BUSINESS: For Princeton Consultants, it’s all optimization

By Stephanie Vaccaro, Staff Writer
   For Princeton Consultants CEO Steve Sashihara, competitors are not the enemy — waste is.
   In his new book “The Optimization Edge,” he makes the case for companies utilizing optimization software that aids the decision-making process.
   ”What optimization is in a nutshell is using this new math technology and high speed computers to make recommendations that formerly you made in your head,” said Mr. Sashihara.
   A simple everyday example of optimization software is GPS. While most software is designed to provide information, a GPS makes recommendations based on data.
   In the past, this technology was used only for very rich companies. It is now available broadly. Optimization can help companies with revenue growth, asset efficiency and strategic decision making.
   ”It’s not one of these take it out of one mouth and put it in the other,” said Mr. Sashihara. “Your enemy is waste.”
   Advances in technology impact consumers and individuals differently. As consumers, we don’t want to listen to our MP3s any faster because our ears can only hear them at a certain speed, said Mr. Sashihara.
   But businesses are asking: How can I harness this power to make more money to get ahead of a competitor?
   As little as five years ago, much of the needed data was in filing cabinets. Now, companies are inundated with data, the dilemma is what to do with it all?
   ”This is what optimization is about,” said Mr. Sashihara. “Rather than just displaying the data using clever graphs and statistics, optimization allows the data to be used to make recommendations on what you should do as a business.”
   In the book, Mr. Sashihara offers examples of businesses that are household names — including McDonald’s, UPS and Marriott — but wants his audience to know that optimization can be used by almost any organization.
   His firm works with many transportation companies, one of which is a large railroad company that wanted its business customers to access their expertise on the Web and to book shipments on the Web.
   ”What the optimizer would do is configure different train schedules and times to give them the best schedules and the best prices,” said Mr. Sashihara. The result was a $200 million gain in the first year.
   ”Even by railroad standards, it’s big,” said Mr. Sashihara.
   ”In terms of more efficient use of assets, one of our clients is a very large printing company, one of the very largest of the printing companies, and the challenge is that they have extremely expensive scarce assets — printing presses, binding lines — and the scheduling for those are very complex,” he said. “We applied optimization, and as a result of using optimization, they made such significant improvements in their base scheduling to be more efficient, they’re now the most efficient in their business.”
   ”There’s nothing like a bad economy to bring out the most efficient,” said Mr. Sashihara. “But because of their efficiency, it allowed them to buy their next biggest competitor.”
   His firm also does a lot of work in the financial services industry. One of their star clients last year was a high frequency hedge fund that buys and sells stocks at high speed.
   ”The challenge was to do this faster and better in a very, very difficult market,” said Mr. Sashihara. “And as a result of optimization, we’ve allowed them to increase their trading volumes by 20 times, 2,000 percent, and to go from unprofitable to profitable.”
   for Mr. Sashihara, location matters.
   ”This is the crossroads between some of the very, very best academics on planet earth and some of the most important and forward-looking businesses,” said Mr. Sashihara, having written the book to try to get this out of the realm of academia and into the business world.
   Mr. Sashihara started the consulting firm upon graduating from Princeton University in 1980, and immediately hired his friend John Crumiller, who studied computer science at the University of Delaware.
   When they started Princeton Consultants 30 years ago, and for the first few years, they only knew about the IT side.
   ”We were computer geeks, and it took us a while to figure out that while technology is useful, it’s exciting, it’s cool, it’s not sufficient,” said Mr. Sashihara. “It’s somewhat like getting a fantastic exercise bike. It’s helpful but you need some other ingredient to make it successful.”
   ”Rather than saying, we’ll bring in the high-tech wizards, and then we’ll bring in the people-nuanced people and blend them together, you really need to have teams of people who can do both sides,” said Mr. Sashihara.
   To find people with high levels of aptitude in these areas, candidates undergo a battery of IQ and psychological testing.
   ”Even starting out, we were very rigorous on the recruiting end,” said Mr. Sashihara. “We do a lot of work with PhDs in physics, mathematics, engineering, science, and we apply those people — their intellect and their curiosity — to business problems.
   ”Many of those people, when they work in business areas, they’re working in research. Whereas, we take those world-class caliber people, which Princeton is very generous with, and apply them to actually solving applied business problems. So not somebody who will make money for somebody five, ten years in the future, but somebody who can make them money this quarter or next quarter.”
   The service their firm offers involves identifying the high value optimization opportunities in a company and converting them into business results.
   ”That’s basically our one-two punch,” said Mr. Sashihara. Princeton Consultants is currently taking applications.
   For more information on the book, see www.optimizationedge.com. For more information on Princeton Consultants, see www.princeton.com.