What is a Operational Business Decision?

A large part of conducting any business is making decisions. Some of these are strategic: should we enter a certain market, how should we design our new product, which partners and distribution channels should we choose? Others are more routine, made manually or automatically during everyday business operations. The latter are operational decisions.

Operational decisions are determinations that businesses make on a regular basis, a selection or calculation of an outcome that depends on a number of prevailing circumstances (inputs) and which, ultimately, has an observable impact on the behavior of an organisation. They include making determinations like:

  • Should we extend a line of credit to this customer? On what terms?
  • Should we initiate an inquiry into a customer’s insurance claim or just pay it?
  • What products should we recommend to a client when they visit our website, given their past behavior?
  • Does this trade fee structure satisfy compliance regulations?

Many operational decisions need to happen many times a second and so they are often automated.

Why are Decisions Important?

Operational decisions determine the day-to-day profitability of the business, how effectively it retains customers or how well it manages risk. Often the quality and consistency of decision-making determines your client reputation—for some clients their sole perception of your company is obtained from the outcome of these decisions.

Operational decisions may not seem as important as the strategic ones, but they are more voluminous and their significance eventually adds up. Decisions are often of special importance in regulatory compliance applications. Digital transformation is partially about how this decision-making can be made more customer focused.

The logic of some decision-making is intellectual capital: it helps to establish or maintain a competitive advantage for your company—it represents what you do to better your rivals, your unique selling points. You need to identify the important decisions you are making, define the decision-making process transparently, ensure they are made accurately, monitor their performance and manage their evolution and improvement. This process of explicitly managing your decisions is business decision management. The means of transparently representing decisions is decision modeling.

Business Decisions and Business Rules

Business decisions are necessarily coarser grain and more tangible to business subject matter experts that business rules. You should be careful not to confuse decisions and rules.

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