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Business framework by Victor Cheng

business framework
New answer on Jun 30, 2020
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Anonymous G asked on Feb 23, 2020

Hello, could anyone help me to understand more about the business framework mentioned in Victor Cheng's book? Is this framework more about exploring different dimensions of the problem, or could it be used to verify the hypothesis?

In the first approach, I ask questions categorized by client / company / competition / product, to try to understand the business issue in detail.

In the second approach, after confirming cost stayed the same, I could say the issue might be driven by internal (company/product) or external (client / competition) factors. The next step is to verify the hypothesis that this is an internal issue, and I branch out the external factors. Lastly, I verify the hypothesis that this is a company problem, and delete the product branch. In the end, I could prove that this is a company related problem, and focus on this area to find a root cause of profitability drop.

Which approach is the correct way to use the framework? Thanks!

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Luca
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replied on Feb 26, 2020
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I would suggest the second one. ANyway, try to build your own frameworks and not be stucked to the ones proposed by casebooks.

Best,
Luca

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Francesco
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replied on Feb 24, 2020
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Hi Anonymous,

your second option (verify the hypothesis) would be better. However, I would stay away from the Victor Cheng structure of company-client-competition-product – this framework is completely outdated and useless for many cases (eg operations).

Best,

Francesco

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Vlad
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replied on Feb 24, 2020
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Hi,

First of all - using hypotheses is not mandatory. I would say - use the hypothesis if you are really good at solving the cases. If not - use the basic approach

There are two ways to use the hypothesis

First - presenting a structure using the hypothesis. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

  • - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit"

4) Present the main 2nd level Hypothesis:

  • "In the market, I would like to make sure that the market is big enough and growing;
  • In the company I would like to find additional opportunities for growth;
  • In competition I would like to check that the market is fragmented enough;
  • Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!

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Ian
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replied on Feb 23, 2020
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Is this framework more about exploring different dimensions of the problem, or could it be used to verify the hypothesis?

This is the exact same question. This is the entire point of a framework...to develop and confirm your hypothesis/es on the problem!

Which approach is the correct way to use the framework?

It depends on the context of your case. However, in general, you are asking questions that get you closer and closer to an answer or an understanding of the world. You're narrowing down (or moving towards) a clearer view of the things that matter for your problem.

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Anonymous replied on Jun 30, 2020

Hi,
Agree with Ian that "exploring different dimension of the problem" and "verify hypothesis" is the same thing. It is both about how you break down a big problem into small pieces and test where the issue lies.
E.g. the problem could be "is it a good idea to enter market A", you can totally rephrase that to hypothesis of "Enter market A is a good idea" or "A bad idea". Then you would look into the same 4 dimension regardless how you state the problem/hypothesis. In the hypothesis approach, you can just rephrase the dimensions, e.g. "I would like to look into the company capability, to see if they have the right capability to enter; once we have that understanding we can prove or disprove the hypothesis from a capability point of view"...Same for other dimension.
It is the same thing, just how you phrase it. But remember to customise the framework according to the specific case context.

Best,

Emily

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Antonello
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replied on Feb 25, 2020
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I confirm the second approach is better.

Best,
Antonello

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Clara
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replied on Feb 24, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

+1 to Francesco, don´t make the mistake at looking at this structures and thinking they would provide you a holistic toolkit, since they won´t.

Is good a pre-read to get up to speed tough.

Hope it helps!

Cheers,

Clara

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Luca gave the best answer

Luca

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