BSAC 2A

BSACCOUNTANCY2A@wmsu.edu.ph
BSACCOUNTANCY2A@wmsu.edu.ph

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REPORTERS

Teams

AMATONG,SAHID, LAM & BASILIO

UYAO & GASPAR NALZARO & JUMSALI

FACTO, ABDURAHMAN,BANZON &

SULAY
INCLAN,BALIGUAT,MALABOTE,ALFARO,D
ALIDA,CALBI

ESTRADA, LEPITEN & CABADING NARCISO,DEOGRACIAS & MARACAG

MASIHUL,GARCIA,NAGDAR,ROJAS,
FEGI & DELOS SANTOS
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THE NATURE OF A DECISION MODEL’S
BUSINESS VALUE
Considerations in determining the business
value of a Business Model:
∙ How much the Decision Model
accelerates business agility
∙ How the Decision Model proves useful
in normal, complicated, and
threatening times, and in times of
crisis
∙ How much profit, reputation,
consistency, and quality the Decision
Model delivers to the marketplace
∙ How much valuable, expensive, and
rare business knowledge the Decision
Model secures
∙ How much the Decision Model
corrects shortcomings in today's best
practices, such as Business Process
Management (BPM) and Business
Decision Management (BDM).
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A business decision is “a conclusion that a business arrives at through
business logic and which the business is interested in managing.”
● The first column of the table shows that each business decision has a
name that begins with a “deciding word” (e.g., calculate, estimate,
determine) and the object of that deciding word.
● Further, the object of that deciding word is correlated to a conclusion fact
type, which is simply the piece of information about which the conclusion
is made.
● And, third, the business decision and its conclusion fact type belong
within a business context (i.e., a business concept), the latter usually
being a business object, data entity, input form, Web page, etc.
The business concepts in this table are person, claim, insurance
policy, loan, inventory item, and vendor. The second row in the table
denotes a business decision that comes to a conclusion about a
particular attribute of the business concept of Claim. This business
decision comes to a conclusion about the amount to pay on a claim,
and this judgment is probably based on a complex evaluation of
business criteria.
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Taylor and Raden state that

“organizations are perceived
through the lens of the
decisions they make” (Taylor
and Raden, 2007). However,
not all business decisions are
equal in value. Some are of
high value, others of less value.
Some are automated, others
may never be automated. Any
one of these business
decisions, taken by itself within
the context of one transaction,
may seem to have a low value.
However, a new realization is
that the high volume of these
operational decisions, taken as
a group, has a huge cumulative
effect on an organization’s
health. Other business
decisions of low volume but of a
strategic nature also can have a
huge impact on an
organization’s health.
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There are three characteristics of a business decision that are

important to its business value as well as to the applicability of the
Decision Model:

The Three Characteristics That

Characteristic #1: Each business decision has an operative
Are Important to a Business
Decision’s Business Value context. The operative context is the complexity of the business
environment in which the business decision is made.

Business decisions vary Characteristic #2: Each business decision varies in its
in character a great deal, volume-based economic impact. Each instance of a business
and are not made in a decision has an economic impact on the business.
vacuum.

Characteristic #3: Each business decision varies in the

complexity of its business logic.
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● THE OPERATIVE CONTEXT

- Determines how a decision model solves a business
problem or opportunity.
- It consists of the methods used by decision models when
encountering unexpected course in business.
IMPACT OF BUSINESS DECISION ● THE VOLUME BASED ECONOMIC IMPACT
ON A BUSINESS - Provides insight into the financial value of the decision
model.
- It focuses on providing a business value in accordance to
There are three the volume of economic impact (Low, Medium, High)
characteristics that affects ● THE BUSINESS LOGIC COMPLEXITY
the impact of business - Assists in understanding the cost of developing and
decisions on a business. managing a decision model.
The following section - It assists the decision model in handling complexity of logic
explains how the three statements.
categories determine the The three characteristics combined will give an insight on the ability
value of business decision of the decision model, its uses to the business and its value to
and decision models business and business decision as well.
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The Three Characteristics That Are
Important to a Business Decision’s
Business Value
Characteristic #1: Its Operative
Context
→ The concept of operative
context is explained in “The
Cynefin Framework”*
(Snowden and Boone,
2007).
→ The framework defines an
operative context in which
business decisions are
made, representing these
operative contexts as a
continuum of “contexts.”
Search
Four different operative contexts for business decisions based on the
input to them
1. The Simple context, where the input consists of “Known knowns.”
2. The Complicated context, where the input consists of “Known
unknowns.”
3. The Complex context, where the input consists of “Unknown
unknowns.”
4. The Chaotic context, where the input consists of “Unknowables.”
A Business Decision in the Simple Operative Context
→ In the Simple context, the “known knowns” form the natural foundation
of a Decision Model because not only are the fact types known, the
fact values are also known.
→ The usefulness of the Decision Model in this context is that it provides
a shared understanding of the logic behind the business decision,
ensures a complete and accurate set of logic, and enhances the
agility of the corresponding business processes.
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A Business Decision in the

