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Decision Yield as a way to measure ROI

Decision Yield is an evaluation metric that reveals the quality of your current decisions and decision processes, and helps you plan, justify and measure improvements. Why do we need one? Well, what constitutes a good decision? Is it the outcome alone? The cost of executing that decision? The speed? How about the coordination of multiple decisions across different parts of your organization?

Many organizations lack a consistent method for measuring and managing the performance of automated decisions. The result is that plans for improvements that are vital to growth are often made based on metrics that focus on only one dimension, such as cost savings.

To determine what constitutes a “good” decision process, you need to understand the many different facets of a decision that contribute to overall business performance. This holistic way of evaluating decisions is called Decision Yield.

Decision Yield is ideal to evaluate automated decisions which are typically:

  • Customer-facing—from approving loans to pricing insurance to determining cross-sell offers.
  • Very frequent—often many thousands of times a day.
  • Executed in real-time (credit overlimit approval) or in batch mode (matching an offer with a prospect).
  • Of small individual value although in aggregate they can drive a large portion of your organization’s performance.

Decision Yield involves measuring five aspects and thinking about improving them as a set:

  • Precision - how accurate or profitable is the decision
  • Consistency - is it taken the same way each time, across product lines and channels
  • Agility - how easy is it to change to respond to new market conditions
  • Speed - how quickly is it made
  • Cost - how expensive is it to make

Considering all five aspects of a decision is key to making intelligent investment decisions on decision automation. The Harvard Business Review had a piece on Decision Yield titled Little Decisions Add Up.

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