Hypotheses in business situation framework

business situation hypothesis
Recent activity on Jul 16, 2018
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asked on Jul 15, 2018


I am studying business situation framework and I am struggling with understanding its issue tree. I understand that each branch of our issue trees should represent a hypothesis but in business situation framework's case, I cannot find out these hypotheses. It looks to me only as a checklist of questions. How can I adjust that framework to be hypothesis-driven?




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replied on Jul 15, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School


There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

  • - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit"

4) Present the main 2nd level Hypothesis:

  • "In the market, I would like to make sure that the market is big enough and growing;
  • In the company I would like to find additional opportunities for growth;
  • In competition I would like to check that the market is fragmented enough;
  • Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!h

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replied on Jul 16, 2018
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi Serdar,

I am not entirely sure what you mean with "Business Situation Framework", but I suspect you refer to some sort of Victor Cheng framework (Customer, Product, Company, Market)?

If this is the case, then you are right: this is NOT a hypothesis-driven approach. In a way, it is rather the opposite! It is an explorative way of looking into a specific set of "buckets" in the hope to find some interesting insights from this exploration. Even worse, it does not give justification for why these 4 buckets are looked into, and not 3 or 7 or 9 buckets...

So from my perspective, using such frameworks to structure your roadmap for the case is a fundamental methodological mistake and will never allow you to develop robust and bullet-proof case skills.

A robust approach towards solving case should be rooted in the actual question that you need to address. From there, you should define the criterion to answer this question, and build a corresponding value driver tree with branches and sub branches. All the "business situation framework"-elements (customer, product, company operations/capabilities, market structure, etc.) should be mapped to the different sub branches of your value driver tree. You then work through these branches by means of hypotheses which you can either confirm or not in your analyses.

This is true for almost any kind of for-profit case scenario you face (M&A, market entry, capacity expansion, product launch, etc.), and also non-profit scenarios!

The crucial point is that, thereby, you create a rigorous thinking frame which organizes all relevant elements into a structure by which you can link the analysis of every element back to the core question you need to answer by means of logic.

Unfortunately, case books are not revealing this to candidates, creating the illusion to candidates that "learning frameworks" is a viable approach towards cases.

Cheers, Sidi

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Vlad gave the best answer


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