Decision Points in Cases

During cases you’ll often come up against a fork in the road, where one path will lead you to an answer and the other path will lead you to the answer.

You might not even be aware of these decision points, but they matter more than you think — because you’re not just being judged on how you drive the case, but where you decide to go and why.

Today’s article is intended to help you identify decision points, and make the right decision, every time.

What is a Decision Point?

A decision point is a point in a case where you can take one of many paths.

A decision tree (also called an issue tree or a structure) is the set of all possible paths that you can take.

Some will be dead ends, others will eventually lead you to the right answer, and others will directly lead you to the right answer.

Some examples would be:

1. Profit is declining, you can start on either the revenues side or the cost side. Where do you start?

2. Volume is declining, you can start by looking at customer, competition, product, distribution channels, or sales and marketing. Where do you start?

3. You’re in the middle of the case and you’ve been trying to figure out whether or not you should bring a product to market. You’ve found no useful information yet. Where do you go from here?

4. You’ve figured out that your company’s industry is in decline. You can stay in the industry or exit the industry. Where do you go from here?

and so on…

How do you Decide?

I would recommend you do the following to make your decisions:

1. Size each Opportunity.

2. Examine the Evidence and Create Hypotheses for Each Branch.

3. Rank Each Hypothesis by Likelihood of Correctness.

4. Start with the Most Likely Hypothesis First

Size Each Opportunity

If you are at a decision point, always try to determine the “size” of each path.

For our example, let’s go back to scenario #1 where profit is declining. To make your decision, you could ask for how much profits, revenues, and costs have changed either in absolute or percentage terms.

Let’s say you find out profits declined by $40 million, revenues declined by $10 million, and costs increased by $30 million. Where should you start?

I’d recommend you start with costs, because it’s the larger problem. Always, always, always start with the largest problem unless you have good reason to believe that the other path will tell you more.

I know many people have their preferences where to start or that they should follow some sort of routine, but that doesn’t show that you know how to really think and be efficient.

If there’s a few issues on the table, you need to demonstrate that you know that you should attack the biggest problem first.

Otherwise, there’s a risk that when you’re actually on one of these cases you could allocate your time improperly and work on things that don’t matter.

Examine The Evidence & Generate Hypotheses

If you can’t size the problem to determine where you should go next, use the information you’ve learned already to generate hypotheses about each option in your decision tree.

For our example, let’s go back to scenario # 2: Volume is declining, and you can start by looking at customer, competition, product, distribution channels, or sales and marketing. Where do you start?

Let’s say you know the following information:

1. Total volume is decreasing, but the volume of one of the products increased while the other decreased.

2. Prices haven’t changed.

Let’s try to generate hypotheses for each branch:

1. Customers – Customer behavior has changed to favor one product and not the others. This may or may not be likely depending on how common these products are.

2. Competition – The competition for some of the products has gotten stiffer; perhaps they lowered prices, offered promotions / discounts, or did something else that makes their product more appealing than yours.

3. Product – Maybe substitutes have come out for one of your products but not the other, or maybe your product features are outdated.

4.  Distribution Channels – Perhaps you’ve lost out on a key distribution channel for one of your products or not the other.

5. Marketing and Sales – Perhaps you allocated some of the marketing budget from one of the products to the other.

Rank Each Hypothesis

All of these are possible, but only hypothesis  5 explains both why the volume of one increased and the other decreased.

Hypothesis 1 is also possible depending if the products are sold to the same customers. I’m not so sure about 2, 3, and 4 but I’ll keep them around just to be thorough.

I’d say 5 > 1 > 2, 3, 4

Start with the Most Likely Hypothesis First

In this case, start by focusing on sales and marketing. In other cases, it will be different.

But you should always start with the most likely scenario first (by the way, the most likely scenario is the one that explains all of the evidence and can predict other things you’ll see).

As a side note, as you proceed through the case you’ll find more evidence that will change the direction you proceed in. Don’t feel like you have to be constrained to the above ranking.

Conclusion

To navigate decision points, you should:

1. Size each Opportunity.

2. Examine the Evidence and Create Hypotheses for Each Branch.

3. Rank Each Hypothesis by Likelihood of Correctness.

4. Start with the Most Likely Hypothesis First

Good luck!

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