Hypothesis or no hypothesis?

Question

If you've watched Victor Cheng's video series, you'll know that for analyzing a case, he suggested taking the following steps:

1. Ask for any info on where to start

2. State a HYPOTHESIS

3. Pick a branch of framework to start

etc...

However, after talking to a MBB alum, I got the suggestion that you should never use hypotheses and always ask questions.

So I'm really confused now, should we hypothesize when analyzing a case? If so, when?

Thanks in advance.

Answer 1

Hi,

First, the hypothesis are not officially required for a McKinsey interview. That's smth Victor Cheng proposed to market his books. However, now there is a whole generation of interviewers who were prepared on his books and they might be looking for the hypothesis:)

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 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!