Knowledge Management and Knowledge Automation Systems by lonyoo


									 Knowledge Management and
Knowledge Automation Systems

      Gallagher Financial System, Inc.
         Shaping the Future of Mortgage Lending
                                                     Gallagher Financial System, Inc.
                                                             Shaping the Future of Mortgage Lending

                        Knowledge Management and
                        Knowledge Automation Systems
                        A White Paper prepared by Gallagher Financial System, Inc.
                        From material provided by Paul Haley, President and CEO of The Haley Enterprise, Inc. and

                        Peter D. LeFebvre, Vice President of Product Development for Gallagher Financial Systems, Inc.
Gallagher Millennium

                        Introduction                                                  business’s infrastructure.
                                                                                          The purpose of this white paper is to introduce
                             In 1876, the English novelist, George Eliot,             the principles of the discipline of Knowledge
                        wrote that, “Of a truth, Knowledge is power.”                 Management, to explore the benefits of Knowledge
                        Now, over a century later, that observation still             Automation Systems over traditional IT models,
                        holds true. Knowledge gives us, as individuals, the           and to examine the real-world application of
                        power to grow, to better ourselves, and to succeed            Knowledge Management to business—specifically,
                        in our endeavors.                                             to the mortgage-lending industry—through the
                             In the business world, knowledge is power as             combined efforts of Gallagher Financial Systems,
                        well. As with individuals, knowledge is what enables          Inc. and The Haley Enterprise.
                        businesses to grow and to succeed. Contained
                        within every business is a wealth of knowledge
                        about its policies and practices, and about the               What is Knowledge Management?
                        industry that it serves. A business uses this
                        knowledge to sell and support the products and                     Any discussion of Knowledge Management
                        services that it offers.                                      should, logically, begin with a definition of
                             However, knowledge is not held within a                  “knowledge,” itself. Unfortunately, there are
                        business itself, but rather by the various individuals        numerous and varied opinions on this subject,
                        that make up the organization. Without the                    each of which is valid in its own right. For our
                        knowledge possessed by the people within it, a                purposes, however, we’ll attempt to provide a
                        business cannot survive. To a business, therefore,            working definition of knowledge and an
                        knowledge can be considered an asset—perhaps                  explanation of how it differs from “data” and
                        the most important asset that it has.                         “information,” all of which are essential
                             The primary concern, then, that must be                  components of Knowledge Management.
                        addressed, if a business is to grow and prosper, is                Data can be broadly defined as a collection of
                        how this knowledge can best be captured and                   facts—facts about specific events and about an
                        harnessed. How can companies preserve their                   industry in general. These facts can originate from
                        existing knowledge assets, encourage the                      a variety of sources and includes such items as raw
                        dissemination of that knowledge across the                    statistics, demographic and marketing information,
                        organization, and use that knowledge to identify              and so forth. Data can form the basis of knowledge,
                        the best business practices and to refine and improve         as it is gathered, analyzed, and synthesized by
                        those practices? The answers to all of these questions        individuals within an organization.
                        lie in the application of Knowledge Management                     Information, which is sometimes referred to
                        to the business’s operations and the adoption of              as “explicit knowledge,” results from the collection
                        Knowledge Management Systems within the                       and communication of ideas and experiences.

                       Gallagher Financial System, Inc.           1500 San Remo Suite 251 Coral Gables, FL 33146             1¥800¥989¥9998
                                                    Gallagher Financial System, Inc.
                                                           Shaping the Future of Mortgage Lending

                        Information is usually codified into documents,           Benefits of Knowledge Management
                        e-mail, voice mail, and other forms of
                        communication, which can be easily shared                     The potential benefits of adopting a Knowledge
                        between individuals. It is explicit precisely because     Management strategy are numerous and have far-
                        it has been “written down” in some format, and            reaching implications for any business. The proper
                                                                                  use of Knowledge Management techniques and

                        it is useful because it can be stored and reused to
                        avoid the duplication of work and the repetition          technology makes a company more agile and better
Gallagher Millennium

