How Forecasting May Forever Change Hollywood

Is it possible to forecast how much money a movie will make just by reading a script?  Statistics professor and movie guru, Vinny Bruzzese says you can.

Mr. Bruzzese and his team have supposedly come up with an equation to forecast how much money a movie will make in the box office, just by reading the script. For only $20,000 his company, Worldwide Motion Picture Group, will read any movie scrip and will compare it to other narratives with comparable story lines, Facebook likes, and data taken from focus groups consisting of over 1,500 moviegoers. With this information, he can dissect any scrip or screenplay, and help directors see how much money their movie will (or will not) make.

Based on statistics and moviegoer opinions, Bruzzese reads a script, and uses data to determine if characters are likable, or should be changed. He uses corresponding data with certain celebrities to determine how many people will attend a movie just because that person is in the film. His recommendations usually come in a 30 page report, and include both minor and large corrections.  Mr. Bruzzese also said that he will not hesitate to inform a writer that the movie is crap, and characters need to be developed into something completely different in order to for the audience to be engaged enough to see the movie in theaters.

So far, Mr. Bruzzese has reviewed over 100 scripts in Hollywood, including “Oz the Great and Powerful,” which earned $484.8 million in the box office. His services also include reviewing scripts for TV shows and Broadway productions. Although his price may be high, Hollywood directors seem to be interested in his operation, and many have found it to be incredibly useful. However, he clearly states to each screenwriter that he will not be held responsible if the movie flops, and his equation is not correct. As we learned, forecasting is rarely 100% correct, and is used as more of a guideline than an indicator of fact.

But what are the implications of using statistical forecasting on an art form like movie making?  Some people are not as excited about the idea. One movie critic wrote, “It’s the enemy of creativity, nothing more than an attempt to mimic that which has worked before. It can only result in an increasingly bland homogenization, a pell-mell rush for the middle of the road” (Ol Parker).

So do you think forecasting of new moves will inhibit creativity in scriptwriters? Do you think Hollywood directors should only focus on their movies making the most amount of money? Will Hollywood movies just become cookie cutters of the previous ones before them? Or do you believe an equation made for forecasting movie success help make new movies better?

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Source: http://www.nytimes.com/2013/05/06/business/media/solving-equation-of-a-hit-film-script-with-data.html?pagewanted=1&_r=1&smid=fb-share&adxnnlx=1368414010-4e41KEMI8B67C1EjLSjPvg

Wrong for Wrigley?

 

When you think of Chicago, some of the thoughts that come to mind are: great food, tourist sites, and sports. Whether you are visiting or living in the city, nearly everyone loves to go to the Chicago Cubs games, unless you are a Sox’s fan, but even then, the charm of Wrigley Field and the surrounding area is something undeniable. So when Tom Ricketts announced the possibility of moving the Cubs outside of Wrigleyville, you better believe he received backlash. The degree of disapproval of the move came from die-heart fans, rooftop owners, and other local businesses. When I first heard that Wrigley Field might be moving, I was heartbroken. All I could think about was the memories my family and I had from going to the games and making a day out of traveling to the city. Even more than contemplating the move, Ricketts is planning a $500 million renovation that will impact the city, fans, and surrounding businesses as a whole.

At first thought, some fans might say to leave Wrigley the way it is. The old nature and lack of high-technology is what makes the field so charming and historic. However, by looking at this situation through Theo Epstein’s mindset, President of Baseball Operations, I have come to see the more important managerial implications that come along with the $500 million renovation. Decisions of forecasting, location, and organizing are all factors in the Wrigley renovation. Theo has to think of the costs/revenues that will be generated by these renovations and compare that to how the location of each addition will impact the field and businesses that surround the ballpark.
For those of you who are not familiar with the renovation, the $500 million plan requires no city or country money. It will provide a video board in left field that will be 6,000 square feet, and a secondary sign in right field that will be 1,000 square feet. The plans also include a three-story addition that will contain new clubhouse, restrooms, restaurants, and potentially an upper-level deck. Furthermore, there have been talks of a proposed hotel on the McDonald’s lot, a two-story Captain Morgan Club, and open-air plaza on the west side of the park.

