Business Rules Spotlight – January 2002

Published in TDAN.com January 2002

How does this emphasis on business rules potentially impact current system development methodologies? That is the subject of Barbara von Halle’s new book, “Business Rules
Applied,” published this fall by Wiley & Sons. This book explains in practical detail how a business rules can be incorporated into existing system development methods, and the dramatic
improvements that result. This month’s column summarizes some of the processes and principles outlined in that book, and emphasizes the importance of focusing our analytical skills on
discovering and especially on evaluating the business value of an organization’s rules. This is because the quality of the decisions an organization makes depends directly on the quality,
availability and consistent application of its business logic e.g. its rules.

Principles of a Business Rules Approach

A business rules approach to developing systems does not seek to replace current methods, but to build on them. All current data and process analysis techniques and modeling skills are just as
important. What differentiates the business rules approach is the addition of new formal rule discovery, analysis and design techniques. For instance, after the business rules that will guide the
business decisions in a new application have been discovered, they should be analyzed with formalism and discipline as separate system components. This is the fundamental difference between the
business rules approach and others.

Barbara identifies four key principles, nicknamed STEP™, upon which the business rules approach difference rests on. They are:

(S)eparate the rules so they can be managed as separate business assets and as separate system components.

(T)race the rules so that everyone can know where the rules came from (business policies), know where they are utilized (business processes) and know where and how they are
automated.

(E)xternalize the rules so business people know what they are and can analyze and challenge them.

(P)osition rules within systems for easy access and modification so the business can evolve.

Rule analysis and optimization begins in the early scoping and requirements gathering phases of a project with an effort to understand business context.

Business Context

Business rules do not exist in a vacuum. Each rule exists in a business context. When we want to evaluate a rule’s value to an organization, its business context can help us determine the
business motivation for the rule and balance the rule’s benefits against its cost of execution, training and audit.

One aspect of business context is the organization’s set of values. For example, an important question for executive management is how much latitude a person filling a position should be
permitted in acting on the company’s behalf. Does management want to mandate decisions or do they want to provide guidance to employees but leave decisions up to them. For instance, it might
be a corporate value that employees should be trusted to carry out their responsibilities to the best of their abilities. On the other hand, granting unlimited authority to employees involves risk.
So a strategy that empowers employees might be implemented together with a grant of authority process (business tactic) that specifies the actions people can take and sets constraints on those
actions. This tactic helps implement the employee empowerment strategy and is shaped by the business policy that: “Executive managers must achieve a balance between business benefits and
risks when authorizing employee actions.”

A second aspect of business context focuses on the organization’s business planning and performance monitoring processes. Rules can be evaluated based on how well they support execution of
business strategies/tactics and achievement of business objectives as set out in current business plans. One approach recommended by The Business Rules Group (BRG) for understanding business
motivation, divides business planning elements into the major categories Ends, Means and Guidance and defines the relationships among them. A much-simplified version of the BRG’s model
appears below. For more information on this model, see “Organizing Business Plans” prepared by the BRG www.businessrulesgroup.org,
November, 2000.

It is clear from the BRG model that business judgments should be made about how effectively each rule guides the implementation of a tactic, supports achievement of objectives and is congruent with
its parent policy. So it is important in the early scoping phase of a project to research and define business context so that in later phases, when business rules have been discovered, we can
accurately evaluate their business value.

Business Rule Analysis

As a project progresses beyond scoping, the business rules approach offers developers rule-aware techniques for discovering, documenting and tracing rules. In “Business Rules Applied”
this is called the Discovery phase. In a rules enhanced approach, the key difference is a strong emphasis on the discovery of the decision points and state changes where rules lie. From this, data
requirements and fundamental process dependencies can be elaborated.

At its completion, most of the rules guiding the application under discussion will be known. At this point, these rules must be analyzed individually and as members of a cohesive set of rules.

Rule Analysis Techniques

There are two sets of business rule analysis techniques. Using the first makes sure that each rule meets individual rule quality criteria. For example, each rule should be expressed declaratively.
That is, the rule should simply prescribe a decision rather than the procedure for carrying out the decision. For instance, “A customer that places more than ten orders each over $5000 in a
year must be treated as a gold-level customer.”

Using the second set of analysis techniques, cohesive groups of rules should be analyzed to insure that they meet rule quality criteria for sets of rules. For example, duplicate rules should be
removed and inconsistencies among rules eliminated. At this point, we will have rules that are individually of high quality and sets of rules that are semantically correct and consistent within
themselves.

High quality rules and rule sets do not guarantee, however, that the rules make the best business sense. So Barbara has offered us a final set of techniques designed to ensure that all rules play a
positive role in moving the organization toward its business objectives. Here’s where our understanding of business context comes into play. We are now looking to optimize the rules.