                        of mistakes.                                              able to respond to changes in the industry. The
                             Knowledge, however, transcends both data             sharing of knowledge between knowledge workers
                        and information in that it comprises ideas,               increases performance and reduces the amount of
                        experiences, and insights themselves. For this            training that is required for new employees. And
                        reason, true knowledge is often referred to as “tacit     the implementation of knowledge assets in the
                        knowledge.” Knowledge also represents the                 company’s Information Technology infrastructure
                        intelligence that individuals apply to data and           maximizes return on investment, both in
                        information to draw conclusions and to make               equipment and personnel. All of these factors
                        decisions—without intelligence, information               contribute to render businesses more competitive
                        cannot become knowledge. Therefore, it is the             and profitable.
                        possession of knowledge, along with intelligence
                        and the ability to create new knowledge, which            Knowledge Automation Systems
                        determines an individual’s value to a business.               In the past, computers, specifically mainframes,
                             Returning to our original question, then, we         mainly performed algorithmic bookkeeping
                        can define Knowledge Management as a business             operations, rather than decision support. Now
                        discipline that attempts to identify and capture          that networked terminals and personal computers
                        knowledge, to promote the sharing of knowledge            are a fixture on every front-office desktop,
                        between individuals, to leverage existing knowledge       computers are mainly being used directly by
                        in the creation of new knowledge, and to use              knowledge workers themselves. The proliferation
                        knowledge to define and improve business practices.       of computer technology makes a company’s
                        While this may seem to be a broad definition, it          Information Technology infrastructure the ideal
                        is necessarily so, as Knowledge Management                place to adopt Knowledge Management principles.
                        incorporates and enhances many other business             This means that businesses need to implement
                        disciplines, including Change Management,                 systems and applications whose behavior is
                        Business Process Reengineering, and Risk                  determined primarily by the company’s knowledge
                        Management. A shorter definition might be that            assets, to assist, augment, and support workers’
                        Knowledge Management is the practice of treating          decision-making efforts.
                        knowledge like any other business asset—as                    Unfortunately, most applications are not
                        something to be used, maintained, and expanded            Knowledge Automation Systems. Traditional
                        to the benefit of the organization.                       applications are created using procedural coding
                                                                                  techniques, wherein knowledge is hard-coded into
                                                                                  the application as a series of step-by-step procedures.
                                                                                  In this model, although knowledge is being
                                                                                  managed and utilized, it is contained in an

                       Gallagher Financial System, Inc.          1500 San Remo Suite 251 Coral Gables, FL 33146             1¥800¥989¥9998
                                                         Gallagher Financial System, Inc.
                                                                  Shaping the Future of Mortgage Lending

                        inflexible, static structure. The behavior of the                             Knowledge Automation System
                        system is driven by the procedural code, while the
                        decision-making efforts of knowledge workers are                                              System Behavior

                        guided externally, resulting in a fundamental
                        separation between the knowledge worker and the                                               Procedural Code
                                                                                                                (Software Engineering Cycle)

                        system. This relationship is illustrated in the
                        following diagram.
Gallagher Millennium

                                                                                                      Business Design (BA)
                                                                                                                                        Parameterized Data
                                                                                                         Knowledge Base

                                       Static Knowledge
                                      Management System                                                                        DBMS

