Slide 1

Methodologies

Our clients create “intelligence” with two tools: Z/Yen's risk/reward methodology and the DELOS Open Source Information System.  Z/EST, Z/Yen’s risk/reward methodology, is unusual in its ability to process hard and soft information and events, to evaluate outcomes and to decide on actions.  Automated systems have a role in keeping the resulting intelligence up to date.  DELOS complements Z/EST and other methodologies by providing structured information input – scanning the event horizon.  For instance, as events in the Far East have shown, appraising country risk is difficult even in countries no longer regarded as ‘developing’.  A key difficulty is integrating the factors affecting the overall risk profile of a country or national market and identifying anomalies.  DELOS helps automate integration.

sample_word_correlation

Figure - sample word correlation

DELOS provides fast and effective access to all open source information available on electronic media.  Originally designed by and for the intelligence community, DELOS acts as a single point access to on-line (including sources such as Reuters and the FT), internet and CD-ROM sources.  It combines the ease of use of a standard web browser interface with the security and anonymity of a military-level system.  Z/Yen staff themselves use DELOS for market research, competitor intelligence and strategic planning.

Filters are used as the basis for data mining and for presenting search information in a graphical context.  For example, the number of news items featuring the words ‘Indonesia’ and ‘bank default’ can be compared with the number featuring ‘Indonesia and ‘New Investment’.  The ratio of the two parameters can be calculated, monitored and compared over a period of time.  Analysts have calculated company ‘business ratios’ for many years: now they have the opportunity to devise their own live intelligence ratios, e.g. “country vulnerability” or “market readiness”.

At Z/Yen’s recommendation, one client in a competitive business-to-business service industry has installed DELOS as a business intelligence tool, linking to their intranet, various online databases, and key industry web-sites of clients, influencers and competitors.  DELOS provides a coherent picture of contracts on tender and awarded, business innovations and competitive activity.  Competitor monitoring has been turned from a project-based ‘snap-shot’ activity to an ongoing process of information fed to decision makers’ desk-tops.  The sales, marketing and corporate finance areas are heavy users, constantly trying to detect changes in normal patterns of activity in their environment.

DELOS should be of particular importance in information intensive, competitive situations for roles such as risk managers, information departments and research analysts in banking, insurance, energy, pharmaceutical, professional service and politically–sensitive organisations.  Z/Yen, working with the developers of DELOS, is happy to demonstrate its capabilities and begin defining how a DELOS installation can help improve any organisation’s intelligence.  The more you know the risks; the more risks you can control; the better your rewards.

Delos Open Source Information System

DELOS is a key tool in information integration, providing a number of services from a central server:

  • competitor intelligence;
  • market research;
  • press clipping services – live and static;
  • active channels for monitoring sectors, industries and deals;
  • active monitoring of internet sites and intranet sites as if they were news feeds.

Designed originally for government organisations, our DELOS system solves the challenge of effective and secure open source information management.

DELOS

With the sheer volume of data now available in the public domain comes the challenge of effective information mining and using information to enhance rewards and reduce risks.

daily_telegraph_example

 Delos provides a unique roadmap to fast, efficient and secure mining of open source information with:

  • ophisticated data search and retrieval;
  • wide range of online data sources
  • secure connection to the Internet;
  • intranet integration;
  • user interest profiling;
  • effective data mining;
  • standardised integration of thousands of information sources;
  • uses internet sites and intranet knowledge as content providers;
  • Delivers integration across all knowledge management platforms;
  • Based on standard Web browser technology

Making sense of information

Fast and effective access to open source information is key to supporting decision making, for monitoring relevant current events day-to-day and “in times of tension”.

Not only does DELOS allow you to index, filter and store the information vital to your organisation but it also includes tools and data representations to assist you in the speedy analysis of this information.

Automated surfing

Time normally spent by employees surfing for and retrieving relevant information can now be spent on more productive tasks.  The information is automatically brought to the desktop of all those who require it.

Once there, it is presented in an easily understood format and it can be seamlessly viewed in different ways through the analysis tools allowing faster focus on the pertinent information whilst highlighting anomalies and areas requiring further research.

Z/Yen is the UK’s leading risk/reward management firm.  We have had to be experts in Information and Knowledge Management in secure environments in order to do our work – explore DELOS with us.

sample_word_correlation

For further information on the opportunities contact:
Michael Mainelli at Z/Yen

 Delos – A Roadmap to Secure Mining Of Open Source Information

 delos_example

Risk management systems control risks in order to enhance performance. Viable risk management systems can be complex, with many benefits, but our summary model is:

Z/Yen works through the seven elements of the viable systems model with clients in order to deliver viable risk management systems, e.g.:

 

System Module

 

Managers

 

Central Risk Unit

 

Inputs

 

Training, risk assessment data, knowledge management ‘nets’

 

Selection, scheduling, incident alerts, near misses

 

