Technology in the Now

The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy

©2009 RealTime Intelligence • www.RealTimeIntelligence.com June 2009

 The question therefore is not so much whether we are the masters or the slaves of our machines, but whether
machines still serve the world and its things, or if, on the contrary, they and the automatic motion of their processes
have begun to rule and even destroy world and things.

--Hannah Arendt

Document Title
Technology in the Now: The
Role of Targeted Intelligence in
a Comprehensive Loss
Prevention Strategy
Introduction
Whenever a new technology emerges, the first question most people ask
is “What does it do?” Humans are by nature curious and attracted to
novelty, traits that propel us toward innovation and have made possible
many of the improvements we enjoy in modern life.

Technology vendors use this to their advantage in marketing. Take a look

Author
Carey S. Head
Director, Product Management
RealTime Intelligence
Publish Date
June 2009
Abstract
Targeted Intelligence is an
emerging technology for
reducing shrink in retail
organizations. By automating
the critical “execution” phase of
Loss Prevention initiatives,
targeted intelligence solutions
become an indispensible
component of the LP process.
around the trade show floor, and you’ll see vendors showcasing the
“sexiest” portions of their products on large screen monitors,
demonstrating all of the novel things they can do.
But in the final analysis, many of these “sexy” products that “do”
interesting things, appealing to the human thirst for novelty, turn out to
provide very little real value. Because what makes a technology valuable is
not its sex appeal nor its feature set, but whether it makes possible the
achievement of a business goal.
This paper looks at the business goal of reducing shrink, specifically from
the standpoint of improving processes within Loss Prevention
departments. It will begin by examining current Loss Prevention practices
aimed at minimizing losses at the point-of-sale, and the technologies
already in use throughout the industry. Then it will evaluate how the new
technology of targeted intelligence fits in with current practices and will
show how implementing targeted intelligence allows Loss Prevention to
execute more effectively on the tools and analysis already in place in order
to achieve less shrink.

For more information, contact

RealTime Intelligence
(704) 631-2500
RealTimeIntelligence.com

2 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.
Question Everything
Describing the Loss Prevention function in terms of a process, or methodology, is critical because it brings to focus
the need of LP departments to provide clear, repeatable, and predictable results. One year with greatly reduced
shrink is wonderful, but if the numbers aren’t sustainable the success will be short-lived. When evaluating a new
technology or product, the fundamental criteria by which the product should be considered is where does it fit and
does it add sufficient value to the LP process?

At its most basic level, the Loss Prevention process—specifically the process of reducing shrink that occurs as a
result of interaction with the point-of-sale, whether due to employee theft or training—can be simplified into
several questions, each with (potentially) a technological solution.
Most retailers have invested
WHERE ARE WE LOSING MONEY? tremendous amounts of capital
This is a question that businesses have been answering for some time now, on point-of-sale, data
and there are many solutions that have been employed to provide these warehousing, connectivity, and
answers. For example, one of the primary advantages of points-of-sale data mining, and in analysts to
over the older cash registers is their ability to consolidate sales data quickly review and report on all that
and reliably, thereby providing management with clear, measurable, and data. But what investments
timely data with which to do their analysis. Through this technology, and have been made to ensure all
others, retailers are answering the first question. that analysis reaps its potential
benefit?
WHY ARE THESE LOSSES OCCURRING?
Arbitrary actions produce arbitrary results. Understanding why losses exist is a necessary step in formulating a
successful plan for eliminating them. For many years, Loss Prevention used anecdotal evidence and expert
knowledge to try and answer this question. While many Loss Prevention initiatives were successful, it wasn’t until
the adoption of data mining technologies (sometimes referred to as “Exception Reporting” in the retail industry)
that organizations were able to quickly and systematically discover the patterns of activity that caused shrink.

The concept of identifying the patterns of activity is an important one, because it describes the series of events
which are most likely to cause or be indicative of loss. Put another way, once Loss Prevention organizations
recognize which patterns of activity are “high risk” for incurring loss, they have answered the “Why?” question,
and can initiate actions to eliminate them.

HOW DO WE CORRECT THE ISSUE?

Like a team that has been practicing all week, the two previous steps were preparation for the LP equivalent of
“game day”. How is the game plan put into action? Most retailers have invested tremendous amounts of capital
on point-of-sale, data warehousing, connectivity, and data mining, and in analysts to review and report on all that
data.

But what investments have been made to ensure all that analysis reaps its potential benefit?

