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What does "key driver" exactly mean?

Anonymous A

Hi, in a recent case I was asked "what is the key driver behinid a flat sale". I got pretty stucked in the opening. What does "key driver" really mean'?

Due to my normal framework, I would want to know why the sale is flat (the reason). Start with volumn and price, and list few aspects why volumn may decrease, e.g. market, competitors, customers, etc...

In the solution, it is actually not the "reason" that I should be after. The "key driver" end up with identifying essential stakeholders who has the major power over sales decisions, e.g. customers and distribution channels. And I was criticised by not understanding the question.

I am pretty confused. If the case is to ask you about "key driver" (not the reason), what is the right way to open the case? In other words, what does key driver mean?!

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replied on 01/16/2018

Hey Anon A,

As Anon B said, the key driver is just the main justification behind the problem statement, so there is no way you can now it beforehand (it would be great if you have some early hypothesis on what it could be, but unless you know very well the industry and the company it's highly unlikely for you to be 100% sure what it is), so you should draft your strcuture normally and proceed with the analysis, so that you can identify it.

"In the solution, it is actually not the "reason" that I should be after. The "key driver" end up with identifying essential stakeholders who has the major power over sales decisions, e.g. customers and distribution channels. And I was criticised by not understanding the question." >> we're not aware of the particularities of this case/situation and it's also not 100% clear the context the problem statement vs. solution, so can you ellaborate further?

Best

Bruno

Anonymous replied on 01/15/2018

If you get asked on key drivers the interviewer really wants to test whether you do understand what aspects mainly impact the business i.e. in your case what impacts revenues. Thus, the interviewer is actually not interested in the basic equation and this would be (at least to me) the wrong approach to start with.

Definition Key Driver: What variable has a high impact on the result.

Let me give u an example: A hotel in Switzerland is experiencing a revenue decrease since a couple of years. What are the three main driver for revenue that you want to look at?

Key Driver:

1. The number of hotel guest per year

2. The average duration a customer is staying in the hotel

3. The average room price / night

Now you need to build your analysis accordingly. Build your hypothesis and now you might want to start asking more precise questions on the revenue equation. Based on your findings you can structure your further analysis and always come back to the identified key drivers.

(edited)

Francesco replied on 01/22/2018
#1 Expert for coaching sessions (1600+) | Ex BCG | 800+ reviews with 100% recommendation rate

Hi Anonymous,

I would divide key drivers in sales as:

  1. External elements; mainly:
    1. Customers interest
    2. Competitors actions
    3. Supplier issues (eg delays in delivery which creates delays in serving clients)
  2. Internal elements; more specifically:
    1. Actions that can affect price (eg setting the right price, applying price discrimination)
    2. Actions that can affect volume (eg distribution channels, marketing, production capacity)

It seems that the interviewer wanted you to brainstorm more clearly between internal and external elements, before moving to the identification of the specific problem reason. I understand this may have confused you, as most of the time you are supposed to first understand what’s the problem, and then what is creating that problem, as you proposed to do. However, in same cases the interviewer may indeed prefer to understand first the division above as a first step. As a consequence, the critique of the interviewer was related to the fact that you have not understood the question properly and therefore have not provided an answer directly related to that.

Best,

Francesco

Anonymous A replied on 01/17/2018

The full case is about a automotive parts company. They have a flat sale. The marketing manager comes and ask about 1) what is the key driver of the flat sale and 2) what to do with it. I started the case with the usual framework: market/customer/distribution channel/client company. I thought it is to identify the reason for the flat sale. What the interviewer actually want is a brainstorming of potential KEY drivers, no data analysis.... I managed to deliver the key driver at the end, but it takes quite some detour to get there. Thus I got confused. When they ask for key driver, it is really a different question than asking for the reason, right?

Anonymous A replied on 01/15/2018

I understand that it is to test your business judgement of the "key point". The question is, those key points can only be revealed after some initial strcutrue, where I may get an idea where to look into, right? In this hotel case, the key drivers are extrapolated from the formular to calculate its revenue, price/night * #of guest * average stay/guest. The key driver can actually be something under each parameter: For example, #of guests maybe changed becaused the total tourism industry is not in a good shape or bad economy. Those two second level driver can even be "blamed" to some specific stakeholders.

I think the problem is, should I brainstorm with structure, or structure to identify potential drivers via looking at all my branches?