Problem solving approach in
Management consulting projects
To understand and improve on results of
eBay case competition
April 2010
AGENDA
▪
Problem solving approach overview
30 min
▪
Practical exercise. Lets improve the eBay
LOPs
30 min
15 min
▪
Practical exercise. Lets assess the eBay LOPs
▪
Q&A
20 min
1
PROBLEM SOLVING PROCESS STRUCTURES YOUR WORK
?
Problem
definition
Problem
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
2
STEP 1: DEFINE THE PROBLEM
?
Think IMPACT:
What is the question you
are trying to answer?
Problem
definition
Problem
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
3
PROBLEM STATEMENT
Characteristics of good problem
statement
Clear
statement of
problem to be
solved
▪
Thought-provoking question, not a
fact
▪
Specific, not general
▪
Debatable (not a statement of fact or
non-disputable assertion)
▪
Able to be acted upon
▪
Focused on what the decision maker
needs to move forward
4
PROBLEM STATEMENT EXAMPLE:
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
5
GOOD PROBLEM SOLVING: OILCO REFINERY
What opportunities exist for Oilco to
improve performance through overhead
rationalization, operational improvements,
or asset/ownership restructuring, either as
a growth platform or as a low- cost local
operator?
OR
Specific,
actionoriented
Oilco should shift to a low-cost local
operator approach, cut overheads,
redesign operations, and restructure noncore assets to improve profitability by
$40 million per year
6
STEP 2: STRUCTURE THE PROBLEM
?
Problem
definition
Problem
Think DISAGGREGATION and
HYPOTHESIS: What could the
key elements of the problem be?
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
7
WHAT IS A LOGIC TREE?
Issue 1
Issue 2
A problemsolving tool
that breaks a
problem into
discrete
chunks
Problem
Issue 3
Issue 4
Issue 5
8
TWO MAIN TYPES OF LOGIC TREES
Issue 1
Argument 1
Issue tree
Issue 2
Hypothesisdriven tree
Argument 2
Argument 3
Issue 3
9
ISSUE TREE – SAVING MONEY
How?
How?
Can I receive a
windfall?
Can I increase
income?
How?
Legally
Inherit
Illegally
Win lottery
Work more
hours
Overtime
Additional job
Make more
per hour
Higher job level
Can I earn
more $ from
investments?
Can I receive
more $ from
work?
How can I have
more money at the
end of the month
without incurring a
debt?
How?
Can I pay less
for same
amount of
items?
Can I reduce
expenses?
Can I buy fewer
items?
Buy lower
quality items
Better paid
industry
Shop around
for specials
▪
▪
▪
▪
▪
Food
Clothing
Entertainment
Travel
Other
10
HYPOTHESIS-DRIVEN – TREE SAVING MONEY
Why?
Comparison
shopping is
an interesting
opportunity
The best way for
me to have more
money at the end
of the month is to
spend less through
comparison
shopping
Why?
Savings
are feasible
Why?
Key spending
categories have
competition in new
formats
New formats offer
same quality at lower
price
Additional
investments
do not wipe
out savings
Hypermarkets
Price Club
Home Depot
Auto mall
Opportunity cost of
additional time
taken up by
comparison shopping
Savings in $
To compensate for demanding workload, I need to invest
in weekly visits to the massage parlor and the opera
Changing my
lifestyle is not
an option
My profession does not allow me to wear lower
quality clothes
To balance the junk food I eat during the week, I need at
least one three-course meal on the weekend
11
TWO MAIN TYPES OF LOGIC TREES
Description
▪
Issue 1
Issue
tree
Issue 2
▪
Issue 3
Argument 1
Hypothesisdriven
tree
▪
Argument 2
Argument 3
▪
Why use it?
Decomposes an ▪ Addresses the
issue into smaller
entire solution
sub-issues (e.g.,
space
measures,
criteria)
Sub-issues answer
the question
"What?" or "How?"
Postulates a
potential solution
and identifies what
arguments are
necessary and
sufficient to prove
or disprove it
Arguments answer
the question
"Why?"
▪
Focuses early
on part of the
solution space,
which
accelerates the
problem solving
process
When to use it?
