"Read Marcus Aurelius .... Clarice"

Unraveling Consumer Behavior with Geographic Information

In the opening chapter of Malcolm Gladwell's book titled "The Tipping Point", Gladwell discusses how an old and nearly defunct shoe brand called Hush Puppies received an unanticipated boost in sales and customer appeal in the mid-1990s.  Somehow without any direct or indirect marketing by the brand's owner, Wolverine, executives were baffled at resurgent interest in the shoes.  They were amazed at how Hush Puppy shoe sales were booming while prior to 1994 average sales per year had been as low as 30,000 pairs.  But resurgent interest in the brand caused sales to boom up to 430,000 in 1995 and rose to nearly 2 million in 1996 and beyond in following years.  Wolverine executives were being told that the shoes were considered 'Cool' and 'Hip' in the trendy bars and clubs of New York City.  People were buying up stock of the shoes in small stores and resale shops that stocked the shoe brand.  Before long orders were coming in from fashion designers in New York and Los Angeles who were promoting the brand as an accessory to their men's fashions.  By 1996 Hush Puppies won the prize for best accessory from the Council of Fashion Designers.  This was an award that the firm,Wolverine, had put little to no effort into achieving.  How did this happen? Evidently it happened organically as a handful of young men started a fad in New York City by wearing an inexpensive shoe that wasn't popular.  Like a viral epidemic the fad grew and grew in popularity to the point that fashion designers were using the shoes to promote their high-priced fashions.  The fad grew such that Gladwell says the brand's popularity "Tipped" - and in two years went from relative obscurity in small Mom & Pop stores to Malls all across the USA.

When I read this passage in Gladwell's book, I was reminded of a scene from the film The Silence of The Lambs -  where the character Hannibal Lecter explains to fledgling FBI agent, Clarice Starling, how to catch a serial killer she is after.  In the scene Lecter suggests that that agent Starling read Marcus Aurelius's writings on the Greek Philosophy of Stoicism - encouraging her to seek the elemental aspects of the killer's behavior to understand his motive.  In this case the killer's covetus nature.  "How do we (humans) covet?  We covet what we see around us every day".

To see video click this link ---; VIDEO

We see items promoted every day on television and billboard advertising, which is meant to provoke our human desire to possess (covet) and purchase goods.  But in the case of Hush Puppies, no advertising had been done to resurrect the brand.  Yet, people began to more frequently see the shoe being worn in 'hip' locations around them and the appeal grew and spread geographically - from New York to Los Angeles and into malls across the USA.

To analyze (breaking down the elements) the Hush Puppy shoe sales and marketing data, the trend could best have been visualized and quantified by using a Geographic Information System (GIS) to identify how the brand's appeal was spreading, where it seemed to initiate, where it sales seemed to be concentrated, and understanding the underlying demographics of the product's appeal.  Very much as an Epidemiologist might study a patterns of a viruses spreading across a geographic area, marketers can use GIS to visualize and understand how, who, and where their products appeal is growing.  And most importantly how to strategically increase the brand's appeal through smart advertising and marketing campaigns - and to efficiently satisfy the demand with supply delivered to the right places at the right time.

Geography and location data is a critical business component that must be strongly considered when analyzing data, performing trend analysis (breaking a problem down to its elements as espoused by Marcus Aurelius), developing forecasting models, developing production & distribution plans, etc.  Not only is this important in Marketing, but also in Operations, Shipping, and Distribution, location data is critically important.  So as your firm considers tools necessary for Business Intelligence and Decision Support, GIS should be among the tools in your firm's analytical tool box to provide better understanding of your data and to provide better strategic business support.

The Importance of "The X-Y-Z-T" in Business Data

If we say "Time is Money" why don't we also say "Space-Time is Money"?

In an episode of Stephen Hawking’s PBS show called “Genius”, I was reminded about how important the elements of location are for our everyday lives.  Since Einstein discovered the Space-Time continuum over 100 years ago in his General Theory of Relativity, we humans have come to understand that we live and navigate our lives on a fabric woven by both Space and Time.  As such every event in our lives can at least partially be described by four numbers – the numbers represented by X, Y, Z, and T.  The X, Y, and Z are geographic coordinates with the X and Y representing what we know on planet Earth as Latitude and Longitude.  And Z represents Elevation above sea level.  These three coordinates supply us with location data.  However, these three coordinates alone is not enough data necessary to meet with a person, place, or thing in the Space-Time continuum.  You must also have a T (Time) metric.  Without out all four numbers, you may arrive very early for an appointment or miss an appointment entirely.  (**FYI - see below for more on the Time dimension)

Why is the X-Y-Z-T of business data important?  Most of our lives and interactions are dictated by places and time.  We are time travelers in a sense, as we must be able to navigate space and time precisely to function in our society.   

