The folks at IDC (Dan Vesset, Maureen Fleming, Steve Hendrick, Henry Morris and others) have just released Worldwide Decision Management Software 2010–2014 Forecast: A Fast-Growing Opportunity to Drive the Intelligent Economy – the first ever market sizing for “Decision Management”. This is exciting – it’s great to have a leading research organization like IDC pull together the data into a comprehensive sizing and start making projections. And it’s an impressive market size too – the Decision Management software market is expected to exceed $10B by 2014 – doubling in the five years from 2009.
Most importantly, IDC recognizes the importance of operational decisions:
Because of the flood of data, the faster cycle times, and the adoption of analytics, the intelligent economy also has a rapidly increasing awareness of the importance of the process of making decisions, which we call decision management. Enterprises succeed or fail based on the decisions made by executives. They compete effectively or lose market share based on the operational decisions made by their managers. And they are more or less profitable based on the day-to-day decisions of various knowledge and line workers who make up most of the workforce. [emphasis mine]
and the value delivered by Decision Management
Our goal in presenting IDC’s view of decision management is first and foremost to highlight the value of using appropriate process models and technology to support all decision-making processes as well as the value of systematic approaches to managing decision-making processes, especially at large and medium-sized organizations. [emphasis mine]
The first section of the report is titled “Decision Management Defined” and covers:
- IDC Decision Management Model
- Decision Types
- Decision Dimensions
- Decision Management Activities
IDC has a slightly different terminology to the one Neil and I wrote in Smart (Enough) Systems in2007 but the basic concept is the same – that there are big strategic decisions that are not automated, don’t get taken very often and have high risk/reward/value and require lots of collaboration (decision support) as well as transactional decisions (we called them operational they call them tactical) decisions with lower individual value but much higher volumes and more potential for automation plus a middle group of management decisions (they call them operational we called them tactical). Regardless of what you call them, it is critical to think about managing (and applying analytics to) all of them.
On the left is the model IDC use and on the right is the one Neil and I published in Smart (Enough) Systems (I also discussed this as part of a series of posts I wrote on Decision-centric organizations).
I like their four dimensions and they combine them very nicely as a set. There are, of course lots of other dimensions of decisions (this is something I am constantly researching and expanding in my work with clients) but these would be a great start for anyone inventorying their decisions.
I have blogged before about dividing the decision-making space in “decision support” and “decision management” (post) and drawing a line between them (as shown in the graphic below) and IDC does something similar – calling them Project-based Decision Management (focused on the lower-left half, what I would call decision support) and Transactional Decision Management (focused on the top right, what I call Decision Management). Like them I still see a large split between software platforms for these different environments which is a pity and one that I hope will be addressed soon (though the two need different capabilities). IDC layout a nice activity model too, expanding on the basic decision-act-measure-improve loop.
The report continues with a discussion of Decision Management Software components. First it differentiates between Project-Based Decision Management (Decision Support) and Transactional Decision Management (Decision Automation), with a nice summary of the breakdown of packaging options available in the market (from applications to tools) and lists the various Decision Management Software Components along with a mapping of these different components to activities and the two types of decision management they have identified. IDC has a very thorough view of the components included in the market including:
- Advanced Analytics Software
- Business Rules Management Systems
- Content Management
- Data Integration and Access Software
- End-User Query, Reporting, and Analysis
- Event-Driven Middleware
- Process Automation Middleware
- Relational Database Management Systems
- Search and Discovery
- Social Platforms
- Team Collaborative Applications
The report wraps up with a section on Future Outlook
- Visibility Is Key Building Block
I agree that visibility is one of the big drivers for Decision Management as people have increasingly complex webs of systems and business relationships that must be managed and controlled. Visibility is the first step to getting control of this (as I discuss in this white paper on responsive enterprises for instance) - Greater Maturity of Enabling Technology Building Blocks
We certainly need more maturity in the building blocks, especially in how the various communities (business, IT and analytics) collaborate (see this post on the three legged stool and this one on BRMS futures). Right now, however, it is a custom solution development world for most Decision Management solutions outside of a few areas like credit risk that have a long history of applying Decision Management. - Cultural Issues and Skills Gaps Have to Be Overcome
Organization and culture issues are important in all the client projects I do. As we noted in Smart (Enough) Systems and this report, a critical success factor for adopting Decision Management systems is understanding and managing the impact on jobs and roles.
