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StructuredProblemSolving&HypothesisGenerationGoalsofthismoduleLayoutasystematicapproachtosolvingbusinessproblems–“StructuredProblemSolving”Establishacommon“modusoperandus”forConsultingteamsPracticethesuggestedprocessonareal-lifeexampleStrategyisaboutthrivinginachangingworld…“Thepicture’sprettybleak,gentlemen...Theworld’sclimatesarechanging,themammalsaretakingover,andweallhaveabrainaboutthesizeofawalnut.”…whichisallabout“decisionmaking”“Strategyisaboutmakingdecisions”Thebeststrategy“makers”areabletoblendanalytictechniqueswithanunderstandingofthefutureuncertaintiesandsimplegoodluckBasedonoftenimperfectinformationtheymakedecisionsandthendriveimplementationTherearetwobasicapproachestoproblemsolving;butbothcanworkThe“there'saponyinheresomewhere”approachThestructuredanalyticapproachPotentialforrichpowerfulsolutionsScurryaroundanalyzingtonsofdatatoseeifyoucanfindsomethingusefulGetthedataPotentialforgood(andmixed)solutionsDefineproblemandhypothesesDefiningtheissueisthefirststepinthejourneytofinalrecommendationsDevelopConclusionsandMakeRecommendationstoImplementFindInsightsAnalyseDataGatherDataFormHypothesesSowhat?—aha,newthoughtWhatyoushoulddo…andhowDefinetheIssuesWhatarethequestionskeepingyouawakeatnight?FactualinformationgatheredtoproveordisprovehypothesesAnalysewhatthedatatellsusStatementsthatprovidedirectionandstructurefortheanalysisHypothesisformationensuresthatouranalysisisfocusedonourclient’sproblemFormHypothesesDefinetheIssuesGatherDataAnalyseDataFindInsightsDevelopConclusionsandMakeRecommendationstoImplementSowhat?—aha,newthoughtWhatyoushoulddo…andhowWhatarethequestionskeepingyouawakeatnight?FactualinformationgatheredtoproveordisprovehypothesesAnalysewhatthedatatellsusStatementsthatprovidedirectionandstructurefortheanalysisHypothesesaredevelopedinthreestepsWhataretherealstrategicissues?Whatistheimpactontheorganisation?Whatarethepriorities?Wethink...Itlookslike...Therightanswermaybe...Theoptionscouldbe...Webelievethistobetrue...Aseriesofstatements,notyetbackedbydataBasedoninitialdatasearchorexpertopinionsAnumberofassertionsneedtobetrueforahypothesistobevalid.Isthereamarketforwhitelabelinsuranceproducts?DirectchannelsaregrowingRetailershaveastrongchannelandbrandThereareexistingproductsChubbInsurancecanaccessnewbusinessbyusingthebrandstrengthofTescoresultingIslowcostofacquisitionandprofitablebusinessDefinethequestionReviewandDescribeMultipleAssertionsFormthehypothesis123AhypothesisshouldidentifynotonlytheissuebutalsothecauseandtheimpactThinkthroughthesethreestagesasyoucreateahypothesistohelpyouplanouthowyouwilltestit:Whatistheissue?Whatistheunderlyingopportunity?Whereistheadvantage?Whatdoyouthinkcausestheissue?Whatarethekeydriversoftheprocess?Whatistheimpactoftheissue?Howcanwetellthereisanopportunity?Whydowecare?“xisanopportunity...”“…dueto...”“…resultingin...”TheStructuredProblemSolvingProcesscoversthelifecycleofaconsultingengagementDefinetheProblemStructuretheProblemDevelopaHypothesisExecutetheAnalysisDevelopaRecommendationCreatetheCommunicationDeliverCommunicationFollowUpwithClientCoveredincurrentmoduleCoveredlaterintheweek©2004Capgemini-AllrightsreservedXxx/yymmdd-StructuredProblemSolvingandHypothesisGeneration,Author/11TheBasics-ProblemSolvingApproachDEFINETHEPROBLEMSTRUCTURETHEANALYSISFINDTHESOLUTIONOurproblemsolvingapproachproducesresultsthroughansweringasimpleseriesofquestionsIsthereaproblemoropportunity?Ifsowheredoesitlie?Whydoesitexist?Whatcouldwedoaboutit?Whatshouldwedoaboutit?Fine,butIWIKH2dothis...Alwaysask:“AretheyMutuallyExclusiveandComprehensivelyExhaustive(MECE)?”Logicalpyramidsarebasictoolsforthisapproach,helpingyoutodefine,structureandsolvetheclient’sproblem1. Ideasatanylevelinthepyramidmustalwaysbesummariesoftheideasgroupedbelowthem2. Ideasineachgroupingmustalwaysbethesamekindofidea,andtheymustanswerthesamequestionimpliedbytheirsummary3. Ideasineachgroupingmustalwaysbeinalogicalorder:MainAssertionKeyLineDeductivelyorinductivelyTracecourseortimeorderDivideorstructuralorder(e.g.,Sales,Marketing,Manufacturing,etc.)Classifyordegreeorder(e.g.,mostimportant,2ndmostimportant,etc.)Logicalpyramidsincreasetheeffectivenessofproblemsolving,resultsdeliveryandcommunication…VerticalstructureHorizontalstructureKeyline/narrative…buthelpensurethoroughanalysis……whiledecreasingcomplexity……andincreasingthepowerofpresentationsLogicalpyramidshavesimplerules…TheeffectivenessofourworkdependsheavilyonhowcompellinglywecanarguethatthesolutionweputforwardservestheclientbestThereasoningwehavetoapplytocometooursolutioniscomplexanddifficulttosummarizeforbriefclientinteractionsTobuildsuccinctandcompellingpresentationsofourwork,weuselogicalpyramidsasthepreferredcommunicationstyle:PyramidsmakeinformationmorememorableandmeaningfulTheyleadtoaclearerdefinitionoftheproblemswesolveTheystructureoursolutionstotheseproblemsandmakethemmorecompellingSource:BarbaraMinto,“ThePyramidPrinciple”.…whichwillmakeyourwork/lifemucheasiertohandleDefineandStructuretheProblem“Ifyoudon’tknowwhereyouaregoing,anyroadwilltakeyouthere.”

