framework: should the qualitative and quantitative part be put together?

Framework
Recent activity on Feb 07, 2019
2 Answers
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qing asked on Feb 07, 2019

I awalys wonder how to combine the qualitative and quantitative part of the framework together.

For example, a case is about whether the client should launch a new product or not. I think my framework would be:

ONE. QUALITATIVE:

  1. market: market size, growth rate
  2. consumers: segmentation, size, preference for the product
  3. competition landscape: #of competitors, market consolidation
  4. company: funds for investment, previous experience, branding, supplychain, feather of new product

TWO. QUANTITATIVE:

Profit of launching new product

  1. revenue: Price*volume
  2. cost: initial investment cost, operation cost(fix, variable)

THREE. RISK AND IMPLEMTATION

My question is: 1) Is it ok for me to seperate the quantitative part and the qualitative part? I know the numbers of quantitative calualation come from qualitative analysis, but I also think that for many case the profit calculation is the main part. 2) if it's ok to sperate these two part, can I change the sequence, (talking about quantitative part first) depending on the case? 3) If I should combine these two, how to do that in a reasonabe and logical way? 4) I also wonder if it is proper to take "risk" as an individual part?

Thank you so much!!!!

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Sidi
Expert
replied on Feb 07, 2019
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers

Hi qing!

In order to do efficient analysis, avoiding to "boil the ocean", you should always start with the quantitative/numerical part. This will very quickly allow you to narrow down the area which you then need to understand in a qualitative way. This is one of the fundamental things that candidates need to learn in order to rigorously disaggregate the value drivers of a business. A driver tree allows you to identify the numerical drivers and sub-drivers of a certain metric (e.g., profit). The qualitative elements (such as consumer demand, market structure, company operations, etc.) then have to be mapped to the sub-branches of the tree!

Hence, your analysis has two steps. Imagine you want to run a diagnostic on why profits have fallen. First you need to identify the numerical driver of the problem (e.g., customer base is shrinking). This gives you an understanding of the WHAT. The second step is the understanding of the WHY! To do this, you have to examine the qualitative elements that link to the "number of customers"-sub-branch in your driver tree (e.g., competitive situation, market entries, new substitutes, relative price point, customer preferences, product/service properties vs. competition, etc.)

You can think of these qualitative elements as the typical business situation framework elements (see V. Cheng et al.) - but here, they are not hanging in the air, but they are embedded in a rigorous thinking frame which emerges from the disaggregation of value drivers and linking it to qualitative reasons.

Cheers, Sidi

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Vlad
Expert
Content Creator
replied on Feb 07, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

First of all - you have a mess with quantitative / qualitativesegmentatation. E.g. Market size and growth rates are qualitative factors

Secondly - you should try to prioritize quantitative for simple reasons:

  1. You have limited time
  2. Most of the issues are usually found in quantitative things

The worst thing for you is being in the middle of the interview with no numbers.

Thus try to put the quantitative things first even in a single bucket. Eg:

Market analysis

- Quantitative

  • Size
  • Growth rate
  • Segments and their growth rates

- Qualitative

  • Regulation
  • Barriers to entry

Best!

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Sidi gave the best answer

Sidi

McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers
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