                                  System Behavior

                                                                                                 With Knowledge Automation Systems, the
                                Business Design
                          (Software Engineering Cycle)          Parameterized Data           business design defines the behavior of the system,
                                                                                             allowing changing business needs to be
                                                                                             implemented directly through the knowledge base,
                                                         DBMS                                rather than through the software engineering cycle.
                                                                                             This means that the system’s behavior can change
                                                                                             dynamically with the business, resulting in a
                            In this type of application, the separation                      dramatic reduction in turnaround times for
                        between the knowledge worker and the system                          meeting new business objectives. This, in turn,
                        means that a company’s business model is applied                     results in a more responsive organization that is
                        inconsistently. Also, because the behavior of the                    able to maximize the use of its knowledge assets
                        system is determined by procedural source code,                      for tangible benefits.
                        changing that behavior requires changing the code,                       Implementing a Knowledge Automation
                        which is an error-prone, time-consuming, and                         System requires a change in mindset—IT
                        expensive process. Finally, since industry change                    departments must learn and embrace rules-based
                        occurs more rapidly than applications can be                         programming in order to provide a Knowledge
                        updated, the software engineering cycle cannot                       Automation System’s infrastructure. This requires
                        keep up with the evolution of the marketplace.                       the adoption of expert system technology, to enable
                            In a true Knowledge Automation System,                           the creation of a knowledge base and the use of
                        knowledge assets drive an application’s behavior,                    an AI engine. Just as people apply intelligence to
                        rather than procedural code. Knowledge                               knowledge to make decisions, so does the
                        Automation Systems incorporate expert system                         Knowledge Automation System apply Artificial
                        technology, which replaces procedural code in an                     Intelligence to the knowledge base to determine
                        application with a knowledge base, to contain                        the system’s behavior. Once these components are
                        knowledge, and an Artificial Intelligence (AI)                       in place, the system can be easily maintained and
                        engine, to drive decisions. This model allows the                    updated through the combined efforts of both
                        knowledge base to be updated and maintained by                       knowledge workers and IT personnel.
                        knowledge workers, closing the gap between the
                        knowledge worker and the system, as illustrated
                        in the following diagram.

                       Gallagher Financial System, Inc.                  1500 San Remo Suite 251 Coral Gables, FL 33146                         1¥800¥989¥9998
                                                   Gallagher Financial System, Inc.
                                                          Shaping the Future of Mortgage Lending

                        Gallagher MillenniumÑKnowledge                           slowing down the application.” Rather than build
                        Automation at Work                                       their own AI engine, Gallagher Financial Systems
                                                                                 partnered with The Haley Enterprise, the leader
                            In 1995, Gallagher Financial Systems, Inc. set       in Knowledge Management and Knowledge
                        out to create a software solution for the mortgage-      Automation technology, to obtain the necessary

                        lending industry that incorporated the principles        expert system components—namely the Eclipse™
                        of Knowledge Management. Gallagher’s goal was            inference engine and Rete++™, the C++
Gallagher Millennium

                        to provide lenders with a system that would allow        encapsulation of that engine.
                        them to keep up with the changes in the mortgage-             By integrating Rete++ into the foundation of
                        lending industry. Such a system would allow lenders      Gallagher Millennium, the application inherited
                        to modify the behavior of the system dynamically         all of the power and flexibility of the Eclipse engine.
                        to support new lending scenarios, allow for the          Gallagher’s developers were able to write compact
                        implementation of more efficient business practices,     procedural objects that were separated from the
                        and meet new regulatory requirements. Further,           business logic of the application. This enabled
                        these modifications would need to be performed           them to concentrate solely on the potential behavior
                        by business analysts who possessed the necessary         of the system, without having to worry about the
                        industry knowledge. To reflect the forward-thinking      logic of that behavior. That logic would be provided
                        design of this new product, the system was               by the knowledge base, which could contain an
                        christened Gallagher Millennium.                         infinite number of business rules.
                            It quickly became apparent that traditional               In the mortgage-lending industry, business
                        application models and methods of development            rules can be based on virtually any combination
                        would not support such a system. In the past,            of loan parameters that constitute a particular
                        Gallagher programmers worked with business               lending scenario. Gallagher wanted to allow these
                        analysts to develop source code that would analyze       rules to be created and maintained by the business
                        the particulars of each lending scenario. All of the     analysts who actually possessed the necessary
                        critical aspects of each scenario, such as loan          mortgage-lending knowledge. To that end, they
                        amount, loan-to-value ratios, debt ratios, property      created the Gallagher System Administrator Tool,
                        state, and so forth, had to be identified and            an interface to Gallagher Millennium’s knowledge
                        embedded in the procedural code. This meant              base that enables business analysts to define the
                        that the business analyst had to teach essential         criteria for each lending scenario in an intuitive,
                        mortgage-lending knowledge to the developer,             database environment. With the Gallagher System
                        which was unnecessarily time-consuming, and              Administrator Tool, business analysts simply select
                        required thousands of IF-THEN statements to be           the appropriate application options for each
                        written for each point in the lending process where      scenario, and the actual business rules are created
                        a decision was needed, which resulted in the             behind the scenes.
                        repeated duplication of each scenario throughout              To tap into these business rules, Gallagher’s
                        the code.                                                developers created procedural objects that inherit
                            According to Doug Gallagher, President and           the rules-based functionality of Rete++
                        CEO of Gallagher Financial Systems, “When we             components. This functionality allows the Eclipse
                        began coding Gallagher Millennium, we realized           engine to control the behavior of Gallagher
                        that we needed an Artificial Intelligence engine in      Millennium’s objects by evaluating the current
                        order to give the lenders what they needed without       values of relevant data fields and comparing them

