Author Archives: John

Revenue Management

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Situation

The client was a rapidly growing food chain based in a metro city in South India. They are focused on the premium cafe customers who are looking for a/c, beautiful interiors and a South Indian menu.

The rapid expansion throughout India has caused their revenues to drop in 3 successive quarters. Most of the newly opened locations have not broken even after 3 months of operations.

Business Need

The client has done a thorough study on the viability of their shop at each new location so they are confident that the location has potential. The client needs to know what changes to make so that their overall revenue per location is increased.

Analysis

The initial knee jerk reaction of the client to the current situation was to increase the advertising budget and start localised advertising, such as flyers and local newspaper and TV channels. Our team had to convince the client’s management to pull back on all the advertising spend and evaluate the entire source of revenue before committing to an advertising budget.

From our expertise in the food and retail industries, we selected a range of parameters to collect data. Most of the parameters that we had selected, such as customer age range, frequency, etc. were available with the client. Some of the parameters such as local events, tourism related customers, etc were not available and therefore we had to setup the collection for the same. Most of the analysis pointed to weak product-market fit for the entire range of menu that was presented.

Solution

The client was instructed to cut back on all menu items to just the ones that were not present in the locality of each cafe. The remaining items on the menu formed the base framework to understand the taste palate of the local customer. We were quite surprised to see the difference between the menu items from location to location. This cut back was held for a few weeks before offering customers additional menu range as a free sample. All new items were provided free for a couple of months until there were some customers who specifically asked for the new menu item. We recommended this ‘ask’ as a trigger to place the item on the menu permanently.

Results

The results were significant to the client as they did not expect the variation in menu items from location to location. The assumption was that the local cafe from a particular location could thrust the opinion of taste to another geographic region and maintain the revenue. 

The client was aware of the taste requirements at their original location but refused to accept that their taste would not be accepted in its native form to another location. 

Once we had shown the client the cut back menu item and only when a customer ‘asked’ for a new item, the results were rather evident to the client. The revenues bounced back to healthy numbers and they have now become a well known eatery in nearly all their locations.

From Risks to Audits

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Risk management and audit management are distinctly separate in terms of personnel involved and the techniques used. Most organisations that have ventured into assessing risks, have found that moving from risk assessment to audit (control and test creation) is quite a daunting task. Conceptually, moving from risk assessment to audits is the ideal and logical step to take, but there has be considerable hesitation from numerous organisations.

The GRC Envelop tool has a risk management module for the enterprise version. Risk registers, associated risks, stakeholders, risk opinions/scoring, risk treatments and many more features are present in the risk module. However, there is no connection between the risk management module and audits module.Why is this left out?

Once there is a decision by the business management as to which risks exist and which are to be assessed, the next step is vague for most of the clients. Here are some of the approaches that have been noticed when we implement GRC Envelop at organisations who have started risk-based auditing:

  • create a new audit and define a “relatively” new set of controls that will assess the risks
  • map the risks to a department or division and create a new set of controls
  • modify existing controls and tests to cover the new risks, but later realise there are control gaps

Over time we have observed two aspects that should help overcome the hesitation while moving from risks to audit creation; first, the understanding that risks are part of a process that exists in the organisation and second, the overlap between existing controls/tests and the new ones has to be taken care of.

Risk as a part of a process

Risks do not exist independently within an organisation.

The recommendation is to attach a risk that needs to be handled, to an existing process. This existing process forms the basis of the risk based audit. Attaching the risk to a process is the most efficient mechanism to track where the risk would fall within the entire organisation.

However, attaching risks directly to a process may not be the ideal situation because risk exists with reference to an objective. A risk is the situation when an objective fails to achieve the desired output of a process. Therefore, attaching the risk to an objective is a much better alternative. This results in the overall structure being: Process (at the top), having numerous objectives, and each objective having numerous risks.

Do keep in mind that risks may span multiple objectives.

Control and test overlap

Though it is true that newly identified risk may need a new set of controls and tests to capture the assurance that business management needs, it is not true that these controls and tests have to be new completely new. Most large organisation have quite stable processes and keeping this assumption means that the newly identified risks may have been implicitly captured in some other control.

