A question about profitability frameworks

Honestly, I wouldn't use this structure to begin with. 

By now, any interviewer can sniff out from a mile away that you're using a pre-learned framework (e.g., company, competition, customer...) and they'll be turned off by that. 

Instead, aim to structure from first principles and use as much as possible your common sense. 

Even on a more basic level, you can look at the profitability equation as an alternative structure that at least is rooted in your mathematical understanding of the term. 

You might also find these resources useful:

• Expert Guide: Mastering Structuring & Brainstorming
• Masterclass: First Principle Structuring

Best,
Cristian

Hi Mena,

I would be happy to share my thoughts on your question:

• First of all, contrary to what other coaches have said, the initial structure is indeed MECE, and interviewers do not care about the creativity in your initial structure, as long as it properly fits - nothing more.
• Moreover, however, thinking in "buckets" is rarely a wise idea, except for McKinsey, who typically ask about dimensions or factors specifically. You should still not talk about "buckets" - that's for collecting rainwater.
• Lastly, I would strongly advise you to consider working with an experienced coach like me on your structuring skills. I developed the "Case Structuring Program" to help exactly such candidates like you who struggle with case study structures.

You can find more on this topic here: How to succeed in the final interview round.

If you would like a more detailed discussion on how to best prepare your application files, for your upcoming pre-interview assessments and/or interviews, please don’t hesitate to contact me directly.

Best,

Hagen

Hi, great question! Personally, I would not recommend it for the same reasons that you mentioned - that it is hard to explain this in a MECE manner. The elements of this framework are great to keep in mind when talking about revenue and cost levers. Imagine solving a real client problem - we are likely to truly look at it in terms of revenues and costs. Thinking about buckets as areas of analysis helps rather than something theoretical 

Hi, 

Thanks for your question.

I agree with you. I would have revenue-cost under profitability framework, and then split revenue by price*volume, and then discuss the different sub buckets driving these categories  (market, customer, competitor, product etc.), fixed and variable cost.

Then you could say - do we know if it is a cost or revenue issue? If not, I would like to first start with revenue and go over some of the key drivers. 

Remember, as much as you want to keep your framework MECE, the goal of the framework is to guide you through the problem to find the issue and solve for it. So you don't want to make your framework confusing or too detailed. So keep it simple and high level and talk through your buckets and thinking.

Hope that helps. Feel free to reach out.

Thanks,
Soh

Hey Mena :)

You’re absolutely right to think critically about MECE here. A pure profitability framework (revenues vs. costs) is the most MECE and safest for quantitative diagnosis. The “company, customer, market, competition” approach is broader, it’s helpful when you suspect the root cause lies beyond just numbers (for example, strategic positioning or market shifts). Your phrasing works perfectly: start with the financial breakdown, then move to qualitative drivers like customers or competition. That balance shows structure and business intuition.

best, Alessa :)

I'm going against the majority here. THAT FRAMEWORK IS MECE. And it (could be) a very good structure if well explained and applied. Which is not the case, probably because on the book the author makes the overall huge misleading mistake of suggesting using "buckets". That is not an approach nor a framework. But in this case... he got it right!

HERE'S HOW IT WORKS:

First you are going to define your approach. It has two key parts:

1. Identify the numerical driver driving the decrease in profits. For that you use a profit tree. You are going to do a deep analysis of the companies financials, breaking down revenues and costs in a logical way that depends on the specific industry and company. You will do that until you identify the variable driving the profits down.

2. Identify the QUALITATIVE DRIVERS that explain why that numerical variable is going down. Those can be internal (a decision the company made) or external. 

   Depending on the variable likely external candidates (at a high level) can be:

   1. customers/the market (provide examples... e.g. lower demand; substitute product driving demand away)
   2. competitors (e.g. price war, new competitor, new offering, etc.)
   3. supply base (yep, the book forgot this obvious one, because forgot to look at the whole industry value chain...)

So... if you communicate that your are going to do 1) a quantitative diagnostic and 2) qualitative diagnostic, it is MECE, because you have a first layer that is MECE, and below each of the branches the sub-layers are also MECE.

I need to reinforce here that too many people seem to be comfortable with the idea of using "buckets" as a framework. This is plain wrong. You won't be perceived as an independent or refined thinker. A bucket is used to carry things in bulk... not the kind of targeted efficient thinking we are looking for. What you need is an approach and then to build a custom case-based framework based on that approach.

Feel free to reach out if you want to learn and practice using approaches that are not based on "buckets", and maximize your chances of getting an offer.

Hi there,

I agree with you that the approach to have customers, market, and competition separate is harder to explain as at it intuitively does not sound MECE. It CAN be more MECE if the buckets are elaborated further to distinguish what the customers, market, and competition covers that the company's financials may not cover (e.g. more qualitative information that are not direct drivers of revenues and costs such as customer preferences and pain points, barriers of entry).

My suggestion is to use a framework that YOU feel confident about defending. If you don't believe in it, don't try to defend someone else's beliefs.