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Guennael

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When should I state the hypothesis during a case interview?

I have a question about hypotheses and issue trees/case structures. Victor Cheng seems to say you should state your hypothesis, and then lay out the structure of your case/draw your issue tree. But surely if you do this and your first couple of hypotheses are disproved, you'll end up with a bunch of wasted effort and having to draw multiple issue trees? Is it not better to draw a structure of all the possible things that could be important in the case, and then take a hypothesis to go down one a

I have a question about hypotheses and issue trees/case structures. Victor Cheng seems to say you should state your hypothesis, and then lay out the structure of your case/draw your issue tree. But surely if you do this and your first couple of hypotheses are disproved, you'll end up with a bunch of wasted effort and having to draw multiple issue trees? Is it not better to draw a structure of all the possible things that could be important in the case, and then take a hypothesis to go down one a

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Originally answered:

Hypothesis, when to state

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This is a great question, that applicants struggle with quite often. I personally believe that you can't formulate a valuable hypothesis early on; however, some recruiters really look for this at the beginning of the case so you should give them what they want. Even if the hypothesis is just "yeah I think we can do what you are trying to do", say it. At worst, no harm done; at best, you made your recruiter happy.

Hope that helps?

Thx,

G.

ex-BCG Dallas

This is a great question, that applicants struggle with quite often. I personally believe that you can't formulate a valuable hypothesis early on; however, some recruiters really look for this at the beginning of the case so you should give them what they want. Even if the hypothesis is just "yeah I think we can do what you are trying to do", say it. At worst, no harm done; at best, you made your recruiter happy.

Hope that helps?

Thx,

G.

ex-BCG Dallas

Originally answered:

Hypothesis

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Originally answered:

Hypothesis, when to state

I would, personally, discount anyone who starts stating a hypothesis right after drawing out a structure. You know very little about the case, you have asked no clarifying questions, you understand just the top surface of the case yet, so you are basically stating a hypothesis that is grounded in guess-work. Here's the way I typically reach a hypothesis.

1. Once you are handed the case, go through it (some interviewers read it out, then hand data, some others just want you to read it yourself -- MBBs typically "give" the case).

2. Ask a few questions about the case. For example, if it's a falling revenue case, then at least try to narrow it down to (a) is it industry wide / economic downturn (b) are we in a seasonal industry. You can deep dive into whether we are the only one suffering, or whether only the smaller players are suffering due to an amazon-like behemoth eating their lunches later in the case.

3. Narrow down your "deep dive" areas to 1-2 places. For a revenue-loss case, you might want to focus on product quality or change in demographics or new entrants. For a profitability loss case, you might narrow it down to rising costs, inefficiencies in capital allocation (e.g., bad forex hedging, or so on), or pricing pressures.

4. Only then state a hypothesis. Something like "My hypothesis is that this is either an issue of pricing or increasing costs. I'd like to further narrow it down and to do so I'd like to look at the financials around revenues and costs."

5. Once you get the data, have reviewed, then fine-tune the hypothesis and you could say something like, "having gone through, I'd like to hypothesis that this is most likely a cost issue; I'd like to understand whether this is only us, or everyone..." etc etc..

Hemant

I would, personally, discount anyone who starts stating a hypothesis right after drawing out a structure. You know very little about the case, you have asked no clarifying questions, you understand just the top surface of the case yet, so you are basically stating a hypothesis that is grounded in guess-work. Here's the way I typically reach a hypothesis.

1. Once you are handed the case, go through it (some interviewers read it out, then hand data, some others just want you to read it yourself -- MBBs typically "give" the case).

2. Ask a few questions about the case. For example, if it's a falling revenue case, then at least try to narrow it down to (a) is it industry wide / economic downturn (b) are we in a seasonal industry. You can deep dive into whether we are the only one suffering, or whether only the smaller players are suffering due to an amazon-like behemoth eating their lunches later in the case.

3. Narrow down your "deep dive" areas to 1-2 places. For a revenue-loss case, you might want to focus on product quality or change in demographics or new entrants. For a profitability loss case, you might narrow it down to rising costs, inefficiencies in capital allocation (e.g., bad forex hedging, or so on), or pricing pressures.