Simple Operative Context

● “Known knowns” form -

natural foundation of a
Decision Model because
not only are the fact types
known, the fact values*
are also known
● ● In this context, parties agreed on the Decision Model, utilize it, and measure it against relevant
Or it is possible to identify
the column headings for business objectives.
● This is to ensure that FACTS necessary for making decision are available when business decision is
Rule Families, also its
condition and conclusion to be made
expression for each USEFULNESS OF DECISION MODEL IN SIMPLE CONTEXT
● Provides a shared understanding of the logic behind the business decision
business logic statement
● Ensures a complete and accurate set of logic and enhances the agility of business processes
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AIRLINE INDUSTRY
● Route distance, average
expenditure per mile driven,
port operational expenses
for each aerodrome, and
personnel deployment.
● Service class, prospective
load characteristics,
charges provided by rival
airline companies, feeder,
and influence on other
routes.
Search
● In many full-service airlines, such a Decision Model provides a different price
for each flight, based on flight days and times.
● The Decision Model enables all stakeholders to clearly understand the
structure of the business decision and to communicate about it in common
terms.
● In the Simple context, the Decision Model emerges as the primary business
construct allowing capture, understanding, communication, and consistency
of the business logic behind an important business decision.
A Business Decision in the Complicated Operative Context
● This is the realm of “known unknowns.” While leaders in a simple
context must sense, categorize, and respond to a situation, those in a
complicated context must sense, analyze, and respond. This approach
is not easy and often requires expertise:
● Often a business decision operating in a Complicated context may
need to
allow for more than a single solution for the same input. If so, the
usefulness of
the Decision Model is that it provides a clear understanding of those
multiple solutions and simplifies the comparative analysis among them.
Microsoft Teams Search

All teams An Example of a Business Decision in a Complicated Context

Possible Scenarios:
● A new airline competitor enters the market
● A regulatory action introduces a new type of tax
● There is a sudden increase in fuelcosts

EXAMPLES:
● By using the Decision Model to
understand how to integrate new fact
1. A motorist may know that types and fact values, the business
something is wrong with his car decision is reduced to the Simple
because the engine is knocking, context.
but he has to take it to a ● In the Complicated context, the
mechanic to diagnose the Decision Model emerges as the
problem. primary business construct to review
2. Another example is the search when conditions change, to change,
for oil or mineral deposits. The extend, add, or remove columns
effort usually requires a team of (fact types), rows (business logic
experts, more than one place will statements), or even whole Rule
potentially produce results, and Families.
the location of the right spots for
drilling or mining involves
complicated analysis and
understanding of consequences
at multiple levels.
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All teams An Example of a Business Decision in the Complex Context