▪
Early in the
problem solving
process, when
you know little
about the
problem
▪
When you know
enough about
the problem to
formulate
sound
hypotheses
12
STEP 3: PRIORITIZE
?
Problem
definition
Problem
Think SPEED:
Which part of the tree seems
most important to the problem?
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
13
CUT OFF BRANCHES
Issue 1
▪
Keep tightening focus
▪
Prioritize your effort on what
is most important
▪
Helps to ask "so what" . . .
but also ask what you have
forgotten
▪
Is the key to working
efficiently
Issue 2
Problem
statement
Issue 3
14
HOW TO PRIORITIZE
Use judgment/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
15
METHODS FOR PRIORITIZING
PRESENTATION
Key ideas
Example methods
▪
▪
▪
Percentage of total "X"
▪
▪
▪
Simple ratios
▪
▪
▪
▪
▪
Ease of implementation
▪
▪
▪
▪
▪
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 reprioritize 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
Estimated potential
increase/decrease (sensitivity
analysis)
Quick industry benchmarks
Qualitative input from clients,
CDs, etc.
Timing
"Quick wins"
Available resources
High/low risk
16
STEP 4: ISSUE ANALYSIS AND WORK PLAN
?
Problem
definition
Problem
Think EFFICIENCY: How
and on what should the
team spend its time?
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
17
ISSUE ANALYSIS WORKSHEET
Issue
Key issue or
unresolved
question that
elicits a "yes"
or "no" answer
and upon
which specific
action
depends
Hypothesis
Supporting
rationale
Analysis
Source
Statement of the
likely resolution
of the issue. It
includes the
reason for
answering yes or
no.
Elements you
have to believe
for the hypothesis
to be true
Detailed
supporting
rationales make
the transition to
analysis easier.
Models that
should be
explored in order
to confirm or
refute the
hypothesis
Likely location
or means of
obtaining data
to carry out
analysis
Yes– ABC costs
will become
uncompetitive
without new
investment
Competitors’
manufacturing
costs declining
Industry leaders
are investing in
new technology
Pay off is very
short
Comparison of
manufacturing
costs
Review of
competitive
investment
Cashflow: NPV
Specialist
magazines/
reports
Manufacturing
and customer
interviews
Accounting
Department
Example
Should ABC
invest $20
million in new
manufacturing
technology?
18
EXTEND THE ISSUE ANALYSIS WORKSHEET TO CREATE A WORK
PLAN
Issue analysis work sheet
Issue
Hypothesis
Supporting
rationale
Analysis
Source
Work plan
End product
States the
analysis’s output
Responsibility
Identifies the team
member who will
under-take the
analysis
Timing
Sets the time (in
work days)
necessary to answer
the key issue
Example
Breakdown of
competitive costs
and reasons for
differences
Fuentes, P.F.
10
Competitors’
Shaw, B.R.
investment trends
and areas of focus
5
Value of
investments
7
Lun, C.A.
19
STEP 6: SYNTHESIZE FINDINGS AND DEVELOP
RECOMMENDATIONS
?
Problem
definition
Problem
Think POTENTIAL
SOLUTION:
What should be done?
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Synthesis
& recommendations
!
Impact
Impact
20
SYNTHESIS ADDS AN INSIGHT THAT ADVANCES YOUR THINKING
Summary
Synthesis
I have lost my keys
and passport and
am behind on my
tax return
I have been sloppy
Facts
▪
▪
▪
I have mislaid my keys
My passport is not where I
thought it was
I am 2 months behind on
my tax return
21
SYNTHESIS PYRAMIDS HELP YOU ORGANIZE YOUR DATA AND
DEVELOP AN INSIGHTS
"So what?"
Data
22
PROBLEM SOLVING IS AN ITERATIVE PROCESS
?
Problem
definition
Problem
Structuring
Prioritizing
Issue
analysis
COMMUNICATION
Analysis
Synthesis
& recommendations
!
Impact
Impact
23
STRATEGIC PROBLEM-SOLVING LOOP
?
Problem
Problem
definition
Problem
structuring
Prioritization
Issue
analysis
and work
plan
Synthesis and
recommendations
Analysis
Think next
iteration: what are
the team’s next
priorities?
