Problem-solving and
decision-making
July, 2011
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organisation without prior written approval from McKinsey & Company.
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presentation; it is not a complete record of the discussion.
Importance of good problem-solving and decision-making
▪ Get to answers faster
▪ Use time and resources more efficiently
▪ Have greater impact on the business
▪ Free up time to do other things
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Objectives and approach for session
Objectives
Approach
▪ Introduce an
▪ Learn key
approach/tools you
can add to your
toolkit of skills and
use for many types
of problem solving
elements of
approach through
plenary lecture
and discussion
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McKinsey’s problem solving approach
IMPACT
Logical
problem solving
Impactdriven
Focused
Factbased
C R EATI V E TH I N K I N G
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The problem-solving cycle
Focus for today
?
Problem
Problem
definition
Problem
structuring
Prioritisation
Issue
analysis
and work
plan
Think next iteration:
what are the team’s
next priorities?
© McKinsey & Company
Recommendations
Synthesis
Analysis
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Step 1: Define the problem
?
Problem
Think IMPACT:
What is the question you
are trying to answer?
StrucProblem turing
definition
Prioritising
Issue
analysis
Analysis
C O M M U N I CATI O N
Synthesis Recommendations
!
Impact
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What is a good problem definition?
A ‘problem definition’ is a way to frame a problem so that
we are clear up front on what we are trying to solve, and
what success will look like
▪
What are characteristics of a good problem
definition?
▪
What are “must-have” elements to
– Ensure we get to the best answer?
– Ensure our answer is practical and
implementable?
▪
What are the common pitfalls?
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Problem statements help sharpen your thinking about the problem
What are we trying to achieve?
Focuses the work and ensures that findings can be acted on. The more specific the statement the
better, provided that it is not so narrow that the “wrong” problem is addressed.
1
Background and context
3
Comments on the “situation” and “complication”
facing the key decision-maker (e.g., industry
trends, relative position in the industry).
2
What is success?
Refers to the basis on which the key decisionmaker will decide whether to act on the
recommendations (e.g.,financial returns, effect on
staff, market share growth).
5
Stakeholders
Identifies primary decision makers (e.g., CEO,
Division Manager) as well as internal and external
parties who can affect implementation (e.g.,
shareholders)
4
Potential challenges
Indicates what will not be included in the project
(e.g., international markets, R&D activities). Also
defines the limits to the set of solutions that can be
considered, including degree of accuracy of
analysis (i.e, 80/20 rule vs. 90/10).
Where will we find information and help?
Describes implementation challenges (e.g., labour relations, communication practices, risk aversion)
that must be addressed to change beliefs and behaviors
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One idea of what a good problem definition looks like…
What are we trying to achieve?
The basic question we are trying to solve. It should be SMART: specific, measurable,
action-oriented, relevant and time-bound.
1
Background and context
3
What is the current situation?
What has happened so far?
Why is this problem is being addressed
now?
2
What is success?
What does a good final product look like?
What are we trying to deliver?
5
Stakeholders
Who are the decision makers?
Who needs to be involved?
4
Potential challenges
What are the potential issues or problems
that we can forsee and plan to mitigate?
Where will we find information and help?
Where does expertise and knowledge, exist (Internal and external)? e.g., work that has
already been done, internal experts who we should draw on, published reports and papers
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Problem statement
Characteristics of good problem statement
• Specific
• Measurable
• Action-oriented
• Relevant (to the key problem)
• Time-bound
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Example problem statement: Oilco refinery
The Oilco refinery is suffering from
poor profitability despite a strong
market niche position
Statement of fact
Should the Oilco refinery improve
its deteriorating position?
Not disputable
Can the Oilco refinery be
managed differently to increase
profitability?
Too general
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Good problem solving: Oilco refinery
What opportunities exist for Oilco to improve
profitability by $40 million per year through
overhead rationalisation, operational
improvements, or restructuring non-core
assets?
• Specific
• Measurable
Specific,
• Action-oriented
action-oriented
• Relevant (to the key
problem)
• Time-bound
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Step 2: Structure the problem
?
Problem
Think DISAGGREGATION and
HYPOTHESIS:
What could the key elements of
the problem be?
Problem
definition
Structuring
Prioritising
Issue
analysis
Analysis
COMMUNICATION
Synthesis Recommendations
!
Impact
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Problem solving requires we answer a number of difficult questions
What issues
should we
think about?
How will we
build our
smart cities?
What steps
will we need
to take?
…?
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What is an issue tree and why is it important?
A problem solving tool that breaks a problem into discrete chunks
Why use logic trees?
▪
▪
▪
Sub-issue
Issue 1
Sub-issue
To break a problem into
component parts
Sub-issue
Issue 2
To ensure integrity of the
problem solving is maintained
Sub-issue
Sub-issue
Problem
Issue 3
To build a common understanding within the team of
the problem solving
framework
Sub-issue
Issue 4
Sub-issue
Issue 5
▪
To help focus team efforts
Sub-issue
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The issue tree is a valuable tool to disaggregate a problem into core subquestions that need to be addressed to answer the main question
Text
Issue
tree
Description
Why use it?