A BusinessDecision in the
Complex Operative Context

● In a Complex context, the input consists

of “Unknown unknowns.” This is when
there is incomplete data, and there may
be no correct answer for some or all
inputs.
● There may be no clear solution for some
or all inputs. Experimental solutions may
be necessary.
● The usefulness of the Decision Model is
that it is an aid for inventing solutions.
● Business decisions in complex contexts
are found in fluid circumstances such as
business mergers and acquisitions,
disruptions in the marketplace, major
changes in regulatory environments,
unexpected litigation, and similar events.
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Decision model from regulated to
unregulated
Consider the complexities that occurred
as a result of deregulation. The number
of additional considerations to be put
into the price choice was unknown or
underappreciated at the time of
deregulation. Experts in the airline
industry had to make business
judgments based on their
understanding of markets with hardly
any oversight. Pattern matching and
intuition were used to make business
decisions. The Decision Model's value
in the Complex setting is that it may be
used to provide the foundation for
iterative solution development.
Search
Iterative development starts with a Decision Rule Family and finds the conditions
(fact types) that may lead to that conclusion one at a time.
● At first, these will be based on experience, advice, and best guesses of
experts.
● As the rows of the Decision Rule Family are populated and as the supporting
Rule Families are built, the condition fact types will be corrected and
improved until a potentially stable model emerges.
● Once the Decision Model is tested in the marketplace, new conditions will
probably be discovered, and these conditions will likely evolve as
competitors show their hands. This in turn will add new fact types, fact
values, or new rows to the Decision Rule Family.
A Business Decision in the Chaotic Operative Context
● The business needs to make decisions in the realm of “unknowables.”
● There is little applicability for Decision Model that addresses the entire
business decision.
● It is improved by finding the areas within the chaos that can be separated
from the chaos. Then, developed into an area of relative order.
● The Decision Model emerges as a primary business construct by which
business leaders carve out islands of order from chaos and develop Decision
Models for them.
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Characteristic #2: Its Volume-
Based Economic Impact
Is the number of times it is
made in a given period,
such as per day, month, or
year. (Taylor and Raden
2007)
Example:
A discount decision for
customer orders may be
made many times a day
based on the quantity of
daily customer orders.
Search
Operational decisions (transactional decisions)
● guide daily business transactions.
● to be effective it is need to be made on high
volumes
Business decision volume
- Often occurs in inverse proportion to its individual
economic value. It depends on its basis.
Example:
The value of the discount decision taken as a whole is the
product of the inconsequential impact of its single
execution and the thousands, perhaps millions, of times
that it is invoked in a given time frame.
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Table 3.2 The Usefulness

of the Decision Model
Based on Operative
Context
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Operational decisions assist the organization in comprehending

certain basic cost-volume relationships related to the company's
operations. Volume, delay, variability, risk management, self-service,
and personalization are all factors to consider while making
Operational operational decisions. The quantity of decisions of a specific type
decisions are what turn made by decision makers must be considerable in volume. The
your business strategy volume might generate issues or increase other decision-making
into reality and issues, such as risk assessment and compliance. Furthermore,
guarantee that your latency refers to the inability to predict an issue but still change how
organization functions you will decide in time. So, you can have a problem with your
operations. The essential mindset shift is like how people's
smoothly, all the way
perceptions of data have shifted in recent years. Data is no longer
down to your workers on merely something that is needed to run systems; it has become
the front lines. You must visible to many people and is managed as a resource for the entire
manage operational company—a corporate asset. Controlling operational decision-
decision-making to making as a corporate asset entail considering it as a strategic asset,
ensure that they are expressly managing it, making it visible and reusable across the
effective business, and constantly improving it.
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All teams Important Characteristics of Operational Decisions

1. Precise – Good operational decisions use data to take the right action. They use this
data to derive insight into the future, not just awareness of the past, and act more properly
to protect customers' interests. The key is to act like a knowledgeable employee.

2. Agile – No modern business system can stay static for long. Operational decisions
must be easy to change quickly and effectively. The agility of these decisions ensures that
they remain aligned with an organization's strategy, even as that strategy changes and
evolves. To minimize lost opportunity costs and maximize overall business agility,
organizations need greater operational agility.

To be effective, an 3. Consistent – Operational decisions must be consistent across the range of channels
you operate through. These systems support third parties and agents who act on your
operational decision behalf and the people who work for you directly. They enforce your organization's laws,
policies, and social preferences wherever it does business.
must be precise, agile,
consistent, fast, and 4. Fast – You need to take the best action that time allows. Your associates are learning
to be impatient and have short attention spans. Supply and demand chains are becoming
cost-effective: more real-time, and your systems must respond quickly as well. You must decide, and act,
quickly.

