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Sidi

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1

Structure: What is the required depth and specificness of McKinsey frameworks?

Hi all,

often heard McKinsey requires very broad while very specific framework, what does that mean?

Example Case Question: Client wants to acquire a firm and has three targets between which he needs to decide (all in different industries, Hospital Software, Website development, inventory software):

Question 1: How to approach this problem?

"Would look into:

1) Market attractivity:

Dynamics:

  • How big are the different market segments?
  • What is their growth?
  • What is the outlook over the next years, any major trends?

Competition:

  • What is the competitive situation? (Concentration, USP of competition, their reactions)
  • What is the market share of the target in the respective market?

Customer:

  • Which segments are there?
  • What drives their demand, what is their willingness to pay?

Entry Barriers:

  • Are there any entry barriers in the specific market (i.e. regulatory constraints like required health care licenses)

2) Target positioning within market

  • What products/services does the target offer? (USP, patents)
  • Where do they sell their products (overlap with client somewhere?)
  • What's the image of the company in the market?
  • Do they focus on specific customer segments within market? (how do they compare to our client?)
  • How is the target culture? (how compared to our client?)
  • What is the ownership structure (private, public?)

3) Financial attractivity

Expected revenues:

  • Revenues generated by target
  • Sales synergies (i.e. cross-selling potential, cannibalization potential)

Expected costs:

  • Price of target/ upfront investment costs
  • Recurring costs of target operation
  • Cost synergies (i.e. best practice sharing, economies of scale etc.)

Compare ROI, payback time, NPV of targets

4) Company + Capabilities

  • What products, customer segment and geographies do we serve?
  • What would add value to our existing customers? (i.e. do we already have hospitals, we can now sell additional software?)
  • Acquisition experience?
  • Financial warchest (can we acquire only one or several firms)"

Would a structure like this be too broad?

Thanks in advance.

Hi all,

often heard McKinsey requires very broad while very specific framework, what does that mean?

Example Case Question: Client wants to acquire a firm and has three targets between which he needs to decide (all in different industries, Hospital Software, Website development, inventory software):

Question 1: How to approach this problem?

"Would look into:

1) Market attractivity:

Dynamics:

  • How big are the different market segments?
  • What is their growth?
  • What is the outlook over the next years, any major trends?

Competition:

  • What is the competitive situation? (Concentration, USP of competition, their reactions)
  • What is the market share of the target in the respective market?

Customer:

  • Which segments are there?
  • What drives their demand, what is their willingness to pay?

Entry Barriers:

  • Are there any entry barriers in the specific market (i.e. regulatory constraints like required health care licenses)

2) Target positioning within market

  • What products/services does the target offer? (USP, patents)
  • Where do they sell their products (overlap with client somewhere?)
  • What's the image of the company in the market?
  • Do they focus on specific customer segments within market? (how do they compare to our client?)
  • How is the target culture? (how compared to our client?)
  • What is the ownership structure (private, public?)

3) Financial attractivity

Expected revenues:

  • Revenues generated by target
  • Sales synergies (i.e. cross-selling potential, cannibalization potential)

Expected costs:

  • Price of target/ upfront investment costs
  • Recurring costs of target operation
  • Cost synergies (i.e. best practice sharing, economies of scale etc.)

Compare ROI, payback time, NPV of targets

4) Company + Capabilities

  • What products, customer segment and geographies do we serve?
  • What would add value to our existing customers? (i.e. do we already have hospitals, we can now sell additional software?)
  • Acquisition experience?
  • Financial warchest (can we acquire only one or several firms)"

Would a structure like this be too broad?

Thanks in advance.

(editiert)

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Hi!

Just three quick comments:

  1. The structure does not make logic sense, since 3) is determined by 1) and 2). Hence, this logical relation should be made explicit, and it does not make too much sense to look at these elements in isolation from each other. (I know it is how case approaches are taught in most books, but it nevertheless rests on flwaed thinking).
  2. Moreover, it does not take into account the central purpose of a structure: to explain to the intervewer how you will answer the precise question of the client (it is NOT to show the interviewer what you want to look into, as this ultimately serves no purpose).
  3. As a corollary of the second comment, the criterion according to which you will get to an answer is lacking, which makes the whole approach somewhat blurry and, thereby, will make your life unnecessarily difficult while navigating through the case.

So a rigorous framework should start with the precise question, define the criterion according to which the question can be answered (for this you have to verify the objective first before starting with the structure!), then disaggregate the elements of this criterion into their component parts, and finally identifiying the qualtiative drivers which influence these component parts. This contains all what you have outlined above, but in a much more rigorous logical way, and it gives you a complete roadmap for the entire case.

Cheers, Sidi

Hi!

Just three quick comments:

  1. The structure does not make logic sense, since 3) is determined by 1) and 2). Hence, this logical relation should be made explicit, and it does not make too much sense to look at these elements in isolation from each other. (I know it is how case approaches are taught in most books, but it nevertheless rests on flwaed thinking).
  2. Moreover, it does not take into account the central purpose of a structure: to explain to the intervewer how you will answer the precise question of the client (it is NOT to show the interviewer what you want to look into, as this ultimately serves no purpose).
  3. As a corollary of the second comment, the criterion according to which you will get to an answer is lacking, which makes the whole approach somewhat blurry and, thereby, will make your life unnecessarily difficult while navigating through the case.

So a rigorous framework should start with the precise question, define the criterion according to which the question can be answered (for this you have to verify the objective first before starting with the structure!), then disaggregate the elements of this criterion into their component parts, and finally identifiying the qualtiative drivers which influence these component parts. This contains all what you have outlined above, but in a much more rigorous logical way, and it gives you a complete roadmap for the entire case.

Cheers, Sidi

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