 There are many pros and cons of the renovation plan. Some thoughts that should be considered are the local businesses – will having more Wrigley restaurants and a hotel take away from local businesses? More importantly, how will the jumbotron affect the rooftops since they bring revenue to the owners and to the city as well?
My question to you is what do you think of the renovation and the managerial decisions that face the Wrigley organization? The location of the jumbotron, hotel, and restaurants are important decisions to consider in the overall effect of the renovation. How do you feel about the possibility of the hotel that will be built right by the ballpark – would you forecast that expenditure to be revenue raising or simply wrong for Wrigley?

Sources:

1. http://ballparkdigest.com/201305066246/major-league-baseball/news/cubs-submit-wrigley-field-renovation-plans-to-city

2. http://www.dnainfo.com/chicago/20130501/wrigleyville/wrigley-field-renovation-renderings-released-jumbotron-hotel-unveiled

Earnings forecast: How companies set low expectations to create a “surprise” growth

With the second quarter of 2013 well under way  companies are beginning to put out their first quarter earnings.  271 companies of the Fortune 500 which make up the S&P 500, have reported a earnings growth at 3.9 percent, 2.4 percent higher than the forecast of 1.5 percent. “Some 69 percent of the S&P 500 have beaten forecasts, once again conforming to the pattern of lowering expectations enough to “surprise” by beating them. The 69 percent figure exceeds the long-term average of 63 percent. This has been the pattern for the last 15 quarters, with growth estimates at the beginning of earnings ultimately being beaten by at least a full percentage point.” According to the article, companies are purposely low-balling their estimates only to beat those forecasts at the end of the quarter. This has held true for the past 15 quarters and seems to be the trend going forward. Investors and stakeholders will continue to be surprised and will be looking at positive earnings growth at the end of the quarters. It seems to me as if investors don’t really mind the idea of that since these earnings reports has caused the S&P 500 to rise 1.2 percent since the first company released its earning back on April 8th.

Photo credit: stockopedia.co.uk

Though the companies that have posted earnings have had a good growth, the companies that are yet to report are expected to have a 0.4 percent decline in earnings. Among these companies could be Walmart and Home Depot since they have not posted their earnings yet. First quarter revenue was projected to have 1 percent growth but instead is expected to fall 0.3 percent. Even though, companies have had a success when it comes to profits, revenue forecasts have declined, which goes to show that many companies still have a decline in sales. “’It does concern me. It’s not sustainable over the medium or the long term. There’s only so much companies can do to sustain growth without increasing sales,’ said Paul Zemsky.” They are able to get higher earnings through cutting costs and expenses but not through an increase in sales. This poses a threat to the economy in coming quarters because it will mean that companies will be hiring very less now since they will try their best to cut cost.

After reading this article, I felt that companies have to better forecast their earnings since there is such a gap between the forecast and the actual amount. They may have to use a different forecasting technique to come up with their earnings projections so that there isn’t a “surprise” when the actual numbers come out.

Do you think that companies are doing the right thing by setting low forecasts of earnings? Does this fairly present the true position of a company?  Also, as I mentioned before, many companies are doing good with profits and yet the revenue is going down. Do you think these companies can survive through cost-cutting measures or will they have to do something to increase sales?

 

 

“Earnings beating forecasts but jury’s out on rest of season” by Caroline Valetkevitch and Ben Berkowitz

http://finance.yahoo.com/news/earnings-beating-forecasts-jurys-rest-211325797.html

 

 

“Inventory Is Evil”


Apple, Inc. is one of the largest, most innovative companies in the world, selling not only electronic gadgets for users of all skill levels, but also how it manages inventory and forecast for its demand. The company has devised new inventory management strategies that have become a benchmark in the electronic industry and examples to many other companies worldwide.

These newly implemented benchmarks not only minimized inventory costs, but simultaneously helped Apple smoothly sail through high profile product launches without giving scope to competitors or allow them to catch up with competitively similar products. The case not only covers inventory management techniques at Apple, but also provide basis for calculating the internal fund requirements of the company based on projected sales.