▪
Decomposes an
issue into smaller
sub-issues (e.g.,
measures, criteria)
▪
Helps
disaggregate
problem into
individual pieces
▪
Sub-issues answer
the question
“What?” or “How?”
▪
Helps divide the
work among
team members
When to use it?
▪
Early in the
problem solving
process, when
you know little
about the
problem
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Basic principle of the issue tree
How / What?
How / What?
Idea 1.1
Idea 1
Idea 1.2
Idea 2.1
Question
Idea 2
Goal:
Break a problem
into component
parts and show
concrete solutions
Idea 2.2
Idea 3.1
Idea 3
Idea 3.2
Formulation of
the basic
question to be
resolved should
be as specific as
possible
Complete but nonoverlapping list of
conceivable solutions
Further levels of detail for ideas,
also complete and nonoverlapping
Level of detail
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Good issue trees meet MECE and 80/20 rule requirements
Mutually Exclusive Collectively Exhaustive
Idea 1
ME
Benefit for impact
Mutually
Exclusive
Question
Idea 2
80/20 rule
Content of
Statements
does not
overlap
100%
80%
Idea 3
CE
Collectively
Exhaustive
Together, statements
answer the question or
fully describe the idea
on the level immediately
above
20%
Efficient
Time and
effort to
100%
structure
problem
Trying to be perfect
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Let’s try out an example
Create an issue tree to address the
following:
How can you reduce monthly shopping
expenses?
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Example Issue tree solution
Food
Clothing
Buy fewer items
Entertainment
How could you
reduce your
expenditure
each month?
Travel
Buy lower-quality items
Pay less for
same quantity of
items
Buy items at discount/on sale
Share costs of items (e.g., split
rent with roommate, car pool)
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Good logic trees help prioritise issues and allocate responsibilities to
team members
?
Problem
Think SPEED:
Which part of the tree seems most
important to the problem?
Problem
definition
Structuring
Prioritising
Issue
analysis
Analysis
COMMUNICATION
Synthesis Recommendations
!
Impact
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Purpose of prioritisation
Bundle of possible actions developed
▪
Prioritisation
required
But:
▪ Limited resources
▪ Time constraints
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How to prioritise
Use judgement/intuition
Involve your team
Be practical!
20
Polishing
80
80
Focusing
on impact
20
Time and
effort
Do back-of-theenvelope calculations
Benefit for
problem
solving
Take risks
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Methods for prioritising
Key ideas
• Take a reasonably quick, informal
•
•
•
•
•
approach to get started
Remember that sometimes a ”back
of an envelope” calculation is all
that’s needed
If new information emerges, you can
always reprioritise and switch your
efforts to another part of the tree
Use likely impact to decide where to
go first
Use readily available data whenever
possible; avoid major data requests
Do not create massive spreadsheets
or other computer models if you can
move forward with less complete
information
Example methods
• Percentage of total “X”
• Estimated potential
•
•
•
•
•
•
•
•
increase/decrease (sensitivity
analysis)
Simple ratios
Quick industry benchmarks
Qualitative input from interviews
Ease of implementation
Timing
“Quick wins”
Available resources
High/low risk
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Step 4: Issue analysis and work plan
?
Problem
Think EFFICIENCY:
How and on what should
the team spend its time?
Problem
definition
Structuring
Prioritising
Analysis
Issue
analysis
C O M M U N I CATI O N
Synthesis Recommendations
!
Impact
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Step 5: Analysis
?
Problem
Think EVIDENCE:
What am I trying to
prove/disprove?
Problem
definition
Structuring
Analysis Synthesis Recommendations
C O M M U N I CATI O N
Prioritising
Issue
analysis
!
Impact
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Step 6: Synthesise findings
?
Problem
Think SO WHAT:
What are the implications
of our findings?
Problem
definition
Structuring
Prioritising
Issue
analysis
Analysis Synthesis Recommendations
C O M M U N I CATI O N
!
Impact
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Summary versus synthesis: what’s the difference?
SUMMARY
SYNTHESIS
?
?
FACTS
▪ I have misplaced my keys
▪ My passport isn't where
I thought it was
▪ I'm 2 months behind
on my tax return
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Summary versus synthesis: extracting a higher level of meaning
SUMMARY
SYNTHESIS
I’ve lost my keys
and passport and
I'm behind on my
tax return
I’ve been sloppy
FACTS
▪ I have misplaced my keys
▪ My passport isn't where
I thought it was
▪ I'm 2 months behind
on my tax return
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Synthesis helps develop a powerful and effective main message
What is the one thing I
want my audience to
think or do as a result of
this communication?
Main message must be:
▪Targeted
▪Overarching
▪Powerful
▪Supportable
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Step 7: Develop recommendations
?
Problem
Think POTENTIAL
SOLUTION:
What should be
done?
Problem
definition
Structuring
Prioritising
Issue
analysis
Analysis Synthesis
C O M M U N I CATI O N
Recommendations
!
Impact
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Last chance for any questions…
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Thank you – Enjoy the rest of your day
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