Data in case interviews

There are several common case types that occur in case interviews for management consulting roles. Profitability cases are some of the most frequent ones. These cases require a structured approach, analytical thinking, and a deep understanding of business fundamentals. Let’s take a look at what profitability cases actually are and how you can approach them successfully. Profitability Cases – The Number 1 Reason for Most Consulting ProjectsOne of the most common reasons why firms instruct consulting firms with their projects is that they struggle with their profitability. As a consultant you will have to diagnose the underlying issues, come up with potential solutions and recommend actions to improve profitability.As a candidate in a case interview, the task is pretty much the same, but on a smaller scale. The good news is: Once you have understood the basic structure of profitability cases, you can solve them no matter the industry or concrete business scenario. The underlying concept is always the same and not very difficult.Profitability issues always stem from falling revenues, rising costs, or both. It is as simple as that. Your task will be two-fold: Perform a structured and quantitative analysis of the data to isolate the problem, and then find a promising solution. In most cases, you can use the profitability framework to structure the problem, but make sure to not blindly apply it, but to really understand the problem at hand and make adjustments as needed in the concrete business scenario. The Profitability Framework – A Basic Tool to Structure Your Profitability CaseThe Profitability Framework is a fundamental tool for approaching profitability cases. It is basically an issue tree that breaks down profitability into its key components: revenues and costs.In the first place, this equation is pretty straightforward and not complicated at all. Next, it is your task to understand each side of the equation and identify the cause for declining profitability. There could be three reasons:Revenues have been declining.Costs have been increasing.Revenues have been declining and costs have been increasing.(Always make sure to remember this option. It happens pretty easily that candidates identify either revenue or cost issues as the problem, completely focus on one side of the issue tree and forget to zoom out again, take a look at the big picture and consider the other side of the equation as well.)So, the first question to get an answer to is “Have revenues been declining?”, “Have costs been increasing?”, or “Have revenues been declining and costs been increasing? And if so, which one is the bigger problem?”. Whenever you get the information that something has changed: quantify it! Ask by how much and in what time period. Depending on the answer, you will know on which side of your profitability tree you need to start your analysis. Always start with the most relevant driver (Pareto Principle).💡 Pro Tip: When trying to find out where to start your analysis, keep in mind to communicate like a consultant. A Bainie would not go to the client and bluntly ask “Have your revenues been declining?”, but rather formulate a question like “How have your revenues been developing over the past five years?”. It may be possible that your interviewer will then share an exhibit with you that not only contains revenue information, but also valuable insights on product lines, geographies or other relevant data, which you can use throughout the case. Scenario 1: Revenues Have Been DecliningLet’s assume, the profitability problem stems from declining revenues. There are many potential reasons for this and you need to find out which one applies in order to come up with a solution. Most important for your analysis is to stay structured at all times.1. Understand How the Business Makes RevenueTo structure your analysis of declining revenues, you need to understand the business model of the company you advise. So basically answer the questions:How does this company make revenue?What does the revenue consist of?Which component of the revenue has been declining?Understanding your client’s business model is absolutely crucial for your revenue analysis. Only when you know which products the company sells and which customers it serves, will you be able to give solid advice on how to solve profitability problems.2. Break Down the Revenue into its Single ComponentsOnce you have understood the general business model of your client, you can go on and break down the revenue into its components. Depending on the business model of the company, the equation can differ.Let’s take a look at some examples depending on different industries:Manufacturing and Retail IndustryRevenue = Number of Units Sold × Selling Price per UnitNumber of Units Sold: The total quantity of products manufactured or sold to