24
AGENDA
▪
Problem solving approach overview
30 min
▪
Practical exercise. Lets improve the eBay
LOPs
30 min
▪
Practical exercise. Lets assess the eBay LOPs 15 min
▪
Q&A
20 min
25
THE RULES OF THE GAME. HOW TO SET UP THE PROBLEM
DEFENITION
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
26
PROBLEM DEFINIOIN.
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
Problem definition
Какая стратегия Ebay будет
наиболее успешна для выхода на
российский рынок в настоящее
время?
27
ISSUE TREE STRUCTURING
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
WHEN?
Нужно ли выходить сейчас
или можно подождать?
Каковы перспективы роста в России по
сравнению с другими рынками, еще не
охваченными eBAy?
Есть ли приоритетные географические регионы?
Есть ли приоритетные продуты и сервисы к
развитию?
Какая стратегия
Ebay будет
наиболее успешна
для выхода на
российский рынок
в настоящее
время?
HOW?
Есть ли необходимость в
партнерстве с российскими
игроками на каждом этапе
value chain?
WHAT TO DO?
Каковы ключевые проблемы
в value chain? (Customer base
acquisition, sales platform,
payment, goods delivery, client
service and repeat purchase)
Кто является ключевым игроком на каждом
этапе value chain? Каковы возможности по
партнерству с данными игроками?
Какие возможности имеет EBay в построении
собственной компетенции на каждом этапе value
chain?
Какие из проблем являются ключевыми
(решающими)?
Как можно преодолеть ключевые проблемы в
value chain? В какие сроки? Какие инвестиции?
Как преодолевались такие проблемы в
прошлом?
28
PRIORITIZING. THE RULES WERE SET
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
29
PRIORITIZING. THE RESULT
Problem
definition
Prioritization based on the task (see previous page)
1.
2.
3.
Why is it important to work now
Demonstrate the market knowledge
Interest the client at showing first results
WHEN?
Нужно ли выходить сейчас
или можно подождать?
Какая стратегия
Ebay будет
наиболее успешна
для выхода на
российский рынок
в настоящее
время?
HOW?
Есть ли необходимость в
партнерстве с российскими
игроками на каждом этапе
value chain?
WHAT TO DO?
Каковы ключевые проблемы
в value chain? (Customer base
acquisition, sales platform,
payment, goods delivery, client
service and repeat purchase)
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
1 Каковы перспективы роста в России по
сравнению с другими рынками, еще не
охваченными eBAy?
Есть ли приоритетные географические
регионы?
Есть ли приоритетные продуты и сервисы к
3
развитию?
2
Кто является ключевым игроком на каждом
4 этапе value chain? Каковы возможности по
партнерству с данными игроками?
Какие возможности имеет EBay в построении
5 собственной компетенции на каждом этапе
value chain?
6 Какие из проблем являются ключевыми
(решающими)?
7
Как можно преодолеть ключевые проблемы в
value chain? В какие сроки? Какие инвестиции?
8
Как преодолевались такие проблемы в
прошлом?
30
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
1 Каковы
перспективы
роста в России
по сравнению с
другими
рынками, еще не
охваченными
eBAy?
2 Есть ли
приоритетные
географические
регионы?
Team QUANTS answer
31
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
1 Каковы
перспективы
роста в России
по сравнению с
другими
рынками, еще не
охваченными
eBAy?
2 Есть ли
приоритетные
географические
регионы?
3 Есть ли
приоритетные
продуты и
сервисы к
развитию?
Team USA answer
32
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
4 Кто является
ключевым
игроком на
каждом этапе
value chain?
Каковы
возможности по
партнерству с
данными
игроками?
Team QUANTS answer
The only team explicitly talked about value chain partnership
33
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
6 Какие из
проблем
являются
ключевыми
(решающими)?
Team Dr. Pepper Consulting answer.
The team set up the full list of problems, but did not prioritize them
34
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
6 Какие из
проблем
являются
ключевыми
(решающими)?
Team Economics Engeeniring answer.
The team set up the full list of problems, but did provide any details and prioritization
35
ISSUE ANALYSIS BEST EXAMPLES
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
7 Как можно
преодолеть
ключевые
проблемы в value
chain?
