The application of decision automation and management is as diverse as the businesses that benefit from the technologies and methods. The four case studies below are courtesy of FICO, the sponsor of this report, and include an airline operator, a telecoms company and two firms operating in financial services. For all four organizations the benefits were substantial, leading to an expansion of the use of decision management within the organization. These examples go well beyond the use of business rules and demonstrate the arsenal techniques available.
- A large payment processor wanted to increase the speed and accuracy of its underwriting processes. Underwriting has traditionally been treated as something of a bottleneck, with a fixed amount of work allocated to underwriting staff. Decision management has allowed throughput to push well through these fixed ratios, sometimes by an order of magnitude. Its use of FICO technology and decision based processes have had a dramatic effect, with faster on-boarding of new merchants, cost reduction, revenue protection and greatly enhanced flexibility. Cycle times have been reduced from days to minutes, and manual reviews have been reduced by 60%. There are now plans to productize underwriting and offer it as a service, and extend the approach to other business processes.
- A major US airline used FICO optimization technology to improve margin and the quality of its products. With 3500+ flights per day, 93 destinations, 45,000 employees, 600 aircraft, nearly two billion gallons of fuel consumed each year, and 100 million passengers annually, the optimization problems were non-trivial and for certain parts of the business required near real-time processing. The people optimization tasks included crew pairing, staff planning, crew recovery and various bidline problems. Resource optimization included making sure aircraft were busy and full, and logistics and costs associated with fuel. The desired outcome sounded modest at just a 2-5% increase in margin, by optimizing resources and people. The company has seen a significant improvement in crew paring, and a project called ‘Open Time Reoptimization’ paid for itself the first time it was run. It is also possible for the airline to run many more flight plans. The project has been sufficiently successful that many more areas of operations will be addressed.
- One of the largest global financial services firms, operating in 60 countries, needed to create decision management solutions for customer centric decisions. This meant complying with a consent order around the life cycle management of analytics, creating efficiencies to reduce operational risk, and allowing traceability of analytics and attributes through a customer centric business (CCB) model. With FICO model management and governance solutions, this organization can now centrally manage all risks within CCB, is served with automated reports to reduce operational risk, and very importantly, monitor the models it is using. The project has been sufficiently successful that thousands of risk models will be created in many other areas of the business.
- A large telecoms operator needed to optimize its credit policy and strategy. Competition is fierce in this industry and there was a need to significantly speed up the formulation of credit policy. The variables involved are large in number, with hundreds of thousands of applications per month, dozens of credit and fraud score bands, many renewal options, numerous third party channels and hundreds of MSAs. Decisions around deposit amounts, the number of lines and monthly spending limit were crucial. A three month project with FICO led to $47 million in additional cash flow. Such was the success of this project that the business has embarked on a 21 month project to embrace additional analytics methods applied to other areas of the business.
There are many, many other examples of businesses which have transformed their process efficiency and efficacy by automating and managing decision processes. An Eastern European Bank significantly improved its early stage collections with a 3 year ROI expected to come out at around 24:1. A leading online shopping provider saw a 3.3% increase in profit per account through decision modelling and optimization. A retail credit card provider saw a significant increase in the profitability of retail portfolios (between 1 and 2%) in the first month of using decision modelling and optimization technologies and methods.
The case studies are numerous and almost always encouraging. Failure to realize significant benefits must inevitably be associated with skill, political and organizational issues. Decision management focuses on the most important issue facing all businesses – the reduction of uncertainty; and with it comes an increase in effectiveness and efficiency.
The previous article in this series is Applying Decisions to Business Processes
The next article in this series is Decision Management Strategy
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