Adapting to Market Dynamics: How Business Rule Engines Enable Agile Business Responses

MARCIN NOWAK
June 18, 2024
Blog

Adapting to Market Dynamics: How Business Rule Engines Enable Agile Business Responses

Heraclitus said: "The only constant thing in life is change".

This is brutally true for businesses all over the world. How can you build stable, predictable business model with so much uncertainty?

One strategy is to prepare for what you can predict, as the saying goes: "Hope for the best, but prepare for the worst". Having a backup plan is crucial here.

"If this happens, then we do that". Which is exactly, how business rules engines work.

If you want to know, how rule engines enable agile business responses, keep on reading.

Business Agility in a Changing Market

The business world is always in motion. Technology, consumer preferences, economic fluctuations, geo-political events and unexpected disruptions like the COVID-19 pandemic are constantly reshaping the market. In this dynamic environment, business agility – the ability to respond quickly and effectively to change – is no longer a nice to have, but a must-have for survival and growth.

The pandemic forced businesses to pivot fast, adopt new technology and re-imagine their business to meet the demands of a changing world.

A McKinsey report found that companies in the financial services industry that adopted digital technologies early on achieved a 6.3% increase in revenue growth and a 16.5% increase in market capitalization compared to their slower-moving peers.

A study by Accenture revealed that insurance companies that embraced digital technologies experienced a 33% increase in profitability and a 17% reduction in operating costs.

According to a report by the World Economic Forum, companies that embraced digital transformation and new technologies saw a 16% increase in revenue and a 26% increase in profitability.

Market volatility isn’t limited to global crises. Even in more stable times, businesses face constant challenges. New competitors emerge, regulations change and consumer expectations shift.

For example, the rise of e-commerce has disrupted traditional retail models and forced brick and mortar stores to adapt or die. A National Retail Federation study found that online and non-store sales grew 13.88% in April 2021.

The consequences of not adapting can be dire. Companies that hold onto old business models and processes risk losing market share, revenue and customer loyalty. McKinsey stated that the average lifespan of companies on the S&P 500 has shrunk from 61 years in 1958 to 18 years today. This is largely due to companies not being able to keep up with the pace of change.

To succeed in this fast changing world, businesses need to make agility a core competency. This means creating an innovation culture, giving employees the ability to make decisions fast and leveraging technology to simplify processes and get real-time insights. 

Rule engines, as we’ll see in the next section are a key tool to help businesses achieve this level of agility and adaptability. By centralizing business logic and allowing rapid rule changes, rule engines enable businesses to respond to market dynamics fast and accurately and ultimately survive and thrive.

Business Rules Engine = Business Agility Engine?

At the heart of business agility is the ability to make fast, informed decisions and adapt any business process seamlessly. Business Rule engines emerge as a key tool in this pursuit, a centralized platform to manage and execute business logic.

What are Rule Engines?

In simple terms, a business rule engine is a software system that allows you to create, store and execute business rules. These rules are conditional statements that define how a business should respond to a specific situation or event. For example, a rule in an e-commerce environment might be, "If a customer spends over $100, offer free shipping."

Business rules management system can empower business users with rule management capabilities – they can create rules, edit them, and manage rules without relying on IT development team. 

Benefits of Rule Engines:

  • Centralized Business Logic: Instead of embedding decision logic into complex code, rule engines consolidate it into a single repository. This makes rules easier to manage, update and audit, more transparent and less prone to errors.
  • Flexibility and Adaptability: Rule engines allow businesses to change or create new rules without extensive code changes. This enables rapid response to market changes, regulatory updates or changes in customer behavior.
  • Better Decision-Making: Partially automated rule execution ensures consistent and accurate decisions based on pre-defined criteria, eliminates human error and bias. This leads to improved operational efficiency, lower costs and higher customer satisfaction.
  • Easier Compliance: business rule engine can help your company stay compliant with ever-changing regulations. This is especially useful for all the financial institutions or medical and pharma companies.

Case Studies and Data

Rule engines in action can be seen in many real world examples. One is Amazon who uses a rule engine to manage their vast product catalog, pricing, and promotions. This allows them to respond to market trends and personalize customer experiences.

In the financial sector JPMorgan Chase use a rule engine to automate compliance checks and simplify loan approval process. This reduces the risk of regulatory breaches and speeds up decision-making, resulting in faster loan approvals and higher customer satisfaction.

Where Rule Engines Help You Adapt Fast

Rule engines are most valuable in situations where you need to adapt to changing circumstances. Here are a few scenarios where their flexibility and efficiency will make a big impact:

  • Supply Chain Disruptions: In the event of unexpected disruptions like natural disasters or geopolitical events rule engines can help you adjust your supply chain. For example, a rule can be set to automatically reroute shipments to alternative suppliers or distribution centers if a primary route becomes unavailable. This ensures products get to customers despite the unexpected.
  • Regulatory Changes: Industries like finance and insurance are subject to regular regulatory updates. Rule engines allow you to change your compliance rules quickly to comply with new regulations and avoid penalties and business disruption. Use case: an insurance company can use a rule engine to automatically adjust premium calculations based on new regulatory requirements.
  • Pricing and Promotions: Dynamic markets demand dynamic pricing. Prices and promotions need to be adjusted in real time to stay competitive and maximize profit. Rule engines can automate these adjustments based on things like competitor pricing, inventory levels or customer demand. For instance, a retailer can use a rule engine to offer discounts on specific products when they are near their end of life or when demand is low.

These are just a few examples of how rule engines can help you navigate market challenges. By codifying business logic into rules and being able to change them quickly businesses can respond to unexpected events and stay competitive and resilient in a changing world.

Real Time Customer Experience

Customer experience is a key differentiator for businesses across all industries, and insurance is no exception. Rule engines can help you deliver personalized, efficient and secure customer experiences in real time.

  • Personalized Offers: A happy customer is a loyal customer. Rule engines can analyze customer data like demographics, purchase history and online behavior to deliver product recommendations, offers, or content. For example, an insurance company could use a rule engine to suggest additional cover to a homeowner who has just bought a new car. An Epsilon study found 80% of consumers are more likely to buy when brands offer personalized experiences.
  • Real Time Decisioning: Rule engines can partially automate decision-making processes like loan approvals or insurance policy underwriting based on pre-defined criteria. This reduces wait times for customers and frees up employees to focus on more complex tasks.
  • Fraud Detection: Insurance fraud is a big problem that costs the industry billions of dollars a year. Rule engines can be used to monitor transactions and flag suspicious activity based on pre-defined patterns. For example, a rule engine could trigger an alert if a claim is filed from a location that is significantly different from the policyholder’s usual address.

Summary: The Strategic Importance of Rule Engines

In a world of constant change, businesses can no longer be reactive. The ability to adapt quickly to new market realities is key, and rule engines have become a key tool in this. By centralizing and partially automating business logic, rule engines allow organizations to respond to market shifts, regulatory changes and customer demands with speed and accuracy.

The benefits of rule engines are many. They simplify decision-making, improve operational efficiency, reduce costs, enhance customer experiences and mitigate risk. They empower non-technical users to apply changes with intuitive business rules management system. It reduces dependency on IT and speeds up time to market for new products and services.

Business rules engines are a strategic, not a tactical tool. They allow you to adapt to changing market dynamics and stay ahead of the game, grab new opportunities and navigate the challenges.

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