1、Structured Problem Solving & Hypothesis Generation.Goals of this moduleLay out a systematic approach to solving business problems “Structured Problem Solving Establish a common “modus operandus for Consulting teamsPractice the suggested process on a real-life example.Strategy is about thriving in a

2、changing world“The pictures pretty bleak, gentlemen . . . The worlds climates are changing, the mammals are taking over, and we all have a brain about the size of a walnut. which is all about “decision making “Strategy is about making decisionsThe best strategy “makers are able to blend analytic tec

3、hniques with an understanding of the future uncertainties and simple good luckBased on often imperfect information they make decisions and then drive implementation.There are two basic approaches to problem solving; but both can workThe “theres a pony in here somewhere approachThe structured analyti

4、c approachPotentialfor richpowerfulsolutionsScurry around analyzing tons of data to see if you can find something usefulGet the dataPotential forgood (and mixed) solutionsDefineproblemandhypotheses.Defining the issue is the first step in the journey to final recommendationsDevelop Conclusions and Ma

5、ke Recommendations to ImplementFind InsightsAnalyse DataGather DataForm HypothesesSo what? aha, new thoughtWhat you should do and howDefine the IssuesWhat are the questions keeping you awake at night?Factual information gathered to prove or disprove hypothesesAnalyse what the data tells usStatements

6、 that provide direction and structure for the analysis.Hypothesis formation ensures that our analysis is focused on our clients problemForm HypothesesDefine the IssuesGather DataAnalyse DataFind InsightsDevelop Conclusions and Make Recommendations to ImplementSo what? aha, new thoughtWhat you should

7、 do and howWhat are the questions keeping you awake at night?Factual information gathered to prove or disprove hypothesesAnalyse what the data tells usStatements that provide direction and structure for the analysis.Hypotheses are developed in three stepsWhat are the real strategic issues?What is th

8、e impact on the organisation?What are the priorities?We think . . . It looks like . . . The right answer may be . . . The options could be . . . We believe this to be true . . .A series of statements, not yet backed by dataBased on initial data search or expert opinionsA number of assertions need to

9、 be true for a hypothesis to be valid.Is there a market for white label insurance products?Direct channels are growingRetailers have a strong channel and brandThere are existing productsChubb Insurance can access new business by using the brand strength of Tesco resulting Is low cost of acquisition

10、and profitable businessDefine the questionReview and Describe Multiple AssertionsForm the hypothesis123.A hypothesis should identify not only the issue but also the cause and the impactThink through these three stages as you create a hypothesis to help you plan out how you will test it:What is the i

11、ssue?What is the underlying opportunity? Where is the advantage?What do you think causes the issue?What are the key drivers of the process?What is the impact of the issue?How can we tell there is an opportunity?Why do we care?“x is anopportunity.“due to.“resultingin.The Structured Problem Solving Pr

12、ocess covers the life cycle of a consulting engagement Define the ProblemStructure the ProblemDevelop a HypothesisExecute the Analysis Develop a Recommendation Create the Communication Deliver CommunicationFollow Up with ClientCovered in current moduleCovered later in the week.The Basics - Problem S

13、olving Approach.DEFINE THE PROBLEMSTRUCTURE THE ANALYSISFIND THE SOLUTIONOur problem solving approach produces results through answering a simple series of questionsIs there a problem or opportunity?If so where does it lie?Why does it exist?What could we do about it?What should we do about it?Fine,

14、but IWIK H2 do this.Source: Barbara Minto, “The Pyramid Principle.Always ask: “Are they Mutually Exclusive and Comprehensively Exhaustive (MECE)?Logical pyramids are basic tools for this approach, helping you to define, structure and solve the clients problem 1.Ideas at any level in the pyramid must

15、 always be summaries of the ideas grouped below them2.Ideas in each grouping must always be the same kind of idea, and they must answer the same question implied by their summary3.Ideas in each grouping must always be in a logical order:MainAssertionKey LineDeductively or inductively Trace course or

