Long term changes that make the company great are not the core part of a business analyst job.
Q: What is always a good questions?
A: What can be changed right now, to increase revenue, maximize profitability and reduce risks?
Q: What does 'right now' really mean?
A: Ideal answer : We have decisions in real time.(Computerized responses). Next best answer : Just-in-time.(respond with a human being). Third best answer : Change made as soon as possible.(AB testing)
Revenue: Outward facing. Sales funnel, Selling.
Profitability: Efficiency. Operationally oriented.
Risk: Track and mitigate dangers. Churn rate(The greater the reliance on recurring-revenue customers, the less dependent the company is on constantly converting new propects into clients and that's a lot less risky). Finacial risk. Leverage.
Dynamic metric conveys urgency. Two attributes: The metric significantly change within a month or less; specific actions can impact the metric in a short term.
Traditional metric is impacted by many factors.
Even a profitable company can go to bankrupt. “One of the most common triggers” for profitable companies to run out of cash is uncontrolled sales growth.
Announcing all your bad news is a good business strategy. :)
Communicating with decision makers using visual metaphors and non technical language.
Revenue
Traditional Enterprise Sales Funnel:
- Qualify a lead: who both plans to buy goods and is affordable.
- Identify the decision maker.
- Expression of interest.
- Negotiations of terms and prices.
When the soft circle sell is made, the sale is not successfully completed.
Amazon.com as a Leading Example of Use of Dynamic Metrics
Enterprise Sales=Personal VS Computer Sales=Impersonal
Two steps to choose candidate items given search terms: retrieve the most relevant categories in subject index; identifying best-selling books in those subcategories.
co-occurring sales (through A/B testing)
Three metrics Amazon uses:
- maximizing frequently bought together metric
- What's likely to be also bought based on the asumption that we do ultimately purchase the first book.
- Based on purchases people made a look at but did not pay on the first book.
Profitability Metrics
Inventory time should be minimized. Reason: Negative float. Fixed costs of storage. Wastage. Obsolescence.
Days Inventory Estimate: Inventory on hand at the end of the year/Total costs of goods sold*365
Hotel room occupancy optimization:
Q: When should a hotel offer a room at its 80% rack price to a loyal customer?
A: When there is less than 80% chance that the room will be rented at the list price before it expires.
Rack/listed rate. Floor rate(Fixed). Intermediate promotional rate.
Risk Metrics
Excessive leverage=low survival rate
Reputational factor.
Quiz
A company sells its services “Net 60.” If it delivers the goods and provides an invoice in March, when can the company expect to be paid?