I also agree with them that the decision management market is growing thanks to its own value and to its value in improving BPM (check out this article, for instance, on the power of decisions to impact processes).
IDC says that companies need a Decision Management strategy. My clients in insurance, banking, health management and more are asking for it and they are looking for their software vendors to support it. Companies working with Decision Management Solutions are taking a systematic look at their decision-making and how it can and should be supported, automated and improved. As IDC makes clear, this is something all companies should be doing. And the time to begin, to conduct a decision inventory and develop a decisioning technology roadmap is now.
You can get the report on IDC’s website.
Here’s the model IDC use:
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That is great news for the Decision Management industry!
I’m not sure about their use of the terminology “tactical” and “operational” which seems a bit backwards, but I suppose it confirms 3 main groups of decisions to consider when talking about decision management.
One question I have for you is: Can you really apply analytics and manage Strategic decisions?
Agree with Eric that “tactical” and “operational” seem bakward. May be as an industry we should adopt the terms strategic, management and transactional as in James’ blog post above.
Example,
Strategic – What should be my Marketing Budget for the next 5 years?
Management – How should I allocate next quarters Marketing Budget across channels?
Transactional – What offer should I make to what customer at what time through what channel?
Transactioanl decsion making is fueled by predictive analytics and optimization; it is oeprationalized using business rules easily and there is technology and expertise available in may industries to support this. Any organization not doing this should really think about their viability in the future compared to their competition who is adopting this route.
Mangement decison making fueled by predictive analytics and optimization does require the middle managers to be trained in thinking this way – essentially they have to know the right question to ask their software.
Strategic decision making should also be based on analytics but because of the nature of this decisions you are not going to have push button software make such decisons, but should allow forward thinking upper managemnt to sift through the reams of data and make sense of it.
James, this is a most exciting post. The transition of decision management from obscurity in the early decade to a $10billion market is good news for many, many organizations around the world. Our experience is that decision management properly applied delivers:
o an order of magnitude improvement in software development outcomes;
o increased business agility;
o better alignment of operational decision making with strategic objectives and policies;
o lower business risk by better managing core IP and detaching it from systems risks;
o the potential for entirely new cross organizational business processes that embed decisioning from multiple participants;
o and new markets in third-party best practice and commoditized decisioning.
The $10billion is the tip of an iceberg of new value to be harvested by global businesses. The only slight caveat is in the words ‘properly applied’. Thanks to IDC for the research and to you for broadcasting it so promptly.
Mark, I agree with you 100%. This is exciting news. My favorite part of what James posted is below because I think if more people thought of Decision Management in these terms they would give it the attention it deserves.
Operational decision making is a corporate asset. High volume operational decisions drive your business every day, playing a role in every transaction. Investing in operational decision making will ensure that every one of these day-to-day decisions adds value.
James,
Great post. Which companies do you think are the leading suppliers of Decision Management solutions? Would you count Google or Autonomy in? How about the ESN companies such as Jive or Telligent? In my opinion, they are just scratching at surface, their offering is too basic? What do others think?
Jochen
Jochen
There are two very different groups of vendors – those focused on collaborative decision making (where I might include Google, certainly Autonomy, Jive etc) and those focused on automated decision making (all the major platform vendors except Microsoft, business rules vendors, most predictive analytics vendors). Obviously some serve both (analytics vendors in particular). Personally my focus is more on automated decision making so that’s where my work and this blog are focused
HTH
James
Jochen,
I think you will find that Fair Isaac (FICO) is a major player in the space offering both the decision automation and the predictive analytics. To me someone like Telligent might be more of a user of decision management and analytics and maybe a play to democratize decision management but not a platform player in the broader sense.
Mark
James,
Thank you. Very helpful indeed.
Jochen