As many of us have heard the adage “Time is Money” – our sense of this important concept has connected itself to our Business lives.  But why don’t we also say “Space is Money” or “Space/Time is Money”?  In spite of the importance of Space-Time, many business professionals continue to ignore location data and geospatial analysis tools, like Geographic Information Systems (GIS), in their analysis of business data.  Why do Business Intelligence analysts persist in focusing solely on Revenues and Time, instead of considering Costs and Revenues in Space/Time?  I am not sure why this is exactly, but I am hopeful that as many businesses have begun to realize the importance of Data Visualizations & Analytics in the form of Charts and Graphs for analyzing their business operations through Time, that perhaps Mapping & Geo-spatial Data Analytics software tools (GIS) can be just as useful for analysis of  Business Operations in both Space and Time.  

Indeed, many if not most business transactions are governed by Space-Time.  For example, a consumer shopping for goods at a Retail Store must navigate both Space and Time in order to connect with the good of choice.  He or she must navigate via various transportation modes to a store location, during normal business hours, and arrive just as the good is in stock at the store.  But, one may point out that with the advent of the Internet, shoppers are no longer governed by Space-Time as they can shop at any time of their choosing and they do not need to navigate the Space-Time continuum in order to receive the good of their choice.

Not so fast though, consider that the good itself has navigated the Space-Time continuum with considerable invisible help from the Online Retailer (ex. Amazon.com or Zappos.com) and a myriad of transshipment services, distribution services, and delivery service providers, warehouses, and manufacturers.  Ignoring Space-Time impacts on business operations would ignore the true cost of doing business as an Online Retailer, as well as a Brick & Mortar retailer.  

Therefore, it is my contention that GIS should be used as part of a set of tools useful for Business Intelligence & Data Analysts to visualize, analyze, and measure the true costs of doing business in the Space-Time Continuum.  Furthermore, to truly understand a business, it’s customers, and it’s factors of success or failure, viewing all dimensions of the Customer’s location (demographics, travel time, travel mode, shopping mode, actual costs of shopping mode by customer, etc.), the Business’s location (demographics, traffic patterns, parking, transportation options, crime rate, competitor locations, suppliers/distributors, etc.), or the Online Retailer’s locations (manufacturers, distributors, suppliers, warehouses, shippers, and delivery services), can be vital for providing true insights useful for increasing business intelligence, improving business operations, increasing customer patronage, gaining business success, and increasing business profitability.

If you've never heard of GIS before, here is a blog that discusses the technology:
http://appgeodata2.blogspot.com/

If you'd like to take an online course to explore the how GIS can be used to build Location Intelligence then check out this course:
http://ecm.elearningcurve.com/Location_Intelligence_p/ba-04-a.htm

And finally, if you're interested in discussing how to implement a GIS for your business data analysis and reporting functions, please contact me at www.appgeodata.com

Have a great day in Space-Time!

*FYI* - Also discussed in Hawking’s program was the relevance of the Z in measuring the T, or that time is experienced differently by observers at different elevations.  Though very minimal time differences are measured on earth between a time observer on the peak of a mountain versus a time observer at the base of a mountain.  The time differences become more significant the higher the observer is above planet earth.  Hence satellites orbiting far above our planet must account for more significant time variations as our planet‘s gravity and rotation bends the space time continuum (pictured).  If not for this consideration, GPS Satellites would not provide accurate location information for earthbound travelers and our Cellular Phones would be not display time accurately for the location of the phone.

