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Resourceful Revenue Recovery

Author:  Robert A. Malone
Editor,; Author: Chain Reaction; Columnist, Managing Automation and Inbound Logistics
Contributed by:
New Momentum, Inc.




This is an era of credit card theft, ATM theft, cell phone account theft, and identity theft. It is also an era of assault on the brands of enterprises, and big time. Brand and intellectual property and intelligence protection has all the excitement of a Bruce Willis chase. No, it is more exciting as it really counts. The only place a Bruce Willis film counts is in box office revenues and that is small change when compared to revenues of major electronic enterprises. Loss of revenue caused by counterfeiting and gray market incursions into an enterprise’s brand status and intellectual property rights has become serious business. It has taken on new importance in a business world that operates under globalization. Enterprise brand and intellectual property risk can act like a computer virus and if left uncorrected can eat out the very substance of a company’s revenue stream. Think of an apple being eaten to the seeds in its core. It is estimated that the sales of counterfeit products worldwide hovers around $600 billion a year. Not to be sneezed at. U.S. Customs & Border Patrol has seen a significant 83% increase in the amount of confiscated goods between 2005 and 2006. Just think how much they do not catch. They also state that the amount of seized counterfeit hardware has increased by a staggering 1,142% (this is not a misprint). One company Cisco estimates that competing gray market sales show a loss of revenue to the company between $200 and 300 million during FY 2006.

Today’s emphasis on globalization and outsourcing offers many cost reduction benefits to enterprises that manufacturer or use electronic components. But this business is not a just a bed of roses - there is a significant proliferation of counterfeits and sales through unauthorized channels. As enterprises expand their operations globally, quality issues can begin to appear in customers’ products. Research into these problems can show that remarked or counterfeit parts were used. This problem can lead to a serious loss of both reputation and revenues. Companies have identified it as a significant problem but in many cases they don’t have the data they need to determine the extent of how counterfeiting is affecting their business.

Forget Yahoo and Google

The cases are growing at an alarming rate and so are the losses. Surprisingly, the common recovery methods used by high technology companies are often publicly available free search tools like Google and Yahoo. This method provides millions of rows of unstructured data that companies need to cleanse, organize, and prioritize. This common method is also the least productive for revenue recovery.  

The only way to find fraudulent parts and products is by systematic planning, searching and evaluation. The blood hounds may get you to a spore track but you have to be prepared to analyze the options. This means not only good deep data but an agile process for detection, confirmation as in testing whether a product is original or a knock off (some knock offs actually work while others are placebos at best). The goal should be revenue recovery not just coming to know where an enterprise has lost advantage. This means finding and recovering revenue from counterfeit and gray market practice. When we are confused we often call for a map.

Where is the map?

The solution to these problems asks for more than a bloodhound. It calls for a revenue recovery process roadmap, and can ask for a partnership as well. Both are available in a combination of Corporate Risk International (CRI) and New Momentum. The roadmap consists of a revenue recovery structure that consists of: visibility, plan development, plan implementation, and the measurement of results. We will examine this road map in detail with helpful commentary from Tom McWeeney, who is the senior VP of CRI. CRI is a midsized investigative company in the revenue recovery business and the crisis management business. It specializes primarily in the IT, pharmaceutical, and Law arenas. Tom McWeeney says, "We feel CRI is more agile than some of its competitors. We are able to work with our clients and offer customization and beyond the normal and available open source domain."

Tom has this to say about New Momentum, "The New Momentum tool lends itself to high technology industries and this is one area that CRI concentrates within. New Momentum’s data recovery is uniquely good in the high technology recovery processes." "New Momentum has the ability to gather unstructured information from a variety of open market sources and provide access to several kinds of data including email-based data, which is important because this problem is bigger, more multi-dimensional, and more at the street level than management had previously thought. This ability to quickly tune our data, change formats, search in different ways, etc. makes it easier for the customer’s intelligence team to get the different kinds data they need rapidly." Here is the road map!


Step one on the map is a concentration on visibility. That means visibility into the counterfeit and gray markets that require seeing who is doing what where and how much. This search can isolate data that weeds out duplicate offerings, separates the players (counterfeit, gray, suspect, etc.) and formats this information into meaningful metrics and this is exactly what CRI does and with New Momentum’s help. Tom McWeeney says, "They drill down not like a Google search or other search companies. New Momentum takes it to the next level, and takes it to a dashboard and beyond to compilation. When people in this business are exposed to New Momentum’s solution their eyes are opened."