5. Cost-effective – Good operational decisions help eliminate wasteful activities and

costly reports. They reduce fraud and prevent fines, and make sure you do as many things
right the first time as possible. Above all, operational decisions must be cost-effective for
companies to succeed in an increasingly challenging economic climate.
.
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Characteristic #3 ITS COMPLEXITY
OF BUSINESS LOGIC
Complex is defined as a
“whole made up of
complicated or interrelated
parts.”
● quantity of fact types
Whole; corresponds to
the Decision Model
● Complicated or
interrelated parts;
represents its Rule
Families of conditions
and conclusions and the
relationships
Search
To categorize a business decision by the complexity of its
business logic, it is necessary to understand the quantity of
Rule Families, conditions, conclusions and the relationships
among Rule Families.
The complexity of a business logic is most often considered
to be high when:
- There is a large quantity of Rule Families
- Each single Rule Family consists of a very large
- There are many logic statements in a Rule Family
In the insurance and financial services industries,
complex decision models are used to operate. With a much
higher quantity business logic statements and relationships
are more complicated.
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All teams Putting the Characteristics Together

Assessing each of the three

characteristics individually
provides insight into the
cost and value of one
aspect of the Decision
Model, putting them
altogether conveys a
holistic view of the worth of
the Decision Model to the
business
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Putting the
Characteristics
Together
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Some practical Ideas
It is important to
determine the potential
business value of a
business decision to
understand fully the
usefulness,
participants, cost,
effort, and benefits of
its corresponding
Decision Model
Applying the Business Value Characteristics :
To have an impact on your business, you need to make your values a part of
everything your business does. Some steps you can take every day to reinforce
with staff the importance of living your business values include:
• Stand up for business values consistently. Be bold – you may decide not to go
down a path that brings short-term benefits because it doesn't align with the
bigger picture
• Regularly talk about your values and test new ideas and suggestions against
how well they align to your values.
• Select and promote staff on their values, not just their job ability. For example,
make values a key criterion in recruiting and promoting staff.
• Train staff in key values. For example, if one of your values is teamwork, provide
all staff with training in how to work as a team.
• Encourage staff to speak out about breaches of values.
• Challenge people when you see them do and say things that undermine values
or praise people when they embrace values.
• Raise values as part of your meetings and discussions when considering
courses of actions or business decisions.
• Make your values visible to staff and customers. Include them in your staff code
of conduct, on your intranet and website, display them in your work and common
areas, use them in staff inductions, etc .
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A financial institution is
reevaluating its loan
approval process, which is
partly automated and
partly handled by loan
officers. The system seems
to operate well in making
most decisions involved in
approving loans except in
the area of the possibility
of the applicant’s
defaulting on a loan.
Search
CASE STUDY
Issues:
(a) the evaluation of an applicant’s likelihood of defaulting on a loan
often differs depending on who the loan officer is..
(b) the quantity of defaulted loans over the past six months has
significantly increased.
The institution wants to automate the business decision involving the
applicant’s likelihood of defaulting on a loan to enforce consistency
and so that only exceptional situations in this regard require
immediate handling by a loan officer.
New objectives: to decrease by 60% in one year the number of loan
applications evaluated by a loan officer regarding the likelihood of default and
to reduce by 25% in one year the quantity of defaulted loans. The task is to
identify a target business decision. The business decision is named starting
with an appropriate deciding word and followed by the fact type to which the
conclusion applies. Business motivations are identified for why it is important
for the business to manage it..
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Solution for Business Decision and Business
Motivation
The solution consists of the following:
✔ Target business decision: Determine
Applicant’s Likelihood of Defaulting on
a Loan
✔ Business Motivations
⮚ General
● Greater consistency in
loan approvals by
automating the business
decision
● Less time spent by
humans making this
business decision; 60%
reduction in one year
● Fewer defaulted loans;
25% reduction of
quantity of loans in one
year
Search
An operative context for an operation is the external environment that
influences its operation.
Simple operative context - The business is related to business decision
Operative Context - The incomplete data of M&A platform.
Chaotic operative context - The part of chaotic operative context is the project
failure and crisis management.
SOLUTION FOR OPERATIVE CONTEXT
● The Simple context is the key operating context for this business decision.
● Although the fact kinds may be known, they may need to be obtained from a variety
of loan officers in order to investigate the entire set of fact types.
● It resembles the Complicated context in certain ways.
● It's possible that the loan officers won't recall the fact values they employ, won't be
consistent in their fact values, or won't want to participate.
● As a result, reducing the business choice to the Simple operative context is a valid
usage of the Decision Model.
● Operational context decision making is a critical company process with significant
implications for profitability and lossng-term viability.
● Operational decisions are often highly structured, repetitive and routine.
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KEY FACTORS INFLUENCING THE USEFULNESS OF DECISION