In the electronics business, companies desire to minimize inventory storage as much as possible to avoid the risk that it won’t move to consumer hands. However, when a company underestimates the anticipated demand of a product and produces fewer units than expected, this results in a shortage of inventory, leading to a loss in both customers and market share. Therefore, a fundamental practice for a manufacturer is to keep as little inventory on hand as possible. As Apple’s agenda is perceived, they try to keep the right balance of inventory in all of their stores to satisfy customers demand.

Marketing products quickly saves the company storage costs and avoids the devaluation of products due to the continuous improvement of technology both internally and by new innovations from competitors. The best way to keep the inventory at minimized level is to invest and focus on supply chain and marketing continuously. To increase production, it is wise to hire contractors for manufacturing equipment instead of owning one. By doing so, the company will focus on promoting the inventory management in order to sell that specific line of products speedily at the fixed price.

Tim Cook, the manager of Apple, believed inventory loses somewhere between 1-2% of its value each week under standard conditions, the same way milk goes bad soon after the carton is opened. Operating under this philosophy, he put Apple in front of other competitors, such as Dell, by improving the way of moving inventory, where he claimed that “inventory is evil”.

There are a few ratios that show how quickly companies can liquidate inventory. For instance, the “days of inventory” ratio measures a company’s performance and provides a better idea to investors of how long a company takes to turn its inventory into sales, with shorter periods being better. Likewise, “inventory turnover,” shows that a low turnover can mean poor sales and thus products will be sits in a warehouse losing their value; on the other hand, high turnover means strong sales and relatively empty warehouses.

 

 
What sort of inventory management practices can other companies learn from Apple, Inc.?

 

 

 

Sources:
H., Victor. “Apple’s Secret Sauce for Success Is Inventory Management.” Phone Arena. N.p., 29 Mar. 2012. Web. 28 Apr. 2013.
http://www.phonearena.com/news/Apples-secret-sauce-for-success-is-inventory-management_id28558

Niu, Evan. “Does Apple Have a Little Inventory Problem?” (AAPL). N.p., 5 Mar. 2013. Web. 28 Apr. 2013.
http://www.fool.com/investing/general/2013/03/05/does-apple-have-a-little-inventory-problem.aspx

“What Is Apple’s Inventory Management Secret? | QuickBooks Manufacturing Blog.”QuickBooks Manufacturing Blog. N.p., 17 Apr. 2012. Web. 28 Apr. 2013.
http://quickbooksmanufacturing.wordpress.com/2012/04/17/apple-inventory-management-secret/

 

To Sell or Not To Sell? That is the Question.

            During these past few years, Chicago Public Schools (CPS) has seen a significant decline in students attending their schools.  This has lead to drastic action to “close 54 schools, which will leave 61 empty”. Closing the underperforming schools and filling other schools help cut costs and make it more efficient for the schools if they are full.  Yet, the problem is what to do with the schools that are closed and empty.          

             In a business, or operations management, the manager or CEO’s job is to find ways to efficiently use products or make the most profit, but most importantly, efficiently run the business.  This means not letting money go to waste.  CPS is trying to do that by not running a school that has low attendance.  It would be more money wasted to heat that school and pay taxes if no one is using it.  Yet, what CPS is trying to do is also sell the lot that these former schools are on in order to make money to pay for their other schools.  This is a great idea because these schools, instead of being empty, can be used as a safe haven for kids who need a place to go, or like a senior center.  This actually happened in Milwaukee.  A former school called Jackie Robinson Middle School was sold in September of last year and turned into a senior center called the Sherman Park Commons Senior Living Center.  This is a place where seniors 55 or older that have a low income can have a place to live. Seniors who can’t afford housing have found a place to live and the city of Milwaukee was able to convert an old school into a beautiful place for others.  Yet, there is a catch.

            First of all, before this former middle school was sold to a developer, it was vacant for five years. Also, the groups that buy the school are mainly “[c]harter schools, other government agencies and nonprofitswho can afford to pay the money to first buy the property and then renovate it.  Yet, most importantly, there is a process that the qualified buyers must go through before they can buy the property.  The buyers go through meetings to describe about the renovations of the former school and what it will become, but also a selling price must also be negotiated as well.