It is estimated that the sales of counterfeit products worldwide hovers around $600 billion a year.

New Momentum’s brand protection evaluation depends upon loading products and prices data. Using their advanced technology, they gather unstructured data from market web sources, XML data sources and gray market emails and in addition data which could include duplicates, market echoing, misnamed products, and other products that aren’t the customers’ products but show up anyway. At this point, New Momentum cleanses the data, filtering out the "noise" and confirming the visibility of their products. They then combine any results around the designated product family. Recently, a whole new dimension of advanced searching by ‘features’, or ‘capabilities’ rather than chip names or product family codes has been added to the offering.

Visibility depends upon data analysis and consequently cost analysis. This means identifying the scope of the violations and the first step is to identify where and with whom your products are being sold. This translates into identifying counterfeit activity and gray market activity and their estimated loss to the enterprise. Part of the loss may be unquantifiable as the public perception of a brand is critical. The accuracy and speed of this information is critical. The technology needs to find the comprehensive and unstructured market data from websites, email, file transfers as it incorporates the information from your ERP data, PLM data, transactions history and run it though data filtering and cleansing. The right market intelligence will help your team focus on where you will get the highest return on your efforts. You will need to incorporate specific technology solutions that will allow you to load your products and prices, allow for data analysis, identify the scope of the violations and be able to report the return on investment (ROI) to management. Tom McWeeney states that, "A core need in revenue recovery is being able to offer tools that get to the enterprise’s ROI and New Momentum is moving there."


Step two in revenue recovery is to develop a plan. When CRI works with a client they would expect them to subscribe to New Momentum’s Enterprise Brand Intelligence and thus establish the means to have the visibility and the intelligent data structure for creating a plan. Many organizations underestimate the significance of the proper plan development. The more time and effort the enterprise places in creating a comprehensive plan the better the implementation and results. Like any strong plan, the enterprise will need to set goals and measure frequently. Its goals need to be realistic and cover a one to two year timeframe. A concentration on due diligence investigations comes next. McWeeney says, "Our due diligence investigation has New Momentum input. Each company we investigate for has a different system and we work back and forth with them in a customized manner." An enterprise will want to plan every aspect of its program including test purchases and due diligence. After reviewing the data, they will decide exactly how they will go about approaching the seller that can lead to a buy. Initial questions that need to be answered include: Is this a massive problem? Is it long-term? How much does the enterprise want to buy it for? What quantity will allow it to become evidence if the enterprise decides to take civil/criminal action? Do they need to purchase at a certain price? Is there a price that will strengthen their role as evidence in future civil/criminal action? Should they get customs, FBI, Customs and Border Patrol (CBP), and Immigration & Customs Enforcement (ICE) involved?

How should they maintain the evidence and for what time period? A test purchase can lead to the need for test purchase engineering examination and in time to either civil action or criminal action, or both. The enterprise may need to set goals for each of its sellers. The goal does not always need to be civil or criminal action. An enterprise’s goal may be to make life so difficult for the counterfeiters that they drop their product and move on to something else.

Implement plan

The third map step revenue recovery is an implementation plan that carries out the conclusions of the planning process. During this activity Tom McWeeney says, "We use New Momentum for actionable intelligence. This leads to whether to do buys or not. New Momentum provides that critical data background." With the right information as background, the implementation is ready to begin. In this phase, the enterprise will need to prioritize targets, follow-through on plan, and incorporate the ability to consistently add new data that could alter the actions that are to be taken. The enterprise should not be afraid to outsource certain parts of their implementation to corporate risk specialists to the extent that such a decision makes sense. With a comprehensive plan in place, the enterprise (with assists from CRI and data and analysis from New Momentum) can start assigning due diligence investigations and conduct strategic under cover test purchases in regard to high volume targets. This process identifies whether the subject in question is legally registered, has a history of counterfeiting, or has a questionable general business profile. This step may also include engineering analysis, civil action, and criminal action. The enterprise may want to do some of this work with inside capabilities but outsourcing is a viable alternative. When doing a test purchase, CRI recommends a wire transfer because it allows the enterprise to have access to valuable data on the counterfeiter’s financial institution. This information may be helpful when taking civil and criminal action. Engineering analyses of test purchases may lead to civil actions (cease and desist letters, lawsuit, etc.). The outsourced undercover purchase of a product or part may require setting an undercover company. When engaging in pursuit of criminal action there may be a liaison with FBI, or CBP and ICE or all three. Whatever actions are taken need to be coordinated in-house and outside counsel. In the long run purchasing may require re-purchasing to ensure that the counterfeiters have actually ceased their illegal activity.