4. Only then state a hypothesis. Something like "My hypothesis is that this is either an issue of pricing or increasing costs. I'd like to further narrow it down and to do so I'd like to look at the financials around revenues and costs."

5. Once you get the data, have reviewed, then fine-tune the hypothesis and you could say something like, "having gone through, I'd like to hypothesis that this is most likely a cost issue; I'd like to understand whether this is only us, or everyone..." etc etc..

Hemant

Thank you! — Alice on Jan 12, 2017

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Hi,

The major mistake of the candidates is that they start using the hypothesis and neglect having a proper structure.

Moreover, if you perfectly solve the case without ever stating a hypothesis - you'll pass the interview. So most probably you had some other issues with the case as well and they used it as a standard feedback.

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 a number of the hypotheses - 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!

Hi,

The major mistake of the candidates is that they start using the hypothesis and neglect having a proper structure.

Moreover, if you perfectly solve the case without ever stating a hypothesis - you'll pass the interview. So most probably you had some other issues with the case as well and they used it as a standard feedback.

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 a number of the hypotheses - 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!

Originally answered:

Hypothesis, when to state

Thank you, it does help actually. So the point taken is that probably it mustn't be done so formally. Instead say something like: "I'll assume that we can enter the market, but in order to determine for sure, I'd like to look at variable X, Y Z." Or maybe, even more simple say: "in order to determine whether we should enter this market id like to look at variables X Y Z" [guess problem with the latter is that you haven't stated a hypothesis really..] :) I might be overthinking this. Even thinking why we don't have null hypothesis and alternative hypothesis at this point. Jk. #physicsenvy

Thank you, it does help actually. So the point taken is that probably it mustn't be done so formally. Instead say something like: "I'll assume that we can enter the market, but in order to determine for sure, I'd like to look at variable X, Y Z." Or maybe, even more simple say: "in order to determine whether we should enter this market id like to look at variables X Y Z" [guess problem with the latter is that you haven't stated a hypothesis really..] :) I might be overthinking this. Even thinking why we don't have null hypothesis and alternative hypothesis at this point. Jk. #physicsenvy

Originally answered:

Hypothesis

Think of it this way...whether you state it or not, you have a hypothesis. If you didn't, you might look at the colour of the sky to solve a profit problem.

You need to direct your case somewhere. Again, if you didn't have a hypothesis on purchasing a company how would you even begin? When you begin by checking the acquirer's offer or the market growth, you are actually saying my hypothesis is that they should proceed, if the offer is attractive. This links into Vlad's comment.

So if you are doing this, which i guess that you are - tell the interviewer!

Think of it this way...whether you state it or not, you have a hypothesis. If you didn't, you might look at the colour of the sky to solve a profit problem.

You need to direct your case somewhere. Again, if you didn't have a hypothesis on purchasing a company how would you even begin? When you begin by checking the acquirer's offer or the market growth, you are actually saying my hypothesis is that they should proceed, if the offer is attractive. This links into Vlad's comment.

So if you are doing this, which i guess that you are - tell the interviewer!

I have a problem with the same, for it discounts the fact that in order to develop hypothesis one needs to have a decent understanding. And having a hypothesis without understanding is akin to speaking without thinking, having opinions without facts, more like stereotyping.

That said, drawing a structure of all that is important is too laborious. However, you could abstract them. For example in profitability case you can start with # Understand specific problem stream # Explore Revenue Opportunities # Explore Cost Opportunities.. Consider your framework as more of chevrons you would use to summarize your project approach from mobilisation, analysis/discovery, opportunity identification, roadmap...

I have a problem with the same, for it discounts the fact that in order to develop hypothesis one needs to have a decent understanding. And having a hypothesis without understanding is akin to speaking without thinking, having opinions without facts, more like stereotyping.

That said, drawing a structure of all that is important is too laborious. However, you could abstract them. For example in profitability case you can start with # Understand specific problem stream # Explore Revenue Opportunities # Explore Cost Opportunities.. Consider your framework as more of chevrons you would use to summarize your project approach from mobilisation, analysis/discovery, opportunity identification, roadmap...

(edited)

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