Best Case Thinking: The Ivy Case System™
5. State your hypothesis
[ 1. Summarize the Question ]
Sometimes the question is short. “How do we increase sales at the campus bookstore?” Other times the question is long and involved and is filled with data that comes at you as if from a fire hose. It’s difficult to capture all that information in your notes, so the first step is to summarize the question. That way, if you missed something or wrote it down wrong, the interviewer will correct you before allowing you to move on. It puts you and the interviewer on the same page from the beginning, thus keeping you from answering the wrong question.
Summarizing the question shows the interviewer that you listened, and it fills the gap of silence between the end of the question and the beginning of your answer.
Make sure you streamline the summary; don’t repeat it back word for word. If there are numbers in the problem, always repeat the numbers because you’re not sure whether they are going to be relevant, and you want to make sure you’ve got it right.
Also, get into the habit of quantifying related numbers as a percentage, e.g., year- to-year comparisons or a change in stock price. If the interviewer tells you that the stock price jumped from $15 to $18, don’t say “It jumped from $15 to $18.” Don’t say “It jumped $3.” Tell the interviewer that it jumped 20 percent. This is the way that consultants and senior managers think, and it’s how they want you to think.
[ 2. Verify the Objective(s) ]
You can bet that when consultants first meet with clients, they always ask about objectives and goals. What are the client’s expectations, and are those expectations realistic? In the client’s mind, what constitutes success? Even if the objective of the case seems obvious, there is always the possibility of an additional underlying objective. So you (the interviewee) should say, “One objective is to raise profits. Are there any other objectives that I should know about?” If the interviewer says, “No, higher profits is the only objective,” you just focus on that one objective. If there is an additional objective, you may need to
break the case in two and tackle one objective at a time. If you don’t ask about other objectives or goals and there is one, the interviewer will have to feed you that information during the case and you’ll lose points. By asking you might receive key information that will affect the way you lay out your structure.
[ 3. Ask Clarifying Questions ]
These are questions to ask only when you don’t understand something or need additional information to lay out your structure. An example might be, if it’s an entering a new market case, a good clarifying question might be “Why does the company want to enter this market?” Or if you have been tasked to raise revenues by 10 percent, a clarifying question might be “What have revenues done for the last three years?”
You ask questions for three reasons: to get additional information, to show the interviewer that you’re not shy about asking questions, and to turn the case into a conversation. The key is to ask broad, open-ended questions that help you narrow the information at the start, because as the case progresses, you’ll lose your
“right” to ask these sweeping questions. (Reason: You may give the impression that you are trying to get the interviewer to answer the case for you.) The case scenarios will guide you in asking these questions.
[ 4. Label the Case and Lay Out Your Structure ]
This is by far the toughest part of the process, and you may want to take a moment at this point to think about structure. About 30 to 90 seconds of silence here may save wasted time later in the interview. You’ve decided which case scenario(s) to work with, and you have asked a few broad questions that have given you information you need to form a logical response. Because you have studied the scenarios, you can quickly go through the bullet points in your mind and decide which are the most relevant to this particular question. You then just need to tell the interviewer how you plan to proceed. Keep in mind that you are not married to your structure. Because new information is constantly added, as well as twists and turns in the case, your structure could stand through the whole case, or it might become obsolete rather quickly. A structure is – given the limited information you have – what would you analyze, and in which order, to solve this problem?
You want to make sure that your structure is MECE, or Mutually Exclusive, Collectively Exhaustive. This is a consulting term that is thrown around a lot. All it means is that there shouldn’t be any overlap in your structure. For example, if you get an entering a new market question, you might want to break your structure down into three buckets: first analyze the client, then analyze the new market, then
look at the different ways to enter the market. Each of those buckets is mutually exclusive of the others, but collectively exhaustive of everything we need to look at to solve this case.
Once you draw your structure, turn your notes toward the interviewer and walk him through your thought process. This brings him into the interview and makes him feel less like an interviewer and more like a client. Be sure to refer to the bucket headings first (in this case it would be company, market, and entering the market), then go back and talk through the bullet points you made beneath each heading.
[ 5. State Your Hypothesis ]
Consulting firms – and only consulting firms – care about a hypothesis. They would like you to state a hypothesis within the first few minutes of the case, usually after you lay out your structure. I know that it seems crazy to give them an answer to the case before you have any information. But the reason consulting firms like it is that when they go into a company they often don’t know what the problem is, so they state an initial hypothesis and try to prove it. Chances are they are going to disprove the first five, but it narrows the scope of the problem. For example, if you get a profit and loss case, you might say, “My hypothesis is that profits have fallen because costs have risen.” That is something you can try to prove as you move through the case. If you disprove it, you’ll want to update your hypothesis as you proceed through the case.
