How to be Hypothesis Driven

We’re all told to be hypothesis driven during cases, but what does it mean and how do you do it?

Being hypothesis driven means you follow a certain logical structure in thought, and possibly speech if you are so inclined.

My hypothesis is:

because of:

to prove it the following would have to be true:

to disprove it the following would have to be true:

As you get more into the details of the case your hypothesis changes. It may change completely from your original hypothesis, or it may become more and more specific as you learn more about the situation.

The prove and disprove part of the hypothesis are things that you will examine during the case (use the brainstorming article to help you come up with these). Your structure should investigate each of these areas.

Example

Let’s say you are asked to help a vending machine company turn around its declining profitability.

As you learn more about the company, you find out that its revenues have declined due to reduced volume and that the costs have actually declined.

Why might this have happened? It’s likely either due to competition, or because the company did something that drove customers away. Possibly both, but the first one seems more likely.

You could then generate a hypothesis –

My hypothesis is: volume has dropped because of competitors (very general)

because of: drop in volume

to prove it the following would have to be true:

1. Only the client’s revenues have dropped.

2. Competitors are offering better price, products, customer service, or have superior marketing.

3. Customers are still interested in the product, but have switched to competitors.

4. Customers haven’t switched to substitutes.

to disprove it the following would have to be true:

1. Everybody’s revenues have dropped.

2. The customers actually perceive the client to be superior on all aspects when compared to competitors.

Now, you can pause and take some time to create a new structure, possibly split it up into Market / Customers / Competition and investigate further.

As you learn more information you can make the hypothesis / evidence more specific.

For example, let’s say you learn customers perceive our client’s prices as being too high. You may hypothesize now that lowering prices will fix the problem. (notice how you switched from hypothesizing about the problem to hypothesizing about the solution)

My hypothesis is: we can increase profits by lowering prices.

because: customers are price sensitive.

to prove it the following would have to be true:

1. Customers are price sensitive (already shown to be true).

2. We can maintain our profit margin by lowering costs.

3. We can sell enough of the product to maintain the profit.

to disprove it the following would have to be true:

1. Lowering prices would ignite a price war.

2. We can’t lower costs, so decreasing price would result in a loss of profit.

Now you can look at costs and examine if they can be decreased.

Why Is Being Hypothesis Driven Important?

I’d argue that it’s important for three reasons:

1. It allows you to keep focus – Many people end up losing momentum in the middle of the case because they forget what they’re trying to do. Having a hypothesis you’re trying to prove or disprove keeps this from happening to you.

2. It allows you to be systematic – Ultimately, any problem has a finite set of solutions (to increase profit you increase prices, sell more, or lower costs). Being hypothesis driven allows you to cross off potential solutions until you find the right one.

3. It allows you to be definite – Because you have criteria for proving or disproving your hypothesis, you can be sure that your answer is correct.

Conclusion

To be hypothesis driven, you should follow the following structure:

My hypothesis is:

because of:

to prove it the following would have to be true:

to disprove it the following would have to be true:

and it’s important because it allows you to be focused, systematic, and definite.

Good luck!

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