Friday, March 25, 2011

Advantages of Cloud Computing– Part XIX – Business Analytics

I came across a fascinating article today regarding television advertising. It helps illustrate how pockets of technological change can create ripples in a pond for some and full-blown tsunamis for others. These tsunamis can be good or bad, depending on how you ride the wave.

In the article I mentioned, the author states: “The Nielsen Company tracks the audience viewership of TV programs so that programmers and advertisers can get a handle on how many people are watching certain shows. Programmers take that data and figure out how much they’ll charge to advertise. At the end of the day, this is the data that helps them figure out they’re going to charge $3 million per minute to advertise on The Super Bowl broadcast and $1 - $3.80 per minute on reruns of the recent reboot of Hawaii Five-0.”

I bought my first video cassette recorder in 1979. Looking back, I can see how the creation of the Sony Betamax VCR sounded the death knell for television advertising and I realize I had thought of this on many occasions as I fast-forwarded through the television commercials while watching pre-recorded shows. Today, television commercials are so pervasive, we pre-record all our movies and watch them when it’s convenient. Even so, until today, I wasn’t particular aware of how the ability to pre-record television shows has affected the television advertising industry.

This event didn’t occur overnight. The advertising industry has had three decades to contemplate their fate, yet they appear to have done little about it.  Today, they are facing an ever shrinking market of consumers that continue to watch these commercials and an ever increasing market that avoids them entirely.

Right this very minute, events are occurring in all of your stores that are having an impact on your profits and losses, and because you are out of touch,  you may not become aware of the results of these events for weeks or even months that follow.

Ripples in the ponds of your stores are continuous indicators of impending tsunamis; however, due to inadequate reporting, most convenience stores are operating in an environment of ‘compressed data’. Back in the day, we referred to ‘compressed data’ as ‘curve smoothing’. I am old enough to remember when the shortest term for performance was reviewed over the previous thirteen weeks.

We compress the day’s sales into daily store reports. This function is usually left to the store manager. The daily sales reports are rolled up into monthly “Profit & Loss Statements,” and generally, this is the first level where upper level management gets involved. To put it mildly, you simply can’t afford to ignore the truth and operate in this fashion any longer.

Events which have occurred over the past few years have made this kind of analysis inadequate. ‘Inflation’ is going to be a real killer, as prices rise faster than your employees can grab their label-guns. Fast moving inventory will take large chunks of profits from stores within hours. Analysis by the month, week or even days will not be enough to offset severe losses.

Convenience store profits are measured in pennies. Volume turns pennies into dollars earned or dollars lost. Within the last five minutes, I can assure you an item was sold in one of your stores for less than what you paid for it. Just how much money you lost over the past hour is a mystery.  I don’t think you can  afford to wait till next month to find out about it. 

At the turn of the twentieth century and article appeared in the NY Times that forecasted “Horse poop in the streets of New York City, will rise to six feet or more if something isn’t done about the manure being deposited on the streets.”

Horse diapers helped, but it took the automobile to save the Big Apple from a fate worse than death; cloud computing, if implemented quickly and correctly, will save you and your stores.


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