Dear all, I'm a bit stuck in the profitability case, especially the process of defining root cause. Would appreciate any suggestions.
Let's assume that the profit is going down, due to volume drop (cost, price remain the same). Here's my questions:
1.Is it okay to split the root cause by "internal (company / product) and external (client / competition)? Or there's other better way to structure?
2.I just realized this approach doesn't seem very clean since there is some overlapping.
For instance, if the root cause was due to end user's purchase preference - prefer buying cheaper products (competitors are providing promotion), is this root cause catagorized in "client (purchase criteria)" , "competition", or "company (company's business model weakness)"? My interviewer told me that other competitors are not facing a volume drop, so it seems that this is a more "internal" issue. My confusion is that, if I say I want to focus on the "internal issue (company / product), I will miss the "client" and "competition" factor since they are categorized in the "external issue".
3.How could I "drill down" the root cause of profitability issue? Is it more like asking tons of questions (client / company / competition / product) to gather thoughts and find a conclusion, or is it branching out internal (company / product) or external (competition / client) first and then try to eliminate unrelevant factors and arrive the final conclusion?
4.Given that our client's product volume has reduced, how do I use a "hypothesis driven" approach to find the root cause?
Thanks in advance!