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Give it structure

Alex recently provided some information to assist in case-interview preparation. When dealing with the myriad of details included in these interviews, you can quickly become overwhelmed with the sheer complexity and amount of data being provided. The only way to manage this effectively is to use structure.

This is where the framework comes in. Utilising frameworks effectively is not only an essential skill for completing case-interviews, but is a critical weapon to be used in your future career, whatever industry you choose to enter. They can help uncover key issues, find potential solutions to problems, and also help you present research and information in an easily understandable way.

The most important thing to remember is that using frameworks will not neccessarily answer the question at hand. They are simply tools to allow an issue to be structured, and require additional acumen and knowledge to assist in discovering the key insights you are really looking for.

Some useful frameworks

Porters 5 Forces

One of the most widely recognised and in-depth frameworks I have come across is Porters 5 forces. This model was developed to gain an insight into how profitable an industry (and consequently firm) could be based on analysing the industry’s structure. This model is complex, but by gaining an understanding of how each of these different components interact, it can assist in improving your understanding of business at a macro level, and how different factors influence each other.

porters 5 forces

Source: dimensionaledge.com

Profitability Analysis

Whenever you are faced with a financial issue; maybe sales have fallen, profits have dropped, variable costs have jumped 20% in the last year etc., it is best to start with the profitability framework. The application of frameworks requires basic business financial knowledge and a logical thought process.

Simply put, you draw the diagram below which shows that profitability = revenue – costs. You then work methodically analysing one branch at a time, from one side to the other, building a synthesis as you go. For example, I may discover sales over the last 5 years have fallen year on year. I may then want to ask for further information to identify whether or not this is an industry wide issue. If not, it may be a driver of the current problems the company is facing.

One of the key points to mention here, is that you must segment your numbers. Your revenues may be decreasing annually by 10%, but how are our competitors doing? And how does our position relate to the industry?

profitability framework

Source: caseinterviewhq.com

Three C’s

This is a very broad framework developed by Kenichi Ohmae, a Japanese strategy guru. He said that a company should focus on three key factors to ensure success:

  • Customers
  • Competitors
  • the Company itself
This framework is useful when you’re not too sure where to start. By using these headings to structure the information you have been presented with, you can begin to delve into the factors driving the situation at hand. You may also add additional dimensions as you see fit. The order you progress through the headings really depends on the problem you are faced with, i.e. if it is a market entry problem then you may want to know what sort of customer segments is the company intending to target, are they similar to our existing customers, and so on.

Some assembly required

The simple problem with frameworks, is that there is too many of them.  The most helpful resource I have found on this subject is Victor Cheng’s caseinterview.com. I completely agree with this ex-McKinsey’s ‘simplicity is key’ approach, and I suggest you look into his resources and subscribe to his newsletter to access a wealth of information.

One important point he emphasises, is that you cannot rely on frameworks completely.  Frameworks are not there to do the work for you. You must adapt them to the situation at hand and be creative in how you apply them. I found this quote quite useful:

 

“I personally found that I got better at solving cases very creatively (deviating from standard frameworks) the more I mastered the main frameworks. I was better able to see which parts of a case situation fit a pre-existing framework and which did not. Often I would combine frameworks – such as starting with a profit and loss framework, realizing there are broader business issues at play to understand why say unit sales are down… and switch to a business situation framework midstream.” – Victor Cheng

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