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How to be MECE in non-profitability cases

Dear all

I am currently practicing cases and have a question about MECE. I have read a lot of articles but am still not getting it completely. Whenever you have an issue problem: profitability, revenue decrease, how to grow your revenue etc. and the question is to find the source of the problem, it is completely logical for me that you have to split it up into P=R-C or similar to be 100% sure that you consider all the possible root-causes for a certain problem.

My problem arises when the questions are something like "Should Aldi enter the Chinese market?". How can you be sure that your approach is MECE there? How can you set up a structure that makes you 100% sure that you consider everything there is to consider (obviously 80/20 in mind)?

How would you structure your approach to solve the case above, and why would it be MECE?

Thanks for your help and best,

A

Dear all

I am currently practicing cases and have a question about MECE. I have read a lot of articles but am still not getting it completely. Whenever you have an issue problem: profitability, revenue decrease, how to grow your revenue etc. and the question is to find the source of the problem, it is completely logical for me that you have to split it up into P=R-C or similar to be 100% sure that you consider all the possible root-causes for a certain problem.

My problem arises when the questions are something like "Should Aldi enter the Chinese market?". How can you be sure that your approach is MECE there? How can you set up a structure that makes you 100% sure that you consider everything there is to consider (obviously 80/20 in mind)?

How would you structure your approach to solve the case above, and why would it be MECE?

Thanks for your help and best,

A

1 answer

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Hi,

First of all - not all issue trees can and should be MECE. Very often it's not the case. For example, depending on the objective, the market entry case should not necessarily be MECE.

Secondly - there is a number of ways how you can approach in a MECE way:

  1. If your structure works mathematically (e.g. Total time spent on cleaning operation = # of people x Frequency x Hours per cleaning per person)
  2. If your structure comes from a formula (e.g. output rate = total number of people being served / time to serve one person)
  3. If you are using the common industry drivers (e.g. revenues = # of customers x av. check) (e.g Passengers on the plane = capacity x Load Factor) or the industry revenue streams (Fuel revenues / non-fuel revenues for the gas station) or the functional drivers (e.g. for the problems in sales : Sales strategy / sales peopleand allocation / motivation / sales process)
  4. If your issue tree is a real framework used by the consultants (e.g. the famous Bain Cap framework for PE due dills: Market / Competitors / Company / Feasibility of exit) (e.g. People / Process / Technology) (e.g. The famous McKinsey framework - People don't want to do smth / they can't do smth / smthprevents them from doing that)
  5. If your structure is a well-known academically MECE framework (e.g. Product / Distribution / Price / Marketing (Also known as 4P))

There is no magic pill how you can learn to build the MECE issue trees. !!!! It comes with a lot of Practice and reflection and building proper industry and functional knowledge. !!!!

Best

Hi,

First of all - not all issue trees can and should be MECE. Very often it's not the case. For example, depending on the objective, the market entry case should not necessarily be MECE.

Secondly - there is a number of ways how you can approach in a MECE way:

  1. If your structure works mathematically (e.g. Total time spent on cleaning operation = # of people x Frequency x Hours per cleaning per person)
  2. If your structure comes from a formula (e.g. output rate = total number of people being served / time to serve one person)
  3. If you are using the common industry drivers (e.g. revenues = # of customers x av. check) (e.g Passengers on the plane = capacity x Load Factor) or the industry revenue streams (Fuel revenues / non-fuel revenues for the gas station) or the functional drivers (e.g. for the problems in sales : Sales strategy / sales peopleand allocation / motivation / sales process)
  4. If your issue tree is a real framework used by the consultants (e.g. the famous Bain Cap framework for PE due dills: Market / Competitors / Company / Feasibility of exit) (e.g. People / Process / Technology) (e.g. The famous McKinsey framework - People don't want to do smth / they can't do smth / smthprevents them from doing that)
  5. If your structure is a well-known academically MECE framework (e.g. Product / Distribution / Price / Marketing (Also known as 4P))

There is no magic pill how you can learn to build the MECE issue trees. !!!! It comes with a lot of Practice and reflection and building proper industry and functional knowledge. !!!!

Best

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