customers.Selling Price per Unit: The price at which each unit of product is sold to distributors, retailers or customers.Subscription-Based Services (e.g., Streaming Services, Software as a Service)Revenue = Number of Subscribers × Monthly Subscription FeeNumber of Subscribers: The total number of customers who subscribe to the service.Monthly Subscription Fee: The amount charged to each subscriber on a monthly basis.E-commerce IndustryRevenue = Number of Transactions × Average Transaction ValueNumber of Transactions: The total number of orders placed by customers.Average Transaction Value: The average amount spent by customers per transaction.Advertising Industry (e.g., Digital Advertising, Print Media)Revenue = Impressions or Clicks × Cost per Impression or ClickImpressions or Clicks: The total number of times an ad is viewed or clicked by users.Cost per Impression or Click: The cost charged to advertisers for each impression or click generated.Hospitality Industry (e.g., Hotels, Restaurants)Revenue = Number of Rooms or Seats Occupied × Average Room Rate or Meal PriceNumber of Rooms or Seats Occupied: The total number of rooms booked or seats occupied by guests.Average Room Rate or Meal Price: The average price charged per room or meal.It becomes obvious that there is no one-size-fits-all-solution for a revenue analysis. You need to adjust your approach according to the client’s business model and needs.3. Analyze the Single Components of the Revenue ModelOnce you have a clear picture of what the revenue of your client is composed of, you can go on with your analysis by focusing on the component of the equation that appears to be the problem. For example, if your client is a manufacturer with declining revenues, you should find out if the number of units sold has been decreasing or the selling price per unit has been lowered (or a combination of both).If the number of units sold has decreased, you go on with a further analysis on the reasons behind. These can be manifold, so make sure to stay structured and use segmentation to get to the root cause of the problem.The segmentation you use needs to be customized to the case at hand. Make sure to let your interviewer know your thoughts and guide him or her through the case. That way, you will usually get valuable hints on which direction to go.Examples for segmentations are:Product segmentation: Product types? Price ranges? Packaging sizes?Customer segmentation: Small / medium-sized / large businesses? Age groups? Sex? Income groups?Market segmentation: Geographies? Industry verticals?Channel segmentation: Distribution channels?If you’ve found the biggest driver of the problem, you oftentimes have to switch to a more qualitative framework (for example the 4 Cs) to find the underlying root cause. For example: when you have less revenue, but the price is the same and units sold dropped, you have to find out why. Is there a new competitor on the market? Do you have quality problems, or did you just stop a marketing initiative that you ran for years prior to this drop?The same procedure applies if pricing seems to be the issue for declining revenues. “Let’s increase prices” might be an easy recommendation to give, but most likely too easy to be valuable. It is crucial to understand first, why prices have decreased and again, the reasons might be diverse. Make sure to use a structured approach in order to pinpoint the exact problem.Possible reasons and forces for decreasing prices may be:Internal:Increased Supply: Overproduction or excess inventory can lead to discounted pricing to clear out stock.Competitive Pricing: Aggressive pricing strategies by competitors can force companies to lower prices to remain competitive.External:Price Sensitivity of Customers: Changes in customer price sensitivity and purchasing behavior can influence demand and pricing strategies.Market Saturation: Increased competition and market saturation can lead to price wars and downward pressure on prices.Economic Conditions: Economic downturns or recessions can impact consumer purchasing power and demand for products.Exchange Rates: Fluctuations in exchange rates can affect import/export prices and overall cost structure. It may not be surprising that when looking out for the reasons of the client’s revenue problem, staying structured is most important. Come up with solid hypotheses and validate or neglect them in the dialogue with your interviewer and based on the data that will be provided to you throughout the conversation. This requires flexibility and spontaneity, so learning frameworks by heart will not help you here. It is important to internalize the way of thinking a consultant uses and solve cases with peers to put it into practice.👉 To find like-minded candidates for mock interviews, take a look at our Meeting Board and simply accept one of the open invitations.