16、 time orderDivide or structural order (e.g., Sales, Marketing, Manufacturing, etc.)Classify or degree order (e.g., most important, 2nd most important, etc.).Logical pyramids increase the effectiveness of problem solving, results delivery and communicationVertical structureHorizontal structureKey lin

17、e / narrativebut help ensure thoroughanalysiswhile decreasingcomplexityand increasing the powerof presentations Logical pyramids have simple rulesThe effectiveness of our work depends heavily on how compellingly we can argue that the solution we put forward serves the client bestThe reasoning we hav

18、e to apply to come to our solution is complex and difficult to summarize for brief client interactionsTo build succinct and compelling presentations of our work, we use logical pyramids as the preferred communication style:Pyramids make information more memorable and meaningfulThey lead to a clearer

19、 definition of the problems we solveThey structure our solutions to these problems and make them more compellingSource: Barbara Minto, “The Pyramid Principle.which will make your work/life much easier to handle.Define and Structure the Problem.“If you dont know where you are going, any road will tak

20、e you there. -AnonymousWhy problem definition matters.In structuring a problem, break it into smaller, easier-to-handle components AND start with the right definitionsUS Car MarketLight TrucksPassenger CarsBig 3Mini VansSport UtilityVehiclesFordGMChryslerBut be careful why does this not work?.Mutual

21、ly Exclusive and Comprehensively ExhaustiveThe most important rule for any structure you impose.DivideClarifyDiagnosticFrameworkCause EffectFrameworkStructuralFrameworkProblem StructureTo help you solve a problem, your structure must:Disaggregate the problem into smaller and easier to solve componen

22、tsBe a “MECE description of the problem and its possible solutionsTrace CauseThere are three ways to structure a business problemSource: Barbara Minto, “The Pyramid Principle.HeadHurtsPhysicalMentalExternalInternalStress, TensionHypochondriaBumped, Bruised HeadAllergiesBad Weather, Sinus Headache, F

23、lu, ColdBrain TumorWater on the BrainExample 1 disaggregate the problem into a diagnostic solution treeSCooPSource: Barbara Minto, “The Pyramid Principle.Store is withinshopping radiusdo not know about the storeknow about the storenever visit the storeenter the storedo not buymake a purchasedo not c

24、ome backmake repeat purchasesLocationAdvertisingSignage, CIConversionCustomer ValueRoot CauseExample 2 (trace cause) disaggregate the problem into a cause-effect frameworkHow can TESCO improve its sales productivity (sales/sq.ft.)?.AccounttypePack sizeREPURCHASETarget market persuaded to repurchase?

25、DISTRIBUTIONBrand madeavailable?TRIALTarget market induced to try?AWARENESSTarget marketaware?ProductrejectionPrice/valuerejectionFrequencyof useOccasionof useConsumerprofilePackDisplayPromotiontypePromotiontuningSell-ineffectivenessFeedbackIf all lines of inquiry fail to reveal a problem source, go

26、 back to consider whether target market and consumer benefit have been accurately defined.AttributeawarenessAdvertisingrecallAdvertisingspending rateMediamixRegional weightAdvertisingcommunicationTargetmarketConsumerbenefitRegionSales forcecoverageSales forcedirectionTradetermsExample 3 disaggregate

27、 the problem into an intrinsic structure Why does Wimpys not show the anticipated financial performance?ChannelSource: Barbara Minto, “The Pyramid Principle.Productspec.SellingpriceBrandnamePackagingPOSITIONINGBrand properly positioned for themarket?.Exercise 1 Kmart vs. Wal*Mart: define and structu

28、re Kmarts business problemSituationKmart and Wal*Mart operate similar chains of Full line Discount storesDifferent pricing strategies: Kmart follows a promotional pricing strategy of weekly sales, offering discounts on selected items, Wal*Mart follows an EDLP strategy (EDLP = Every Day Low Prices);

