A hybrid system-identification method for forecasting telecommunications product demands

A crucial challenge for telecommunications companies is how to forecast changes in demand for specific products over the next 6 to 18 months—the length of a typical short-range capacity-planning and capital-budgeting planning horizon. The problem is especially acute when only short histories of product sales are available. This paper presents a new two-level approach to forecasting demand from short-term data. The lower of the two levels consists of adaptive system-identification algorithms borrowed from signal processing, especially, Hidden Markov Model (HMM) methods [Hidden Markov Models: Estimation and Control (1995) Springer Verlag]. Although they have primarily been used in engineering applications such as automated speech recognition and seismic data processing, HMM techniques also appear to be very promising for predicting probabilities of individual customer behaviors from relatively short samples of recent product-purchasing histories. The upper level of our approach applies a classification tree algorithm to combine information from the lower-level forecasting algorithms. In contrast to other forecast-combination algorithms, such as weighted averaging or Bayesian aggregation formulas, the classification tree approach exploits high-order interactions among error patterns from different predictive systems. It creates a hybrid, forecasting algorithm that out-performs any of the individual algorithms on which it is based. This tree-based approach to hybridizing forecasts provides a new, general way to combine and improve individual forecasts, whether or not they are based on HMM algorithms. The paper concludes with the results of validation tests. These show the power of HMM methods to forecast what individual customers are likely to do next. They also show the gain from classification tree post-processing of the predictions from lower-level forecasts. In essence, these techniques enhance the limited techniques available for new product forecasting.     

The products liability coordinator: A partial solution

Product liability problems have beset businesses for the past decade. Lack of availability of products liability insurance, soaring insurance premiums, proliferation of products liability lawsuits, astronomical damage awards and ever changing products liability laws have created severe problems in many industries. While many states are enacting new products liability laws modeled after federal legislation to ease the burden, businesses must take the initiative to solve their own problems. Most companies have relied on their legal staffs to deal with product liability. This paper presents an organizational change that can help manufacturers cope with products liability. A products liability coordinator can generate, process, and disseminate relevant information in this dynamic area and oversee corporate strategic decisions which might result in products liability.     

Style Drift in Private Equity

Abstract:  We introduce the concept of style drift to private equity investment. We present theory and evidence pertaining to style drifts in terms of a fund manager's stated focus on particular stages of entrepreneurial development. We develop a model that derives conditions under which style drifts are less likely among younger fund managers. We also show ways in which changes in market conditions can affect style drifts, and differences for funds committed to early-stage investments compared to funds committed to late-stage investments. We find some evidence of a positive relation between style drifting and investment performance.     

Market orientation,marketing capabilities,and firm performance

Drawing on traditional resource‐based theory and its recent dynamic capabilities theory extensions, we examine both the possession of a market orientation and the marketing capabilities through which resources are deployed into the marketplace as drivers of firm performance in a cross‐industry sample. Our findings indicate that market orientation and marketing capabilities are complementary assets that contribute to superior firm performance. We also find that market orientation has a direct effect on firms' return on assets (ROA), and that marketing capabilities directly impact both ROA and perceived firm performance. Copyright © 2009 John Wiley & Sons, Ltd.     

Dynamic pricing and asymmetries in retail gasoline markets: What can they tell us about price stickiness?

Theoretical explanations for price stickiness used in businesses cycle models are diverse (e.g., information processing delays, rational inattention and fair pricing), with each theory resulting in a different implication for inflation dynamics. Using an autoregressive conditional binomial model and a data set consisting of daily observations of price and cost for 15 Philadelphia retail gasoline stations, we test which of these theories is most consistent with the observed pattern of price adjustment. Our findings of time dependence, asymmetry and the role of cost volatility are consistent with a combination of fairness considerations and rational inattention by producers.     

A multivariate time series analysis of the United States aggregate production function

This study examines the effects of hours of work per unit of private sector capital, the relative price of energy, government capital per unit of private sector capital, and inflation on private sector output per unit of capital in the U.S. over the period 1952–90. A small vector autoregressive model that comprises the variables typically employed in single-equation estimates of the aggregate production function is used. Variance decompositions and cumulative impulse response functions indicate that hours of work per unit of private sector capital, the relative price of energy, and the inflation rate have significant effects on private sector output per unit of capital over the 1952–90 period. However, there is no evidence of a significant effect for government capital per unit of private capital. An historical decomposition that begins in 1973 with the emergence of a “productivity slump” and continues through 1990 indicates that shocks to hours of work per unit of capital, the relative price of oil, and inflation appear important in explaining output per unit of capital but shocks to government capital are not important.     

Market Perception of Goodwill: Some Empirical Evidence

Accounting and reporting for goodwill has been on the agenda of the Financial Accounting Standards Board, the International Accounting Standards Committee, the UK's Accounting Standards Board, and the US Congress. Goodwill has also been the subject of Securities Exchange Commission rulings directed at specific companies. The attention directed towards goodwill would suggest that it is a material asset for a large number of firms. This article analyses the market perception of goodwill as an asset in the determination of the firm's valuation. Also explored is whether the market values goodwill to the same degree as it values other assets. The results of this study found that the market perceives goodwill as an asset and incorporates the information in the valuation of a firm. The findings of this study could be of importance to those involved in and affected by standard-setting deliberations involving goodwill.     

A more rational approach to new-product development

Companies often treat new-product development as a monolithic process, but it can be more rationally divided into two parts: an early stage that focuses on evaluating prospects and eliminating bad bets, and a late stage that maximizes the remaining candidates' market potential. Recognizing the value of this approach, Eli Lilly designed and piloted Chorus, an autonomous unit dedicated solely to the early stage. This article demonstrates how segmenting development in this way can speed it up and make it more cost-effective. Two classes of decision-making errors can impede NPD, the authors say. First, managers often ignore evidence challenging their assumptions that projects will succeed. As a result, many projects go forward despite multiple red flags; some even reach the market, only to fail dramatically after their introduction. Second, companies sometimes terminate projects prematurely because people fail to conduct the right experiments to reveal products' potential. Most companies promote both kinds of errors by focusing disproportionately on late-stage development; they lack the early, truth-seeking functions that would head such errors off. In segmented NPD, however, the early-stage organization maintains loyalty to the experiment rather than the product, whereas the late-stage organization pursues commercial success. Chorus has significantly improved NPD efficiency and productivity at Lilly. Although the unit absorbs just one-tenth of Lilly's investment in early-stage development, it delivers a substantially greater fraction of the molecules slated for late Phase II trials--at almost twice the speed and less than a third of the cost of the standard process, sometimes shaving as much as two years off the usual development time.