Optimizing the Rules

Optimizing rules means challenging the business value of each rule because every rule costs money and time to train, enforce, change and audit. Optimizing means making business decisions about
modifying today’s rules, retiring some rules and adding new ones. For example, rules may need to be changed because the business wants consistent rules applied across all sales divisions
because these divisions serve many of the same customers. The best way to evaluate the benefits of a rule is to look at the business motivation for the rule. Business motivation for a rule can be
found in its business context. Let’s look at an example using a rule related to purchasing goods and services.

Strategy: Simplify, standardize and automate procurement worldwide.

Goal: To achieve the highest levels of operational excellence.

Objective: Reduce the value of the organization’s spending by 10% by June 30, 2002.

Tactic: Increase spending under strategic purchasing agreements.

Policy: Whenever possible, the Purchasing Department must place purchase orders with strategic suppliers.

Business Rule: If there is a strategic supplier agreement in effect for a requested product, then place purchase order for the product with that strategic supplier.

The business questions are: Is the rule congruent with its parent policy? Does it support achievement of objectives? Does it further the implementation of a tactic? In other words, does it pay its
way?

Another rule optimization criterion is what assessment of an external opportunity or threat provided the impetus for writing the parent policy of this rule?

Assessment of an External Opportunity or Threat

External influences such as the actions of competitors and changes in the regulatory environment can offer an organization opportunities or pose threats. Executive management may craft new business
strategies as a result.

However, implementation of a business strategy always involves some risk. Some risks can be anticipated. Business policies and rules can be formulated that reduce the chances of risks occurring.
Other policies and rules can be constructed to mitigate the affects of risks should they occur. For example, using the Internet as the technology for implementing a worldwide procurement system has
benefits but also risks. The Internet opens up the possibility that corporate information could be exposed to competitors and the potential for its malicious destruction by hackers. A solid set of
information security policies and rules will be a must.

Planning for Rule Changes

Managing business rules, although made a lot easier and reliable in a business rules approach, remains a high value business process. Once rules have been identified for addition, change or
retirement, we should have reliable procedures for planning and executing rule modifications. People executing these procedures should have available the following information about each rule.

  • The business organization(s) and location(s) that will feel the change
  • The business processes that rely on the rule
  • The other rules that depend on the outcome of the target rule or provide input to it
  • The systems changes required (programs, database code, etc.)

If you have a rule stewardship program in place, the responsibility for rule change plans should be assumed by appropriate rule steward along with IT assistance for estimating the time and cost for
system modifications.

To deliver this kind of rule information you will need a business rule repository, a database with well-defined meta data. The rule management procedures and repository that will support your rule
change efforts will need to be specified, designed and built starting in the scoping phase and included as part of your project plan.

Considerations for Iterative Development

In a business rules approach, rule analysis and optimization are not one-time activities. If you are following an iterative development method, like the Rational Unified Process, you can expect to
iterate through rule analysis tasks multiple times finding new rules and correcting existing ones as you go. Also, iterative development is a way to test the ongoing rule change processes you will
be implementing. For example, you can find out how long it takes to challenge a rule, assess the impact of changing it and test that change.

Summary

Business rules reflect an organization’s values, act as its guidance system and express how it differentiates itself in its competitors. Barbara von Halle’s business rules approach to
information system development and enhancement recognizes the key role rules play in the on-going success of an organization. Barbara’s business rules approach separates rules from data and
process and offers rule-specific concepts, techniques and standards for rule analysis and optimization. The ideas of rule separation and analysis are similar to the ideas of data separation and
analysis that we have adhered to for some time.

By integrating rule separation and analysis tasks into your development method and project plans and by establishing a continuing rule management process, you can build systems that will better
meet business requirements in the short-term and will be more easily modified to meet changing business needs in the future. You can find more information on business rule analysis and optimization
in Barbara von Halle’s book “Business Rules Applied” from Wiley.

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About Barbara von Halle

Barb von Halle is Managing Partner of Knowledge Partners, Inc. (KPI). She is co-inventor of the Decision Model and co-author of The Decision Model: A Business Logic Framework Linking Business and Technology published by Taylor and Francis 2009. She is the fifth recipient of the Outstanding Individual Achievement Award from International DAMA, inducted into the Hall of Fame in 1995. Known as a business rules pioneer, she has consulted in this area for more than 10 years. She is an invited keynote speaker at conferences in the U.S. and Europe.

Her first book, Handbook of Relational Database Design has sold more than 21,000 copies. She was the most popular in Database Programming and Design magazine for manyÊ years.

Other book publications include Business Rules Applied and The Business Rule Revolution. Her recent article in Intelligent Enterprise magazine features case studies from Oregon State, Freddie Mac, Dell Financial Systems, and Pershing LLC.Ê

Barb can be found at www.TheDecisionModel.com where new announcements and materials on the Decision Model appear as well as a link to purchase The Decision Model: A Business Logic Framework Linking Business and Technology.

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