The War: Netscape -vs- Landscape (GIS as part of a comprehensive BI Solution)

 (A)

The War: Netscape (E-Commerce) versus Landscape (Brick & Mortar Stores)

(Adopting GIS as part of  a comprehensive Business Intelligence Solution)

* GIS = Geographic Information System

Sun Tzu was a Chinese military leader who is thought to have lived between 544 - 496 BC and served as a general, minister, strategist, philosopher, and adviser to King Helu of Wu. (B)  Sun Tzu is credited with authoring a book titled: "The Art of War".  In his book Sun Tzu makes several observations about the critical importance of geography in waging War.  Of the thirteen chapters in The Art of War four chapters are devoted to the importance of geography (terrain and topography), and they are titled "The Nine Variables", "Marches", "Terrain", and "The Nine Varieties of Ground". (C)

Here is one of Sun Tzu's relevant quotes:

"Conformation of the ground (geography/terrain) is of great assistance in battle.  Therefore, to estimate the enemy's attempts and to calculate the degree of difficulty and distances of the terrain in order to control forces of victory are tasks of a superior general.  He who fights with full knowledge of these factors is certain to win, and he who does not is sure to be defeated." (C)

Competition in business can be viewed as a less violent form of battle, but a form of War nonetheless. Business and commerce is a struggle for resources between competitors for market share which can include acquisition of territory.  Most often these battles take place on Main Street (USA, UK, EU, SA, CHN, etc.) as companies such as car dealerships (Ford vs GM) or various types of retailers (Mom & Pop stores vs Wal-Mart) vie for consumer attention and sales revenue.  However, since the 1990s these battles are more often happening between Internet-based E-commerce firms like Amazon.com and Zappos.com versus Brick & Mortar retailers like Borders bookstores and Foot Locker, respectively.  In the past few years evidence is growing that Brick & Mortar stores have been losing ground. (H)

In the realm of Brick & Mortar, small coffee shops and diners used to be a common theme in strip malls and on corners at intersections along Main Street.  But, General Howard Schultz, the CEO of Starbucks, has put an end to that common experience.  Now it is more common to see a few Starbucks coffee shops within a 1-mile radius of a major intersection more than any other type of Cafe.  How is this possible?  My response to this question is that General Schultz has mastered the 'Art of Business' by understanding every aspect of the geography (traffic patterns, demography, competitors, coffee consumption, income, etc.) of his stores' surroundings. (A)  As you will see in the video link below from the 2014 Esri GIS User Conference, featuring some of General Schultz's lieutenants discussing how Starbucks uses Geographic Information Systems (GIS) and online map data visualizations for worldwide store site locating and analysis of store performance.  Their work is showcased as a key component of Starbucks' overall Business Intelligence and Information Technology strategy.

VIDEO- >  Starbucks and GIS    (E)

Who remembers Borders book stores?  They used to be one of my favorite destinations in the 1990s. But they had to declare bankruptcy in 2011 and went out of business.  In a July 2011 Time.com article, five reasons were cited for Borders eventual failure (F):
(1) It was Too Late to the Web
(2) It was Too Late to E-Books
(3) It Opened Too Many Stores
(4) It had Too Much Debt
(5) It Over-invested in Music Sales

Of the reasons cited, I contend that both reasons #1 and #3 have geographic dimensions.  For an example of reason #1, in a book titled "Built for Growth" by Arthur Rubinfeld and Collins Hemingway, the authors make it clear that Store Location and Branding are two related key factors for a retail business's success (G).  Borders decided to outsource its e-commerce strategy to Amazon.com and it effectively ruined their brand, as Borders did not exist online (F).  And without carefully considering their geographic locations and commercial impact areas, Borders did not realize that they had too many stores until it was too late (reflected in both #3 and #4 in my opinion). General Jeff Bezos, CEO of Amazon.com, won that battle in the war between E-commerce and Brick & Mortar stores.

The trend of E-commerce defeating Brick & Mortar stores began affecting one of America's seemingly indomitable concepts, the Shopping Mall.  The business model of the Shopping Mall is beginning to fail.  Malls across the USA have begun to close as many of their flagship stores are pulling out and consolidating in newer larger more modern mall locations. (H) (I) These flagship stores are citing diminished sales, due in large part to competition from E-commerce competitors, in addition to the great recession of 2008-2014.

