How many levels to original issue tree?

Question

Hi,

When creating the first issue tree/structure in a case, I'm struggling to determine how many levels deep to go.

Listening to LOMS, for instance, I feel like applicants name the 3-4 domains they want to investigate and then just start asking questions about each one, without having formulated underlying levels upfront. Perhaps a bit less structured, but seems to allow for more unconstrained thinking.

Any thoughts? Thanks,

Chris

Answer 1

Hi!

Completely agree with Guido. I would also add that you can formulate subpoints as hypothesis.

For example if you are having a PE (private equity) case, you should do the following:

Make classic structure (market, company, competitors, feasibility of exit)
Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)
Present your 1st level Hypothesis:

- "In order to understand whether we should invest in Company A, I would like to look at: Market attractiveness, Company Attractiveness, Competition Intensity, Feasibility of exit"

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"

Good luck!

Answer 2

Hi Chris,

I think the approach would really depend by the case.

As a general rule of thumbs I would suggest you to apply a 2-level structure for general/classic cases and a more detailed one for market sizing.

For general/classic cases you should state your initial hypothesis and list the area (1st-level) you need to address to answer to that hypothesis.Then for each area I would list the subpoints I want to analyze (2nd-level).

I hope that answers your question.

Best,

Guido