapestry of the culture of the company and customer experience. What this blog describes is how decisions are made at all levels of an organisation and how DMN can potentially be used to express those higher-level ad-hoc decisions. In the next blog we will delve into the process of creating those operational decisions in the context of next best action marketing.

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