Understanding control overlap caused by the newly identified risk is a painful process of weeding out controls and tests that are no longer needed. This also maintains an optimised number of controls and tests for each process (not to mention control owner satisfaction).

Not so easy to find a common path

To conclude, I agree that moving from risk assessment to audit execution is not a straight forward task, but the framework of using the process/objective hierarchy will help ease the transition and help manage the ever growing risk control matrices in large organisations.

One aspect that I’d like to throw in is, the feedback from audit results back to risk assessment, but I think I’ll keep it for another post.

I look forward to your feedback on how you move from risk assessment to audit definition!

Data analysis in Sales and Marketing

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Situation

The client was a small mutual fund company whose parent company was a medium sized Bank based in Western Europe. As part of a major restructuring and cost reduction, a majority of the internal workforce was reduced at the mutual fund company. The marketing department was almost eliminated and the sales department was reduced by more than 50%.

Business Need

The client needed to show that they still have the ability to grab market share in the tight economy in Europe in 2011. The sales force was strained significantly because of the workforce reduction. The client needed a different strategy to approach the market.

Solution

The reduced sales force needed much more quality data to fill the sales pipeline. There was no other alternative. Buying market data sets would lead to large volume of cold calls and turnaround would be very slow.

Based on numerous conversations with the management of the mutual fund company, we found a majority of the board members and operational heads, also reported to the parent Bank. Using this as a key stepping stone to enter the parent Bank we were able to access the customer data of the bank.

We proposed to use the data of all the customers in the parent Bank and map them to the existing clients of the mutual fund company. Using data analytics tools we found potential customers from the parent Bank data that have similar characteristics as those who had bought mutual funds. Using this inference, we were able to rank the potential bank customers who had not yet bought mutual funds.

Results

The results were extremely pleasing to the client. The list of potential customers had a very high propensity to buy mutual funds and in turn the sales team found it very easy and efficient to approach and close new mutual fund accounts

Within a period of 3 months we were able to deliver the entire data set from the parent Bank, rank ordered for potential customers.

There was a 300% increase in new mutual fund account creation for the mutual fund company.

Looking for an Audit management tool at low cost?

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When looking for a GRC software, how much would price affect your decision? Would you try a free open source, but reduced feature software?

An interesting comment on the Norman Marks blog asks why you would stick to a fixed set of features rather than look for “á la carte” GRC software. At what “point” would you choose product that covers a fixed feature set over a pick-and-choose approach to software or visa versa?

The GRC Envelop is a risk and audit management tool that is web – based and has risk and audit work flows. To answer the price issue, GRC Envelop tool is available in 2 licences: an open source licence and an enterprise licence. The open source licence is referred to as the community version. The enterprise licence is refer to as the enterprise version. The enterprise version has commercial support and many additional features to help with risk and audits. Please take a look at the feature list to decide which one is better for you.

GRC Envelop tries to blend the price and feature set issue by the classic software design of breaking the tool into modules. For example, the risk management module that can be swapped for another risk management tool, using APIs provided.

Audit and risk management tools are quite common in the enterprise, and they help structure the audit work flow, maintain a common repository of audit/risk related information (such as objectives, risks, controls, and tests) and manage the people around the audit/risk activities. Assuming we look at audit management for now, there are four basic areas for every audit management tool should have:

  1. Creating audits – Title, description, start and end dates are of some of the features that are available while creating an audit. You can also attached work papers to an Audit. While creating an audit, you can create the processes, the objectives, the risks, the controls and the tests. At each of these levels you can attach work papers too.
  2. Managing and executing audits – to manage or execute an Audit, the GRC Envelop tool provides a separate workflow to ensure that auditors can only enter test results and test descriptions. While executing the audit you can create findings and actions. The ability to make control and test assessment is only available in the enterprise version.
  3. Report generation – the main use of this tool is to provide easy report generation at the end of an auditing exercise. report generation template can be modified according to your needs. The community version has only one default report generation template. The enterprise version has the ability to have multiple templates.
  4. User management – Restricting users to their areas is an important task for a tool. The community version has only one user type ( auditor) whereas the enterprise version has 6 user types (Audit manager, auditor, external viewer, internal business user, repository manager and risk manager)

