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Navigating the demand supply conundrum using big data and intuition

January 6, 2017

Fabrizio Fantini, CEO of Evo Pricing, talks about ‘sat navs for management’ and intelligence failures

’Tis the season for refining your pricing strategies to meet and exceed your customers’ expectations. In the holiday season, how do you determine which profitable pricing changes and new promotions you should focus your energy on?

Sat Navs for management

I’ve always been fascinated by numbers.

I love knowing that, if you process numbers in the right way, they help you to make sense of the world. It’s something like how the ancient Egyptians aligned the pyramids to the stars. Or how the mariners of old used the mathematical precision of the constellations to help them navigate the seven seas.

Actually, it was this thought that led me to dub our Evo Pricing system ‘sat navs for management’.

What we do is based on predictive analysis. We gather all the internal data of a company – sales, consumer behaviour, stock levels, planning – and our team of scientists and academic researchers combine this with market data to provide recommendations to our clients on pricing, promotions, demand planning and supply optimization.

Now, unless you are a data scientist, that’s quite a lot to take on board, hence, when I’m explaining our services, I prefer to use the analogy of satellite navigation and GPS systems. A GPS system is a highly sophisticated piece of technology yet it is very easy for the driver to use.

Our algorithm is very complicated and contains over a million variables. And it doesn’t just analyse all the standard data I mentioned previously. We factor in things like geographical location, climate and weather.

For example, the Met Office forecasts heavy snow next week.

What do you do?

Should you reduce stock levels and risk missing out on sales? Should you ask staff to take a couple of days of annual leave because, by the time they get to work, it will be nearly time to leave?

Empowering your management decisions

Our algorithm can give you all the information you need to help you make your decision. And here I want to emphasize the words ‘your decision’. Experienced managers who have a ‘feel’ for their market can often perform just as well as computer programmes because of their highly developed sense of intuition.

Some scientists argue that this is because we haven’t developed the perfect algorithm yet, but I think this whole human versus machine debate is redundant. It’s far better to marry the strengths of machines and humans so they complement each other.

Essentially, the Evo Pricing solution is to provide a company with recommendations based on objective assessments of the available data. The manager is not forced to implement what we recommend. He or she is free to make different decisions. They are the driver and we are just the sat nav.

However, even after explaining this, some executives still feel nervous about putting faith in the human element.

My answer to this is to highlight a well-known problem in the intelligence world.

In a 2013 Global Security Studies report titled The Lack of HUMINT: A Recurring Intelligence Problem, author Gabriel Margolis states

“An infatuation with technological methods of intelligence gathering has developed within many intelligence organizations . . . As a result of the focus on technical methods, some of the worst intelligence failures of the 20th century can be attributed to an absence of human intelligence.”

I love technology. My life and career revolves around it, but I also recognise its limitations.

So, if there is somebody in your organization suffering from ‘shiny object syndrome’, who believes technology is the answer to everything, print them out a copy of this report.

Or, better still, ask them to talk to our team so we can sit down over a cup of coffee and discuss sat navs and intelligence failures.

About the author

Martin Luxton is a writer and content strategist who specializes in explaining how technology affects business and everyday life.

Big Data and Predictive Analytics are here to stay and we have only just begun tapping into their enormous potential.

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