1. From Business
Intelligence to
Predictive Analytics
James Taylor,
CEO

2. Your presenter – James Taylor
CEO of Decision Management Solutions
Works with clients to improve their
business by applying analytics and
analytic
technology to automate and improve
decisions
Spent the last 9 years developing the
concept of Decision Management
20 years experience in all aspects
of software including time in
FICO, PeopleSoft R&D,
Ernst & Young
©2011 Decision Management Solutions 2

3. AGENDA
1 2
Business
Intelligence
Today
Introducing
Predictive
Analytics
3
Predictive
Analytics in
Operations
4 5 6
Decision Tips for Success Wrap and next
Management steps
Technologies

4. The one slide you need
Business Intelligence and Predictive Analytics
add value by improving decisions
Predictive Analytics improves operational
decisions in particular
Decision Management is a proven approach
for applying predictive analytics in operations
Decision Management takes you from
Business Intelligence to Predictive Analytics
©2011 Decision Management Solutions 4

5. Business Intelligence today

6. The value of BI is not software
Software is a foundation
Web Analytics
ETL
MDM
Reporting
OLAP
©2011 Decision Management Solutions 6

7. The value of BI is not data
Timely and reliable data is useful
©2011 Decision Management Solutions 7

8. The value is of BI is better decisions
BI adds value by delivering intelligence about your
business that enables better decisions
Individualized customer interactions, targeted offers, fraud
detection, risk based pricing, dynamic routing…
©2011 Decision Management Solutions 8

9. Different kinds of decisions
Type
Strategy
Tactics
Operations
Low Economic impact High
©2011 Decision Management Solutions 9

10. A focus on the past works … for people
Challenge
Decisions impact the
future
Data summarizes the past
10 People
See patterns
5 Extrapolate
0
Day Day Day Day Day Day Day Day Day
1 2 3 4 5 6 7 8 9
Day 1 Day 2 Day 3
©2011 Decision Management Solutions 10

11. Introducing
Predictive
Analytics

12. Different kinds of analytics
Business Intelligence Descriptive Analytics Predictive Analytics
* *
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* * * * *
* * * * ** *
*** * * * * *
* * * ** ** *
* *
*
* *
*
* * * ** * *
* * ** * *
*
How do I use data to Who are my How are those
learn about my best/worst customers likely to
customers? What customers? How do behave in the
has been happening I turn my data into future? How do they
in my business? rules for better react to the myriad
decisions? ways I can “touch”
them?
Knowledge - Description Action - Prescription
©2011 Decision Management Solutions 12

13. What can predictive analytics do?
They can automatically discover patterns in data
Patterns that show problems
Patterns that identify opportunities
They can predict trends or likely future behavior
They can be used to identify population segments
They turn uncertainty about the future
into usable probability
©2011 Decision Management Solutions 13

14. Descriptive analytics group and cluster
High
Income High income,
low-moderate education
*
* Moderate-high education
Low-moderate * * *
* *
income, young * * low-moderate income
* *
* *
* * *
* *
* *
* * *
*
* *
* * * * * * *
* * Education
*
High
* * *
* * Moderate education,
* * * *
* low income, middle-aged
* * *
* * * *
*
High
Low education,
low income
©2011 Decision Management Solutions 14

15. Predictive analytics rank order
©2011 Decision Management Solutions 15

16. Proven use cases for Predictive Analytics
Identify cross-sell opportunities
Predict cancellation
Predict likely interests
Predict what a customer might want to do next
Predict lifetime value
Predict someone is not who they say they are
Predict non-responders
Predict riskiness of a customer
©2011 Decision Management Solutions 16

17. Sample techniques
©2011 Decision Management Solutions 17

18. Predictive
analytics in
operations

19. Operational systems can’t see patterns
10
5
0
Day 1 Day 2 Day 3
©2011 Decision Management Solutions 19

20. But predictions matter in operations
How likely is this customer to churn?
How likely is this offer to convert this visitor?
How likely is it that this claim is fraudulent?
What is the risk that this loan will not be paid?
Which offer is likely to retain this customer?
How likely is this person to respond to this?
Is this person who they say they are?
©2011 Decision Management Solutions 20

21. Predictive Analytics must be applied
?
*
** * ** *
* * * *
* * * * **
* * **
* * * ** * * * * * * *
* **
*
* *
*
* * * ** * *
* * ** * *
*
Predictive
Analytics must be
executable at a
decision point
©2011 Decision Management Solutions 21

22. Decision Management
Decision Management is a
proven approach to deploy
and apply predictive
analytics
©2011 Decision Management Solutions 22

23. Steps to decision management
3 stages to better operational decisions
Create a “closed
loop” between
operations and
Design and build analytics to
independent measure results
decision and drive
processes to improvement
Identify the replace decision
decisions (usually points embedded
about customers) in processes
that are critical to
your operational
processes
©2011 Decision Management Solutions 24