The GRC Envelop provides all these basic areas. Paid support is also available for the community version. The community version has to be downloaded and installed on your machine or server. The enterprise version can be run on your servers or hosted on a public server. Please take a look at the feature list to understand which version will be most suitable for your use. Here are a few questions that we’d like to pose:

  1. Do you think there are other basic areas that was missed out?
  2. How would you define if a audit tool is easy or complex to use (steep learning curve)? The time it takes to learn a tool is one aspect, what else affects complexity?

Let us know in the comments below.

Information trends as a measure of Media maturity

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Media maturity would be a measure of how comfortable a society feels with interacting with a particular medium as an information source and as channel to express themselves. Have you ever thought about where you are reading this article? Whether its on printed material or electronic media. If on printed, whether it is in an early morning edition, midday edition, or a weekly magazine.

Similarly on an electronic media, whether it is from a technology site, a blog or emailed newsletter. Why is media maturity important? Well if you are from the marketing profession then you’ll need to know what sort of media delivers to the kind of audience you are looking for. However understanding media maturity for everyone else, does not have a straight forward justification.

One overarching reason: When you interact with media that is not mature your opinions derived may tend to become skewed.Unfortunately there are no clean and simple methods of measuring media maturity. My recommendation would be to triangulate the results of a few different methods .

One method is to find out what the consumers of a particular media are actively seeking through that media. On Printed media look out for the classifieds or types of advertisements, while on electronic media look at search results or key words responses.

A simple result to show you how media maturity differs based on geographic location. A knee jerk interpretation would show that people in India have a higher sexual appetite (yes, we do have a large population but is not a well grounded reason), which is not true. In my opinion this difference shown in the images are based on the fact that electronic media is not mature in India.

I’m sure that those of you who have made this far with my reasoning would have numerous other factors that play into electronic media being not so popular in India.An apt question at this point would be to ask whether other media such as newspaper or television have higher incidence of carnal content at their early stages?

Using media technology as a focal point for discussion, how does media maturity affect media technology. The rather obvious affect for media maturity is the network effect, i.e. a more mature media would entice more people to use that particular media and in turn, the more people that use a particular media, the more is the usefulness of that particular media is to a single person. In other words particular media would more successful (read mature) if it has access to more people, i.e. “touching more people”. Lets take an example of the cell phone. If the cell phone media is not mature then there would be less cell phone users because they would feel that the information they receive through the cell phone is not sufficient or appropriate.

This would stagnate the growth of this media and in turn would reduce the number of people who put ads or write (content generators) and hence reduce the people who read or see these ads (content consumers).Keep in mind this does not affect you calling your friends or family through the cell phone.I guess I should have started this article by saying, “where should phone companies (any media company) look towards when moving up the valuing chain of handling information”

So, is measuring media maturity just about getting the information to a consumer? What about end consumers creating content? Isn’t the whole idea about Web 2.0 for ordinary people being able to share their content to the public? Could we use this as a measure of media maturity?

The second measure for media maturity: The more easy it is to share content on a particular media to the general public the more mature that media is. Would you say that the mobile phones are a mature media in this respect?
The last measure of media maturity that I’d like mention is mass customisation. Though this is debatable, the ability of newer media to customise messages or content more cost efficiently leads to more consumer engagement. So as compared to a regular newspaper article, if this article appeared in your email or mobile phone and started with “Dear Mr , I think this article may interest you because of your interest in IT and media.” I’m sure you will read the article with more interest.

Though mass customisation is based on need for more precision for content generators, it does provide a window into the different types of information that is possible for a particular media to handle.

So what do you take away from this small article? Mine would be: try to look at what others around me (society) are trying to get out of a particular media. If there is a wide variety of information ‘seeking trends’ then the media is a mature one.I eagerly look forward to your interpretations of what media maturity means to you.