3 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.
 Bell the Cat
According Aesop’s famous fable The Mice in Council, the rodents had
devised a simple but elegant solution to their most pressing issue: They
would tie a bell around the neck of the resident cat, thereby preventing
it from sneaking up on them. While all agreed that this was the best
proposal, the entire enterprise was doomed when none would come
forward to actually “bell the cat”.

Affecting positive, lasting change in large and dispersed organizations like

retail is much more difficult than simply determining what behaviors
need to be altered. Often, Loss Prevention is prevented from realizing
success not because of a lack of knowledge or will, but due to a lack of
resources.

While traditional awareness campaigns are an essential part of an execution plan, by themselves they do not
provide a complete solution that meets the requirements discussed above: reliable, predictable, and sustainable
elimination of the patterns of loss occurring in the stores. This is the gap that targeted intelligence fills.

WHAT IS “TARGETED INTELLIGENCE”?

Targeted Intelligence solutions, such as the CatchPoint Suite for Loss Prevention, provide situational awareness to
i
associates within the organization. To quote the U.S. Army , “Situational Awareness is the ability to generate
actionable knowledge through the use of timely and accurate information about the… enterprise, its processes,
and external factors.”

Although targeted intelligence products work very closely with data mining, there are several key points of
differentiation as highlighted in the Army’s definition of situational awareness.

Timely
Data mining solutions are, by their very definition, forensic in nature and perspective. They take large quantities of
historical data and can identify trends in the data that correlate to the past incidents of shrinkage. These are the
patterns of loss which are so critical to the LP process. But since the data mining is backward looking, it doesn’t
provide associates with the ability to recognize those patterns as they occur, especially when the patterns of loss
include data collected from multiple sources or take place over an extended duration.

Targeted Intelligence is “technology in the now”, giving users the information they need to act in order to affect
change. Consider an example where Loss Prevention has identified “Item Cancel” transactions at the POS as being
a target for improvement. Employee training and awareness programs will help reduce the number of incidents,
but these methods don’t occur in the same time and place as the issue itself, and therefore aren’t always retained
by employees. The targeted intelligence solution will notify an in-store associate as soon as an employee’s
transactions have met the “high risk” threshold, allowing the associate to interact with the employee and reinforce
the company’s policies and expectations. When these activities point to employee integrity issues, the associate
could be directed to warn or remove the employee from the POS, depending on the severity of the activity.

4 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.
Actionable Knowledge
Targeted Intelligence is not a report; it is a notification to act.

Reports require analysis, which can be subjective and usually require additional information and/or judgment on
the part of the reader before acting. A targeted intelligence notification, on the other hand, gives the recipient
immediate instructions on which to act, making possible the use of basic in-store personnel to perform key loss
prevention functions.

Furthermore, Targeted Intelligence is not an alert. Alerts are nothing more than brief periodic reports. They
broadcast status data to recipients indiscriminately, provide no clear call to action, and are often deleted as soon
as they are received. In contrast, Targeted Intelligence provides rules-based, specific, and contextual information
to the individual able to act on that particular notification, and include instructions for resolution.

Environmental Context
Retail environments are not just a point-of-sale operating in isolation. There are many other systems at work
which provide valuable context to the transactions taking place. In order to provide true situational awareness,
the rules which drive targeted intelligence need to be able to monitor multiple systems simultaneously, and to
aggregate the data from each into a single stream of events which can be evaluated together.

HOW TARGETED INTELLIGENCE BENEFITS THE LP PROCESS

The previous section described what targeted intelligence is, and how it allows Loss Prevention organizations to
execute on the analysis already taking place. But there is significantly more value in Targeted Intelligence than
simply as a mechanism to monitor for high risk activities and communicate them to store associates.

Eliminate the routine tasks in identifying issues

Data analysis is an indispensible tool for indentifying systemic issues within an organization. But once those
patterns of loss have been identified, it is grossly inefficient to expend those resources again and again to perform
the same routine analysis on the same kinds of data. The initial results of the data mining activity will provide Loss
Prevention with the business rules needed to automate the monitoring and notification tasks. This frees valuable
resources to focus on other opportunities for improvement, and allows LP to positively affect more situations than
possible before.

Partner with store personnel

Few retailers have enough LP personnel to attend to all potential areas of loss in each store: stock rooms, checkout
lanes, front and back doors, etc. Absent that, Targeted Intelligence allows LP to take advantage of human assets
already at work inside the stores.

Because targeted intelligence notifications are rules-driven, and provide the context and plan for action, there’s no
guesswork required on the part of the in-store associate. Store and/or department managers can be effectively
used as an extension of the LP organization to affect positive change. Associates are willing to assist not only for
the P/L benefit, but because the solution only sends them the issues that require action—leaving them free to deal
with their other pressing responsibilities.