24. Decision Discovery
Risk & Fraud Opportunity
Three kinds of
analytic decisions
©2011 Decision Management Solutions 25

25. Analytic operational decisions
Risk decisions Opportunity decisions
How risky is this deal How profitable might this
and what should we do? customer be?
Predict risk of a bad outcome Predict response,
Rigorous, regulated opportunity, potential
Rapidly evolving
Fraud decisions
How likely is this to
be fraudulent?
Predict risk of fraud
“Black box”
©2011 Decision Management Solutions 26

26. Decision Services
©2011 Decision Management Solutions 27

27. Decision Analysis
Decision Analysis is NOT maintenance work
Decision Analysis is about making decisions
better
Increase profit
Reduce losses
Improve retention
…
A process for formal and continual review and
improvement
©2011 Decision Management Solutions 28

28. Technologies
for Decision
Management

29. Technologies for managing decisions
Business Process Management, Enterprise Applications
Web Services
Visualization Decision Service
BI
Descriptive Predictive Decision Performance
Analytics Analytics Analysis Management
Database
Business Rules
Data
Warehouse
Enterprise Platform
©2011 Decision Management Solutions 30

30. Data Mining and Predictive Analytics
Business Process Management, Enterprise Applications
Web Services
Visualization Decision Service
BI
Descriptive Predictive Decision Performance
Analytics Analytics Analysis Management
Database
Business Rules
Data
Warehouse
Enterprise Platform
©2011 Decision Management Solutions 31

31. Business Rules Management
Business Process Management, Enterprise Applications
Web Services
Visualization Decision Service
BI
Descriptive Predictive Decision Performance
Analytics Analytics Analysis Management
Database
Business Rules
Data
Warehouse
Enterprise Platform
©2011 Decision Management Solutions 32

32. Data Infrastructure
Business Process Management, Enterprise Applications
Web Services
Visualization Decision Service
BI
Descriptive Predictive Decision Performance
Analytics Analytics Analysis Management
Database
Business Rules
Data
Warehouse
Enterprise Platform
©2011 Decision Management Solutions 33

33. Performance Management
Business Process Management, Enterprise Applications
Web Services
Visualization Decision Service
BI
Descriptive Predictive Decision Performance
Analytics Analytics Analysis Management
Database
Business Rules
Data
Warehouse
Enterprise Platform
©2011 Decision Management Solutions 34

34. Tips for success

35. Don’t start by focusing on the data
Better
decision
Analytic
insight
Derived
information
Available
data
©2011 Decision Management Solutions 36

36. Begin with the decision in mind
Better
decision
Analytic
insight
Analytic
Derived insight
Derived
information
Available information
data
Available
data
©2011 Decision Management Solutions 37

37. Focus on detailed data
Monthly Totals
400
300 Summaries can
200
100
obscure
0
Store, integrate,
clean and use the
details of
behavior
Daily Minutes in May
20
15
10
5
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
©2011 Decision Management Solutions 38

38. Focus on all three legs for success
Business
Decision
©2011 Decision Management Solutions 39

39. Adopt Business Rules Management
Business Rules Management Systems give
you
Visible, business friendly analytic implementation
Platform for all three groups to share
Rapid deployment
Support for defining actions
If customer is GoldCustomer
and Home_Equity_Loan_Value is more than $100,000
then college_loan_discount = 0.5%
If member has greater than 3 prescriptions
and prescription’s renewal_date is less than 30 days in the future
then set reminder=“email”
If patient’s age is less than 18
and member’s coverage is “standard”
and member’s number_of_claims does not exceed 4
then set patient’s coverage to “standard”
©2011 Decision Management Solutions 40

40. Wrap Up

41. The one slide you need
Business Intelligence and Predictive Analytics
add value by improving decisions
Predictive Analytics improves operational
decisions in particular
Decision Management is a proven approach
for applying predictive analytics in operations
Decision Management takes you from
Business Intelligence to Predictive Analytics
©2011 Decision Management Solutions 42

42. Action Plan
Identify your decisions before
applying Predictive Analytics
Focus Predictive Analytics
on operations
Adopt Business Rules as a
platform for Predictive Analytics
©2011 Decision Management Solutions 43

43. Decision Management Solutions
Decision Management Solutions can help you
Focus on the right decisions
Implement a technology blueprint
Build decisioning systems
For assistance, to find out more or if you have
questions
james@decisionmanagementsolutions.com
http://www.decisionmanagementsolutions.com
http://jtonedm.com
@jamet123 or @decisionmgt
©2011 Decision Management Solutions 44

44. Thank you!
James Taylor, CEO
james@decisionmanagementsolutions.com
www.decisionmangementsolutions.com/learnmo
re