Measure results

Step four is measure the results. Revenue recovery happens by intelligent discovery or as a famous detective once said, "Just the facts Ma’am." The measurement of the revenue recovery is an outtake, a result of the process undergone. Part of any revenue recovery program needs to include a method to consistently measure results. On a weekly basis for instance, an enterprise has to determine the value of the product on and off the market. They will want to record the amount recovered through test purchases and document progress. They will take note the criminal and civil actions taken and their results.

The enterprise’s management team needs to take an active role in the revenue recovery process - continually reviewing results data and determining changes when needed. Or as Tom McWeeney reminds us, "Not all sales in a gray market reflect back upon the OEM or legitimate distributor.

The price has to be seen in the context of market price and manufactured price.

Data value requires close examination and there are not necessarily experts in each part or product. New Momentum helps CRI in recovery process to a great degree by quantifying." Tom says further that, "We look for sale prices that are not reasonable. We may do a buy, or not, depending upon the discount. Is it a price that can lead to profit? We use New Momentum’s input to help us measure these results."

"When people in this business are exposed to New Momentum’s solution their eyes are opened." Tom McWeeney| The results have to be presented to enterprise management. At the customer’s request, New Momentum can implement a monitoring process around an analysis designed to produce a standard set of outputs that are ‘meeting’ or ‘boardroom’ ready. Armed with these outputs, an intelligence group can attend high level or even board level meetings to discuss changes in the gray market landscape, new brand, IP, or counterfeiting risks which may be appearing. These risks can then be reduced with follow up or on-going legal action and an overall strategy for setting priorities based on product families or technology groups. These reports, which are provided in both a summary and detail level, consist of: trending charts across all product families; by customer assigned product family types showing change in market activity; by individual part or part family within the product family; by geographical region for quantity, number of buy/sell offers and number of new companies interested in the customer’s products. The reports also include top ten-style rankings of individual companies who trade in the largest quantities of the customer’s products and who do the most number of transactions, regardless of total quantity. All of the summaries and analytics above can always "drill" back to the original open market buy/sell transaction that contributed to the total or summary. This data is maintained historically and archived so that as patterns of activity or risk emerge in the analytics, record by record research can be done back to the original time period where the pattern started.

An ongoing activity

Protecting brands and intellectual property is not a once in a life time event. It is an ongoing activity. The steps above make it clear that an enterprise has to first understand its problem and then it must develop a plan to mitigate the problem and this means getting a management buy-in. Given the go ahead the plan must be implemented and after the findings and action the plan should be evaluated for its effectiveness. With the data the New Momentum solution provides, a customer can approach partners who are selling unauthorized products, brokers buying and selling on the gray market or companies buying/selling counterfeits and makes an effort to turn them into legitimate distributors selling authorized products at the appropriate price and quality levels. The result can be that the violators either become authorized distributors or they know they’ve been found out, and they cease operations. By way of review a New Momentum solution builds specific search agents that empower organizations to search hundreds of thousands of pages per night including open market web servers, franchise web servers, gray market sites and even trade board email blasts.  

The advanced web mining and reporting technology quickly provide global visibility via a user defined dashboard view- allowing an enterprise’s team to manage the entire operation from one powerful screen. New Momentum’s web based solution is helping companies get the visibility they need to start an aggressive revenue recovery program and take back control of their business.

New Momentum providess brand protection solutions for manufacturers who make or use electronic components. With a focus on supply chain risk management, New Momentum’s software solution allows manufacturers to constantly monitor the open marketplace through the collection of global buying and selling transaction data from Web sources. The San Clemente, California based company also provides services for supply interruption, partner compliance, and asset valuation applications.

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