Around 80% of smart phone owners use navigation applications regularly. In fact, many of us are so used to using these navigation tools, we even use them when familiar with our planned destination.
For something so ingrained in our day to day lives, few of us have really stopped to think what these navigation apps are doing. A navigation app uses a combination of maps and GPS location data to provide turn-by-turn guidance from our current location to a destination of choice. Users set overarching objectives such as ‘fastest route’ or ‘shortest route’ and the navigation app will essentially consider all available routes to your destination to determine one that best meets your defined objective.
Let’s think on that for a second. The navigation system is assessing every possible route, considering the constraints of each leg of the route, such as traffic flow and legal speed limits, determining time and distance to destination for each route and then comparing all the considered routes against your set objective, to work out which one provides the best outcome.
Wouldn’t it be nice if we had something like this for navigating our business decisions?
We could tell it our corporate goals and ask it to help define a strategy that allowed us to meet those goals within our financial, regulatory or operational constraints.
In fact, we do. For many years FICO have been working with some of the world’s leading organisations to deploy similar techniques to those we use in our navigation systems to help solve significantly more complex business problems across a broad range of industries, including banking and finance, retail, manufacturing, telecommunications, auto finance, energy and supply chain management.
Take collections as an example. For each customer in collections, we have a range of options we could take each day, from do nothing, through to automated voicemails, SMS, emails or a more formal letter. Think of these as the possible routes we could take on a journey. Each of these treatment options has its own probability of success, which varies by customer and age of debt, along with its own cost. Just like different routes, each activity may cost more or take longer.
Evaluate All Your Options Upfront
In business, more progressive companies regularly test “challenger” strategies to assess whether a better alternative is available and compare it with the current champion. While these decisions are often driven by deep domain experience, they are not much different to trying a different route to a favourite destination and seeing if it’s faster or slower. This can often take the business in the wrong direction and is a slow incremental process of improvement, towards an often-moving target.
By using powerful machine learning optimisation solvers in conjunction with existing statistical models and action-effect relationships, we can instead consider all the possible actions and likely effects, so that we have a full picture of possible outcomes and associated costs.
Source: FICO
We can evaluate all the routes to our destination before we set off. Then, by overlaying business and operational constraints such as cost, affordability criteria, responsible collections practices and overarching business goals — such as maximise collections amount while minimising customer attrition or maintaining operation headcount —we can determine a collective set of actions across all customers that maximise our goals.
You wouldn’t take a journey to a new destination without using navigation. Your business decisions are even more critical.
About the Author
Mark Collingwood, VP and managing director for FICO’s decision management business across EMEA, has spent almost 25 years working in analytics and business consulting arenas. He began work as a senior analyst helping to develop statistical models for a leading analytics provider before moving into senior consulting roles for both Scorex and Experian Decision Analytics, working across a number of sectors including financial services, banking and telecom. Mark joined FICO in 2008 to head up the Solution Sales team for EMEA before taking on the role of managing director for non-financial services business, aimed at growing FICO’s footprint in non-banking markets.
About
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO’s South African offices are headquartered in Illovo, Sandton. FICO and Decision Central are trademarks or registered trademarks of Fair Isaac Corporation in the U.S. and other countries. FICO is a registered trademark of Fair Isaac Corporation in the US and other countries. https://www.fico.com/en/about-us
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