Processes

 

Day to day management, peer reviews, project management

 

Risk assessments, premium calculations, risk/reward models

 

Outputs

 

Safer operating procedures, reduced process variability, fairer appraisal mechanisms

 

Reduced insurance premiums, better risk practices, improved performance

 

Feedback

 

League tables, benchmarking, premium costs, risk databases

 

Financial results, perceived fairness, risk publications

 

Feedforward

 

Premium reduction agreements, new behaviours

 

Strategic direction, corporate ‘scorecards’

 

Monitoring

 

Operational improvements, standards accreditation

 

Improved management information, internal market

 

Governance

 

Board direction, cost of capital charges

 

External pricing mechanisms, e.g. captives and re-insurance

 


For example, in one organisation, each project, site and legal entity obtains a notional insurance premium from a central risk management unit. The premium covers the manager of the entity from a variety of financial and operational risks, permitting him or her to achieve P&L objectives within a framework of calculated risk. Some of the risks are financial, others are softer, e.g. damage to prestige or loss of quality certification. Managers reduce risk, often using best practice from elsewhere in the organisation, but must notify the central risk management unit of possible claims within short timescales, providing new information on near misses. The central unit publishes information to reduce the ‘losses’ of all its customers. This all sounds like transfer pricing and ‘playing shops’, but it has a real impact. The central unit has to put a price on the risks managers do and don’t assume and is subject to clear performance measurement – internal audit with carrots and sticks. Managers see the financial implications of many of the softer decisions they make through a unified reporting system and can show the financial benefits of longer-term projects which reduce risk, e.g. a new preventative system will reduce their notional premium.

Z/Yen is ideally placed to help clients with viable risk management systems, one of the most exciting, new organisational performance improvement techniques.

The ability of an organisation to compete over the long term is a vital concern to management. Organisations which have successfully traded through the economic cycles of recent decades have maintained their investment in productive assets, R&D and people.

These resources are the foundations of any organisation. It is possible to improve, enhance and maintain them, but to cut deeply to meet short-term expediencies erodes the long term stability of the organisation’s structure, and results in the loss of productive assets and skilled staff.  We help our clients develop and implement strategies for continuous cost improvement. We focus on providing value to the customer, and eliminating costs that do not match customer requirements. The key features of our Value from Cost methodology are :

  • Customer focus: what does the customer require?
  • Process flow analysis: what internal processes are needed to meet those requirements?
  • Value added: how can activities which add little or no value to the product or service be identified and eliminated?
  • Continuous improvement: how can an organisation align, and keep aligned, its cost base with its long-term corporate goals?

Customer Value

Every successful organisation, whether public or private, manufacturing or service based, has a common goal – to provide value to its customers or clients.  Customer value is a function of quality, delivery and price. The objective of an organisation’s internal processes must be to increase quality and delivery performance, and improve productivity, to offer competitive price.

Each of these components is important, but performance can only be improved if the organisation knows and manages the real cost of its operations.  Cost includes all the resources of an organisation, including people, equipment, data and facilities, used to meet the quality and delivery requirements of the customer.  Our approach to cost management is to optimise the value obtained from the mix of resources the organisation needs to meet customer requirements.

Cost Management

We define effective cost management as a set of techniques and methods for planning, implementing, measuring and reporting, designed to improve the productivity of an organisation’s products/services and related processes.  Our approach identifies how resources such as labour, equipment and materials are expended on activities which support an organisation’s existing portfolio or products and services. We break down the processes involved into individual activities and groups of activity in order to identify inefficiencies, duplication or waste.

Over time an organisation tends to develop a fairly rigid organisational structure, with established methods, procedures and reporting systems which people are reluctant to change. Lasting cost improvements are achieved by concentrating on mainstream, or core, activities which add value to the organisation’s products/services, and reducing the resources on non-core activities which do not add value.

We test the validity of the organisation’s infrastructure through an analysis of its customers’ needs and establish how these are met by the organisation as a whole. We identify those supporting processes which cut across departmental lines of accountability, often creating pools of cost incurred to meet purely internal needs.

The emphasis of our work is to identify :

  • Waste: activities that add no value to the final product as perceived by the customer ;
  • Inefficiency: operating processes that are complex, duplicated etc. and which extend the overall process time;
  • Instability: processes which are erratic or which are subject to unpredictable levels of input or output;
  • Gaps: areas where the needs of the customer are not met.

We make use of two powerful management tools :

  • Dynamic simulation: we use computer-based simulation techniques to help management understand and improve the processes and workflows in their organisation;
  • Competitive benchmarking: we use competitive benchmarking to establish comparisons with competitors’ costs.

