What is an algorithm?
An algorithm is a step-by-step procedure for calculations. The following is an example from the “HowStuffWorks” website:
Let’s say that you have a friend arriving at the airport, and your friend needs to get from the airport to your house. Here are four different algorithms that you might give your friend for getting to your home:
- Go to the taxi stand.
- Get in a taxi.
- Give the driver my address.
- When your plane arrives, call my cell phone.
- Meet me outside baggage claim.
The rent-a-car algorithm:
- Take the shuttle to the rental car place.
- Rent a car.
- Follow the directions to get to my house.
- Outside baggage claim, catch bus number 70.
- Transfer to bus 14 on Main Street.
- Get off on Elm street.
- Walk two blocks north to my house.
Continente Siete Beginnings
Continente Siete started as a business consulting boutique company, with big focus in mathematics. We had the know-how, we had technology, methodology and teaching experience. Put these traits in the cocktail mixer and the first result that pops out is: consulting! Why? Consulting pays, and we already had some experience in the industry as well.
We started out as “Business Psychologists”, trying to understand companies’ problems, and offering innovative solutions to overcome them. This path took us to Demand Forecasting, where we tackled Forecast Accuracy problems for major companies through various approaches (technology, process engineering, methodology and training). The path also took us to Transportation, Online Marketing, Telecommunications and other Industries. The mechanics, however, were always the same. You tell us your bigger problems, and we’ll find an innovative solution.
Business for Continente Siete resulted promising, the company grew from 4 employees to 20 in less than 2 years.
The Consulting Dilemma
What was our growth model? Sell more projects! However, this required us to hire more people, more training, etc. In the end, we could never turn around income-cost equation drastically enough.
Furthermore, potential projects were always huge, and often led to long negotiations that could turn out either way. This made planning extremely difficult.
Combine these two, and you have a company that is always living in the edge, having to think thrice before entering negotiations with a potential new client.
Continente Siete’s Shift
Early 2012 we took a strategic turn towards pure algorithms. Before, algorithms were part of a bigger service, but after this point, they became our core.
The idea was simple (and frankly, it was always there, but we had never made it explicit before this point), find a massive problem, and identify what part of that problem can be addressed with pure mathematics, no humans involved.
Continente Siete would then continue their consulting service, but redefine it as either Private Lab, or Premium Service. These are today our labor intensive areas of application. The third area, the biggest one, is development. This way our services fund our product developments, until they become self-sustainable.
This is where we are right now, trying to make our developments self-sustainable so that they can serve as an “income buffer” for the whole Company, and shift planification towards the long-term.
Algorithms in Continente Siete
Today there are several algorithms we are developing inhouse.
: our most mature product, Flimbu automatically optimizes any Adwords account by changing the CPC (cost-per-click) values of every keyword in the portfolio. In order to do this there are extraction, forecasting and optimization algorithms working in sync.
Behavioral: e-commerce is still growing at gigantic steps. Almost all sales come from either the website or a newsletter. However, most companies are using the same website layout and newsletter configuration for everyone. This not only has a short-term opportunity cost, but it also has a negative long-term effect on the user (they get tired, saturated). Behavioral is a set of algorithms that understands patterns in the users and uses these patterns to optimize both newsletter configuration and website layout. Businesses should only offer what is attractive for the specific user.
Forecastia: this product not only contains a set of forecasting algorithms (this is commodity) but it offers an extremely efficient matching algorithm. The latter is its competitive advantage, which is understanding what forecasting model should be used for each series, and how to “clean” the series before even starting to segment it.
Price Analytics: how much do I gain by increasing the price of this product by 10%? Price Analytics is a set of algorithms that target this type of questions. By reading price movements and volume shifts in sales through econometric and data mining algorithms, it is able to quantify price elasticity effects (of both promoted and non-promoted products).
|Continente Siete logo figure – a mathematical algorithm that rotates a simple geometric shape in three dimensions, but it’s easier to say it’s a butterfly, right? Plus, it has the metaphorical perks…
Why do Algorithms?
The strategic turn in Continente Siete aimed towards algorithms, but… Why algortihms? Well, there are several benefits in developing algorithms:
- Non-linearity: algorithms can be run by computers, which in turn can be set into products, enabling for non-linear growth. This means that they are completely scalabale, and we don’t need to incur in significant costs to provide the product for more clients. Marginal costs are close to zero.
- Universal language: mathematics is Universal, and so are algorithms. It doesn’t matter whether you are in Argentina, or in Pakistan, the code is the same.
- No boundaries: no shipping costs, no material movement, basic logistics. The only thing that travels is information, and Internet enables it to travel the whole World.
- Unrestricted: there are practically no laws or policies that restricts the importing / exporting of data. Business does not depend on the Government type.
All these benefits make algorithm development extremely attractive. However, there is a big con in algortihms. As it travels the world and is somewhat visible to many eyes, copying becomes fairly easy. There are very low entry barriers. So how does Continente Siete build their protection policies?
I like to believe we turn a con into a pro. These low entry barriers motivate us to build our protection system base on innovation and continuous improvement. Stay ahead and let them copy!