5 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.
Responsiveness
Loss Prevention is more than recovery after a loss has occurred. It has its greatest impact on the company when it
can prevent and mitigate losses. To do this, LP organizations need the ability to recognize losses as quickly as
possible in order to affect the outcome.

No LP professional is going to rush to a store to tackle an employee on receiving a notification, but they can reduce
the severity of the issue through simple acknowledgement. It has been conclusively shown that shoplifting is
greatly curtailed through good customer service. Greeting customers and being present on the floor lets potential
thieves know store personnel is aware of what is going on, and reduces the windows of opportunity for theft.

A store manager interacting with a cashier immediately after suspicious transactions have been rung has a similar
effect: the employee is more aware of the prospect of getting caught and of the narrowing window of opportunity.
While this will not prevent all employee theft, it will help keep opportunistic employees honest and curtail the
amount of loss incurred by employees who have already begun stealing.

Drive corrective action

Improve LP awareness campaigns and HR policy compliance by including the plan for action with notifications.
Associates can be directed to specific forms, websites, or numbers to contact when particular events occur. In
addition, by specifying the expected next steps, Loss Prevention can initiate follow-up plans which measure the
effectiveness of the program.

Consistent response
Inconsistent actions to identified issues can lead to unexpected
Targeted Intelligence is not a report;
or misleading results. Targeted Intelligence notifications include
it is a notification to act. the plan for action with the message, so improvement becomes
more predictable and reliable across the enterprise. And,
because the action with the employee is clearly defined, liability
resulting from improper employee interaction is nearly eliminated.

Maintain target levels beyond the initial focus period

Loss Prevention organizations don’t have to use targeted intelligence solutions to see improvement. By expending
enough resources (people, emails, memos, training, etc.), a program can realize shrink reduction in specific areas.
But once focus has moved on to the next issue on the priority list, and those resources are no longer driving
awareness and response, the number of incidents begins to creep back up.

Automated business rules can monitor thousands of patterns of loss without any human involvement, allowing LP
organizations to drive and maintain reduction in shrink over the long term.

6 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.
Plan of Action
Targeted Intelligence is a simple, effective way to maximize the benefit of existing Loss Prevention tools and
processes. An integral part of any Loss Prevention program, Targeted Intelligence solutions have an immediate
ROI, which can be extended to other departments within the enterprise.

There are many companies now attempting to provide Targeted Intelligence solutions, generally as an add-on to
their existing product. As you begin to evaluate which solution is right for your organization, consider the
following criteria.

Comprehensive Integration Capability

The Targeted Intelligence solution should be able to monitor data and events from all the relevant systems in your
stores, including POS, CCTV, EAS, and alarm panels. In order to extend the ROI of the product to other
departments, such as Operations, it will also need to integrate to systems such as inventory and timekeeping.

The best products on the market are those which translate the data from these disparate systems into a common
format. This feature will allow Loss Prevention initiatives to continue without interruption, because the business
rules to continue to function as the data sources change (for example, when multiple points-of-sale exist due to a
technology refresh or brand acquisition).

“Data first” focus

Now that Loss Prevention organizations have proved the value of Targeted Intelligence solutions, many companies
have added components to their existing solutions which claim to address this need. Often, these are CCTV
vendors who provide alerting to supplement their existing video-to-POS-transaction features. Other companies
have acquired products and bolted them onto their existing offerings.

In all of these cases, any Targeted Intelligence capabilities are secondary. In order to realize the ROI and value
discussed here, insist on a vendor that has a “data first” mentality, rather than video-first or security-first . Also, be
wary of vendors whose primary offering is a video or hardware security product. Too often, their Targeted
Intelligence solutions do not perform as well when integrated with competing products.

Packaged Rules
Getting started with Targeted Intelligence can involve a steep learning curve if the product doesn’t provide out-of-
the-box solutions sets. Ask your vendor if their solution has packaged rule-sets which are based on customers’
best practices.

Enterprise capable
In order to achieve situational awareness, the Targeted Intelligence solution needs real-time access to the in-store
systems. This means a distributed client install base. The preferred solutions should remotely configure and
maintain business rules from a central server, without the need to send costly technicians on-site.

i
Situational Awareness definition taken from http://www.army.mil/armyBTKC/focus/sa/index.htm.

7 Technology in the Now: The Role of Targeted Intelligence in a Comprehensive Loss Prevention Strategy
© 2009, RealTime Intelligence, Inc.