-AnonymousWhyproblemdefinitionmattersInstructuringaproblem,breakitintosmaller,easier-to-handlecomponentsANDstartwiththerightdefinitionsUSCarMarketLightTrucksPassengerCarsBig3MiniVansSport

UtilityVehiclesFordGMChryslerButbecareful—whydoesthisnotwork?"MutuallyExclusiveandComprehensivelyExhaustive"ThemostimportantruleforanystructureyouimposeDivideClarifyDiagnostic

FrameworkCauseEffect

FrameworkStructural

FrameworkProblemStructureTohelpyousolveaproblem,yourstructuremust:DisaggregatetheproblemintosmallerandeasiertosolvecomponentsBea“MECE”descriptionoftheproblemanditspossiblesolutionsTraceCauseTherearethreewaystostructureabusinessproblemHeadHurtsPhysicalMentalExternalInternalStress,TensionHypochondriaBumped,BruisedHeadAllergiesBadWeather,SinusHeadache,

Flu,ColdBrainTumorWaterontheBrainExample1—disaggregatetheproblemintoadiagnosticsolutiontreeSCooPStoreiswithinshoppingradiusdonotknowaboutthestoreknowaboutthestorenevervisitthestoreenterthestoredonotbuymakeapurchasedonotcomebackmakerepeatpurchasesLocationAdvertisingSignage,CIConversionCustomerValueRootCauseExample2(tracecause)—disaggregatetheproblemintoacause-effectframeworkHowcanTESCOimproveitssalesproductivity(sales/sq.ft.)?AccounttypePacksizeREPURCHASETargetmarketpersuadedtorepurchase?DISTRIBUTIONBrandmadeavailable?TRIALTargetmarket

inducedtotry?AWARENESSTargetmarketaware?ProductrejectionPrice/valuerejectionFrequencyofuseOccasionofuseConsumerprofilePackDisplayPromotiontypePromotiontuningSell-ineffectivenessFeedbackIfalllinesofinquiryfailtorevealaproblemsource,gobacktoconsiderwhethertargetmarketandconsumerbenefithavebeenaccuratelydefined.AttributeawarenessAdvertisingrecallAdvertisingspendingrateMediamixRegionalweightAdvertisingcommunicationTargetmarketConsumerbenefitRegionSalesforcecoverageSalesforcedirectionTradetermsExample3—disaggregatetheproblemintoanintrinsicstructureWhydoesWimpy’snotshowtheanticipatedfinancialperformance?ChannelSource:BarbaraMinto,“ThePyramidPrinciple”.Productspec.SellingpriceBrandnamePackagingPOSITIONINGBrandproperly

