WORKING DRAFT

Last Modified 11/15/2010 9:38:03 PM SA Pacific Standard Time

Printed 08/03/2011 12:07:20 a.m. SA Pacific Standard Time

Problem Solving Approach

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Principles of problem solving approach

IMPACT

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Logical
problem solving

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Impact- Focused Fact-
driven based

CREATIVE THINKING

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Thought leaders need to stay ahead of the problem

• Structure and manage the process

• Structure the problem and advance the thinking

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• Offer new insights

• Challenge the thinking and assumptions of the group

• Help colleagues focus on the most important issues

• Engage all the group's resources and use creative

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approaches

• Get to the essence of the problem

• Manage pace with an appropriate sense of urgency and

thoughtful pacing

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Three critical capabilities for effective problem-solving

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Ability to discern
Ability to connections between
understand whole Constructing
Identifying elements inside and
and its parts from multiple
relationships outside the problem
many angles perspectives

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Finding the
essence

Ability to cut through complexity

to reveal the heart of the matter

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Problem-solving approach

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Define Structure Prioritize
Problem
problem problem issues

Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

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Problem-solving approach

Develop early hypotheses

Be clear about the about the problem – What Identify what you should
problem – What do could be the key elements study further – Which
you have to resolve? of the problem? issues are most important?

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
Tell the story to your ation findings analyses
team and audience –
When and how do you
Communicate
share findings?

Given the context, Leverage resources – Who Structure your activities –

what does the has the knowledge and Where and how should
analysis tell you? expertise to assist you? you spend your time?

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Summary vs. synthesis

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SUMMARY SYNTHESIS
? ?

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FACTS
▪ I have misplaced my keys
▪ My passport isn't where
I thought it was
▪ I'm 2 months behind
on my tax return

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Summary vs. synthesis

Difference

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SUMMARY SYNTHESIS
I've lost my keys I've been sloppy
and passport and
I'm behind on my
tax return

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FACTS
▪ I have misplaced my keys
▪ My passport isn't where
I thought it was
▪ I'm 2 months behind
on my tax return

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Problem-solving approach

Be clear about the problem

• What is the mandate?
• What is the problem we
are trying to resolve?

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

Communicate

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Problem statement

Clear statement of Characteristics of good

problem to be solved problem statement

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• Thought-provoking (not fact) • Specific

• Debatable (not statement/ • Measurable

assertion)
• Action-oriented
• Focused on what decision
maker needs to move forward • Relevant (to the key

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problem)
• Pointing towards necessary
analysis • Time-bound

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Problem statement worksheet

Basic question to be resolved
▪ The basic question brings focus to the analytic work – it should be succinct and ensure that the findings
can be acted upon. The more specific the statement the better, provided it is not so narrow that
important levers to solve the problem are missed
1 Perspective/context 3 Decision makers

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▪ Comments on the "situation" and ▪ Identifies who at the client decides whether to
"complication" facing the client, e.g., industry act upon the study recommendations, e.g.,
trends, relative position in the industry CEO, Division Manager, SBU Manager

4 Other key study stakeholders

▪ Identifies who else could support/derail the
study and who else is influential
2 Criteria for success

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▪ Refers to the basis on which the client will
decide whether or not to act on the study
recommendations, e.g., financial returns, 5 Constraints within solution space
effect on staff, market share growth ▪ Defines the limits to the set of solutions that
can be considered. Note: constraints may
have to be relaxed as the study proceeds

6 Scope of solution space

▪ Indicates what will not be included in the study, e.g., international markets, research and
development activities, uncontrolled corporate costs

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Problem-solving approach

Develop early hypotheses

about the problem – What
could be the key elements
of the problem?

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

Communicate

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What is a logic tree?

