How to do root cause analysis in profitability case efficiently?

Question

In a profitability case structuring, after doing initial diagnosis, I will usually go to the second step “root cause analysis” (i.e. discuss what has driven the change identified in the initial analysis).

At times I struggle on the root cause analysis, since (1) Before going into the case discussion, not much information is disclosed. I don't know whether price / revenue / cost / quantity have changed. (2) Without know the specific change factors, it is hard to structure a tailed root cause analysis issue tree.

Should I just mention a general structure (such as, I will look into product / competitor / company / customer related factors, and will come up with a tailored issue tree after knowing more facts and data), or should I come up with a comprehensive structure mapping at most possible root causes driving the profit decline?

Please share your thoughts, thank you!

Answer 1

Hi there,

First of all, you need to read as much into the prompt hints as possible. You also need to ask strong clarifying questions that help you understand the lay of the land.

From there, as you drive the case forward, you need to use an objective-driven, MECE approach to solving the problem! You know never just “mention” a “general” structure. You should always have a tailored approach to solving the problem based on the case + industry + hints provided!

At every step of the way, you need to be thinking in 2-3 “buckets” or driver tree pathways so as to never get “lost”. Solving cases is not just about listing random ideas!

Apologies, but this is supremely difficult to explain in writing. Feel free to reach out for coaching around this - it's truly best taught live and through drills/exercises.

Answer 2

Hi!

You could include the Diagnosis as the first step of your structure and start the case with it. You'll have the chance to collect the right information to then go into improvement initiatives.

However, your structure should be as specific as possible from the beginning. For example, if you want to dig deeper on revenues, make a list of the main streams you see and communicate your intention of exploring each of them once validated with your interviewer.

Hope this helps.

Best,

Anto