Sunday, June 27, 2010

Oracle Crosstalk 2010: Yes, OR can help retail

Analytics is a hot topic for retailers. Several presentations during this conference returned to this theme and is a huge positive sign for OR in this industry. However, how to apply science smartly to the tons of sales data being collected (and retailers collect this like holy dust nowadays) and to automate robust decision making is another question altogether - 99% of the retailers do not have the right skill sets to pull this off. It is not easy building this system in-house from the ground up, and companies like Oracle Retail can do this better and faster, allowing retailers to focus on their core business areas. Few if any, were even aware of 'OR' (is OR by any name still OR ?). On the other hand, the general consensus was that revenue and supply chain optimization is a must to compete in this tough economy (honey, i shrunk the margins). A panel of investment experts with representatives from major financial institutions, both government and private, felt that in addition to top-line growth, being able to optimize the use of scarce resources to achieve operational excellence is one of the keys for survival in this new economy.

The level of hype surrounding the virtual region that lies at the intersection of social networking and mobile technology is staggering with numbers going off the charts (literally). How can OR grab a share of the science pie here? For example, I liked the way Wet Seal has been innovating and surely this area is going to see new and innovative applications being developed soon. Experts from Google and other tech-heavy companies weighed in on this as well and all signs point to an interesting retail shopping experience in the near future. Get your scan-ready smart-phone out and interactively and collaboratively shop in a real store with your virtual friends. The line between brick-and-mortar stores and the virtual shopping world is rapidly blurring.

On a side note, it was great visiting Chicago after a few years. The single most beautiful landmark there is the dazzling Swaminarayan Mandir (loosely translates to 'temple') in Bartlett. Hand-sculpted from Italian Marble and Turkish limestone by thousands of Indian craftsman, this Mandir does not rely on machine-tools and does not contain a single metal part or fastener in keeping with the sacred Indian tradition of Mandir architecture. Interlocking stones are used throughout, with individual stones weighing between a few grams to 5.2 tons. Pretty amazing. It is open to the public and is a must-see for visitors. The gardens and fountains surrounding the temple are well-maintained and pleasing to the eye. Inside the complex, smartly designed fiber-optic lighting and hidden underground heating add an invisible high-tech layer to this construction, and combines with the silence that must be observed within the ethereal sanctum-sanctorum to create a deeply personal and spiritual experience. The food served in the community center in the basement is excellent, and is strictly vegetarian, of course.

Friday, June 18, 2010

Oracle Cross-talk, June 22-24, Chicago - strong OR presence

Operations Research at Oracle Retail will have a strong presence in this year's edition of Oracle Cross-talk, to held next week between June 22-24 in Chicago, where (paraphrasing the press release) " ... retail executives and retail industry experts from around the world will share insights, demonstrate innovations and better understand the role of technology in new retail business strategies...".

There are a few analytics-heavy sessions planned, and being an attendee as well as an 'optimization facilitator' this time, I hope to spread the OR gospel and gain insight into the progress of OR-usage in this industry over the last 5 years, the level of user acceptance, and value added.

Sunday, June 13, 2010

The Reverse What-if: more hard-won insight into OR practice

The real fun in O.R practice is when your optimization product (say a recommendation system) is evaluated by it's first customer. Usually this is the point where you throw away the last 6 months of your textbook work and build something that your customer can actually use rather than what you wanted to build.

If you are in the business of providing software-as-a-service, you can do several iterations with a customer and that practice is more forgiving, but i am learning the hard way that building an air-tight OR product and then handing it off to a customer is mighty hard and you only have one or maybe two chances to get it right.

(note: some dramatic license exercised for illustrative purposes)
Today's tab focuses on the 'what-if', the practice of walking a customer thru a choreographed sequence of optimization scenarios. An obvious choice is to start with a somewhat unconstrained model, say, only having boxed variables, and then show the user or the consultant how the solution changes as you throw in, one by one, all those beautiful constraints your system can handle. At the end of this process, if everything goes well, you end up with a real and optimized solution that business can use and will save them many $$.

