There was a Shopkeeper who was operating a successful fruit market in a busy area of a large city. The Shopkeeper was known for carrying the best quality produce, having the best customer service, and maintaining a competitive price – and he was rewarded with many paying customers and a successful, growing business.
Over time, the Shopkeeper began to notice that – while the number of visitors to the shop remained the same – the revenue began to decline. Furthermore, the Shopkeeper noticed that his costs – which he would have expected to decline at pace with revenue – were, in fact, INCREASING over time.
The Shopkeeper hired the Firm – a specialty consultant for fruit shop revenue loss – to investigate the mystery. Having seen many cases similar to this in the past, the Firm quickly identified the issue: the fruit shop had a back door which was left unattended, through which patrons could depart, unnoticed, with their illicitly-obtained fruit.
The Shopkeeper and the Firm quickly arranged a contract to help detect stolen fruit incidents. The Firm would stand at the back door and keep track of people sneaking through the exit with stolen fruit – reporting to the Shopkeeper each month how many people walked out without paying for their fruit. Additionally, the Firm would provide a description of each thief to the Shopkeeper to help identify and prevent future theft from that individual.
Not wanting to get ripped off by the Firm, the Shopkeeper insisted on a Key Performance Indicator to measure the Firm’s success: each month the Firm must detect and report at least 200 stolen fruit incidents.
The first month, the Firm met the KPI with ease – 320 stolen fruit incidents. The second month, another 320 stolen fruit incidents were reported (the Shopkeeper wanted to validate and eliminate any possible false positive identifications). As the process matured, and more would-be thieves were identified before walking through the back door, the number of stolen fruit incidents began to sharply decline. In Month 9 of the Contract Year, the Firm reported just 75 stolen fruit incidents.
The Shopkeeper’s satisfaction with the Firm began to decline alongside the reduction in stolen fruit incidents. The Shopkeeper continuously complained that the Firm was not meeting the pre-defined KPIs, and they must begin reporting at least 200 stolen fruit incidents per month or the contract will be cancelled.
The story of the Shopkeeper and the Firm is a much-too-simplistic story to illustrate how measuring the wrong results can incentivize wrong business decisions. By demanding that the Firm produce evidence of >= 200 stolen fruit incidents per month, the Shopkeeper incentivizes the Firm to make sure there remains a consistent presence of theft.
The Only KPI That Matters
What if, instead of measuring and incentivizing a consistent level of theft, the Shopkeeper focused on a more meaningful measurement – an increase in revenue back to expected levels? This KPI would encourage the Firm – and other competitors bidding for the Shopkeeper’s business – to innovate and create new, proactive ways to prevent revenue loss.
The illustration of the Shopkeeper and the Firm resembles a caricature of the current SIM Box fraud control landscape for mobile network operators. We often will see Fraud Managers looking for a solution to completely eliminate fraud from their network and including a KPI to meet a minimum number of detections per month in Month 36 of the contract. In an ideal world, these goals would be mutually exclusive – you cannot completely eliminate fraud and continue to deliver fraud detections.
A more important KPI – and I would argue that it’s the only KPI that matters – is a net gain in revenue. Our goal is to provide Returns on Investment that a Fraud Manager will be proud to report to their C-Level executive team, and we often encourage our clients to look at their increasing international termination revenues as the true measure of success.
At LATRO, we continue to push against the industry trend of KPIs that encourage enduring levels of loss-inducing fraud. Instead, we strive to provide innovative and unique solutions that proactively detect, block, and eliminate fraud – while focusing on positive ROI for our clients.
Case Study – Africa SIM Box Fraud Investigation Project
Earlier this year, we had the opportunity to complete a fraud investigation project with a mobile network operator in Africa. Our team spent several weeks on-the-ground, working with mobile network operator staff and local law enforcement to locate and seize GSM Gateways (SIM Boxes) being used to illegally terminate international voice traffic.
The team was able to locate 13 individual SIM Box operations, including 376 GSM modems. At maximum utilization, these illegal SIM Box operations were able to terminate > 500k minutes of voice traffic per day and exposed the operator to a potential revenue loss risk of $3M USD per month (Maximum Revenue at Risk). These figures, of course, assume that the devices would be operating 24/7, which is never the case.
Rather than market inflated revenue recovery figures based on hypothetical maximums and theoretical usage patterns, the mobile network operator graciously shared the actual international termination volumes before, during, and after the project to obtain a realistic ROI measurement. The results were astounding.
Prior to our project, the mobile network operator averaged 1.45M minutes of incoming international voice traffic per day. After the completion of our project, and the successful elimination of 13 SIM Box operations, the operator reported a daily average of 1.65M minutes of incoming international voice traffic. This 14% increase in traffic – due to elimination of illegal grey traffic termination routes – represents a real revenue recovery of $470k USD over a one-year period.
Within 90 days of completing this project, our client experienced a 156% Return on Investment, which translates to almost a 10X ROI over one year. The project paid for itself in less than 40 days.
One of our goals is to encourage mobile network operators to pursue solutions that bring real financial results, and to eschew industry KPI trends that incentivize perpetual problems – like the Shopkeeper and the Firm.
Our team is proud when we are able to help our clients recover that level of revenue – which would have been lost to grey route providers and SIM Box fraudsters – because it means more capital for an operator to invest in critical infrastructure which enables global connection, more resources to provide employment opportunities for the local community, and more economic value for those investing in the growth of developing markets.
For more success stories and pictures of illegal SIM Box equipment seized by law enforcement during LATRO-led fraud investigation projects, follow @simboxhunter on Instagram
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