            It is good that CPS wants to fix up these schools to cancel their debts and create efficiency, but who is getting hurt is the kids.  They are losing their relationships with their friends and teachers because they are forced to go to new schools because their old schools are underperforming.  Also, they are also scared to ask questions because they are not used to this new school and their new teachers which could hurt their grades in the future.   

 

Should Chicago Public Schools close and sell their schools so that that building could be used for other purposes or should the schools stay open?

Source:
Nix, Naomi. “Schools Often a Hard Sell.” Chicago Tribune 21 Apr. 2013, Final ed., sec. 2: 1+. Print.

Can the all-electric car reach mass market appeal?

Who killed the electric car is a term you sometimes hear when referring to motor vehicles that run exclusively on electricity. With the environment issues being a big concern for our society today, many car manufacturing companies have developed hybrid vehicles. Hybrid Car being a vehicle that uses two different power sources to move the car, most commonly the internal combustion engine which uses gas fuel and an electric motor that uses.  The hybrid cars have gained popularity among consumers, especially the Toyota Prius, this has resulted in many car manufacturers developing hybrid vehicles to gain some market share.

However some come car manufacturers such as Honda, Nissan, Toyota, and Tesla to name a few have taken it a step further by producing purely electric vehicles that run only on electricity.  Electric cars are nothing new, being created in the late 1800’s and early 1900’s,  however gasoline fueled cars gained increased popularity and have captured the market ever since.

So what will it take for the Electric Car to reach mass market appeal? What do the managers at these huge car companies have to do. Many executives believe the electric car has to gain trust amongst car consumers. For now many consumers foresee a future with the hybrid car because of its driving range which drives a certain amount of miles on electric power then gasoline power takes over, which is fuel efficient.  Compared with the limited driving range of the electric vehicles.  There are a few factors which  limit electric cars from reaching mass market appeal. First the limited Driving Range of some of the electric vehicles and niche battery powered cohorts is a main factor  stopping consumers from buying into the technology. Another factor is the high initial price of many of the Electric Vehicles, many times being more costly than gasoline powered vehicles. One more huge factor is the unavailability of electric charging stations compared to gas stations. Going to a gas station is very convenient for consumers and that is what they are used to.

Nevertheless there is much advancement taking place with the electric vehicle technology and the availability of electric charging stations. John O’dell, and Edmund’s analyst predict the following would constitute an electric vehicle that could be mainstream: an electric car with a driving range of 150 miles that could be completely recharged in about 10 minutes or and electric car with a driving range  of 300 miles that could be completely recharged in 30 minutes. The price of these vehicles should be in the range $25,000 to $30,000, so it could somewhat affordable to middle-lower income comsumers. Also it was suggested that there be a good national network of electric vehicle charging stations so that it could be convenient to charge your car anywhere.

These are all great suggestions to making the electric car more appealing to the mass market and I definitely know I plan on getting one in the future, being a big environmental guy myself. However what would make you switch from Gasoline powered vehicle to purely Electric powered?

 

http://business.time.com/2013/01/29/what-would-make-an-all-electric-car-appeal-to-the-masses/

http://inventors.about.com/od/estartinventions/a/History-Of-Electric-Vehicles.htm

Predicting the Future with Business Forecasting

Wayne Gretzky said.  “I skate to where the puck is going to be, not where it is.”  This statement not only applies to hockey, but also to the business world.

Our class just completed a Capstone simulation where we competed as companies selling sensors.  It gave us an opportunity to run a corporation by making several business decisions including R&D, HR, Marketing, Operations and Finance.  One lesson I learned is how important forecasting is to a company.  It helps drive some very important decisions.  It impacts on how we calculate our capacity as well as how we want to invest for the year.  We are constantly challenged to keep a positive cash flow.  This is also very true in the real world.  I believe we would have performed better with more accurate forecasting and we did put together a spreadsheet to help us, but it’s more than just data.  Professor Byron Anderson from the University of Wisconsin-Stout said it best.  “If futuring were only based on science, statisticians would be wealthy.”

