How would you structure this one:
Your client is a biotech company who is considering outsourcing its R&D function. They want you to help in determining whether or not this is a good idea.
Their target is to reduce costs and increase the flexibility of their cost base.
Glad you included the target. Most people miss this. Without the clear objective/reasoning, we can't create a good framework :)
This is a perfect example of why you can't memorize frameworks! You have to come up with your own though process here. Here is one example. It is not the only approach.
Baseline - Current State
Objective: Evaualte our current state to determine baseline costs (both absolute and a measurement of "flexibility")
Outsourcing - Future State
Objective: Evauluate our outsourcing option to determine expected costs (both absolute and a measurement of "flexibility")
Cost-Benefit & Alternatives Analysis
Objective: Do the benefits of the future state outweight the costs? AND, are there better alternatives? We have to make sure that we get true cost savings AND do not hurt our ability to generate revenues/profits.
Hi Anonymous!
if the question is wheather or not it's a good idea (vs. where to outsource to, which is also an often asked question), you can approach the case as follows:
Based on the above, you can calculate an annual saving, put that together with the cost of moving to calculate a pay-back period and then do a deep dive on some of the risks if the interviewer encourages it.
Hope this helps!
The most important here is to understand your client and his main objective of outsourcing (cost reduction, Capability, etc). Find a clear metric to support the case. Then moving forward should be easier for you.
