Better decision-making can boost your top line

I saw this post by Keith Harrison-Broninski Some Processes Cost Money – Others Processes Make Money, in which he discusses the fact that companies have already squeezed lots of costs out of their systems and processes. He takes away from this the valid conclusion that not all processes are therefore good targets for high ROI projects – some will already be so efficient that not much more can be squeezed out. He ends by saying “All this can be summarized by saying that mechanistic processes are about increasing efficiency, while human-driven processes are about adding value.”

Now, while he has a good point, I think I am going to have to take issue with this. It is true if you consider processes that used to be human driven. However many more processes are being automated these days. Underwriting, for instance, used to be a human-driven process but it is increasingly mechanized. Making cross-sell or up-sell decisions in a marketing process used to be human-driven but it too is increasingly mechanized. The common theme in these processes is that they used to be human-centric because companies believed only humans could make the decisions required. Now, with companies automating and managing more and more of these operational decisions, these are becoming more mechanistic. This trend is only going to continue if you believe the studies covered by books like Super Crunchers (reviewed here).

These operational decisions can be improved through automation in many ways. They can be done faster and cheaper – the mechanistic improvement Keith discusses. However they can also be improved by being made more precise (more targeted, more profitable, more accurately based on risk), more consistent (improving customer satisfaction and retention) and more agile or easy to change (though this does tend to reduce costs, it also allows for opportunities to be taken where the window of opportunity is small). In these ways improving a decision can add value not just reduce costs. These five dimensions of a decision – precision, consistency, agility, speed and cost – are what is known as the Decision Yield.