Unfortunately, this approach of "increased complexity" rarely works. The procedure described above is nice if you are trying to teach a student about OR. The average business user doesn't really care about this. He/She probably understands real-life solutions much better than you. She/we wants your system to work well and maybe help get a bonus at the end of the fiscal year. In fact, you are better of looking at its dual, the reverse-what if.

The reverse what-if, as you would guess, starts with the best approximation of the customer's reality and then you navigate from there. Otherwise, the customer has little patience for all the n-1 steps in the 'straight' what-if which represent imaginary solutions he doesn't care about. The n'th step brought him to reality, which he already understands better than you, so you haven't helped him much.

The reverse what-if perfectly ties in with Rosenthal and Brown's practical philosophy of starting with a legacy solution. Your recommendation system should be able to represent the legacy recommendation, else your product is not going to earn your customer's vote. Even if they purchased it, they may end up just using your GUI and throw your analytics into the trash. Unless you are providing an order of magnitude improvement in business value (in which case, you should start your own company!), revolutionary solutions are a hard sell. Yes, a customer values seemingly non-intuitive solutions that your OR unlocks to make him more money, but to truly ensure user-adoption, you need demonstrate this improvement from the legacy solution.

It also goes to user experience. In fact, it's about avoiding home-sickness. Being able to return to something familiar is critical for user acceptance. How many times have we initially cursed websites who suddenly redesigned and changed everything and you cant find your favorite menus in the same place? Windows OS always provides us the option of returning to something that resembles their previous release, even though they know they fixed a million bugs since their prior release. And we gradually outgrow the old if the new performs as advertised. I still use my favorite music player Winamp's classic skin. Feels like home.

Comments welcome.

Wednesday, June 9, 2010

June sports roundup with an O.R eye

May was spent writing and rewriting analytical specification documents for some exciting new retail O.R products, and when it was done, it is June. which tends to be the best month of the year for international sports fans. Apart from the main course of cricket, there's the NBA finals, which looks like going the distance, and the tennis at Roland Garros and Wimbledon, where baseline power-duels are becoming increasingly boring to watch. We had the spelling bee during the weekend, where Anamika Veeramani ('stromuhr') won this year's edition, while another Indian-American Aadith Moorthy won the other bee - The National Geographic ("where would you speak Tswana?"). Amazingly, both had perfect scores throughout the competition. The spelling bee in particular seemed more interesting this year. Unlike the past where gifted kids with 10Tbs of RAM seemed to do a "total enumeration" by memorizing entire dictionaries, this time the words were chosen such that you invariably had to apply analytical methods - 'word root signatures' - and construct an optimal prediction from pieces of noisy data, without a computer and within the time limit. Consequently, total enumeration failed this time, and made for better TV viewing on ESPN, apart from being a small victory for O.R.

It is increasingly important to read and experience other cultures, with so many words from all corners of the world. Any fan of the Asterix comic book series would have spelled 'Menhir' right, while anybody who's dined at a Punjabi Indian restaurant would have drank 'Lassi' for lunch. On the other hand, the word expert who walks the kids through the definitions needs to do his own homework. Either he needs to brush up his pronunciations of these new words, or there needs to be more than one expert doing the talking (Only french-rooted words ever seem to be get pronounced right). More and more analytic job descriptions require you to work harmoniously with cross-cultural teams in this new world. Now, in addition to knowing your AMPL, you have to correctly spell or pronounce the interviewer's name (without the middle initial, to make it easy), Aransanipalai K. Ananthapadmanabhan, to get the job. Good luck.

Talking about rainbow warriors, the FIFA football world cup starts in a couple of days in the diverse nation of South Africa (yes, Invictus is based on a true story). A whole bunch of analytical work has been devoted to the deadly business of penalty kicks, which seems to determine winners in recent times. A conclusion is that a spot-kick taker can increase the odds in his favor by acting upon the recommendations from this analysis. It is not a total crap-shoot, and some teams are consistently better at this, e.g., blood and guts Germany, while others such as the soccer hooligans from across the pond are abysmal. Of course, once the goalkeeper and the striker both starting applying analytics-based prayer techniques at this sports ritual, its going to cancel out and we are going back to square one. Until then, sports analytics witch-doctors bearing stochastic gifts can ride the gravy train.

update: also see here for more on the science of penalty kicks.