Adaptive control enables organizations to understand how their decisions (and their decisions' outcomes) will impact the organization's overall goals, also on top of that, which of their business decisions are performing better than the others to meet the required objectives.

When a decision is modeled and deployed, it is not enough to just monitor the execution performance, but also it is critical to understand if the decision is performing well at the larger scale. This means whether or not the decisions deliver the expected outcomes for organizations and positively impact business operations.

More often than not, the impact of the results of business decisions cannot be measured instantaneously. Let’s look at an example.

In the director's meeting on an e-commerce site, let's say they decide to increase profitability by selling more items. And as a strategy to ensure the organization can increase sell volume, they use a recommendation engine encouraging users to purchase more high-end and supplementary products.

The better recommendation engine on the checkout point encourages on the upsell and cross-sell to visitors and customers, the more chances the customers and visitors add new items to the basket, and as a result more profit of the company. Well, this is a very naive way of thinking.

There are delivery and handling costs, Cost Of Goods Sold (COGS), warehouse space issues and handling, and many extra activities (and associated costs) related to logistics because of the recommendation and extra purchase orders they’ve come through. Therefore all-in-all, the company may, or maybe not be more profitable!

As you see in the above example, just building a recommendation engine will not solve the company's profitability. It is even more complex because neither ensuring the recommendation works as expected (QA stage of development) nor monitoring the decision outcomes to ensure they are correct will solve this challenge.

Measure overall impact rather focusing only on the outcomes!

As explained in the above example, measuring the impact of business decisions is critical. Adaptive control is a method to help organizations holistically understand how their made and executed business decisions will impact the organization's overall objectives.

So in the above example, there is already an action point which in an online e-commerce website is the checkout page. Hopefully, the example company already knows its profitability based on the checkout value of customers’ baskets. Should they just introduce the upsell and cross-sell strategy and hope for the best? Well, hope is not a winning strategy.

They should roll out new checkout strategies in a safe and controlled manner. In this example, let’s assume they decide to have 3 different strategies:

  • Basket v1: Straight customer’s basket check out (standard basket)
  • Basket v2: Upsell plus standard basket
  • Basket v3: Cross-sell plus standard basket

Therefore, in our example company, what they can do is now introducing two other decisions for upsell and cross sell, so in total 3 decisions as part of Checkout strategy:

champion-challenger

 
With the use of Champion Challenger, the company can specify the importance of each individual Basket's strategy and not risk the whole company's Standard Basket strategy for uncertain decisions such as Upsell and Cross-sell. By specifying the weight for a different version of the decisions (Standard, upsell and, cross-sell), the adaptive control automatically distributes the requests between the 3 different versions and associates the correlation identifier for each outcome.

Later they can understand which of these 3 strategies was most effective by looking at the correlation identifier of the outcome and their contribution to the quarter's profit. Then and only then they can find whether or not any of those cross-sell and upsell strategies really helped the profitability of their company.

Conclusion

Understanding the impact of the business decisions that are made and executed cannot be done by simply looking at the decisions' outcomes. From the time decision's outcomes are created to influencing the operation and seeing the impact of the decision, there is a big gap. If we do not monitor and measure the decision's outcomes and their influence on overall objectives, the decision drift happens. Even more importantly, adaptive control in decision management enables organizations to test out new strategies and decisions safely in a controlled manner without taking the big risk of disturbing the existing operations entirely.

Last updated September 14th, 2022 at 01:21 pm, Published September 9th, 2022 at 01:21 pm