The advantages to stating a hypothesis up front are that it will help you ask the right questions, make your analysis more linear, and force you to focus on issues that you can either prove or disprove. It also helps you identify which structure to use, thus defining the starting point.
I’ve known plenty of candidates who received job offers without ever stating a hypothesis. Think of it as icing on the cake. If you can remember to state one, they’ll love it. If you forget, though, it’s not the end of the world. But because the interviews are so competitive you’ll want to take every advantage. A simple trick to remind yourself to state a hypothesis is to lightly write the letter H in the middle of your first page of notes before you go in to the interview. That way, as you are writing out your structure, you’ll see the H and be reminded to offer a hypothesis.
In real life, consultants can take up to two days to form a hypothesis, but you have about five minutes. So don’t worry if your hypothesis is wrong. It eliminates one possibility and allows you to restate your hypothesis and focus on another aspect of the case. Think of the process as one of elimination.
+ Core to the Case
You know you are going to get a lot of cases that ask you to analyze a company (the client) and cases that ask you to analyze the market/industry. Below are two lists of core questions you should be thinking about and asking about the company and market/industry. You need to learn these so you can rattle them off in your sleep. It will speed up your structure (because you won’t have to stop and think) and ensure that you don’t miss anything critical. You will probably add to or subtract from the list depending on the case, but it will eventually become second nature to you and thus build up your confidence.
❏ Company
It’s important to ask about the profit and revenue trends so you can get a feel for the size of the company and how it’s been
doing. You may even want to ask whether it is a publicly traded or private company.
Customer segmentation is critical. You need to know who the client’s customers are so you can craft a strategy.
Product mix. What products or services does the company offer and what are the costs and margins associated with each product? Have there been any recent changes in the product mix?
Production capabilities and capacity allow
you to access several key areas. Does the
company have the ability to expand? Are
they running at full capacity now and if not,
why not?
Brand. How strong is its brand? Is it a market leader or has the brand faded?
Oftentimes the company in the case is made up, so we have no idea about the strength of the brand.
Distribution channels. How are the products and services currently distributed? Usually the more distribution channels the better. So how can the company expand its channels?
WCS. What constitutes success? This is different from the objective. If it’s an entering a new market case, the objective might be to decide whether to enter or not.
While success might be defined as 10 percent of the market in three years, it is critical to understand what success means to the client.
❏ Market
Market size, growth rate, and trends. Ask for three years of data. How is the industry doing overall and how is the company
growing compared with the industry?
Industry drivers. Is it brand, price, content,
size, economics, technology, geopolitical
events, bargaining power of buyers, bargaining power of suppliers, or distribution channels?
Customer segmentation(s). There are often a number of segments within an industry.
Which is the company going after? How big are they?
Industry changes. Have there been any major changes within the industry, such as new players, mergers, new technology, or new regulations?
Distribution channels. What are the major distribution channels within this industry?
As an example, think of all the ways you can watch a movie.
Major players and market share. Who are the competitors and how much market share do they have? Is it a fragmented market or one dominated by one or two major players?
Product differentiation. This often ties into the one above. How do the competitors differentiate their products or services?
Match it up to market share.
Barriers. Barriers to entry can be access to
capital, distribution channels, raw materials,
or human talent. Barriers could also be
government regulations, customer loyalty, sticky features (making it hard to leave one product for another), or market domination by one or two major players. Barriers to exit could be massive investment and
nontransferable fixed assets, contract
requirements with suppliers, or government requirements (e.g. a company receives major tax breaks from a state government to
employ a certain number of people from that state). Another barrier would be that the costs of leaving a market are higher than those incurred to continue competing in the market.
+ The Four Key Case Scenarios, Developing Your Structure
While interviewers give dozens of different types of cases, the four scenarios listed below are the basic building blocks of many of the cases. While it is unlikely that a case will fit neatly into one of these scenarios, you will find that the components that make up the various cases are tied in the scenarios below. They are to be used to base your thinking; they will help you ask the right questions and turn the case into a well-structured conversation. Be cautious of books that sell you on the fact that one structure fits all cases – it’s the lazy way out. If I gave you two very different cases and you structured your thought process the same way for each case, I’d show you the door. These are often just glorified cookie-cutter approaches that stifle original thought and make it harder to set yourself apart from the next candidate.
The four key case scenarios are: