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April 2010

Problem solving approach in Management consulting projects To understand and improve on results of eBay case competition. April 2010. AGENDA. Problem solving approach overview Practical exercise. Lets improve the eBay LOPs Practical exercise. Lets assess the eBay LOPs Q&A. 30 min 30 min

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April 2010

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  1. Problem solving approach in Management consulting projectsTo understand and improve on results of eBay case competition April 2010

  2. AGENDA • Problem solving approach overview • Practical exercise. Lets improve the eBay LOPs • Practical exercise. Lets assess the eBay LOPs • Q&A 30 min 30 min 15 min 20 min

  3. PROBLEM SOLVING PROCESS STRUCTURES YOUR WORK Problem definition Structu-ring Prioriti-zing Issue analysis Synthesis & recom-mendations COMMUNICATION

  4. STEP 1: DEFINE THE PROBLEM Problem definition Issue analysis Structu-ring Prioriti-zing Synthesis & recom-mendations COMMUNICATION Think IMPACT: What is the question you are trying to answer?

  5. PROBLEM STATEMENT Characteristics of good problem statement • Thought-provoking question, not a fact • Specific, not general • Debatable (not a statement of fact or non-disputable assertion) • Able to be acted upon • Focused on what the decision maker needs to move forward Clear statement of problem to be solved

  6. PROBLEM STATEMENT EXAMPLE: OILCO REFINERY The Oilco refinery is suffering from poor profitability despite a strong market niche position. Statement of fact Should the Oilco refinery improve its deteriorating position? Not disputable Can the Oilco refinery be managed differently to increase profitability? Too general

  7. GOOD PROBLEM SOLVING: OILCO REFINERY OR What opportunities exist for Oilco to improve performance through overhead rationalization, operational improvements, or asset/ownership restructuring, either as a growth platform or as a low- cost local operator? Specific, action-oriented Oilco should shift to a low-cost local operator approach, cut overheads, redesign operations, and restructure non-core assets to improve profitability by $40 million per year

  8. STEP 2: STRUCTURE THE PROBLEM Problem definition Issue analysis Structu-ring Prioriti-zing Synthesis & recom-mendations COMMUNICATION Think DISAGGREGATION and HYPOTHESIS: What could the key elements of the problem be?

  9. WHAT IS A LOGIC TREE? Issue 1 Issue 2 A problem- solving tool that breaks a problem into discrete chunks Problem Issue 3 Issue 4 Issue 5

  10. TWO MAIN TYPES OF LOGIC TREES Issue 1 Argument 1 Hypo-thesis-driven tree Issue tree Argument 2 Issue 2 Argument 3 Issue 3

  11. ISSUE TREE – SAVING MONEY How? How? How? How? Can I receive a windfall? Legally Inherit Illegally Win lottery Can I earn more $ from investments? Can I increase income? Can I receive more $ from work? Work more hours Overtime How can I have more money at the end of the month without incurring a debt? Additional job Make more per hour Higher job level Better paid industry Can I pay less for same amount of items? Buy lower quality items Shop around for specials Can I reduce expenses? • Food • Clothing • Entertainment • Travel • Other Can I buy fewer items?

  12. HYPOTHESIS-DRIVEN – TREE SAVING MONEY Why? Why? Why? Key spending categories have competition in new formats Hypermarkets Price Club Comparison shopping is an interesting opportunity Savings are feasible Home Depot Auto mall New formats offer same quality at lower price The best way for me to have more money at the end of the month is to spend less through comparison shopping Opportunity cost of additional time taken up by comparison shopping Additional investments do not wipe out savings Savings in $ To compensate for demanding workload, I need to invest in weekly visits to the massage parlor and the opera Changing my lifestyle is not an option 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

  13. TWO MAIN TYPES OF LOGIC TREES Issue 1 Argument 1 Hypo-thesis-driven tree Issue tree Argument 2 Issue 2 Argument 3 Issue 3 Description Why use it? When to use it? • Decomposes an issue into smaller sub-issues (e.g., measures, criteria) • Sub-issues answer the question "What?" or "How?" • Addresses the entire solution space • Early in the problem solving process, when you know little about the problem • Postulates a potential solution and identifies what arguments are necessary and sufficient to prove or disprove it • Arguments answer the question "Why?" • Focuses early on part of the solution space, which accelerates the problem solving process • When you know enough about the problem to formulate sound hypotheses

  14. STEP 3: PRIORITIZE Problem definition Issue analysis Structu-ring Prioriti-zing Synthesis & recom-mendations COMMUNICATION Think SPEED: Which part of the tree seems most important to the problem?

  15. CUT OFF BRANCHES Issue 4 Issue 1 • Keep tightening focus • Prioritize your effort on what is most important • Helps to ask "so what" . . . but also ask what you have forgotten • Is the key to working efficiently Issue 2 Problem statement Issue 3

  16. HOW TO PRIORITIZE Be practical! Polishing Focusing on impact Time and effort Benefit for problem solving Use judgment/intuition Involve your team Do back-of-the-envelope calculations Take risks

  17. METHODS FOR PRIORITIZING PRESENTATION Key ideas Example methods • Take a reasonably quick, informal approach to get started • Remember that sometimes a "back of an envelope" calculation is all that’s needed • If new information emerges, you can always reprioritize and switch your efforts to another part of the tree • Use likely impact to decide where to go first • Use readily available data whenever possible; avoid major data requests • Do not create massive spreadsheets or other computer models if you can move forward with less complete information • Percentage of total "X" • Estimated potential increase/decrease (sensitivity analysis) • Simple ratios • Quick industry benchmarks • Qualitative input from clients, CDs, etc. • Ease of implementation • Timing • "Quick wins" • Available resources • High/low risk

  18. STEP 4: ISSUE ANALYSIS AND WORK PLAN Problem definition Issue analysis Structu-ring Prioriti-zing Synthesis & recom-mendations COMMUNICATION Think EFFICIENCY: How and on what should the team spend its time?

  19. ISSUE ANALYSIS WORKSHEET Issue Supporting rationale Analysis Source Hypothesis Key issue or unresolved question that elicits a "yes" or "no" answer and upon which specific action depends Statement of the likely resolution of the issue. It includes the reason for answering yes or no. Elements you have to believe for the hypothesis to be true Detailed supporting rationales make the transition to analysis easier. Models that should be explored in order to confirm or refute the hypothesis Likely location or means of obtaining data to carry out analysis Example Should ABC invest $20 million in new manufacturing technology? Yes– ABC costs will become uncompetitive without new investment Competitors’ manufacturing costs declining Industry leaders are investing in new technology Pay off is very short Comparison of manufacturing costs Review of competitive investment Cashflow: NPV Specialist magazines/ reports Manufacturing and customer interviews Accounting Department

  20. EXTEND THE ISSUE ANALYSIS WORKSHEET TO CREATE A WORK PLAN Issue End product Responsibility Source Timing Support-ing rationale Hypo-thesis Analysis Issue analysis work sheet Work plan States the analysis’s output Identifies the team member who will under-take the analysis Sets the time (in work days) necessary to answer the key issue Example Breakdown of competitive costs and reasons for differences Competitors’ investment trends and areas of focus Value of investments Fuentes, P.F. Shaw, B.R. Lun, C.A. 10 5 7

  21. STEP 6: SYNTHESIZE FINDINGS AND DEVELOP RECOMMENDATIONS Problem definition Issue analysis Structu-ring Prioriti-zing Synthesis & recom-mendations COMMUNICATION Think POTENTIAL SOLUTION: What should be done?

  22. SYNTHESIS ADDS AN INSIGHT THAT ADVANCES YOUR THINKING Summary Synthesis I have lost my keys and passport and am behind on my tax return I have been sloppy Facts • I have mislaid my keys • My passport is not where I thought it was • I am 2 months behind on my tax return

  23. SYNTHESIS PYRAMIDS HELP YOU ORGANIZE YOUR DATA AND DEVELOP AN INSIGHTS "So what?" Synthesize Data

  24. PROBLEM SOLVING IS AN ITERATIVE PROCESS Problem definition Analysis Structu-ring Prioriti-zing Issue analysis Synthesis & recom-menda-tions COMMUNICATION

  25. STRATEGIC PROBLEM-SOLVING LOOP Problem definition Problem structuring Prioritization Issue analysis and work plan Synthesis and recommen-dations Analysis ? Problem Think next iteration: what are the team’s next priorities?

  26. AGENDA • Problem solving approach overview • Practical exercise. Lets improve the eBay LOPs • Practical exercise. Lets assess the eBay LOPs • Q&A 30 min 30 min 15 min 20 min

  27. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION THE RULES OF THE GAME. HOW TO SET UP THE PROBLEM DEFENITION

  28. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION Problem definition Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? PROBLEM DEFINIOIN.

  29. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION ISSUE TREE STRUCTURING Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? WHEN? Нужно ли выходить сейчас или можно подождать? Есть ли приоритетные географические регионы? Есть ли приоритетные продуты и сервисы к развитию? HOW? Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? Кто является ключевым игроком на каждом этапе value chain? Каковы возможности по партнерству с данными игроками? Есть ли необходимость в партнерстве с российскими игроками на каждом этапе value chain? Какие возможности имеет EBay в построении собственной компетенции на каждом этапе value chain? WHAT TO DO? Какие из проблем являются ключевыми (решающими)? Каковы ключевые проблемы в value chain? (Customer base acquisition, sales platform, payment, goods delivery, client service and repeat purchase) Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? Как преодолевались такие проблемы в прошлом? 28

  30. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION PRIORITIZING. THE RULES WERE SET

