Quotes & Stories

Quotes

Quotes ands stories seem to easily convey complex messages. Here are some quotes and stories that will help you understand some of the concepts that guide Profit Optimization Strategies.  At the bottom of the page are 2 jokes I have created that also convey some of the principles POS.

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These first three quotes talk about the strategic directions and concepts that need to be adhered to when implementing complex strategies.

    "When your strategy is deep and far reaching, then what you gain by your calculations is much, so you can win before you even fight. When your strategic thinking is shallow and nearsighted, then what you gain by your calculations is little, so you lose before you do battle. Therefore it is said that victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win." -"The Art of War" by Sun Tzu

    “Those who fail to learn from history are doomed to repeat it..” – Sir Winston Churchill

    "The only constant in the universe is change." -Albert Einstein

    "We are like dwarfs sitting on the shoulders of giants. We see more, and things that are more distant, than they did, not because our sight is superior or because we are taller than they, but because they raise us up, and by their great stature add to ours." John of Salisbury

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These next quotes talk about revenue management as a discipline. The key to understanding these are stand revenue management as a discipline and way of thinking that can be applied across multiple areas company. Revenue management is based upon the optimal application of analytics, which can be done in many different areas of the company.

    RM is "…the number one emerging business strategy – a practice poised to explode". -The Wall Street Journal

    "Your re-engineering has run its course. You manage your quality totally. Where do you turn for future gains? Perhaps to the marketplace, with 'revenue management'... ...Now with computing costs plunging, revenue management is poised to explode." The Wall Street Journal

    "Revenue Management has proven to be a devastatingly effective competitive device" -Dr. Alfred Kahn, Economist, Former Senior Staff Member, President's Councils on Economic Advisors

 

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Stories

Stories can often be used to convey a concept much better than just giving the facts. Here are 2 jokes that I hav created to talk about 2 key topics for Profit Optimization:

Close enough for practical purposes

    There are always ways that people in companies, particularly management,  who do not want change, or anything they cannot control, can point to and say that things will not work. Today there are always people in companies who do not want or like analytics to be introduced into the business process. They will continue to say that “You cannot possibly get that analytics right, or you would be a billionaire from Wall Street. Here is a true story that helps explain why this should not be used as a reason to not apply analytics...

    I worked at Martin Marietta Aerospace with a Top Secret clearance on black world projects for Defense, Intelligence and NASA. We had exceptional engineers and mathematicians. They did not get along in many work environments, and I asked an older engineer why this was the case. He told me that he had a true story that would explain this.

    When he was in high school he went to the guidance counselor asking if he should become an engineer or a mathematician and what the difference was in the two disciplines. The counselor told him to imagine that he got all the mathematicians and engineers into the gym and lined up against one wall. He placed the cheerleaders against the opposite wall and told the mathematicians and engineers that each time he blew the whistle they could move exactly half the distance towards the cheerleader of their choice. The mathematicians would all quickly leave and say that they were not dumb enough to think that they ever get there. The engineers would laugh and say that they could get close enough for practical purposes.

    Both are right. Forecasts and optimization, etc. do not need to be 100% correct in order to be beneficial. Using analytics is definitely far better than not using it and missing the benefits from realizing that what is needed is a better or a practical solution and not an absolute or perfect solution.

     

    A joke I use to describe the improper use of technology as a tool.....

    Man first found fire when lightning hit a tree. As man progressed he set himself apart from other animals by being able to create and use tools. We learned to rub rocks together to create fire, then we made matches, lighters and now we have cheap disposable, adjustable, windproof lighters. Some people today curse that technology never works right, as they furiously rub disposable lighters against rocks, trying to get sparks to build a fire."

    Today it is improbable that someone can run a competitive business and know enough about all the new technologies to know what to use for their business, without outside assistance. Do you feel like you may have rubbed any lighters against rocks?

 

    An example of the necessary interaction between pricing and RM & Marketing/CRM/Loyalty

    I live in South Florida and teach scuba diving on weekends. One morning, as we went out to sea in the dive boat, I noticed two divers next to me getting ready for their dive. The divers were going spear fishing and were deciding where to target their dive. If they dove on the top of the reef the fish they would encounter would be different then the fish population that lived on the bottom of the reef near the sand. They decided to dive along the tops of the reefs for the entire dive and to target for a type of fish found on reef tops.

    After the dive the underwater hunters had no fish. They had not even seen any fish to try and catch on top of the reefs. To make matters worse, as we went back to port we saw a fishing boat coming into port. Their nets swayed on the support arms hanging over the sides of the fishing boat. The fishermen were sorting through their catch, and throwing back many fish they did not want, so they only kept the best fish to fill their limited refrigerated hold.

    I realized - this is an example of revenue management and the need for proper marketing and pricing! The divers selected one region to target and luck was not with them and the reef top fish were not there that day. The fishing boat was hunting in a different way. The boat knew that they could not predict which fish would be out at what times and depths - so they had multiple nets that were fishing at many levels at the same time. The boats knew that this way they would capture what ever fish were out where they were. They combined the use of multiple nets with prior knowledge and experience of where to fish and at what times and depths. The fishing boat would rather sort through a catch and throw back what is not wanted, instead of targeting one area and not filling their refrigerated storage holds.

    Like the fishermen, RM needs to target multiple market segments at different prices at the same time. Then RM helps you select what demand to accept. RM helps you decide where and when to target markets and allows you to target more than one market at a time. You can control which market gets the inventory and how much based on the responses other markets are giving you. These are real time decisions, and with RM you can have the option of having these decision to make instead of being empty handed or not capturing enough demand. What do PO, RO and TRM do?


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