As big box stores like Sears and J.C. Penny begin to consolidate, malls are beginning to rethink their commercial strategy.  Moving away from their old strategy of spreading stores (for example shoe stores) into disparate locations of the mall in order to keep customers in the mall as long as possible (note the geographic dimension).  Malls are re-organizing their layouts so that like stores are closer together and form a geographic theme within the mall. Mall managers are finding that convenience and modern amenities are important factors for modern consumers. (J)

And big box stores are beginning to rethink their commercial (battle) strategies as well.  Many stores like Macy's, Wal-Mart, Best Buy, and others are realizing a new business strategy called
'Omni-channel Fulfillment'.  This strategy combines both Brick & Mortar presence with an E-commerce platforms so that stores can provide tactile shoppers with a place to shop, touch, and try products, while at the same time providing convenient online shopping for busy customers that don't have the time to fight traffic and wade through crowds.  Perhaps General Bezos is also realizing the power of this 'Omni-channel Fulfillment' strategy, as he places his first Brick & Mortar store on the same street as Macy's flagship store in Manhattan, NY just in time for the 2014 Christmas shopping rush. (K)

The bottom line, is that E-commerce is making great strides and winning battles against Brick & Mortar stores.  But, Brick & Mortar stores do still has some advantages as many customers prefer to shop for products in person. (K) And are finding that Omni-channel Fulfillment strategies may help established Brick & Mortar retailers fend off E-commerce retailers.  However, fledgling Brick & Mortar stores had best learn from General Sun Tzu and understand their competitors, their customers, their brand appeal, and their ground (or Geography).  In doing so, new small retail stores and their brands can grow and thrive, by including GIS (and I might also add Social Media) in a comprehensive business intelligence strategy just like the Big Box Generals have been doing.

There are many small and unique retailers and brands that aspire to grow in the USA and throughout the world.  Many of them cannot afford a dedicated team of IT and BI professionals.  In a case like this, it would behoove a small and growing retailer to reach out for IT and BI consulting, and be sure to include a BI strategist that has GIS capabilities, like  Applied GeoData offers its clients.

In case I post later in February, I want to wish you all a Happy Chinese New Year on February 19th! Or as they say in Hong Kong - "Gong Hey Fat Choy".

Thanks for reading.

REFERENCES

(A) Sun Tzu’s The Art of Business by Michael Albanese.  
http://www.tutor2u.net/blog/index.php/business-studies/comments/sun-tzus-the-art-of-business

(B) Wikipedia: Sun Tzu
http://en.wikipedia.org/wiki/Sun_Tzu

(C) The Art of War Sun Tzu : The Book of Lord Shang Shang Yang (Chapter 7)
books.google.com (long URL)

(E) Esri 2014 GIS User Conference video - http://video.esri.com/watch/3654/coffee-or-it-starbucks

(F) "5 Reasons Borders Went Out of Business" by Josh Sanburn, Time.com, July 19, 2011
http://business.time.com/2011/07/19/5-reasons-borders-went-out-of-business-and-what-will-take-its-place/

(G) Built for Growth: Expanding Your Business Around the Corner of Across the Globe
by Arthur Rubinfeld and Collins Hemingway, Wharton School Publishing, 2005

(H) E-commerce will make the shopping mall a retail wastelands, ZDNet, by Jason Perlow
http://www.zdnet.com/article/e-commerce-will-make-the-shopping-mall-a-retail-wasteland/

(I)The Rise of E-commerce and the Fall of Shopping centers, Storify.com, by Maggie Kelly. Nov 2014
https://storify.com/maggiekelly/the-rise-of-e-commerce-and-the-fall-of-shopping-ce

(J) How malls are reinventing themselves for the e-commerce era.  by Sarah Halzack
The Washington Post online.  12/19/14
http://www.washingtonpost.com/news/business/wp/2014/12/19/how-malls-are-reinventing-themselves-for-the-e-commerce-era/

(K) Amazon vs. Walmart: E-commerce vs. Omni-Channel Logistics. by Steve Banker for Forbes.com
http://www.forbes.com/sites/stevebanker/2013/10/04/amazon-vs-walmart-e-commerce-vs-omni-channel-logistics/

(L) So Amazon thinks it can do Retail. by Denise Lee Yohn for Forbes.com
http://www.forbes.com/sites/deniselyohn/2014/10/17/so-amazon-thinks-it-can-do-retail/

The Challenge of Geography

December 21, 2014

by

George Williams, MBA, CPM

Certified Project Manager and Business Analyst

Applied GeoData

www.appgeodata.com

1

Happy Holidays!  As many people celebrate the Holiday Season, young children throughout the world (mine included) are waiting with excitement for Santa Claus to make his annual trip around the world delivering toys and presents on Christmas Eve.  Most of us in regions of the world where Christmas is celebrated recall those days of our youth when we were starry-eyed and innocent, praying that our good deeds of the year would be recognized by the Jolly Ole Man from the North Pole.