Poor structure, or sometimes no structure at all is one of the main reasons why candidates fail in case interviews. Why? Because case interviews are designed to simulate real-life consulting scenarios. And in the real consulting world, you need to structure problems all day long. If you cannot clearly demonstrate this skill during your interview, you probably won’t be able to apply it on the job and therefore not succeed in a consulting career. But let’s stay positive: Structuring skills can be learned. With some basic principles in mind and lots of practice afterwards, you will be able to excel in this consulting-crucial discipline. Why Is a Good Structure So Important in Consulting Case Interviews?By following a structured approach in your case interview, you not only improve your chances to succeed in the interview but also demonstrate the key attributes that consulting firms seek in potential hires:Problem-solving skills: A good structure allows you to break down complex problems into manageable parts. It helps you prioritize the most impactful areas to focus on and ensures that you cover all aspects of the problem systematically. This thoroughness is crucial in consulting, where incomplete analysis can lead to suboptimal recommendations.Analytical skills: A good structure ensures your analysis is rigorous and logically sound, which is critical for building credible and persuasive arguments. Structuring your case around hypotheses and testing your hypotheses with data leads to the kind of evidence-based recommendations expected in consulting.Communication skills: Structuring your thoughts helps you explain your reasoning clearly and concisely to the interviewer. This keeps the interviewer engaged and makes it easier for them to follow your analysis. After all, effective communication is essential in consulting. Just as important as solving a problem is communicating the results in simple terms. Your audience (be it the interviewer or the CEO once you have landed the job) must understand your reasoning in order to go on with it and make the corresponding decisions. How Can You Build a Good Structure in Your Case Interview?A good structure is the basis for solving your case successfully. It can be understood as a map that guides you through your analysis to come up with a final, profound and thought-through solution. By following a good structure, it is ensured that you have covered all relevant points and taken all the necessary steps to give a solid recommendation on your case.The first thing to understand in this context is that there is no one-size-fits-all solution. Each case differs and you must be able to adjust your approach flexibly to the situation at hand. Just like in the real consulting world, your structure needs to be customized to the unique circumstances of the client and demonstrate that you have really understood the individual case scenario. Consultants at top firms such as McKinsey, BCG, or Bain are not hired (and paid tremendously) for offering off-the-shelf solutions, but for finding unique solutions to unique challenges whilst covering all relevant aspects.Even though your structure needs to be highly customized to the case at hand, the following four simple steps will get you a lot closer to success:Step 1: Define the Problem ClearlyYou cannot come up with a structure to solve your case, if you have not understood the case correctly in the first place. Always make sure to pinpoint the exact problem of your case scenario. Ask relevant questions about the company, the business model behind and the situation you are asked to advise on. In some cases this may also involve asking for more information about the customer base or competitive landscape your client is in. However, each question you ask should have a clear intent and the resulting insights should be used for building your structure.After your 2-3 initial questions, summarize what you think the main problem is and get feedback from the interviewer if you have understood the situation correctly. Once the interviewer confirms, ask for a couple of minutes to create your case structure and then you are good to go. Step 2: Break Down the Problem Into its Component PartsA good structure is basically nothing else than a problem broken down into manageable parts that can be prioritized and worked off step by step. There are manifold ways to do this, but some are easier to follow than others. After all, the aim is to create a logical approach that reduces the complexity of a problem and in that way makes it easier to handle.There are generally two approaches to how successful candidates go on with structuring: Number one is to create an issue tree from scratch and number two is to use an existing framework and adjust it individually to the case. Issue trees are oftentimes helpful for simple and rather short-term problems. The more complex it gets, the likelier you will hit the limits of this tool and need to work with conceptual frameworks that need to be individually adjusted to the case.Unsuccessful candidates often use approach number three: Take an existing framework and apply it to the case, suitable or not. We would actually not even consider this an approach at all. Case interviews are not meant to test your knowledge about common frameworks, but they are used to evaluate your problem-solving skills, creativity and analytical thinking. How can you demonstrate these skills by applying off-the-shelf frameworks to your case? The answer is simple: You can’t. So let’s focus on the approaches successful candidates use to build a structure.Approach 1: Create an issue treeCreating an issue tree is a very simple, yet effective method to structuring your case. The general idea is to identify the drivers of your problems and break them down into categories that are mutually exclusive and collectively exhaustive (MECE). Once you have done that, you can work your way through the tree branch by branch. Build hypotheses on the most relevant branches that will be prioritized in your analysis and always stick to the structure of your tree.Important to note is that your issue tree should be built from scratch and custom-tailored to your case. In your interview preparation process you will most likely see quite a few issue trees. That’s great and can help you to come up more easily with a structure for your tree in the real interview, but don’t make the mistake and rely on issue trees you have used in the past. As we have learned earlier, each case scenario is different and you need to be 100% attentive to what is asked from you in order to find a suitable solution.