Structured Approach to Cases

Neal Shah
Tanay Shah
Hypothesis driven problem solving
Agenda

1 The Case Interview Roadmap, MECE, & Logical Breakdown

2 Sample Case

2
Hypothesis driven problem solving
Case Interview Roadmap: The Flow of a Case Interview

@#$ @#$ @#$

% % %

Hypothesis
Hypothesis Information
Information
Introduction
Introduction Solution
Solution
Development
Development Gathering
Gathering

Activities: • Interviewer • Develop hypothesis • Fill in the gaps in • Restate Critical

Provides • Create a MECE Information Points of Issue
Introductory Issue Tree • Formulate a • State Solution
Information about Response to the • Be Succinct and
the Case Problem Crisp
• Ask Clarifying
Questions

 Transition Statements Between the Phases Will Help Your Interviewer Understand You

3
Hypothesis driven problem solving
Remember Minto1 – The Pyramid Principle
• Structured communication is a very important part of case interviews.
• Combined with strong logical reasoning will prove your abilities for a case

 Summarize the situation, complication, and question to be answered in the beginning

1
Minto, Barbara. The Minto Pyramid Principle: Logic in Writing, Thinking and Problem Solving.
Minto International, London 1996.
Hypothesis driven problem solving
The Importance of Mutually Exclusive Collectively Exhaustive

Example

Making a Meal:
• Select meal
Mutually Any points overlap? • Buy ingredients
Exclusive
• Prepare

Watch Types:
MECE • Analog
• Digital
• Automatic
• Wind Up
Collectively All possibilities covered? Reasons to acquire a competitor:
Exhaustive • Complimentary customer base
• Superior technology
• Digestible size

 Being MECE Builds Logic Into your Response, and Helps Drive Logical Communication
5
Hypothesis driven problem solving
MECE Exercise

Which Belong to a MECE Grouping?

1. St. Louis 7. Panama City

2. Philadelphia 8. Seattle

3. Amazon 9. Santiago

4. Sierra Nevada 10. Mississippi

5. Bogotá 11. Andes

6. Calgary 12. NYC

6
 Hypothesis driven problem solving
Build Out Your Issue Tree
• The next step is to build a MECE Issue Tree

Question/Hypothesis MECE Logic Further Breakdown Questions to Ask

 Breakdown the issue into logical categories and begin asking questions 7
Hypothesis driven problem solving
Finish the Case By Tying Together Findings with Logic

Inductive Logic
You
You must
must move
move into
into the
the
credit card industry
credit card industry

There
There is
is aa great
great deal
deal of
of
synergy between
synergy between youryour ItIt will
will improve
improve your
your ItIt will
will improve
improve your
your
current
current business
business and
and the
the company’s performance
company’s performance competitive
competitive position
position
credit card business
credit card business

Deductive Logic You

You need
need to
to investigate
investigate
selling
selling your business to
your business to respond
respond
to
to pressures
pressures from
from abroad
abroad

Your
Your present
present ownership
ownership structure
structure
The
The business
business faces
faces an
an increasing
increasing A
Adifferent
different ownership
ownership structure
structure is
is
will not enable you to respond
will not enable you to respond
threat
threat from
from abroad
abroad needed
needed
effectively
effectively to
to this
this threat
threat

8
 Always close with reviewing the situation, complication, question, hypothesis, and highlights
that led to the answer.
Hypothesis driven problem solving
Case Interview Roadmap: The Flow of a Case Interview

• State Hypothesis
• State MECE Logic
• State Solution
• Situation Breakdown • Then prepare
• Complicati • State Desire to
to provide a
on Begin Filling in
• Question brief revisit of
Information Gaps
the case

Hypothesis
Hypothesis Information
Information
Introduction
Introduction Solution
Solution
Development
Development Gathering
Gathering

• Develop hypothesis
Activities: • Interviewer • Create a MECE • Fill in the gaps in • Restate Critical
Provides Issue Tree Information Points of Issue
Introductory • Formulate a • State Solution
Information about Response to the • Be Succinct and
the Case Problem Crisp
• Ask Clarifying
Questions

 Transition Statements Between the Phases Will Help Your Interviewer Understand You

9
Hypothesis driven problem solving

Sample Case
Practice Makes Perfect

10
Hypothesis driven problem solving
Drug Co. has hired xxx Consulting Company

Situation
• Drug Co. is a privately held retail drug
store chain located in the Northeast
• Drug Co. has 40 locations
• Drug Co.’s business model is to be
located in smaller towns where
competition may be limited
• Drug Co. also differentiates itself by
offering compounding service
• We are hired to identify problem(s)
and recommend solution(s)
Complication
• Private equity company recently
purchased Drug Co. and is exploring
options to create value; would like to
exit within 3-5 years
• Drug Co. lags against its chief
competitor, Walgreen’s, in terms of
operating margin (5.7% versus 2.5%)