MODEL
• Operative Context
Usefulness of the Decision • Characteristics of Inputs
Model • Typical Characteristics of Corresponding Decision Models

The Usefulness of
the Decision Model based
on Operative context is a ⮚ For the effectivity of a Decision Model, it is vital to
critical part in determining systematize vast quantities of data. Information must be
how much of the Decision
accurate and well formulated.
Model can be populated
⮚ On the final assessment, it must ensure that the Decision
and what levels of
Model will influence a positive foundation regarding with
expertise need to be
involved to have a the overall operational business decisions and other
functional outcome. areas with deficient measurements
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The Decision Model will:

 Represent agreed-upon, shared, complete and
accurate business logic for determining applicant’s
likelihood of defaulting on a loan that can be
SOLUTION FOR
measured against business objectives
USEFUFNESS OF  Point out which fact types and values are not
THE DECISION well known, needing more expertise so that expert
MODEL knowledge will be in place for the nonexperts using
the system
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Volume-Based Economic
Impact
After determining the usefulness of the
Decision Model, the next step that
should be done is to identify its
volume-based economic impact. Each
business entails economic impact and
volume-based economic impact
provides information regarding the
financial value of the Decision Model.
This involves estimating its value,
based on the value of its individual
conclusions as well as how frequently
it is executed.
.
Search
Solution for Economic Impact
⮚ The business decision of determining an applicant’s likelihood
of defaulting on a loan is made 25 times a day and the average
loan is for $100,000. If it is assumed that 5% of the loans
default, it means that 1.25 loans approved in a day will default.
⮚ The business people need to provide information on how much money is lost on
average for each defaulted loan. Then, the product of number of defaulted loans per
day times the amount of money lost for each will provide the volume-based economic
impact of improving this business decision. Assuming this can amount to hundreds of
thousands of dollars very quickly, the savings due to reduction in the quantity of
defaulting loans by 25% can be calculated.
● Depending on the volume-based economic impact of the Decision Model, the
stakeholders determine that it makes economic sense to proceed with estimates for
creating and maintaining this Decision Model which involves understanding of the
complexity of the business logic.
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Solution for Economic Impact
- Calculate the amount of
volume based economic
impact of improving the
business decision by;
Volume based
economic impact =
No. of Defaulted Loans
per day X Amount of
Money Lost for Each
- With the amount that may reach hundreds of thousands the
saving due to reduction in quantity of defaulting loans by 25%
can be calculated
- After calculating the volume based economic impact
stakeholder may verify if decision model could benefit them or
not and whether to maintain it or creating another business
model
The Business Logic Complexity
It is now necessary to determine the business logic
complexity of the Decision Model so that the cost/benefit
analysis of developing the Decision Model can be performed.
Estimations for the quantity of Rule Families, business logic
statements, and fact types are needed.
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Early estimations are that there will be fewer than five Rule
Families, approximately 200 business logic statements, and possibly
25 fact types. This indicates that the business logic is expected to be
simple.

Based on the business logic complexity of the Decision Model,

Solution for Business the effort is assessed by estimating the time required to define fact

Logic Complexity of types, Rule Families, populate Rule Families, and resolve conflicts,

Decision Model Pieces confusion, and unknowns.

If the IT group already has experience in automating Decision

Models in target technology, estimates can be made for incorporating
the automated Decision Model into a business application.
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CHARACTERISTICS • Operative Context

• Volume-based economic impact

3
• Complexity of its business logic

• Simple
• Complicated
operative types: • Complex
• Chaotic

Reminders: DECISION + MODEL = VALUE

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EMCEE
POWERPOINT IN-CHARGE

FELICIANO & PEREZ

AGUSTIN & MARIANO

POWERPOINT PRESENTERS

DAGALEA & MATARLO

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