29、Kmarts regular prices are higher than Wal*Marts, its sales prices are lowerWal*Mart has a better price perception than KmartKmart has a higher GM than Wal*Mart (23% vs. 21%)Kmart has significantly higher SG&A as percent of sales, which eliminate Kmarts Gross Margin advantage over Wal*MartWal*Marts s

30、cale advantage is not driven by the number of stores, but by its sales per store (better sales per square foot)Kmart has significantly lower sales per square foot sales than Wal*Mart ($170 vs $250). With Wal*Marts sales productivity, Kmart would be about as profitable as Wal*MartComplicationKmart is

31、 operating at break-even, and Wal*Marts aggressive expansion puts more and more of Kmarts stores into direct competition with Wal*Mart, decreasing their store contribution and Kmarts overall profitabilityQuestion?Structure Kmarts problem to help its management devise a solution, including identifyin

32、g the key question that our study must answer.Exercise 1 define and structure Kmarts problem: first step is to logically organize the factsCompanyCompetitorCustomerHigher GM than WalMart (+)Higher SG&A expenses than WalMart (-)Aging storesHi / Lo pricing strategyLower net income than WalMartEroding

33、same-store sales vs. WalMartSales / sq. ft. higher than KmartAggressive expansion into Kmart territoriesEDLP pricing strategyCustomers perceive WalMart prices better than Kmart.Exercise 1 define and structure Kmarts problem: second step is to iterate to drive insight creationAlthough Kmarts Hi/Lo pr

34、icing strategy leads to high GM, high SG&A has led to eroding sales productivityHigher GM than WalMart (+)Higher SG&A expenses than WalMart (-)Aging storesHi / Lo pricing strategyLower net income than WalMartEroding same-store sales vs. WalMartSales / sq. ft. higher than KmartAggressive expansion in

35、to Kmart territoriesEDLP pricing strategyCustomers perceive WalMart prices better than KmartWalMart is aggressively expanding, with highly productive stores and a different pricing strategy than KMartCustomers perceive WalMart delivers higher value in some areasHow can Kmart improve its sales produc

36、tivity (sales / sq. ft.)?.Exercise 4 summary performance data for a credit card issuer whats the problem?Note: All figures in 1000s. Assume no priceinflation and that interest rates have remained constantThe 80/20 Rule 80% of the answer is in 20% of the dataOften we miss the goldmine because we are

37、busy trying to value the shack built on top of it This data, taken from a real client (but rebased,) tells the whole sorry story of their strategic problem in one picture .Exercise 5 using a “quick and dirty approach can produce surprisingly accurate results30 million?300 million?3 billion?30 billio

38、n?300 billion?How Many (Retail) Litres of Petrol Are Sold in France Per Year?Data: French Population 60 million. 1 Gallon = 3.8 Litres .Develop a Hypothesis.Explicitly ties your analysis to your problem definitionWhy hypotheses matterThey keep your effortHelps define the level of accuracy that matte

39、rsEnsures you analyze no more than is needed to disprove hypotheses within a reasonable doubtAllows quick check before massive data collection and crunching:“If we confirm our belief in the hypothesis, will we be able to act on it?Keeps you efficientOn targetAccurateMinimalActionableOn Time.Source:

40、Barbara Minto, “The Pyramid Principle.1. Rule2. Case3. ResultRuleCaseResultIf we put the price too high, sales will go downWe have put prices too highTherefore, sales will go downCaseResultRuleWe have put prices upSales have gone downSales have gone down because the price is too highSales have gone

41、downSales go down when prices are too highProbably we have put prices too highHypothesisResultRuleCaseAbduction is a variation on deductive and inductive reasoning and a powerful tool to develop hypothesesDeductionInductionAbduction1. Case2. Result3. Rule1. Result2. Rule3. Case.DEVELOP A HYPOTHESISWhat differentiates a good hypothesis from a bad one?On target:Answers the core question on the clients mindAccurate:Embraces the entire range of