👉 Find more detailed information on how to use an issue tree to structure your thoughts here.Approach 2: Use an existing framework and adjust it individually to the caseIf you find it hard to create an issue tree for the given problem (and not every problem can be structured with an issue tree), you can use an existing framework and adjust it individually to the case.The following frameworks can be a good starting point for your individual one:👉 4C Framework👉 4P Framework👉 Porter’s Five Forces👉 Supply and Demand👉 The Value ChainHowever, the individual adjustment is the important part here. There are many ways to do this, but the following three tips can be a good starting point:➡ Adjust the general components of the framework you would like to apply.Based on the clear definition of the case scenario, identify the specific needs and goals your framework needs to address. Choose a framework that you would like to use as a basis and review the components and steps of that framework critically. Determine which parts are most relevant, add components if necessary and leave out aspects that are not needed for your case.Your framework should be as exhaustive as possible to cover all aspects of your problem, but at the same time density is needed for it to be problem-specific. This may sound complicated at first, but once you have internalized the common frameworks you can rely on as a basis, you can start playing around with them, and will find it easier to adjust them flexibly.💡 Prep Tip: Make sure to practice with peers (or a professional coach) in order to receive feedback on your structure: Is it logical and easy to understand? Does it cover all critical aspects? Is it suitable for the case at hand? Gather the feedback you have received and identify patterns of structuring approaches that have worked well and those that haven’t. You will see that your structuring skills will sharpen rapidly.➡ Combine different frameworks with one another.A more advanced approach than simply adapting the general components of one framework is to combine different frameworks with one another. To solve the specific problems identified in your case, it may be a good idea to combine elements from different frameworks to create your own customized framework. Make sure you take a logical approach and stay structured. The frameworks you work with should be well-selected and fit in the same context.➡ Adapt the language and terminology of the framework to match the case.Modify your language to the specific context and requirements of your case. Depending on the industry your fictional client is in, certain terminology may apply. Tailor the names of your framework categories to the individual circumstances of your case and demonstrate that you have understood your client’s particular situation. For example, it makes a difference if the case is about a B2B company with “businesses” as customers, or an online B2C platform with “users” as customers. Small adjustments in your wording like this can make a difference between a good and an excellent candidate. Step 3: Prioritize the Drivers of the ProblemOnce you have built your initial framework for the case, the next step is to prioritize the drivers of the problem. Determine the order in which to tackle issues based on their impact and urgency. This prioritization will help to structure your analysis and recommendations logically.Hypothesis-driven thinking is key here. Based on the information given to you and some further questions you may have asked, you should be able to build an initial hypothesis on the main problem drivers of your case. Focus on these first and communicate clearly why you have chosen a certain aspect of the problem as a starting point for your analysis. The reasoning behind this should be clear and logical. If you are on the wrong track, your interviewer will most likely let you know right away, but you will get credit anyway for following a straightforward problem-solving approach.After you have identified the most relevant aspect of your problem, you dig deeper into the analysis. Add some more depth and insights into your initial framework, but remember to always stay structured while doing so. Stay focused on solving the main problem you have defined at the beginning of the case, follow a logical approach and do not get lost in too many details. Step 4: Adjust your Structure as NeededIt may happen that you start with your analysis and find out that your initial structure does not fit the case any more. State this finding to your interviewer, and adjust the structure as needed. It is better to make adjustments than sticking with it and getting completely stuck. However, make sure you explain the reasons for any changes to your framework to provide clarity and context. Ensure that the interviewer understands the changes and evaluate and refine your framework continuously. What Is the Best Way to Improve Your Structuring Skills?The best way to sharpen your structuring skills is the simplest one of all: Practice. There is no secret recipe behind it and no magic involved. Internalize the frameworks you can use as a basis and practice, practice, practice. Solve some cases on your own, but then make sure to practice together with peers as soon as possible. By conducting mock interviews, you will not only receive valuable feedback on your own structuring skills, but can also observe how other candidates go on with this task. Write down best practices, keep track of your progress and get better and better until you feel confident for the final interview day. On average, successful candidates on PrepLounge usually conduct 20-30 mock interviews, so don’t be shy and get out there.