Real-World Experience in Applying Business Intelligence to Business Processes James Taylor VP Enterprise Decision Management Fair Isaac

2 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Introductions  Agenda  The problem of hindsight  Challenges in analytic improvement of business process  Enterprise Decision Management  Some examples

3 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Business Intelligence Alluring… Provides much more information access and insight Increases knowledge worker productivity Describes and synthesizes past performance … and yet limited Need action not insight Applying the insight to identify the ideal action is too hard No operational improvement Need to use intelligence to improve operational processes More hindsight than insight We need to predict and optimize future performance

4 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Applying intelligence to business processes Lots of approaches Process Analytics Operational BI Business Activity Monitoring None really satisfactory The process is not the business These analytics don’t use customer information or the rules of your business to control the process Systems cannot read reports No matter how real-time and how focused, reports and cubes don’t help “code” get smarter People, people, people BAM is still aimed at getting people to do something. So much for straight through processing…

5 Copyright © 2006 Fair Isaac Corporation. All rights reserved. So What is Enterprise Decision Management? EDM is a systematic approach to automate and improve decisions across the enterprise. It allows businesses to: Make more profitable and targeted decisions PRECISION In the same way, over and over again CONSISTENCY While being able to adapt “on-the-fly” AGILITY

6 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Models Operational decisions across the enterprise Operational Systems and Process CRM SCM ERP Call Center Website POS Etc. Rules Analytic Models Business Rules Enterprise DataExternal Data Decision Service

7 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Components of Fair Isaac’s solution  Blaze Advisor™ business rule management system  SmartForms rules-driven data capture  Model Builder Software and Mentoring  Predictive Models – Risk, Opportunity  Evidence-based Rules  Professional Services

8 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Various Analytics Can Improve Results X X X X X X X X X X X X X X X X X X X X X X X XX X XX X X X X X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X X X X X X X X Descriptive Analytics How do I use data to learn about my customers? Predictive Modeling How are those customers likely to behave in the future? How will they react? Decision Optimization How do I leverage that knowledge to recommend the best action? Knowledge - Description Action - Prescription

9 Copyright © 2006 Fair Isaac Corporation. All rights reserved. The business case for EDM Timeliness of Decisions Days Real-time / Point of Contact Complexity of Decisions Local / Simple Corporate Objectives / Trade-Offs Constraints on Decisions Static / Simple Dynamic / Complex Changes to Decisions Every 3-5 Years Frequent Adjustments ObservationData Point Better decisions drive better results  93% felt that operational decisions impacted profitability  61% significantly Not leveraging data properly  70% of CIOs/CTOs did not get the most value from data.  47% because could not blend business rules with insight Large number of unaddressed decisions  51% had automated about 25% or less  79% had automated about 50% or less

10 Copyright © 2006 Fair Isaac Corporation. All rights reserved. There are many dimensions to the benefits Precision  Effectiveness  Granularity  Quantitative Metrics Cost  Efficiency  Cost – Value Trade-off  Activity Based Consistency  Repeatability  Compliance  Expected Outcomes Speed  Responsiveness  Service Levels  Opportunity Cost Agility  Adapting to Change  Testing  Design & Deployment Costs

11 Copyright © 2006 Fair Isaac Corporation. All rights reserved. And many possibilities for competitive advantage As discussed in Harvard Business Review, June 2005

12 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Agility  Improved strategic alignment  Capitalize on new product & market opportunities….fast  Lower IT / Development costs to change decisions Consistency  Lower costs of making decisions through automation  Lower costs of compliance, regulatory requirements  Better customer service across channels Precision  Higher revenue yield per customer interaction  Lower costs through improved risk management  Lower costs through less waste / fewer ‘off target’ messages EDM provides tremendous benefits

13 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Successful companies harness both approaches  Strategic decisions have broad business scope but occur less frequently  Tactical decisions determine how to manage processes and customers  Operational decisions deal with individual transactions

14 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Enterprise Decision Management in Action: Legacy Renewal for Motor Vehicle Agency  2,000+ rules applied to 70,000 transactions a day generating $4B in revenue  13,000 hours of maintenance saved in the first year  90% reduction in problem resolution time  Reuse across batch, 170 offices, new web service Government agencies world wide use Fair Isaac solutions 80

15 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Enterprise Decision Management in Action: Managing Risk in Financial Services  Change time from 35 days to 2  Manual referrals reduced 75%  Income increased by 1.5%  Provision for bad debt reduced by 1%  0% downtime since it went live in February 2003  ROI ~6 months with subsequent savings >£5M annually (>$9M annually) of the world’s top 100 banks work with Fair Isaac 2/3 card accounts worldwide are managed using Fair Isaac solutions 700 million

16 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Enterprise Decision Management in Action: Marketing Sharper in Retail  Advanced analytics deployed using business rules  Personalized recommendations in categories with no prior purchases  Deeper customer relationships  More customer visits and bigger baskets  17% began buying in new product categories a 2,000% lift IDC ranks Fair Isaac #4 in Worldwide Automation Applications Revenue #4 of the top 10 global pharmaceuticals companies have worked with Fair Isaac 8

17 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Enterprise Decision Management in Action: Streamlining Operations in Insurance  Automated more than 3,000 underwriting rules  Update strategies, policies and rules easily, without programming  Processing 99% of new policy applications automatically  Held expenses down as applications grew by 35% and agents accessing the system tripled of the top 50 U.S. P&C insurers use Fair Isaac technology 70% insurers and healthcare payers worldwide use Fair Isaac technology 400+

18 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Enterprise Decision Management in Action: Fighting Fraud in Telecommunications  Cut fraud losses in half with fewer “false positives”  Prevented $14 million in early-life bad debt in one year  Return on investment of 100% in less than four months transactions are reviewed every day by one provider using our network analytics 1.5 billion of all roaming cellular call records in North America are processed with our technology 90%

19 Copyright © 2006 Fair Isaac Corporation. All rights reserved. Things you can do  Go to Fair Isaac’s website:   Come to our booth - #305  Automate decisions with Fair Isaac Blaze Advisor   Read my blog   Send me questions or comments 