Revenue/Cost framework vs business framework?

BCG McKinsey and Bain
New answer on Dec 31, 2020
6 Answers
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Jimmy asked on Feb 15, 2020

Can i use my own framework to the case instead of Revenue framework required on casebook?

Of if i case is about revenuge/cost i should use revenue framework always?

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Anonymous replied on Feb 16, 2020

Hi there,

If the case is about profitabilty, then yes, you're probably going to need to do something related to profitability. However, here's how to think about it:

1) Always ask the company's goal. If it's something related to profit (or arresting declining revenue, etc.), then chances are they're going to want you to do something related to profit. If not, then start with the goal and with the clue's you've been give.

2) Revenues and costs without context aren't useful, nor is information on customers interesting without seeing how it impacts the client's bottom line. In your initial framework, keep both qualitative and quantitative factors in mind in all cases, but prioritize depending on the specific prompt.

3) If the goal is profit, then start with revenues and costs, (ask about different product lines, price and quantity on each, then variable and fixed costs on each, add them all together and you'll get profit), but state up front what other qualitative factors you'll want to look into. These probably include competitors, customers, internal capabilties, maybe government, maybe technology.

Hope this helps,

Bryan

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Ian
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replied on Dec 31, 2020
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Honestly, it depends! You need to think about the industry/business context, the company context, and the situationally/problem context. Only then can you create an appropriately tailored cost breakdown.

In general, for determining cost issues, you need to break down the problem into a tree/root-cause analysis and ask the highest level (but specific) questions first! In this way, you essentially move down the tree.

How do you identify where to look? Well, you need to look into whichever of the following 5 make the most sense based on where you are:

  1. What's the biggest? (i.e. largest piece of the pie...most likely to change the end result)
  2. What's changing the most? (I.e. could be driving the most and most likely to be fixable)
  3. What's the easiest to answer/eliminate? (i.e. quick win. Yes/No type of question that eliminates a lot of other things)
  4. What's the most different? (differences between companies, business units, products, geographies etc....difference = oopportunity)
  5. What's the most likely? (self-explanatory)
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Anonymous replied on Jun 30, 2020

You can totally use your own framework, as long as it solve the problem, which means of course your framework need to be effective and comprehensive enough. You might need to to test it on a few cases and keep improving them (and customise each time the case context changes).

Best,

Emily

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Antonello
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replied on Feb 16, 2020
McKinsey | MBA professor for consulting interviews

Hi Alex,
please do not do the classical error of copy-pasting frameworks from books or from good solutions. These kinds of structure should only be a basis in your mind to build everytime a customized case-specific framework.

Best,
Antonello

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Vlad
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replied on Feb 15, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

First of all - 99% of the frameworks in case books are useless and you should not use them for MBB interviews (However they'll be ok for big4)

Secondly - you should use your structures, yes

Thirdly - there is no revenue framework. There is a profitability framework, that is disaggregating mathematically profits into revenue and costs

I would recommend the following approach:

1) Ask clarifying questions:

- Clarify the business model (i.e. how the business works and what are the revenue streams / core products or business lines). Why do you need to know the revenue streams? Because it's one of the most critical pieces in understanding the business model. An example is Oil&Gas with up-, mid- and down- streams that are completely different businesses.

- Clarify the objective both in money terms and timeline (e.g. Our objective is to increase profits by 5M in 5 years). When you have a to select from several options in a case - clarify the selection criteria

- Clarify other possible limitations if you feel that it's necessary

2) You make a classic profitability structure adapting it to the case. Sometimes cases are not that easy as just declining profits. For example, if the profits are lower than planned, it is either because we have problems with profits or we have problems with planning. Try to be MECE here.

3) While you do your structure and split revenues into price and quantity - add proactively the 3rd box with the "Mix". Thus you show your business sense and demonstrate that you know the most common case traps. Pls note that the "mix" can be anything - geography, customer, product, etc. You split the costs into fixed and variable.

Note that this approach only works if you have 1-3 products. If you have a case on retail or restaurant, for example, you should split number of customers and av check.

3) Costs I would split into Fixed and Variable

4) I would start the case by checking whether its increasing revenues, declining costs, or both - so that you could eliminate the part that is irrelevant

5) If it is the quantity problem I would further analyze whether it's the external market problem or internal one

Best!

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Clara
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replied on Feb 15, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Without knowing how your "persona framework" looks it is difficul to say. Also, when casing, is normally dargerous to talk in absolute terms such as "is always better to...".

A priori, one would say that originality is a plus, and the traditional frameworks tend not to work to crack the interview.

Hope it helps!

Best,

Clara

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