Yet at some point during our childhoods we begin to question how possible it would be for Santa to make such a journey covering the entire planet Earth in a 24-hour period.  As a young child, at age 7, I began to question the physical possibility for Santa to make such a journey.  That year I had experienced my first plane flight from Houston, TX to Albuquerque, NM.  And I realized that it took at least a couple of hours to make the trip on a TWA Jetliner (I think I just dated myself).  How could it be possible for Santa to make such a journey covering the entire surface of the planet Earth (510 Million square kilometers)² in a 24-hour period when it required at least two hours for my family to fly 1196 kilometers (743 miles)³ in a jet airplane?  This question bothered me intensely as a child and by the time I was 8 years old, I started to realize that my parents were playing a trick on us kids.  And now as an adult with children of my own, I continue the tradition of playing that trick on my children, in hopes that they will go to sleep (before Santa arrives) so my wife and I can bring out the gifts from their hiding places and wrap them in peace.  But, while I play this trick on my kids, I want them to eventually understand and appreciate the grand scale, complex terrain, and exquisite beauty of our planet through the study of Geography and Earth Sciences.  I want them to eventually understand that there are physical limits presented by Geography.

Adults in the USA seem to ignore the challenges presented by Geography.  Indeed, recent evidence has shown that Geography Education in the USA is NOT FUNDED by our government and consequently the subject of Geography is poorly taught in our schools, if Geography is taught at all.  Alex Trebek, the moderator and host of the TV show Jeopardy, and the outgoing 25-year long host of the annual National Geographic Bee, spoke last year with MSNBC’s Chuck Todd about why Americans are so unprepared to understand the challenges of Geography.⁴  Americans are not realizing the intellectual challenges needed to make our people understand the physical complexities of planet Earth, the diversity of Earth’s flora and fauna, how Earth’s resources are geographically dispersed and limited, and how Earth’s peoples and cultures have developed and evolved through time.  These challenges are not inconsequential and we Americans, as global citizens, ignore the challenges of Geography at our peril.

As the push for greater global commerce and trade proceeds, our businesses also need to meet the challenges of Geography.  In the “Internet of Things”, it may seem that Geography is irrelevant.  If someone orders Christmas gifts online, they don’t need to drive to the store to make the purchase.  But, somewhere that purchased gift was warehoused and that item needed to be transported from its warehouse location to the purchaser’s residence.  Geography presents the challenge of transportation and logistics.  More than likely, the item purchased was produced overseas – perhaps in China, or Pakistan, or Sri Lanka, among many places in the world tapped by global corporations as locations for industrial production.  These production locations also have challenges presented by Geography.  These produced goods must be transported from a foreign production facility to a transshipment port where they can be loaded on a cargo vessel and shipped across one of Earth’s many vast oceans to destinations in North America, South America, and Europe at a significant cost.  A cost presented by the challenge of Geography.

My intent through this blog is to explore the ‘Challenge of Geography’ that is presented to commercial businesses, and how these firms can begin to better analyze and understand the costs, benefits, and complexities that our planet Earth’s geography presents to them.

Happy Holidays and lets all hope for a Fantastic New Year! 

REFERENCES:

1)      Image of Santa Flying on his Sleigh Over Earth, by Acclaim Images Stock Photography                                     

http://www.acclaimimages.com/photos-images/santa_flying_his_sleigh_over_the_earth.html

2)      “Surface of the Earth” by Jeffery Coffey, Feb. 18, 2009                                           http://www.universetoday.com/25756/surface-area-of-the-earth/

3)      Air Miles Calculator: Albuquerque to Houston                       http://www.airmilescalculator.com/distance/iah-to-abq/

4) "Alex Trebek Speaks to Lack of Funding for U.S. Geography Education in No Child Left Behind",  Directions Magazine All Points Blog.                    http://apb.directionsmag.com/entry/alex-trebek-speaks-to-lack-of-funding-for-u.s.-geography-education-in-/331226