OIS Introduction: OIS is the fulfillment of MILP modeling’s “most profit possible” functionality. This fulfillment is analytically accomplished by relaxing a MILP model of the firm’s income statement’s assumption of a fixed forecast. Relaxing this assumption is accomplished by populating the model with response functions developed by a marketing mix model (MMM).  As context, the author has been working  since 2009 with Glenn Sabin of ZS Associates and Mike Hanssens of UCLA’s Anderson business school, both experts on these functions.

OIS Business Case: As outlined above, OIS’s business case is straightforward.  Specifically, i) a MILP  baseline model of the firm’s income statement is created by OIS’s MILP vendor  ii) then that model’s assumption of a fixed forecast is relaxed by populating the model with response functions and iii) the resulting optimization demonstrates how much profit the firm forfeited by not using OIS last year.

The MILP vendor will partner with ZS to provide the necessary response functions required for Stage I . It’s suggested they be drawn from either ZS or the vendor’s current clients because of their familiarity with the client and, perhaps, its possible in OIS. Also, the two firm’s  will decide what are the appropriate SIC code(s) for the initial OIS prospects. Also, should it make sense, the partners may choose as an incentive for this essential OIS “start up”phase to discount the cost of creating the base-line model and associated response functions.

It will also be up to the MILP vendor and ZS to decide when and how additional response function vendor(s) will be added as alternatives to ZS. Considerations will include SIC codes ZS does not wish to service, vendor(s) with SIC code MMM experience, vendors with whom the prospects are already familiar apropos their previous  MMM efforts et al.  ZS may also decide to vet all candidates to assure they can provide the MILP vendor the necessary response functions.

Finally, to illustrate the efficacy of the business case, a simple proof of concept OIS business case model was created for the previous year’s income statement of an iconic global gift company.

The results were astonishing: the firm had left 50-150% of last year’s profit on the table.  See the article, OIS Works for the details.