Key Questions

11
Hypothesis driven problem solving
Hypothesis tree

Drug Co.’s operating margins are lower

that Walgreen’s as a result of poor
operations and lower revenue

Drug Co. generates less Drug Co.’s operations are

What’s happening in the
revenue per location, per not as efficient as
square foot Walgreen’s market?
• Store specs? • COGS? • Regulatory changes?
– Size of store – Does Walgreen’s have an • Industry trends?
– Hours of operation advantage due to buying – Consolidation?
• Product mix? power? – Diversification of product
– Prescription – How does product mix
versus base?
general merchandise affect COGS? • Competitors?
– Brand prescriptions versus – Pricing? – Walgreen’s
generic • Fixed costs – Eckerd?
– Compounding as a % of – Rent – Is Drug Co.
• Substitutes?
prescription cheaper as a result of
• Locations? location?
– Do Drug Co.’s locations – Wages and salaries?
– Size of locations?
hurt the business?
– Traffic at a Walgreen’s – Number of employees? 12

versus Drug Co. • Variable costs?

Hypothesis driven problem solving

Nokia is losing out on market share

to new entrants because of
changing market conditions and
feature competition

RURAL URBAN MARKET TELECOM

INNOVATION
MARKET MARKET CHANGES POLICY
• Lack of desired • Has the rural • Is Nokia • Reduction in • Will the
features (esp market been comparable with product lifecycle impending ban
dual sim) in low ignored in the the other smart for a customer on imported
priced segment smart phone phones in the leading to mobile handsets
• High cost due to race? “coolness” demand for fall through?
quality parts • Does Nokia quotient lower priced
• Indifference of have a deep handsets
the rural reach within the
segment rural market?
towards quality • Are the new
entrants playing
a different
marginalization
game?

13
Hypothesis driven problem solving

• Marginalization
• Lack of features in the lower priced segment – high cost due to better quality – indifference of the rural
segment regarding quality
• Distribution network
• Low end – losing out on aspirational value, high end – losing out on the “coolness” quotient.

14
Hypothesis driven problem solving
Walgreen's is more profitable than Drug Co.

5.7 2.5

100%
21.0
21.3
80

60

40 73.0 76.5

20 EBIT
SGA
COGS
0
Walgreens Drug Co.

15
 Hypothesis driven problem solving
General merchandise has the best margin

Product Mix

100 100 Gross Margins

100% 28%
10.0

80
50.0

60 60.0 15%

40

50.0
20 Compound
30.0 39%
Prescription
General merchandise
0
Walgreens Drug Co.

16
 Hypothesis driven problem solving
Walgreen's sells more per store

Sales per store

10,000,000

8,000,000
27%

6,000,000

4,000,000 8,184,199
6,450,500
2,000,000

0
Walgreens Drug Co

17
 Hypothesis driven problem solving
Walgreen's sells more per square foot

Sales per square foot

800

600 42%

400
677

476
200

0
Walgreens Drug Co

18
Hypothesis driven problem solving
Drug Co. has hired xxx Consulting Company

Situation
• Drug Co. is a privately held retail drug
store chain located in the Northeast
• Drug Co. has 40 locations
• Drug Co.’s business model is to be
located in smaller towns where
competition may be limited
• Drug Co. also differentiates itself by
offering compounding service
• We are hired to identify problem(s) and
recommend solution(s)
Complication
• Private equity company recently purchased
Drug Co. and is exploring options to create
value; would like to exit within 3-5 years
• Drug Co. lags against its chief competitor,
Walgreen’s, in terms of operating margin
(5.7% versus 2.5%)

Key Questions

• Do locations have anything to do with the revenues?

• What does product mix do to the operating margins? More specifically, to the gross margins?
• Does Walgreen’s have any cost advantage when it comes to suppliers as a result of volume?
19
Hypothesis driven problem solving
Hypothesis tree

Walgreen’s lower COGS combined with

more revenue drives higher operating
margins compared to Drug Co.

Store locations and

Product mix? Buying power/suppliers?
layout?
• Prescription versus general • Demographics • Same suppliers?
merchandise – Population? • Volume discounts?
• Brand prescriptions versus – Average income?
• Collaborative planning?
generic • Traffic? Vendor managed inventor?
• Compounding as a % of • Proximity to competitors?
prescription • Store layout?

20
Hypothesis driven problem solving
Important Points

1.Practice, Practice, Practice

2.Approach the Case Methodically
3.Learning and Understanding Frameworks only Provides Basic Business
Knowledge, and is Only a Baseline – Never Directly Reference a
Framework
4.Effective Communication of your Methodical Approach to the Case and
the Answer will Differentiate You
5.Keep the Case Roadmap in Mind

21
Hypothesis driven problem solving
Important Points to Remember

1 Practice, Practice, Practice

2 Approach the Case Methodically

3
Learning and Understanding Frameworks only Provides You with Basic Business
Knowledge. This is only a baseline. Never directly reference a framework.

4
Effective Communication of your Methodical Approach and Answer to the Case
will Differentiate You.

5 Keep the Case Interview Roadmap in Mind

22