In an age where Big Data is becoming increasingly important, people continue to struggle with forecasting.  Data as a platform is quickly becoming an industry of its own.  Businesses are being formed around meta-data management, enterprise performance management tools, data warehouse utilities and search engines.  However, people still struggle to accurately forecast.  These tools are great, but they are just tools.  There is a human element that also exists.  During our competition, some of us knew how other teams would react because we know them well.  These decisions can’t be found in a spreadsheet or queried from some place.  We are forced to know our customers and our competition at all times.  This information is invaluable.

  • What’s the size of the market and how fast is it growing?
  • What’s the competition doing?
  • What types of opportunities are there for the company?
  • How much demand will there be?
  • How much money will the company need to borrow?
  • Etc.

John Vanston did some work around forecasting.  He created a model bringing Forecasting, Foresight and Strategy together.  This model gives us a view ranging from heavily quantitative to more qualitative approaches. (Byron C. Anderson 2012)  This helps students understand what is needed to decipher the data around us and I’ve provided a picture of his framework below.

After my recent experience and reading a little more about forecasting, I wonder if there is a need for a required class within the MBA program.  This isn’t a challenge for one particular industry.  It can be applied from manufacturing to finance to sports (as evident with the recent movie Moneyball).  I believe forecasting is more than just numbers.  It’s an art.  Who’s making decisions and why are they making these decisions are just as important.  In a constant world of pressure for margin, having accurate forecasts could mean the difference between staying in business or not.

What are your thoughts about forecasting as a mandatory course for MBA students?

What experiences (Good / Bad) have you encountered at work with forecasting?

References:

11:11 Make a Wish – China’s Cyber Monday

Many may know and participate in the United States huge rush for online shopping after Thanksgiving, also known as Cyber Monday.  However this ranks as the second largest e-commerce event in the world.  In the recent years, an online shopping extravaganza has emerged for China.  It began in the 1990s by college students who did not have a significant other.  As a replacement for Valentines Day, young adults without partners began treating themselves to dinners and gifts.  The concept of the date arose by November 11th or 11-11 which has 4 singles (for singles).  It has now erupted into possibly the busiest online shopping day in the world.

The simple items have now evolved into jewelry, TVs, and even cars.  The event has also spurred the need for different marketing techniques and price cuts.  As the article mentioned, some retailers have promised discounts up to 70 percent off.  The deals are very hard to resist and resemble many aspects of the United States’ Cyber Monday.  Halfway through the day,  approximately $1.6 billion in sales have been accumulated by means of the largest website for online shopping in China, tmall.com.  This amount has surpassed the $1.25 billion that United States online retailers took in last year’s Cyber Monday according to the article’s source comScore, a research firm.

Companies have also had to begin planning and forecasting sales and delivery services months in advance.  Alibaba, the largest Chinese operator of e-commerce, has requested additional lounge chairs and made reservations for rooms in nearby hotels for their employees to take much need breaks and relaxation.  According to the article,  more than 800,000 delivery personal will be working Sunday with the additional 75,000 hired seasonal workers.  And one of the largest companies has even expanded their operating capacity by 50 percent.

Although the idea of a large shopping spree day online in China may be different from the United States, there are many similarities when it comes to the businesses and their preparation.  Do you see a growing trend in online shopping in American or believe that making the trip to the store is necessary?  In my opinion, I believe it matters in the nature of a product to either purchase it from a picture on the screen or physically taking the good off the shelf.

 

Article Source : http://finance.yahoo.com/news/singles-day-chinas-online-shopping-070856623.html

Black Friday vs. Black Thursday !!!

 

 

It’s that time of the year again Black Friday deals. I never understand why so many people sleep outside all night to get something that is limited to very low number like five or ten pieces and the person there whose number eleven just got nothing but waited all night in cold weather. Last year I decided to try and shop at midnight I went to Macy’s waited in line for about two hours and when we finally got into the store I honestly didn’t find any good deals so I think it was not worth it for me to wait in cold weather for noting. I just wanted to experience it and I did but I don’t think I would repeat it again. Well I found this interesting article that talks about opening as early as 8:00pm on Thursday this year that means Thanksgiving will be cut short for a lot of people. Wal-Mart was the first one to announce that they will be opening as early as 8:00pm this year. And this is when competitors come in to place Sears also announced they will open at 8:00pm. Now Wal-Mart has to worry about their competitors and what they are offering to beat their prices.