  31. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION PRIORITIZING. THE RESULT • Prioritization based on the task (see previous page) • Why is it important to work now • Demonstrate the market knowledge • Interest the client at showing first results 1 Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? WHEN? Есть ли приоритетные географические регионы? Нужно ли выходить сейчас или можно подождать? 2 Есть ли приоритетные продуты и сервисы к развитию? 3 Кто является ключевым игроком на каждом этапе value chain? Каковы возможности по партнерству с данными игроками? Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? HOW? 4 Есть ли необходимость в партнерстве с российскими игроками на каждом этапе value chain? Какие возможности имеет EBay в построении собственной компетенции на каждом этапе value chain? 5 Какие из проблем являются ключевыми (решающими)? WHAT TO DO? 6 Каковы ключевые проблемы в value chain? (Customer base acquisition, sales platform, payment, goods delivery, client service and repeat purchase) Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? 7 Как преодолевались такие проблемы в прошлом? 8

  32. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION ISSUE ANALYSIS BEST EXAMPLES 1 Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? 2 Есть ли приоритетные географические регионы? Team QUANTS answer

  33. ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION 1 Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? 2 Есть ли приоритетные географические регионы? 3 Есть ли приоритетные продуты и сервисы к развитию? Team USA answer

  34. ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION 4 Кто является ключевым игроком на каждом этапе value chain? Каковы возможности по партнерству с данными игроками? Team QUANTS answer The only team explicitly talked about value chain partnership

  35. ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION 6 Какие из проблем являются ключевыми (решающими)? Team Dr. Pepper Consulting answer. The team set up the full list of problems, but did not prioritize them

  36. ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION 6 Какие из проблем являются ключевыми (решающими)? Team Economics Engeeniring answer. The team set up the full list of problems, but did provide any details and prioritization

  37. ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION 7 Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? Team USA answer. The team clearly identified the 2 major issues and addressed solutions for both (the example shows the second set of issues) – further analysis path is clear

  38. SYNTHESIS AND RECOMMENDATIONS. STORYLINE Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION • Prioritization based on the task • Why is it important to work now • Demonstrate the market knowledge • Interest the client at showing first results Российский рынок интернета растет и будет расти (#3 CAGR в мире, #8 по числу пользователей) 1 WHEN? Выходить надо сейчас, фокусируясь на Москве и центральном регионе. EBay должен стать площадкой для малого и среднего бизнеса Высокая концентрация в Москве и других миллионниках (50% пользователей в Центральном регионе) 2 Рассмотреть B2B, B2C, C2C. Определить фокус (на revenues) 3 HOW? Крупных игроков на всех этапах кроме логистики практически нет (Molotok мал), либо бизнес еще слишком молод в России (Yandex money) Возможно сотрудничество для acquiring users. Нет партнеров для площадки и оплат. Необходимость плотного сотрудничества по логистике (в начале). Нет партнеров в customer service Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? 4 Собственный опыт EBay значителен на всех этапах, кроме логистики. Доставка товаров EBay всегда осуществлялась партнерами 5 Разбивка проблем на внутренние и внешние, выделение ключевых проблем 6 WHAT TO DO? План развития бизнеса в России с описанием возможных следующих шагов в анализе Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? – выдвинуть гипотезы 7 Как преодолевались такие проблемы в прошлом? – интервью, анализ рынка 8

  39. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE Team QUANTS answer The team clearly answered the major question as well as showed the road map to success The team clearly demonstrated its knowledge and a promise for further insights down the consulting project

  40. Synthesis & recom-mendations Problem definition Structu-ring Prioriti-zing Issue analysis COMMUNICATION SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE Team Dr. Pepper Consulting answer The team outlined the possible strategies and outcomes as well the major problems to be solved on the way to success

  41. AGENDA • Problem solving approach overview • Practical exercise. Lets improve the eBay LOPs • Practical exercise. Lets assess the eBay LOPs • Q&A 30 min 30 min 15 min 20 min

  42. WHAT ARE THE ASSESSMENT CRITERIA? Assessment criteria* • Content • Structure • Logics • Creativeness and depth of recommendations • Communication • Slides quality • Language • Consistency • Orientation to the client • Problem understanding • Knowledge of client situation * Example. Actual assessment criteria might differ significantly

  43. Assessment criteria* Dr. Pepper Consulants Economics and Engineering IKNOW USA Quants Content and headers not connected Lack of facts, only statements Lack of priority The strongest Out of blue aggressive Too theore-tical, can you keep the promise But can you keep the promise Great ideas, no time? Overloaded slides 100% McK Headers are not statements English Lighter to the end Depth decreased Consistently shallow Extremely promising ending Lighter to the end Consistently shallow Omitted Pay Pall discussion HOW THE TEAMS PERFORMED ACCORDING TO THE CRITERIA LIST? • Content • Structure • Logics • Creativeness and depth of recommendations • Communication • Slides quality • Language • Consistency • Orientation to the client • Problem understanding • Knowledge of client situation * Example. Actual assessment criteria might differ significantly

  44. AGENDA • Problem solving approach overview • Practical exercise. Lets improve the eBay LOPs • Practical exercise. Lets assess the eBay LOPs • Q&A 30 min 30 min 15 min 20 min

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