Dynamic Simulation

Purchasing Process Diagram - Click for full image

We use computer-based dynamic simulation modelling of an organisation’s processes to provide a moving image of operations. This demonstrates visually the routing of products, services, paper and data through machines, service points, clerks or computer networks.  This visual, interactive approach provides a panoramic view of complex processes, and enables managers from all disciplines, such as finance, operations, IT services, clearly to communicate ideas and solutions through a common language.  The models we develop are designed to focus on the use of key resources - skilled people, equipment, facilities. Management can review the impact of changes in product/service demand and mix on critical areas, including :

  • resource utilisation;
  • process flow bottlenecks;
  • distribution of common resources to a number of products or services.

These operational models are supported by a subsidiary, integrated financial model we have developed to show the cost impact of changes in projected product/service volume and mix, and resource capacities. This operational-financial link is shown in the diagram on the facing page. It provides management with real information against which to control their business, significantly more useful than costs based on historic events.

Competitive Benchmarking

Projected costs can be compared with industry benchmark costs and "what-if" analyses can be carried out to help optimise the way in which operations are structured and managed.  Competitive benchmarking provides invaluable information for management to compare cost performance, both historic and projected, with competitors and/or comparable operations.  Organisations have traditionally set internal targets as part of their annual planning process, but without the external perspective management cannot know whether the target is demanding enough.  Benchmarking provides externally validated targets against which to develop long-term cost improvement plans. These targets may often be derived from readily available published information but where necessary we carry out survey-based research directly with comparable organisations.

Industry Sector Benchmarking - Click for Full Picture

Product Costing

Once an organisation has established an understanding of its cost structure and has set targets to align it with its long-term corporate goals, the next objective is to understand the real cost of individual products and services. Our approach to product/service costing resolves the problems caused by current costing systems:

  • Poor pricing decisions;
  • Poor product/service rationalisation decisions;
  • Unreliable and unsubstantiated management information.

Unlike traditional cost accounting systems which spread overhead costs to products/services often on an arbitrary basis, such as numbers employed, we seek to identify the root causes of cost in all departments and sections. Based on this work we can accurately assign costs to products and services based upon the amount of each resource consumed in the process of manufacturing a product or providing a service.

Our approach makes use of spreadsheet-based financial models. They include those costs which are normally excluded from costing systems such as administration, sales, marketing and distribution. This enhanced and more relevant costing approach provides management with information to help analyse product/service profitability by customer and market channel.

Z/Yen seeks to share the rewards of successful advisory work with its clients. Sharing the attendant risks can sometimes mean "putting your money where your mouth is". Z/Yen is prepared to share risks in a number of ways, portions of fees based on successful work, performance-linked fees, joint marketing and joint products. Increasingly, but relatively rare, Z/Yen is prepared to invest in clients, e.g. subscribe for shares, purchase shares, arrange finance or provide loans. The vehicles for investment in clients are Z/Yen ventures.

Z/Yen's investment in clients is based on the belief that advisory services combined with capital can, in certain circumstances, achieve more than advice or capital alone. Z/Yen is not a banker; if clients have a simple money problem, there are sophisticated financial markets available to them which Z/Yen can help navigate. More complex circumstances, such as a major change in direction undertaken under Z/Yen's advice or joint undertakings among clients, can require seed money or enabling finance. Z/Yen is prepared to take stakes in these circumstances and seeks, over the longer term, a return above that of a typical financial institution. Above average returns can be gained by Z/Yen's active deployment of its own resources in helping its clients succeed.

Z/Yen has access to venture capital funds under certain conditions (naturally, the conditions are those suiting the risk/reward profile of the investors). In outline, Z/Yen can arrange for investments in commercial companies for which it has worked, or has an agreement to perform work where it can gain significant background and input. Z/Yen is particularly interested in stakes where the company is involved with:

  • business to business services;
  • high technology;
  • mid-range commercial property;
  • financial markets information technology and services;
  • healthcare and medicine.

Z/Yen ties any investment to a framework agreement setting out the agreed strategy, specific projects which will be undertaken, specific milestones for operational achievement, specific financial milestones, the basis of the investment and the terms of the reward. Z/Yen may arrange for a portion of its fees to be paid after the investment has been made. As is normal with all Z/Yen projects, these fees would be for previously agreed work in helping the company to meet its targets. Z/Yen will often arrange for more detailed operational information to be provided, e.g. management accounts, and sometimes for an external board member.

The key benefit of investing in clients for Z/Yen is higher returns from investments which Z/Yen is better placed to judge because of working with the company. Unlike a bank or most venture capitalists, Z/Yen is actively working at an operational level with organisations in business services, high technology and property. Z/Yen would seek to maximise its investment in an number of ways, such as through establishing relationships with prospective clients, personnel, joint ventures, suppliers or other investors.

Z/Yen ventures are some of the most exciting areas of Z/Yen's work and offer significant opportunities for its clients and for Z/Yen. Working together with its clients, Z/Yen believes that the combination of advice and finance is a powerful one, motivating and improving both organisations.