Are Your Business Rules Creating Business Success or Wreaking Havoc?

Increased automation is key to competitiveness in the digital economy. But automation requires articulating clear business rules and embedding them into systems. Once there, those business rules more or less run our businesses. They take or guide actions ranging from pricing products and services to ordering parts and supplies to defining partner relationships. Before companies started implementing ERPs in the late 1990s, most business rules were in people’s heads. Inconsistency was a big concern.

Automation addresses that concern; once embedded in systems, rules are reliably consistent. The question becomes: Are they effective? When business rules are managed well, they align operational activities to the strategic objectives of the company. But in our ever-changing business environments, how do we ensure that our thousands of business rules have the desired impact on business outcomes?

Just as automated trading rules have occasionally wreaked havoc on Wall Street, long-forgotten business rules can run amok in a business. The great danger with automated business rules is that no one is paying attention to them. Even carefully designed rules may prove counter-productive or eventually become outdated.

Allstate Insurance Company recognized the opportunities and challenges of business rules after it built a new claims processing platform. A team of IT and business people identifies rules related to claims processing, reviews their impact, and decides what changes are necessary. That team can determine which decisions should conform to automated business rules and which benefit from the discretion of an expert. Such analysis has helped the team reduce the time needed to process total loss claims from 40 to 14 days.

While automated business rules offer consistency, other business rules can empower a high-performing workforce. Some decisions demand personal judgment and creativity in order to achieve organizational objectives. In those cases, employees can be coached to optimize intended outcomes, such as speed, cost, and customer delight. 7-Eleven Japan, for example, has excelled by empowering salespeople to optimize inventory turnover through individual decisions about what should be put on the shelves.

At MIT CISR, our sense is that business rules are too often left unmanaged. Automated business rules must be owned by someone who regularly analyzes their impact and can easily change rules that aren’t working as planned—ideally through a rules engine that bypasses IT unit involvement. When rules are intended to guide individual decisions and activities, management must provide four things: clear goals; data to inform each decision; feedback on decision outcomes; and coaching on how to improve performance. And, as with automated rules, designated owners of rules must be authorized to analyze and change them.

In the digital economy, strategy matters but execution matters more. For better or worse, business rules are executing your strategy. Who is minding your business rules?

Jeanne W. Ross is director and principal research scientist at MIT CISR. Read related MIT CISR research briefingHow Business Rules Define your Business Strategy” and learn how Allstate is working smarter with business rules in Working Smarter: The Next Change Management Challenge with free registration on the MIT CISR website.