September 25, 2008

Principles are Coming

Principles are Coming

More judgment and knowledge needed

While the finance industry is moving toward more rules and exceptions, and rules-based regulation, financial accounting and reporting is moving in the opposite direction, towards fewer rules and exceptions. Accounting and tax is moving towards more principles-based regulation.

The US is moving away from GAAP (Generally Accepted Accounting Principles) and towards IFRS (International Financial Reporting Standards). IFRS is the reporting framework used by most of the world today, and it has growing support in the US. IFRS relies on professional judgment rather than detailed rules. Under this principle-based approach, management will have a mandate and obligation to exercise its own best judgment when making decisions.

Companies will need to implement systems that use knowledge and judgment to make principle-based decisions.

It is time to adopt knowledgebase technology and knowledge management. It's time to build knowledge bases and embed knowledgebased technology into operations and existing systems.

Knowledgebased systems that are engineered and architected properly can

  • follow principles and guidelines
  • automate management's best judgment
  • ensure compliance
  • and deliver trust. These expert systems can be trusted because they use expert judgment to make the same decisions top experts would make, thus improving the quality, accuracy, and consistency of decision-making.

I don't believe there is any other practical or proven way of automating human judgment, other than building intelligent, knowledge-based systems.

Knowledgebased systems are the solution for principle-based compliance.

March 13, 2008

Visible Knowledge LLC helps companies prevent Brain Drain

10,000 baby boomers are retiring today.

10,000 more will retire next Monday. And Tuesday. And so on. That's the way it's going to be for the next 20 years. Key personnel and subject matter experts with 20 to 30 years of experience are going to clear their desk and head down to Florida. As they walk out the door, invaluable corporate knowledge will simply disappear.

Intellectual capital, a vital corporate asset, will melt away unless companies do something to stop the brain drain and to retain critical knowledge.

Visible Knowledge LLC ( has a solution:

  • An interactive RuleMap™ that models business rules & simulates business logic
  • An interactive Expertise Blueprint™ that transforms knowledge into Visible Knowledge™
  • A Legacy Interview(sm) 

Visible Knowledge helps companies retain vital corporate knowledge before it melts away. They focus on documenting invaluable critical knowledge from your top domain experts and key personnel, before they retire. It can take companies years and millions of dollars to recover from losing this type of knowledge.

A traditional exit interview is just not enough when you're dealing with subject matter experts or super experts. So Visible Knowledge has developed a Legacy Interview(sm) process that extracts and documents critical knowledge before experts leave or retire. They use a rapid knowledge acquisition process to extract maximum amount of knowledge in a minimum amount of time. Visible Knowledge focuses on capturing critical knowledge.

If Know It All Ken just gave you two weeks notice, and he's the only one who knows how to fix the $5 million widget making machine, Visible Knowledge can help. They can spend a few days with Ken and document the crucial knowledge you need to keep the business running.  

If Super Expert Sally is retiring in a few months, Visible Knowledge can spend a few weeks with her to elicit as much vital and critical knowledge as possible before she leaves.

If your entire Dept of Super Experts is retiring next year, Visible Knowledge can work with your team over the next few months or years to document the critical knowledge you need to retain.

Later, if you need to automate the knowledge that was captured and retained, companies like BIZRULES can help you do that. BIZRULES works with leading knowledge software vendors to design and build knowledge-based and rule-based solutions.

July 12, 2007

Interview with Fair Isaac VP James Taylor on EDM and Smart (enough) Systems

Say hello to Enterprise Decision Management, or EDM for short. EDM is the new buzzword that business rules folks are buzzing about lately.

It sounds like it was dreamed up by marketers to put a new spin on something that great companies have been doing all along, albeit probably manually. In fact, it’s a great acronym invented by James Taylor, Vice President of Enterprise Decision Management at Fair Isaac, to describe what their customers were essentially doing with Fair Isaac’s Blaze Advisor rule engine: Building smart rule-based systems to manage and automate decisions.

It turns out that all sorts of companies are using business rule engines to build EDM applications. James just figured this out first and gave it a great name. By now many of the leading BRE vendors are probably updating their marketing materials with the EDM buzzword.

(shameless plug – I just added EDM to the BIZRULES website in the decisioning solutions page.)

James just published a new book, along with co-author Neil Raden, about EDM and their ideas for building smarter systems. I had an opportunity to chat with James recently and interview him about his new book called, appropriately enough, Smart (enough) Systems. (see

BIZRULES: Tell us about your new book, Smart (enough) Systems 

Taylor: The book is being published by Prentice Hall Professional, and it describes how companies can use the computer-based systems they have in place rather than purchasing new ones to build smarter systems - and how these systems can help companies thrive through Enterprise Decision Management.  

Continue reading "Interview with Fair Isaac VP James Taylor on EDM and Smart (enough) Systems" »

April 05, 2007

Why business rules? Why not expert systems?

James Taylor over at Fair Isaac has a really good list of "Why business rules?" I agree with most of the points, except the stuff about expert systems.

Maybe the question should be "why not expert systems?"

The dirty little secret is that a lot of the rule engines out there were originally called "expert systems" or "inference engines", then they were called "business rule engines", and today they are known as "business rule management systems. (See the business rules hype cycle)

Of course, everything is better today. And faster. And connected. When expert systems first came out, the Web wasn't even born yet, and PCs were running at 10 mHz. 

The biggest problem we had at Mobil Oil between 1988-1994 when we were building the Global Expert System Strategy and Lube Knowledgebase Strategy was making and mailing floppy disks to all our affiliates.

