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Making your framework relevant

Anonymous A asked on Aug 14, 2019 - 4 answers

Hi all,

I'm a rising junior preparing for fall recruitment. Regarding cases, I struggle with making frameworks relevant to the cases/ questions being asked. For example, if the case asks about launching a new product, I'd do the Customer, Competitor, Company framework- parts of Victor Cheng's business framework. But I'm afraid that by doing so I would sound too rigid (taking a framework straight out of the book)... so I don't know how to be more relevant. (This framework still helps me solve the case tho)

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Sidi
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updated his answer on Aug 14, 2019
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Hi!

Let me be very blunt: with this kind of "bucket thinking", you will always struggle in cases, and you will always have to rely on luck.

In many ways, the way how V. Cheng presents his "business situation framework" is a prime example of how to NOT work as a strategy consultant! I believe it teaches a very junior and also fundamentally flawed way of how to think about business / strategy / organizational problems. It is a purely explorative approach: you define a couple of (more or less random) areas, and you hope to find something interesting in there which will lead you on the right track towards solving the issue. This is not a structure, but just a bucket list! This is not rigorous thinking! This is, essentially, guessing.

Rigorously thinking through business problems is fundamentally different. Each element that you want to scrutinize needs to clearly relate back to the question that you want to address! This principle should form the basis of any structure. And since you have to repeat this process for every question, it makes absolutely no sense to "learn" and memorize frameworks.

At the core, all strategic questions necessitate a more or less identical assessment:

Can the client create value or not?

Hence, juggling around with different frameworks, trying to map and match them to these questions is just demonstrating this fundamental non-understanding of the candidate. I will say it again and again: cases should be approached and solved from first principles!

  • One of these first principles is that you start EVERY case from the core question that you need to answer! This core question is the starting point of a rigorous logic tree, and each element that you want to analyze needs to clearly relate back to the core question! This principle forms the basis of any structure.
  • Another first principle is, e.g, to define the criterion or criteria that need to be met in order to anwer this core question in one way or another.

The big advantage is that this is making "frameworks" unneccessary for the structuring of cases! You need to learn and internalize the logic, then you have a bullet-proof toolbox under your belt, far more rigorous then a "framework-learning" approach.

Just one example below which I described in an earlier post. This is about capacity expansion and vertical integration. Please think it through - I hope you will realize that the same logic, centered around value creation, can be applied to a myriad of different situations that people often describe as "different case types" (new market, new product, m&a, etc.). It also works indepent of whether Profit is the primary objective or not. As long as the objective(s) is/are clear, the criterion to answer the core questions can be adapted accordingly. It can also easily applied to your outlined example!

EXAMPLE:

Question:

Our client is a large producer of PET. PET is a type of plastic that is used mainly for producing bottles, such as the ones you find in grocery stores. The main component of PET is PTA. Our client has a PET plant in the US and serves clients both in the US and Europe. They have made the decision to build a PET plant in Europe to be closer to the clients. They have asked you to evaluate whether they should also backward integrate and purchase a PTA plant and locate both plants next to each other.

Approach:

This is a strategic investment decision. A very clear approach would be:

1. Core Question: "Should the client invest into purchasing a PTA plant next to the new PET plant in Europe?"

2. Identify criterion to make this decision: The additional value we can create over the client's investment horizon has to be significantly higher than the investment cost. Moreover, the risks need to be manageable.

3. Compile base information: Purchasing Price of PTA plant / yearly operating cost of PTA plant if purchased / capacity of PTA plant vs. PTA need / investment horizon of client

4. Deep dive into the value bucket by means of a profitability tree: what are the levers of value here? Compare Scenario A (PTA plant in Europe) to Scenario B (no PTA plant in Europe). Probably the value lever lies on the cost side: how much savings potential due to decreased/eliminated transport costs? How much savings due to eliminated import tariffs? etc.

5. Calculate annual value (delta between Scenario A and B). If a PTA plant in Europe indeed increases annual profits by a certain amount, you then divide the purchasing price of the PTA plant by this additional yearly profit. This gives you the break even point (point in time after which the investment becomes profitable). If this point comes earlier than the investment horizon, then this is a beneficial investment and the client should proceed with the purchase (purely based on financials).

6. Don't forget to compile potential risks and mention them in your summary

Cheers, Sidi

(edited)

Robert
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replied on Aug 15, 2019
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I mainly agree with Sidi's points about the structuring a case and that everything you cover needs to have a clear connection to driving value.

At the same time and based on my experience, frameworks are nevertheless also helpful for most candidates - and the framework is just a tool which is neither good nor bad, it's more the way on how you use this tool.

Having said that, I see 2 main areas for which case interview frameworks and concepts are relevant for case interviews:

  1. Sub-structuing specific branches of your general structure on how to approach the case. This will not only save you time if you can re-use/re-purpose some existing structure, but also help you to be more MECE under pressure. Just to be clear: I am not saying to use standard frameworks/concepts for building the main structuring of your case at all - it's about using them in layers below whereever they are appropriate and help you to be MECE.
  2. Structuring more specific questions/situations in later stages of the case. It's rather difficult for most candidates to come up with a structured answer/approach spontaneously - so also for structuing more detailed questions/situations it's oftenly useful to not start thinking from scratch, but to use something existing if it's appropriate and makes your answer better!

Hope that helps as a small addition!

Robert

Ivan updated his answer on Aug 14, 2019

Try to start broadly (firm's revenues, situation, industry, competition) and narrow it down to the core queston (profitability case, market entry case, business case etc).

For example, new product case:

1) Firms' revenues, costs, trends

2) Industry

3) Product mix (some math required)

4) Recommendation

(edited)

John
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replied on Aug 14, 2019
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Hi,

the three C's are very much a beginner's framework. I would rarely recommend to use it because it is to broad and requires you to asks dozens of questions to get to an anwer and you will likely run out of time. Don't forget real interviews are only ~30-35 minutes and not an hour like on preplounge.

There are some good resources out there that help you setting up structures, e.g. craftingcases.com - I also recommend as a good practice to take 50 cases (e.g. from MBA casesbooks) and only do the first 2 minutes ot the case of writing down a structure.

Hope this helps..

John

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