What are Micro-Calculations?
Micro-calculations (analogy to Michael Ross and James Taylor’s “micro-decisions”) are all those simple yet numerous calculations for pricing, rating, or scoring that businesses often codify into large spreadsheets. For example, life insurers rely on actuarial tables (aka life expectancy tables or mortality tables) to predict how long an individual is likely to live based on various factors. Life expectancy is combined with other factors such as credit risk (which could be derived from a separate credit risk scoring table) to determine the price of a life insurance policy. Therefore, pricing of insurance is not just a simple numerical formula. Rather, it combines data, micro-calculations, and rules.
Micro Mistakes Lead to Macro Losses
The more micro-calculations involved in rating and scoring, the more complex managing pricing will be. And more complexity increases likelihood of mistakes. A single miscalculation could translate into huge losses. Just imagine how an extra “0” or mistaking “+” for “-” or dropping the “or equal to” from a single micro-calculation could impact the overall price. Noticing a price error is one matter. Finding which micro-calculations are responsible is another, especially in automated systems. Often times, IT has to recode the tables and spreadsheets that contain the micro-calculations. Therefore what is running in production is different than what is being managed by domain experts. Determining whether the error is in the code or from the original document can be a cumbersome exercise.
The SMARTS™ Way for Micro-Calculations
SMARTS™ is a low-code decision management platform that helps organizations automate and optimize operational business rules and decisions. Businesses can use SMARTS™ to effectively manage micro-calculations. Whether businesses desire to build a pricing engine or rating engine, SMARTS™ provides the tools to build it fast and makes it executes fast.
First, SMARTS™ enables businesses to cut out the “middleman.” Through its Lookup Model tool, users can simply upload their pricing, scoring, and rating tables in Excel spreadsheet form and users will be able to reference the information in the spreadsheets when writing business rules. Once uploaded, users can reference these spreadsheets in multiple projects and multiple times within a project to ensure a single source of truth. This means, the same information that is being managed is what will be running in production. Learn more by watching our webinar: Implementing Rating Engines with Business Rules and Lookup Models.
Starting from Scratch
Second, in cases where the tables or micro-calculations don’t already exist, SMARTS™ provides the tools to build them accurately and efficiency.
- Start with existing data. SMARTS™ integrated interface enables users to upload sample data and reference it when developing micro-calculations and other business rules. The RedPen™ point-and-click rules authoring tool allows users to generate rules by selecting data attributes and values from sample data.
- Experiment with different representations. SMARTS™ fluid rule metaphors enables users to visualize the business rules in different graphical representations: tables, trees, graphs, and text. This allows users to organize rules in the manner that’s easiest to manage.
- Test as you author rules. Users can test rules using the same sample data. Rather than waiting until the end to test, SMARTS™ enables users to test and validate each rule as they’re being written. Learn more by watching our webinar: Best-in-class Series: Testing your Decisions.
- Conduct Champion/Challenger experiments. When multiple strategies could work, SMARTS™ allows users to create and run Champion/Challenger (A/B) experiments to test multiple strategies at once. Users can conduct experiments on both sample data and live production data. Regardless where the data comes from, SMARTS™ mitigates the risk in finding the winning the strategy.
- Monitor results in real-time. SMARTS™ built-in Dashboard and real-time metrics enables users to monitor performance through out development and deployment. In addition to reporting capabilities, SMARTS™ enables users to define KPIs, alerts, and notifications.
Learn how organizations leverage Sparkling Logic’s SMARTS™ Data-Powered Decision Manager for rules-based personalization and data marketplaces.