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Anonymous A
on Jul 13, 2020
Global
I want to receive updates regarding this question via email.

Hypothesis

Hello everyone, 

I just came across a market entry case where the client is considering expanding into new markets (new countries). The choice was between two countries (U.K & U.S).

My question is:

Would you recommend stating an opening hypothesis in this particular case (After drawing out a framework)

What could a good example be?   

*Assuming the main objective is maximising revenue. 

Thank you

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Deleted
Coach
on Jul 13, 2020
FREE 1st session in November | From Lawyer to MBB | Top in FIT | 10x your structuring skills | Message to get Free Prep Checklist

Hi,

Stating your hypothesis in the very beginning of the case is a great way for .... REJECTION.

Why?

Interviewer wants to test your approach to structuring. Will he be able to test if you just state one hypothesis? The answer is no.

What can you do about it?

I would suggest that you should come up with a strong comparison table structure that would allow you to investigate each option and arrive to the right conclusion.

As we are focused on revenue I would suggest to use sales funnel approach and would investigate:

  1. MARKET: total addressable market (TAM) in each country
  2. AWARENESS: % of TAM that your company can address with marketing campaigns to build awareness
  3. CONSIDERATION: % of clients that will consider buying your product after viewing your advertising 
  4. PURCHASING: % of clients who will actually buy your product after consideration and their average bill
  5. RETURNS: % of clients who may return your goods if they don’t like it (very relevant for e-commerce)
  6. LOYALTY: % of clients who will become loyal to you 

That would be a MECE and smart way to address this case from revenue perspective (demand).

However it would be also smart investigating our capacity to satisfy this demand (supply).

Hope it helps!

Anton

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Robert
Coach
on Jul 13, 2020
McKinsey offers w/o final round interviews - 100% risk-free - 10+ years MBB coaching experience - Multiple book author

Hi Anonymous,

Not sure if you are asking the right question. 

Even though Victor Cheng offers a lot of excellent advice, including a strong focus on the hypothesis-driven approach (which really helps many candidates sharpening and focusing their thinking along the case!), stating a hypothesis at the very beginning of the case usually turns out to be more counterproductive than helpful.

Unless you are an experienced hire with a strong focus on exactly that one case question to discuss, stating a hypothesis right at the beginning of the case interview is essentially nothing else than poaching with a stick in the dark and guessing around. And here you are: you are perfectly set for a highly unstructured and confusing start into your case! (Please note that even as experienced hire, you might be completely wrong with your hypothesis, especially in the slightly artificial case interview world - so I would not even strongly recommend the early hypothesis there)

However, at the same time it's also a matter of defining 'hypothesis'. If you look at your structure at the beginning of the case interview, it is basically the connection between the current client situation and a specific goal you want to achieve. In other words, this initial structure is also a kind of hypothesis which elements you need to consider and analyze in order to clearly understand the root cause and develop a solution for that. So essentially you can also consider your structure as some kind of hypothesis.

Apart from that technicality, the correct time to explicitly state a hypothesis during your analysis phase is when you have collected some initial data and you start 'connecting the dots'. Once some distinct pieces of your analysis guide you into one specific direction, then it's the correct time to explicitly state your hypothesis and focus in on 'verifying' (in the non-scientific way) your hypothesis!

Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!

Robert

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Sidi
Coach
on Jul 13, 2020
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 400+ candidates secure MBB offers

Hi!

clear answer: no. 

Much better approach would be to first verify what the objective is, and then outline how you can compare the two options with respect to that objective.

Cheers, Sidi

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Deleted
Coach
on Jul 14, 2020
Experienced strategy consultant

Hi,

You can have initial hypothesis at the beginning to you have to make sure that your framework is designed/tailor made to test the hypothesis.

Also hypothesis can be developed in several stages during the case depending on the new data and analysis that you did.

Example of initial hypothesis at the start of the case:

Q: Profit decline but sales remain the same

Potential Hypothesis: Issue is on cost, product mix (if more than 1 product)

Framework: Focus on investigating cost structure and the changes in product mix

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Francesco
Coach
on Jul 14, 2020
#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi there,

This is always a very debated point ;)

There is nothing wrong with stating a hypothesis after you presented the initial structure.

However:

  1. It is not compulsory to do so. In your case, you could simply say that you want to explore the elements listed in your structure to see which market meets the objective of the client. Given the goal (which you should have verified) that will lead you to identify the right target
  2. If you state the hypothesis, it is critical that you explain how you want to verify the hypothesis and ask for information related to that.

If the interviewer for example asks where you want to start in a cost analysis, you could answer:

“Well, costs can be divided into fixed and variable costs. Given the initial information I received, my hypothesis is that this could be a fixed cost problem; to verify this, I would like to know how fixed and variable costs changed. Do we have any information on that?”

What I would not do in the case you presented is to state as hypothesis that the best market is – say – the US. That hypothesis is too broad and doesn’t bring any benefit to the analysis.

Instead, assuming your first point is an industry analysis, you may state that your hypothesis is that the US market is attractive and ask information on the points you listed to verify it.

Best,

Francesco

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Ian
Coach
on Jul 17, 2020
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

My view is that your framework is actually your hypothesis. It's a bit nuanced, but bear with me :)

Your framework is your structure for approaching the problem. It consits of a few main areas you'd like to look at. Inherent in your framework is a view that "If I answer A, B, and C, then we have an answer"

So, for market entry:

1) If the market is big, and it's growing, then we still want to considering entering

2) If #1 = yes, then let's see if it's attractive...can we win there? Is our product good/better than our competition's? Etc. If yes, let's definitely consider entering.