I remember one day we were showing the customer (an executive in Mobil Marine division) a demo of the expert system, his comments were:

  1. This is like an intelligent checklist, it never asks un-needed or dumb questions!
  2. I like that I can click on an underlined word (a hyperlink) and popup a definition, photo, go to the next page, or whatever!
  3. This is not like our other DOS or mainframe apps. Our users will not like the fact that this works on a "one page at a time" metaphor,
  4. because we're forcing users to fill out information or answer questions on the page (screen), then they have to press enter to go to the next page (screen).

That one page at a time metaphor he described was basically how the World Wide Web works. We were doing this in a business rule engine (BRE), aka an expert system (ES) in 1988. Before WWW. Before Windows.

(Want proof, go here and click on the photo on the right. There's a picture from back then, in my younger days... the program on the PC behind me is 1DirPlus or something like that.... Definately B.W. Before Windows). And so back then we built expert systems that did reasoning, chaining, hypertext / linking, and of course inferencing. Basically they would fire rules exactly the same way a modern rule engine would today. And give the same answer the expert would give,

Even after the experts retired long ago!

We did that in AION. We could have used Neuron Data (which evolved into Fair Isaac Blaze Advisor), or we could have done it in ILOG. Or any number of other ES tools at the time. Some of them are still around today. (See BRE Family Tree)

Distribution of expert systems, and access, is one of the reasons they "never took off". People used to say expert systems were a solution looking for a problem. Deploying expert systems on the web solves those problems.

I think the Web is "the problem" that expert systems were looking for. The Semantic Web is reigniting a lot of the good stuff from the AI/ES days. Adding intelligence and reasoning to applications is what expert systems have been doing all along.

And by the way, not everyone agrees that expert systems never took off. I certainly don't.

As Richard Barfus, CEO of MindBox, (an ES/BRE/BRMS firm) likes to say, "Expert systems didn't really go away. They went undercover."


October 24, 2006

What's The Greatest Software Ever Written?

Now here's an interesting story by Charles Babcock in InformationWeek, Aug. 14, 2006:

"First, let's set criteria for what makes software great. Superior programming can be judged only within its historical context. It must represent a breakthrough, technical brilliance, something difficult that hadn't been done before. And it must be adopted in the real world. ...

The AI application that produced the first real breakthrough was the inference engine, a system with a knowledge base of conditions and rules. Such a computer can match a condition, such as a 104-degree fever in a patient, to a rule, such as the fact that bacterial infections cause high fevers. One of the best, the Mycin medical diagnosis system, could correctly identify bacterial infections in people based on their symptoms 65% of the time. That's better than most nonspecialized physicians. But it never moved out of the lab into popular use. No one knew who to sue when it was wrong.

My favorite AI package was IBM's Deep Blue program, which defeated chess Grand Champion Garry Kasparov in a six-game match. ... AI software can be impressive, but all my examples fall short of being among the greatest. ... Continuing into modern times, Google, in one aspect at least, represents great software. ... American Airlines' Sabre system was great, showing how software could evolve beyond the tactical needs of business and into the strategic. Sabre had the ability to match a customer's travel needs with the flights available at a travel agent's office. ... So how do I rank my candidates on a list from 1-12? In descending order, the greatest software ever written is: ...."

For the full story, click the link below:

Source: August 14, 2006: What's The Greatest Software Ever Written?

September 29, 2006

Knowledge-Based Systems Defined (by IBM)

Here's a great article in Insurance Networking News where James Bisker, global insurance industry leader, IBM Institute for Business Value, defines knowledge-based, expert and artificial intelligence systems and provides insight into how they can benefit insurance industry operations. He says:

"The type of KBS that is often referred to as an 'expert system' is technically known as a rule-based system."
At first I didn't totally agree and said so right here. Then I felt bad saying he was wrong and I was right. So what I'd really like to say is that the article is great, and James has said some pretty wonderful things about technology that I am pretty passionate about: rules, knowledge, A.I., and expert systems. Sure, I have some thoughts that are a little different, but that doesn't mean that one of us is wrong and the other is right. Life is too short for that.

It means that we both believe the same technologies can help business improve their condition. We see a few minor details a little differently, but who cares. The key point is that IBM is telling us that AI, expert systems, and rule engines are driving the insurance industry forward. This is great stuff! Executives everywhere would do themselves a disservice if they ignore his advice.

My newly enlightened take-way from this article is that a key executive at IBM is helping to legitimize much-maligned solutions like expert systems and knowledge management. Wow!

James says that a Knowledge based system is referred to or technically known as an expert system. I agree. Then he goes on to say that a knowledge-based system is the same as a rule-based system.

I see them as two different types of applications, however, with slightly different technology behind each.

I believe the difference between knowledge-based and rule-based systems is subtle, yet criticially important. Here's why: companies spend millions of dollars buying rule-based and knowledge SW packages every year. Sometimes they buy a rule-based solution when they really need a knowledge-based solution, and vice-versa.

I wrote about the differences earlier:

James goes on to say really smart things about the value of capturing corporate knowledge and building KBSs. I agree completely:

"One of the important implications of using KBSs will center around their impact on individual employees. This is especially true as more insurance employees leave the workforce as they retire or seek other employment. In this case, using knowledge management systems to capture the knowledge of internal experts will be crucial. Being able to extract corporate knowledge and distribute it consistently will ensure steady performance and efficiency in times of transition. KBSs also allow less experienced staff to operate at higher levels with less oversight, which frees up more senior personnel for more complex activities. Finally, and perhaps most importantly, the use of these systems increases consistency and compliance to internal and external policies and regulations."

I wrote recently (Knowledge Management is Key to Preventing Brain Drain. BP found out the hard way) about what happened to BP when they didn't retain knowledge, and what happened to Mobil Oil when they did.

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