How to develop business judgement properly?

business acumen business knowledge Case Interview Case Prep interview skills
New answer on May 04, 2020
15 Answers
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Vasiliy asked on Dec 04, 2017
2 years in banking, BA for a Russian Consulting company

Hi there!

So far I've heard several answers to such a question:
1) read business articles
2) practice more cases
3) read business literature

Tried all 3 options, but somehow I'm still stagnating (constantly recieving same feedback while improving in other areas). The only thing that works for me so far is real experience, but it's definetely not the most time/energy-efficient way to develop business judgement for case interviews.

Please elaborate as thorough as possilbe! Especially if you were able to solve such a problem for yourself.

Any specific business books will also be highly appreciated (since most "best-sellers" are.. let's say not really suited for case prep).

Thanks in advance!
Best regards,
Vasiliy

(edited)

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Vlad
Expert
replied on Dec 05, 2017
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

Building Business Judgement is actually about building industry and functional knowledge.

Focus on the most common industries in the following priority (sorted by probability of getting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

There are several sources of info to develop business sense:

1) Cases - you simply solve 50-70 cases and get a broad knowledge of different industries, common pitfalls and questions. The key here - find good partners who already had case interviews with MBB companies

2) Company reports, equity reports, IB roadshow docs - usually have a good overview of company and industries. One of the best sources to prepare

3) HBS cases - quite useful, but not sure if lot's of them available publically. Probably worth buying

4) Books - one good book about airlines with numbers and industry analysis can give you all needed industry knowledge

5) News, Industry blogs

For each industry, you should understand:

  • Revenue streams
  • Cost structure
  • Margins
  • Key performance indicators
  • Key revenue drivers
  • Industry trends

I strongly recommend practice drawing structures for each industry - profitability, value chain, etc

Then I will switch to getting functional knowledge and key concepts in:

  • Marketing (Brand and trade marketing tools, etc)
  • Supply chain (Ops metrics like cycle time and throughput time, distribution and delivery specifics, etc)
  • Finance (Basic Accounting and Valuation)

Good Luck

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Francesco
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Content Creator
replied on Dec 04, 2017
#1 Coach for Sessions (4.000+) | 1.500+ 5-Star Reviews | Proven Success (➡ InterviewOffers.com) | Ex BCG | 10Y+ Coaching

Hi Vasiliy,

it would be helpful to understand the exact feedback you received, as business judgment could mean different things: are you unable to find potential reasons for a decline in revenues in a specific industry? Or maybe how the business model works in a sector? Or maybe types of potential synergies?

Most of the time people expect that in order to have proper business judgment you should know everything about an industry – eg. that you cannot really solve a financial industry case if you don’t have deep knowledge of the sector. That’s not necessarily true. Although knowledge of the industry of the client helps, you can usually receive from the interviewer the necessary information you are lacking covering better two areas:

  1. Your ability to ask the right questions at the beginning
  2. You knowledge of the right frameworks to use (for right frameworks I don’t mean the standard ones in Case in point or Victor Cheng, which most of the time are too vague)

This is not to say that it is a completely waste of time to read books, blogs or reports on specific industries – such material may be indeed be useful; however that should be complemented with a more universal approach that helps you to identify issues even for unfamiliar sectors.

Thus in your case, this is what I would do:

  1. Ask for detailed feedback on what “lack of business judgment” means – such terms could hide several different things
  2. Understand what you could have asked at the beginning or added to your structure to unlock the missing element - posting a new comment on the PrepLounge blog could help to receive feedback on that particular area
  3. If you identify a specific lack of knowledge in a certain sector that you are unable to unlock with questions at the beginning or a proper structure, move to read cases from MBA handbooks related to such a sector – the INSEAD one has for example a good list of cases for that. Then, add the missing element to your structure/initial questions toolkit.

Hope this helps,

Francesco

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Vasiliy on Dec 22, 2017

Thanks! By business judgement my last interviewer meant not being able to assume the right things fast in a certain industry, e.g. in case of selling \ not selling a steel plant, I've found out that the plant's profit is near 0, and the right course of action was to actually not sell it since "the profits can only go up"

(edited)

Vasiliy on Dec 22, 2017

So working through a case via structuring works just fine, but there's not enough time to question every possible assumption, and it seemed that "good business judgement" means quickly making the right ones

(edited)

Anonymous B updated the answer on Dec 04, 2017

When you read a news article, try reading the headline only and think of the drivers/reasons for why that might be happening. And then read the rest of the article

E.g. WSJ article 'Company A buys company B for 70B USD'.

Ask yourself: why would company A buy company B?

1. Economics: Synergies (cost/revenue)

2. Data/patents

3. Assets/labor.

4. New markets / existing relationships with buyers/sellers.

5. Etc..

You won't be able to replicate this with 100% of the articles, just get in the habit of applying this technique to most articles and see which reasons you may have missed out on. That's how you learn.

(edited)

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Ian
Expert
Content Creator
replied on May 04, 2020
#1 BCG coach| MBB |Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate | Customized

Hi Vasiliy,

It seems that your approach to-date has been mostly self-taught. This also includes the advice below (i.e. read more).

I honestly find that a lot of people with this issue fundamentally need a mindset shift. This isn't about # of hours spend reading/studying. This is about talking through your thinking, and reframing it. This can be fixed (for some) in as little as 30 minutes. However, you need to talk to someone for this type of learning to take root.

Sort of like frameworks, it can help to memorize them, but ultimately it's best to learn how to think about them.

Happy to offer you a session on shifting your mindset.

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Samuel replied on May 03, 2020

You have great answers here but similar responses I have read off different case interview sites didn't really make help to develop business judgement or show me how to mine my existing experience (my opinion) until I listened to this podcast "https://www.firmsconsulting.com/podcasts/what-is-business-judgement/". I am going to summarize what I learnt from it for you:

Business judgement/intuition effectively means your ability to make reasonable guesses/ inferences in business situations.It is the way you interpret things based on your collective past experience. What does that imply?

First, you have business judgement, you just lack the ability to mine your own experience. As soon as I learnt this, I took a pause from travelling, reading tonnes of Mckinsey quarterly and asked myself, how can I mine what I already know and bring into a case? It was then I realised that I knew a lot!

I was doing a case where I had to estimate the revenue Disney world generated in its theme park in Paris. I have never been to Disney World or any large theme park for that matter but as soon as I figured I could mine my experience with going to a stadium (I am a big premier league fan) and an Amusement park (I went to as a child), it all came together and I just drew inferences that impressed my coach.

Firmsconsulting.com has tonnes of practical articles on how to improve your business judgement that I encourage you to read and listen to. It will change the way you approach this.

I wish you the best.

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Vlad gave the best answer

Vlad

McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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