3) If #1 and #2 = yes, then, when we do enter, are we sure we can win? I.e. do we have the right plans. Will implementation actually pan out? Do we have the expertise, capital, etc.? In other words, if #2 is the thearectical, #3 is the reality.

Then, your summary becomes "I believe we should enter the market, if we can prove it's a good market, the it's attractive to us specifically, and that we will win it".

^Now this is a hypothesis :)

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Clara
Coach
on Jul 14, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Nope!

First I would check their targets, and then make the full tree checking feasibility for each of the target KPIs for each market. 

Best, 

Clara

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Coach
on Jul 15, 2020
Bain Consultant | Interviewer for 3 years at Bain |Passionate about coaching |I will make you a case interview Rockstar

Hi,

The topic of using a hypothesis is indeed a very tricky one. In general, if you did not receive information during the case prompt, or have significant industry expertise, stating a hypothesis at the very beginning is likely to be counter-productive and does not work at all for some case types.

For the case type that you have specified, you should rather think about it from the perspective, what would be the key drivers of the decision of what would be the most attractive market to enter given the client's situation and objectives. If you are the decision-maker, what factors could sway your decision to go for the US market vs. the UK market?

Once you have detailed a solid framework outlining these factors and you have started to receive some information, a hypothesis could be leveraged to guide your thinking and information gathering. However, if you want to do so its critical that you specify what are the things you need to look at to confirm the hypothesis leveraging the framework that you have developed.

-A  

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The Role of the Hypothesis in Consulting
In the field of consulting, the hypothesis plays a central role in the analysis of problems, the development of solutions and the derivation of strategic recommendations. A hypothesis is a preliminary assumption or conjecture made on the basis of existing information and data. It serves as a starting point for investigations to gain empirically verifiable knowledge. This article explores the meaning, purpose, and application of hypotheses in the consulting context. The Importance of a Hypothesis in ConsultingIn the world of consulting, where complex business issues must be solved, the hypothesis is a fundamental component in developing structured approaches to solving them. A hypothesis allows consultants to sort through their thoughts and focus specifically on certain aspects of an issue. It also serves as a guideline to direct and guide the research process as data are collected and analyzed.The hypothesis also functions as an "educated guess" or informed conjecture based on existing knowledge, experience, and market insights. It helps structure the advisory process and guide efforts in the right direction. Components of a HypothesisA well-formulated hypothesis consists of several essential components:Independent and Dependent Variables: The hypothesis defines the relationship between an independent (manipulated) variable and a dependent (measured) variable. The independent variable is the one that is purposefully changed in an experiment, while the dependent variable is the response that is measured.Prediction: The hypothesis contains a clear prediction about how the change in the independent variable will affect the dependent variable. This prediction is what is tested in the experiment.Testability: A hypothesis must be testable, meaning that it can be tested by experimental investigation. It should be formulated in such a way that its correctness or incorrectness can be determined from observations and data.Clear Formulation: the hypothesis should be precise and clearly formulated to avoid misunderstandings. Clear wording also facilitates communication of the results. The Purpose of a Hypothesis in ConsultingFormulating a hypothesis serves several important purposes in consulting:Directional Thinking: A hypothesis forces consultants to think about possible causes and relationships that may have led to a problem. It promotes structured thinking and prevents aimless poking around in problem-solving.Focused Analysis: Hypotheses help focus the investigation on relevant data and information. This prevents an overload of unimportant details and allows for an in-depth analysis of the aspects that are most likely to have an impact.Measurable Results: A clear hypothesis makes it possible to establish concrete criteria for the success or failure of an investigation. This creates a basis for evaluating the effectiveness of proposed solutions.Structured Communication: A precisely formulated hypothesis facilitates communication between consultants and clients. It enables the planned steps, methods and expected results to be communicated in an understandable way. The Application of Hypotheses in ConsultingThe use of hypotheses in consulting spans several key phases of the consulting process and contributes significantly to structuring and finding solutions. In the problem identification phase, hypotheses help identify potential causes and influencing factors of a business problem by serving as a starting point for in-depth investigations.During data collection and analysis, hypotheses act as a guide to extract targeted relevant information, enabling more precise and focused data analysis.In the solution development phase, hypotheses play an important role in the evaluation and selection of different solution approaches. By serving as criteria to assess the probability of success of different options, they contribute to the development of the most promising solutions. Finally, hypotheses enable strategic recommendations to be derived. They provide a sound basis for formulating persuasive arguments in favor of particular strategies and for convincing clients of the soundness of proposed actions.Overall, the application of hypotheses functions as a systematic approach in consulting to bring structure to complex issues, perform targeted analyses, and ultimately derive informed decisions. This approach promotes the efficiency and effectiveness of the consulting process and ensures that the solutions developed are based on sound and validated assumptions. ConclusionThe hypothesis is an essential tool in consulting that helps structure complex problems, conduct targeted analyses, and derive informed solutions. It promotes a structured and focused approach and plays a crucial role in communicating ideas and recommendations to clients. In an industry based on informed decision-making, hypothesis is a powerful tool to influence the success of consulting projects.
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