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How to be hypothesis driven in your structure?

Anonymous A asked on Aug 15, 2018 - 2 answers

I got feedback from my McKinsey first round stating that my structure was not hypothesis driven enough. What did they mean by that? I understand the importance in being hypothesis driven, but how do you make your structure illustrate that?

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Anonymous B replied on Aug 21, 2018

I can think of two instances when using a hypothesis makes sense:

1. Graphs - here an interviewer might explicitly ask you for your conclusions and hypothesis if you have any. Hypothesis in this instance would be something that is possibly true but would need to be proven and further analyzed before making a final conclusion.

2. After you've developed a framework. An interviewer might excplicitly ask you for your hypothesis. For example, you have a case about profitability problem of a regulated company (utilities etc.). I broke down the structure into revenue drivers and cost drivers. At the end, my interviewer asked me what is my hypothesis. A good hypothesis would have been: "The problem could be on the revenue or cost side, you told me that the utility is regulated, so we can't manipulate prices and increasing the volume of our customer base in limited to our region and is a long term solution (upgrading infrastructure, etc.), so I'd focus on optimizing costs and would return to revenue if we have time.

replied on Aug 15, 2018
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The major mistake of the candidates is that they start using the hypothesis and neglect having a proper structure.

Moreover, if you perfectly solve the case without ever stating a hypothesis - you'll pass the interview. So most probably you had some other issues with the case as well and they used it as a standard feedback.

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 a number of the hypotheses - 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!