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                 Cox Associates: Superior Business Decisions through Better Data Analysis

Business simulation models that contain adequate empirical data on customer behaviors, competitor strategies, and their responses to your marketing and engineering decisions provide one of the most powerful approaches to risk management and risk mitigation.    They allow the likely consequences of different business decisions, such as price plans, product launch dates in different markets, bundling strategies, and investments in network and operations infrastructures, to be predicted before costly investments or actions are undertaken. 

Cox Associates has developed business simulation models for the wireless, cable, data, and multimedia (bundled telephony, cable, and data service) industries.  Examples of business simulation software models developed since 1996 include the following:

1. Multimedia demand and market penetration forecasting model
2. Telephony growth-product introduction strategy model
3. Wireless Switch and Interconnect planning model
4. Cable customer acquisition, attrition and retention model

In each case, the main outputs included multi-year revenue projections and uncertainty analyses showing how the probable value (NPV) of a business depends on its structure, price plans, timing and locations of new service and network plant rollouts, changing composition of subscriber or customer demographics, service performance indicators, and competitor and regulatory actions.

Cox Associates' Business Simulation Models are distinguished from competing models by their use of well-validated customer behavior models based on extensive data.  Most competing models rely on speculative assumptions about how customers (and competitors) are likely to respond to changes. Our method is based on the following principles:

1. All revenue projections are driven by detailed modeling of customer purchasing, usage, and attrition decisions in response to company and competitor offerings.
2. Service offerings and service-level performance are linked to investments in network infrastructure, operations support, and staffing. These decisions also flow into the cost side of the financial model.
3. Competitor actions are modeled by simple behavioral rules that incorporate typical behavioral strategies. Sophisticated (game-theory and A-life) modeling strategies have been investigated by our researchers, but simple behavioral rules appear to be more practical and realistic.
4. Regulatory changes, technology innovations, mergers, and similar one-time events are modeled by stochastic binary indicator variables.
5. The preceding elements are integrated and use to clarify our clients' understanding of their business through several iterations of (a) Formal influence diagram structuring and quantification, leading to useful pictures of the business; (b) Statistical estimation of key empirical relations (e.g., for costs and demand functions) from market and engineering data. We can supply most starting values based on extensive industry experience and data when this is needed to make a warm start. (c) Simulation of customer transitions among behaviors over time, with links to resulting financial outputs. (d) Model validation, refinement, and communication, to maximize its value to planners and strategists.

We have applied this modeling approach successfully to over a dozen businesses in the U.S. and abroad, delivering interactive "electronic business cases" that add substantial insight and value to static paper displays.

Our business simulation models allow business planners and strategists to experiment with different assumptions and scenarios, to gain insights into effective competitive and technology strategies, and to examine the sensitivity of business value and viability to both strategic and tactical decisions. In addition to hypothetical and what-if capabilities, we bring special value to this area by providing the results from data mining and hard data on customer behaviors and survey responses in wireless, data, cable, and bundled service markets.