I would like to seek your input on how to “structure” and identify the root cause of a drop in sales volume. I've frequently got stuck at this stage within a profitability case.
As you can see in the below, there are so many possibilities that drives a sales volume drop. What is the best way to structure the issue tree (being MECE but more concised)? Many people recommend using internal / external, but it's hard to explain what factors are “internal” vs. “external”, and there are a lot of factors that could fall under each bucket.
- Internal issue
- Product
- Service
- Pricing / positioning
- Promotuion
- Channel
- External issue
- Political
- Environmental
- Social
- Technology
- Economics
- Regulation
- Customer
- Competition
Thanks, Sidi, I usually adopt the overall structure that you mentioned. But I suffer especially in the second step "identifying root cause" , and I'm specifically referring to this section. Any tips on how to quickly map out a "mini structure" for this part in probably only less than 20 seconds? It's a bit challenging to be "MECE" and "specific" within the time frame.
Yes! You need to understand that you can only create a proper structure for the second part once you understand what came out of the first part! You sould NOT attempt to do this at the start - this would be the worst "boiling the ocean" imaginable! Instead, your task is to explain to the interviewer that you will address this task once you know what the task is about. What you should do at the beginning is to just give ONE example of how this could look like (e.g., "If we for example find out that the numerical root cause is that we have lost 25% of our customer base, then we can start to assess the qualitative reasons for this. For example, have we cahnged the features of our product and the customers don't like it anymore? Or do we have new competitors? Or has the underlying need of our customers disappeared? These are just a few examples - we need to address this systematically once we identified the actual numerical problem driver."