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PROBLEM SOLVING WITH
THE MCKINSEY METHOD
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MCKINSEY PROBLEM SOLVING APPROACH
Intuition
Data
Problem Solution
Business Need
• Competitive
• Organizational
• Financial
• Operational
Analyzing
• Framing
• Designing
• Gathering
• Interpreting
Presenting
• Structure
• Buy-in
Implementation
• Dedication
• Reaction
• Completion
• Iteration
Leadership
• Vision
• Inspiration
• Delegation
Managing
• Team
• Client
• Self
Focus of today’s
discussion
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FRAMING THE PROBLEM – KEY TIPS
• Start with structure, not data
• Break the problem into “MECE” parts (using
issue trees)
• Form a sound hypothesis as to the answer
• Identify what conditions are necessary and
sufficient to prove the hypothesis (using
hypothesis trees)
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
Problem: How can the Acme Widget
Company increase profits from its
existing business lines?
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
How can
Acme
increase
profits from
existing
business
lines?
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
How can
Acme
increase
profits from
existing
business
lines?
From
Widgets
From
Thrum-mats
From
Grommets
Which Business
Lines?
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
How can
Acme
increase
profits from
existing
business
lines?
From
Widgets
From
Thrum-mats
From
Grommets
Increase
Revenues
Decrease
Expenses
Which Business
Lines?
How?
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
How can
Acme
increase
profits from
existing
business
lines?
From
Widgets
From
Thrum-mats
From
Grommets
Increase
Revenues
Decrease
Expenses
Decrease
raw
material
costs
Decrease
labor
costs
Decrease
overhead
costs
Which Business
Lines?
How?
How?
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FRAMING THE PROBLEM – ISSUE TREE EXAMPLE
How can
Acme
increase
profits from
existing
business
lines?
From
Widgets
From
Thrum-mats
From
Grommets
Increase
Revenues
Decrease
Expenses
Decrease
raw
material
costs
Decrease
labor
costs
Decrease
overhead
costs
Negotiate wage concessions
Implement a labor-saving
production process
Which Product Lines?
How?
How?
How?
Negotiate higher productivity
quotas
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FRAMING THE PROBLEM – ISSUE TREE ASSIGNMENT
Problem: How can I have more money at the
end of each month without incurring
debt?
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ISSUE TREES VS. HYPOTHESIS TREES
• Issue trees identify all potential ideas
• Issue trees ask “How” we could meet a desired outcome
• Issue trees are excellent for organizing ideas in a “MECE” manner
• Complete issue trees uncover all potential ideas
• Hypothesis trees focus and build up an argument or conclusion
• Hypothesis trees ask “Why” we believe something to be true
• Hypothesis trees are excellent for narrowing down investigation to essentials
• Complete hypothesis trees build up a complete argument
• Hypothesis trees focus on the “so what” of any data that is presented
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FRAMING THE PROBLEM – HYPOTHESIS TREE
EXAMPLE
Hypothesis: We can increase the profitability
of the Acme Widget Company
through a streamlined production
process for thrum-mats.
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FRAMING THE PROBLEM – HYPOTHESIS TREE
EXAMPLE
We can increase
thrum-mat
profitability with
the new production
process.
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FRAMING THE PROBLEM – HYPOTHESIS TREE
EXAMPLE
We can increase
thrum-mat
profitability with
the new production
process.
It will reduce our
costs.
Our organization
can implement the
necessary changes.
We can maintain
product quality
while implementing
the process.
Why?
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FRAMING THE PROBLEM – HYPOTHESIS TREE
EXAMPLE
We can increase
thrum-mat
profitability with
the new production
process.
It will reduce our
costs.
Our organization
can implement the
necessary changes.
We can maintain
product quality
while implementing
the process.
The process does
not require new
facilities.
The process does
not require new
skills.
Why? Why?
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FRAMING THE PROBLEM – HYPOTHESIS TREE
ASSIGNMENT
Hypothesis: The best way for me to have more
money at the end of the month is
to spend less through comparison
shopping.
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DESIGNING THE ANALYSIS – KEY TIPS
• Lay out the issues in a written workplan by
priority
• Identify the essential analyses necessary to
draw conclusions on each issue
• Disregard analyses that are “interesting” but
not essential to prove/disprove the
hypothesis
• Avoid time-consuming analyses designed for
more precision than necessary
• Begin each analysis with the end (specific
end products and timing) in mind
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DESIGNING THE ANALYSIS – WORKPLAN EXAMPLE
Issue/Hypothesis
Can we implement
the new production
process? Yes
Does the process
require new
facilities? No
If it does require
new facilities, can
we acquire them
economically?
Yes
Analyses
Technical
specifications
List of facilities that
meet new criteria
Map of “facilities
gap”
Sources of required
facilities/equipment
Cost to fill gaps
Effect on project
rate of return
Data Sources
Articles, interviews
Facilities management,
interviews
Facilities management,
thrum-mat line
supervisors, interviews
Operations, trade
publications
Operations, contractors,
interviews
Finance department,
prior analysis
End Product
Chart
List
Chart
List
Table
Spreadsheet
Responsibility
Tom
Tom
Belinda
Belinda
Belinda
Terry
Due dates
3-Jun
5-Jun
7-Jun
7-Jun
10-Jun
12-Jun
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GATHERING THE DATA – KEY TIPS
• Use the workplan to focus the search
• Search the web and other public sources for
essential facts
• Identify and interview experts to uncover
hard-to-find facts and deeper insights
• Conduct primary research only if
unavoidable
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INTERPRETING THE RESULTS – KEY TIPS
• Look for the 80/20 opportunities
• Always ask, “what’s the so what?”
• Perform sanity checks
• Draw a chart for each insight
• Don’t make the facts fit your hypothesis
• Pull together “the story”
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BACKUP
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22
ISSUE TREE – SAVING MONEY
How? How?
. . .
How? How?
How can I have more money at the end of each month without incurring a debt?
Increase income
Reduce expenses
Receive a windfall
Receive more $ from investments
Receive more $ from work
Pay less for same amount of items
Buy less
Legally
Illegally
Work more hours
Make more per hour
Buy lower quality items
Shop around for specials
• Food • Clothing • Utensils • Entertainment • Travel •Other
Better paid industry
Higher job level
Additional job
Overtime
Win lottery
Inherit
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23
HYPOTHESIS-DRIVEN – TREE SAVING MONEY
The best way for
me to have more
money at the end of
the month is to
spend less through
comparison
shopping
Why? Why? Why? Which?
Comparison
shopping is
an interesting
opportunity
Changing
my lifestyle
is not an
option
Additional
investments
do not wipe
out savings
Savings
are feasible
To compensate for demanding workload, I need to invest
in weekly visits to the spa and the opera
My profession does not allow me to wear
lower quality clothes
To balance the junk food I eat during the week, I need at
least one three-course meal on the weekend
Savings in $
Opportunity cost of
additional time
taken up by comparison
shopping
New formats offer
same quality at
lower price
Key spending
categories have
competition in
new formats
Hypermarkets
Price Club
Home Depot
Auto mall