Category Archives: Techniques

Don’t Forget You Can Raise Prices

In the classic profitability decline cases usually there’s only a few possible solutions:

1. Lower your costs.

2. Sell more of your products.

3. Raise your prices.

Most people talk about the first two, but you’d be surprised at how few people mention the third.

I think it’s because usually in these cases you’re seeing a loss of volume or maybe prices went down or something like that. The intuitive response is simply to forget about prices because if they’ve gone down for everybody you probably can’t do much.

But, I’d argue if you automatically cross out this option you may be losing out on some really good solutions.

The reality is that raising your level of service or focusing on a specific customer segment along with raising your prices can be a good strategy to restore profitability as well.

Keep this one in the back of your mind for your next profitability decline case.

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When can you Conclude a Case?

Back in February I wrote an article on how you should conclude a case. I consider that the definitive guide on how a conclusion should sound. But it does beg another question:

How do you know when you’re ready to conclude a case?

And my answer is very straightforward. You can conclude a case when:

1. You’ve isolated what the problem is.

2. You’re sure that the problem you’ve identified completely explains all of the symptoms the client is seeing.

3. You’ve proposed a solution to the problem that treats the underlying issue.

What does this look like in practice?

In a typical case you’re presented with a set of symptoms your client is facing (i.e. profits are down in my business).

Your goal is to isolate the problem (#1), and we’ve talked extensively on how to do that.

Once you isolate the problem you need to quantify the extent of that problem and see if it explains everything.

The classic example is a case where your profits are down. You find out it’s because the raw material costs are up. You could conclude now but it’s premature. You need to verify that the reason profits are down is only because raw material costs have gone up.

So you quantify the profit decline and the cost increase and see if they match. If they don’t, there’s another problem that you need to isolate before you can go to the solution stage and conclude.

And what if the case is purely qualitative? Then I would argue you aren’t done until you cross off all high probability hypotheses off of your list. Even if you stumble upon one problem it doesn’t mean that it’s the only problem.

You need to check this with your interviewer (“could this completely explain the client’s drop in profitability?”), and if not keep going.

Conclusion

You can conclude a case when:

1. You’ve isolated what the problem is.

2. You’re sure that the problem you’ve identified completely explains all of the symptoms the client is seeing.

3. You’ve proposed a solution to the problem that treats the underlying issue.

Usually you accomplish step # 2 by quantifying the symptoms (i.e. profits have declined) and the problem (costs have gone up) to see if the problem you isolated completely explains the symptoms. If it does, go to step 3 and afterwards conclude.

If the problem you discovered doesn’t completely explain the symptoms there’s probably another issue or you haven’t used the five whys effectively enough to discover the underlying problem.

If you can’t quantify the symptoms and the problem you need to ask your interviewer if your problem completely explains the symptoms, and if not keep digging.

Good luck!

How to Use Decision Matrices

Today’s article is about using decision matrices in cases. Decision matrices are a way of visualizing all of the various strategic options you have in a business situation.

They’re useful because they all you to very easily narrow down all of your potential options to the one or two that you will pursue.

We’ll start by talking about the example everybody knows (the BCG Growth-Share Matrix), and then explore how it can be used in both competitive response situations and to prioritize solutions.

Continue reading How to Use Decision Matrices