positionedforthe

market?Exercise1—Kmartvs.Wal*Mart:defineandstructureKmart’sbusinessproblemSituationKmartandWal*MartoperatesimilarchainsofFulllineDiscountstoresDifferentpricingstrategies:Kmartfollowsapromotionalpricingstrategyofweeklysales,offeringdiscountsonselecteditems,Wal*MartfollowsanEDLPstrategy(EDLP=EveryDayLowPrices);Kmart'sregularpricesarehigherthanWal*Mart’s,itssalespricesarelowerWal*MarthasabetterpriceperceptionthanKmartKmarthasahigherGMthanWal*Mart(23%vs.21%)KmarthassignificantlyhigherSG&Aaspercentofsales,whicheliminateKmart'sGrossMarginadvantageoverWal*MartWal*Mart’sscaleadvantageisnotdrivenbythenumberofstores,butbyitssalesperstore(bettersalespersquarefoot)KmarthassignificantlylowersalespersquarefootsalesthanWal*Mart($170vs$250).WithWal*Mart’ssalesproductivity,KmartwouldbeaboutasprofitableasWal*MartComplicationKmartisoperatingatbreak-even,andWal*Mart’saggressiveexpansionputsmoreandmoreofKmart'sstoresintodirectcompetitionwithWal*Mart,decreasingtheirstorecontributionandKmart'soverallprofitabilityQuestion?????StructureKmart'sproblemtohelpitsmanagementdeviseasolution,includingidentifyingthekeyquestionthatourstudymustanswerExercise1—

defineandstructureKmart’sproblem:firststepistologicallyorganizethefactsCompanyCompetitorCustomerHigherGMthanWalMart(+)HigherSG&AexpensesthanWalMart(-)AgingstoresHi/LopricingstrategyLowernetincomethanWalMartErodingsame-storesalesvs.WalMartSales/sq.ft.higherthanKmartAggressiveexpansionintoKmartterritoriesEDLPpricingstrategyCustomersperceiveWalMartpricesbetterthanKmartExercise1—

defineandstructureKmart’sproblem:secondstepistoiteratetodriveinsightcreationAlthoughKmart’sHi/LopricingstrategyleadstohighGM,highSG&AhasledtoerodingsalesproductivityHigherGMthanWalMart(+)HigherSG&AexpensesthanWalMart(-)AgingstoresHi/LopricingstrategyLowernetincomethanWalMartErodingsame-storesalesvs.WalMartSales/sq.ft.higherthanKmartAggressiveexpansionintoKmartterritoriesEDLPpricingstrategyCustomersperceiveWalMartpricesbetterthanKmartWalMartisaggressivelyexpanding,withhighlyproductivestoresandadifferentpricingstrategythanKMartCustomersperceiveWalMartdelivershighervalueinsomeareasHowcanKmartimproveitssalesproductivity(sales/sq.ft.)?Exercise4—summaryperformancedataforacreditcardissuer…what’stheproblem?Note:Allfiguresin1000s.AssumenopriceinflationandthatinterestrateshaveremainedconstantThe80/20Rule…80%oftheanswerisin20%ofthedataOftenwemissthegoldminebecausewearebusytryingtovaluetheshackbuiltontopofitThisdata,takenfromarealclient(butrebased,)tellsthewholesorrystoryoftheirstrategicprobleminonepicture

Exercise5—

usinga“quickanddirty”approachcanproducesurprisinglyaccurateresults30million?300million?3billion?30billion?300billion?HowMany(Retail)LitresofPetrolAreSoldinFrancePerYear?Data:FrenchPopulation~60million.1Gallon=3.8LitresDevelopaHypothesisExplicitlytiesyouranalysistoyourproblemdefinitionWhyhypothesesmatterTheykeepyoureffortHelpsdefinethelevelofaccuracythatmattersEnsuresyouanalyzenomorethanisneededtodisprovehypotheseswithinareasonabledoubtAllowsquickcheckbeforemassivedatacollectionandcrunching:“Ifweconfirmourbeliefinthehypothesis,willwebeabletoactonit?”KeepsyouefficientOntargetAccurateMinimalActionableOnTimeSource:BarbaraMinto,“ThePyramidPrinciple”.1.Rule2.Case3.ResultRuleCaseResultIfweputthepricetoo

high,saleswillgodownWehaveputpricestoohighTherefore,saleswillgodownCaseResultRuleWehaveputpricesupSaleshavegonedownSaleshavegonedownbecausethepriceistoohighSaleshavegonedownSalesgodownwhenpricesaretoohighProbablywehaveputpricestoohighHypothesisResultRuleCaseAbductionisavariationondeductiveandinductivereasoningandapowerfultooltodevelophypothesesDeductionInductionAbduction1.Case2.Result3.Rule1.Result2.Rule3.CaseDEVELOPAHYPOTHESIS

Whatdifferentiatesagoodhypothesisfromabadone?Ontarget:Answersthecorequestionontheclients’mindAccurate:Embracestheentirerangeo

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