В какие сроки?
Какие
инвестиции?
Team USA answer.
The team clearly identified the 2 major issues and addressed solutions for both (the example
shows the second set of issues) – further analysis path is clear
36
SYNTHESIS AND RECOMMENDATIONS. STORYLINE
Problem
definition
Prioritization based on the task
1.
2.
3.
Why is it important to work now
Demonstrate the market knowledge
Interest the client at showing first results
WHEN?
Выходить надо сейчас,
фокусируясь на Москве и
центральном регионе. EBay
должен стать площадкой для
малого и среднего бизнеса
HOW?
Какая стратегия
Ebay будет
наиболее успешна
для выхода на
российский рынок
в настоящее
время?
Возможно сотрудничество
для acquiring users. Нет
партнеров для площадки и
оплат. Необходимость
плотного сотрудничества по
логистике (в начале). Нет
партнеров в customer service
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
Российский рынок интернета растет и будет
1 расти (#3 CAGR в мире, #8 по числу
пользователей)
Высокая концентрация в Москве и других
2 миллионниках (50% пользователей в
Центральном регионе)
Рассмотреть B2B, B2C, C2C. Определить
3
фокус (на revenues)
Крупных игроков на всех этапах кроме
логистики практически нет (Molotok мал), либо
4
бизнес еще слишком молод в России (Yandex
money)
Собственный опыт EBay значителен на всех
5 этапах, кроме логистики. Доставка товаров
EBay всегда осуществлялась партнерами
WHAT TO DO?
6 Разбивка проблем на внутренние и внешние,
выделение ключевых проблем
План развития бизнеса в
России с описанием
возможных следующих шагов
в анализе
Как можно преодолеть ключевые проблемы в
7 value chain? В какие сроки? Какие инвестиции?
– выдвинуть гипотезы
8
Как преодолевались такие проблемы в
прошлом? – интервью, анализ рынка
37
SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
Team QUANTS answer
The team clearly answered the major question as well as showed the road map to success
The team clearly demonstrated its knowledge and a promise for further insights down the
consulting project
38
SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE
Problem
definition
Structuring
Prioritizing
Issue
analysis
Synthesis
& recommendations
COMMUNICATION
Team Dr. Pepper Consulting answer
The team outlined the possible strategies and outcomes as well the major problems to be
solved on the way to success
39
AGENDA
▪
Problem solving approach overview
30 min
▪
Practical exercise. Lets improve the eBay
LOPs
30 min
▪
Practical exercise. Lets assess the eBay
LOPs
15 min
▪
Q&A
20 min
40
WHAT ARE THE ASSESSMENT CRITERIA?
Assessment criteria*
Content
▪ Structure
▪ Logics
▪ Creativeness and depth of recommendations
Communication
▪ Slides quality
▪ Language
▪ Consistency
Orientation to the client
▪ Problem understanding
▪ Knowledge of client situation
* Example. Actual assessment criteria might differ significantly
41
HOW THE TEAMS PERFORMED ACCORDING TO THE CRITERIA LIST?
Assessment
criteria*
Dr. Pepper
Consulants
Economics and
Engineering
IKNOW
Quants
USA
Content
▪ Structure
▪
Logics
▪
Creativeness and depth
of recommendations
Communication
▪ Slides quality
▪
Language
▪
Consistency
Lack of
priority
Lack of facts,
only
statements
Content and
headers not
connected
But can
you keep
the
promise
Great ideas,
no time?
Out of blue
aggressive
The
strongest
Too theoretical, can
you keep
the promise
Overloaded
slides
100%
McK
Headers are
not statements
Lighter to
the end
Depth
decreased
English
Consistently
shallow
Extremely
promising
ending
Consistently
shallow
Omitted
Pay Pall
discussion
Lighter to
the end
Orientation to the client
▪ Problem
understanding
▪
Knowledge of client
situation
* Example. Actual assessment criteria might differ significantly
42
AGENDA
▪
Problem solving approach overview
30 min
▪
Practical exercise. Lets improve the eBay
LOPs
30 min
▪
Practical exercise. Lets assess the eBay
LOPs
15 min
▪
Q&A
20 min
43
44