Wal-Mart also announced that they will have enough inventory from 10:00-11:00pm for customers to get the same deal as they would get in store online. Now inventory managing will be a big part of this they will have to make sure that inventory will remain available and the numbers of inventory are accurate so that no problems will occur with consumers. Wal-Mart has to make sure that their entire inventory will come on time with correct amount to avoid any problems. The best way to make sure inventory is accurate is to forecast their inventory and make sure the demand numbers are correct. Some customers are already unhappy because they will have to cut their Thanksgiving with family and friends early to go shopping so that’s why inventory has to be done correctly so that customers will be satisfied. But what happens to those poor employees who want to spend some quality time with their family and friends on Thanksgiving Day? Now they have to come to work early but will the quality of employees towards customers be the same? Of course not employees will be unhappy and quality will go down. This is where Wal-Mart and Sears need to work on quality management system so that they will make sure their employees are happy so that customers will be satisfied and happy also. So maybe paying them double on that day will make their employees happier. So opening early is good but Wal-Mart and Sears need to make sure that quality, and inventory is in good shape for customers to be happy and for them to make good profit.

Do you think opening early this year is a good idea? And will quality and inventory be in good shape or will there be a problem?

la-fi-walmart-black-friday-20121108,0,376002.story

la-fi-thanksgiving-shopping-protest-20121110,0,4704988.story

 

Is Microsoft Creating Some Bad Blood?

For almost as long as the company has existed, Microsoft has relied on 3rd party hardware developers like Dell, Samsung, Sony, and Hewlett Packard to use the products they created. Because of this, Microsoft has always dominated the operating system market with many companies like the ones listed making use of the many variations of Windows along with other products like Word, Excel, and PowerPoint. However, for the first time in thirty-seven years, Microsoft is releasing a computer.

Microsoft released its Surface, a tablet based computer, on October 26, 2012. Many would wonder why Microsoft would venture into such territory. Microsoft has had such success selling its operating systems to other companies, why would it take such a large risk in creating its own computers? The answer comes down to design.

Companies like Dell and Samsung will run Microsoft’s new operating system, Windows 8. But Microsoft felt that in order to fully display the capabilities of Windows 8, they would need to take design duties in their own hands. “We decided to do Surface because it’s the ultimate expression of Windows,” Steven Sinofsky, president of Microsoft’s Windows division said. “It’s a stage.”

The Surface is designed to come with a magnetically attached keyboard which nearly doubles the tablet as a laptop. By doing this, they are hoping to directly compete with Apple’s iPad. The iPad, due to its ease of use and compatibility, has been adopted by many businesses and schools to be used in their day to day operations. For example, in the article it is mentioned that at a medical technology company 5,500 iPads have been issued to employees for use. Because of this, some have predicted that soon the iPad and other tablets will overtake laptops. Laptops have already lost sales to the iPad and other tablets.

In order to establish itself in the tablet market, Microsoft wants to ensure that the operating system is utilized effectively. By creating its own design for a tablet Microsoft is hoping to take some of those sales away from Apple and make a name for itself in the tablet market. Since most businesses already use PCs, Microsoft should have no issues with compatibility with the computers that companies already use. However, the Surface has not had the time that the iPad has had to develop. Many applications and 3rd party accessories already developed for it. Microsoft will have to hope that the Surface catches on quickly.

As for companies like Dell and Samsung, do you think they should be upset that Microsoft has developed its own tablet that will directly compete with their own? Do you think they feel upset that Microsoft felt that their own hardware would not be good enough to display the capabilities of Windows 8? Or do you think it will help them in the end as more people might by desktops from Dell and other hardware developers due to success of Windows 8? The article seems to suggest that it could be a win-win for these hardware developers but I would like to hear your input on what the future might hold for Microsoft and hardware companies.

http://www.nytimes.com/2012/10/26/technology/with-new-tablet-microsoft-faces-a-balancing-act.html?_r=0