                       Gallagher Financial System, Inc.         1500 San Remo Suite 251 Coral Gables, FL 33146             1¥800¥989¥9998
                                                    Gallagher Financial System, Inc.
                                                           Shaping the Future of Mortgage Lending

                        to the corresponding rules in the knowledge base.         the power of knowledge back in the hands of those
                        Further, the Eclipse engine only compares business        who can make the best use of it, which is the goal
                        rules to the values in a particular loan record that      of every Knowledge Automation System.
                        have changed, allowing system performance to
                        remain constant, regardless of the number of rules

                        in the knowledge base.
                             By integrating expert system technology into
Gallagher Millennium

                                                                                      If, as Eliot suggested, knowledge is indeed
                        Gallagher Millennium, Gallagher Financial
                                                                                  power, then Knowledge Management and
                        Systems, Inc. and The Haley Enterprise have
                                                                                  Knowledge Automation Systems are the best means
                        fulfilled the promise of Knowledge Management
                                                                                  of tapping into that power. Knowledge
                        for the mortgage-lending industry. With Gallagher
                                                                                  Management and Knowledge Automation Systems
                        Millennium, Gallagher Financial Systems provides
                                                                                  enable businesses to put their knowledge assets to
                        its clients with the level of flexibility and control
                                                                                  work as efficiently and cost-effectively as possible.
                        they need to do business in the manner that best
                                                                                  Only through knowledge will businesses survive,
                        suits their needs and to adapt quickly to new
                                                                                  and only through the cultivation, dissemination,
                        developments in an ever-changing marketplace.
                                                                                  and effective use of that knowledge can businesses
                        Gallagher Millennium’s rules-based approach places

                        About The Haley Enterprise                                About Gallagher Financial Systems

                        The Haley Enterprise, Inc. is the leader in               Gallagher Financial Systems, Inc., a privately-held
                        commercial knowledge management and                       company founded in 1985 by President and CEO
                        knowledge automation technology. Rules-based              Doug Gallagher, is a leading provider of mortgage
                        programming and case-based reasoning software             origination and secondary marketing software
                        from The Haley Enterprise is embedded                     solutions. Gallagher Financial Systems is
                        in a variety of commercial software packages and          headquartered in Coral Gables, FL, with a
                        Web applications from many of the world's largest         development office in Nashville, TN.
                        companies, including IBM, Adobe, AT&T, and
                        NCR. The Haley Enterprise is a privately-held
                        corporation headquartered in Pittsburgh, PA.

                                 The Haley Enterprise, Inc.                                Gallagher Financial Systems, Inc.
                                 1108 Ohio River Boulevard                                   1500 San Remo, Suite 251
                                    Sewickley, PA 15143                                        Coral Gables, FL 33146
                                   Phone: (800) 233-2622                                       Phone: (800) 989-9998
                                    Fax: (412) 741-6457                                          Fax: (305) 665-0547

                       Gallagher Financial System, Inc.          1500 San Remo Suite 251 Coral Gables, FL 33146           1¥800¥989¥9998

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