Growth/Profitability cases root cause or not?

Declining Profitability Case growth strategy profitability Revenue analysis Structure
New answer on Aug 18, 2020
4 Answers
1.1 k Views
Anonymous A asked on Sep 19, 2019

Hello,

Thje prompt in some cases tells you that profits/revenue have been declining or that CEO is not happy with revenue or performance and you are staffed to turnaround the situation (either improve profitability or grow revenue). In cases like that when you are not explicitly asked for root cause, are you supposed to look at root cause or dive directly into driving growth by improving revenue/cutting cost?

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Deniz
Expert
Content Creator
replied on Sep 19, 2019
BCG | A.T. Kearney | University of Cambridge | 350+ coachees | 5+ years of consulting experience in London, Dubai and Istanbul

Hi,

You are supposed to look at the root cause, so that you can devise appropriate actions to turn the situation around. Thus, in your structure, you can have a three-step approach:

  • Context: understand the client context, key market dynamics qualitatively
  • Diagnosis of financials: understand why the problem is happening (with a standard issue tree)
  • Next steps: layout which actions are feasible and can turn the situation around

Best,

Deniz

Was this answer helpful?
Anonymous replied on Aug 18, 2020

Dear A,

Root causing is important in profitability case. Try to identify it. For that you need to have a look firts on the development of the overall profitability over years and to find why is it declining:

- because revenues

- or because of the costs.

Aftewards drill down accordingly, either on the revenue side or on the cost side, or on both.

Pretty often, both, the revenues and costs, have been down over the years but the revenues went down faster than the costs.

After you have found the root causing measures, fix them and develop the solution which will fix both bites and will lead to the increase of profitability.

Recently I've uploaded a profitability case “Deep Water rescue” (available in English & German) here on Preplounge:
https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/advanced/deep-water-rescue-206

I used similar cases when I was interviewing candidates on my own in Central Europe (Germany & DACH Region), Eastern Europe (Ukraine & Russia) as well as Middle East (Dubai, KSA, Lebanon, and Qatar). So, this case is very advanced and could be typically used in the 2nd or 3rd interview rounds by the leading consulting firms.

Try, whether you can crack it.

Best,
​André

Was this answer helpful?
0
Vlad
Expert
Content Creator
replied on Sep 19, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

The part of every consulting engagement in real life is diagnostics. Same with the cases. You should always find the root causes of the existing problems first before jumping into conclusions

Best

Was this answer helpful?
Francesco
Expert
Content Creator
replied on Sep 19, 2019
#1 Expert for Coaching Sessions (3.600+) | 1.300+ Reviews with 100% Recommendation Rate | Ex BCG | 8+ Years of Coaching

Hi Anonymous,

I agree with Deniz, in a case with a profitability problem or revenue you should first identify the reason for the problem, then look for potential ways to improve the situation. This because the easier way to improve the performance in terms of revenues or profitability is normally to fix the revenue or cost problem of the company.

The only case involving revenues where you don’t have to look at the problem is when you have a pure growth strategy case, where the company is doing fine and the CEO wants to improve performance even more, since in this case you simply don’t have an issue to investigate.

Best,

Francesco

Was this answer helpful?
Deniz gave the best answer

Deniz

Content Creator
BCG | A.T. Kearney | University of Cambridge | 350+ coachees | 5+ years of consulting experience in London, Dubai and Is
417
Meetings
653
Q&A Upvotes
41
Awards
89 Reviews