Issue 1

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Issue 2

A problem-solving tool
that breaks a problem Problem Issue 3
into discrete chunks

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Issue 4

Issue 5

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Problem structuring

Key advantages

Facilitates problem-solving
▪ Parts of problem easier to

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handle
▪ Ensures completeness
▪ Focus topics more easily
recognizable

Facilitates planning
▪ Working in parallel possible

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▪ Difficulties easier to detect
▪ Scheduling more transparent
▪ Goal-oriented approach
Facilitates communication
▪ Concentration on key topics
▪ Context clearer

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First exercise – choose one of two problems

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Issue tree exercise 1: Reducing travel expenses at McKinsey Issue tree exercise 2: Saving money
Basic question to be resolved
▪ How can McKinsey significantly reduce its consultants' travel expenses?

1. Perspective/context 3. Decision makers

▪ Office manager

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▪ Travel expenses have risen compared to
previous years ▪ MGM group

4. Other key study stakeholders How can I have

▪ Transportation more money
at the end of the
2. Criteria for success month without
▪ Bring the cost level back to the average of the incurring debt?

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past 3 years
5. Constraints within solution space
▪ Quality of client service should not be affected

6. Scope of solution space

▪ Travel expenses of offices with more than 80 consultants

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Issue tree exercise 1: Reducing travel expenses at McKinsey

Basic question to be resolved
▪ How can McKinsey significantly reduce its consultants' travel expenses?

1. Perspective/context 3. Decision makers

▪ Office manager

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▪ Travel expenses have risen compared to
previous years ▪ MGM group

4. Other key study stakeholders

▪ Transportation
2. Criteria for success

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▪ Bring the cost level back to the average of the
past 3 years
5. Constraints within solution space
▪ Quality of client service should not be affected

6. Scope of solution space

▪ Travel expenses of offices with more than 80 consultants

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Issue tree exercise 2: Saving money

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How can I have
more money
at the end of the
month without
incurring debt?

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Issue tree 1A – Reducing travel expenses

How? – How? –
Type of Quantity Reduce number of days at the client site for given
costs vs. price assignments

Create more home studies for given offices by targeting

assignments
Reduce

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number of
Reduce days away Open new offices at locations of relevant clients
hotel
and food
expenses Reduce specific price Negotiate better discounts
Reduce costs
per day away Share double rooms at hotels
Reduce level of luxury
Don't serve clients
Reduce distance to >100 km from McK office
locations visited

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Reduce Invite clients to McK office
Reduce
transportation
travel Substitute meetings with
routes
expenses conference calls
Reduce frequency of
Reduce location change Stay at the client site over the
trans- weekend
portation Reduce costs Reduce level of luxury
costs per transpor Negotiate better discounts
tation route
Reduce specific price
Reduce
Form car pools
other costs

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Issue tree 1B – Reducing travel expenses

Members
of the Firm How?
involved

Plan more cost-consciously while maintaining comfort level

By teams

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Accept reduced comfort

Use available price/discount systems to best effect

By
transportation
Negotiate special conditions with certain partners
Reduce
travel

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expenses Reduce the need to travel while maintaining the existing office
By office structure
leadership
Create client-oriented office structure (additional locations)

By other Firm
members

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Issue tree 2 – Saving money

How? How?
Inherit
Legally …
Receive a
windfall Win lottery
Illegally

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Increase Receive more $ Overtime
income from investments
Work more hours
Additional job
Receive more $
How can I from work
have more Higher job level
money Make more per hour
at the end of Better paid industry
the month

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without Buyer lower quality
incurring a Pay less for items
debt? same amount of
items Shop around for
specials
Reduce
expenses ▪ Food
▪ Clothing
Buy less
▪ Utensils
▪ Entertainment
▪ Travel
▪ Other

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Logic trees answer specific questions at different levels of detail

How/what?
How/what?
Idea 1.1
Idea 1
Problem statement

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Idea 1.2
Mutually

Consistent
Idea 2.1
Exclusive
Question Idea 2
Collectively
Idea 2.2
Exhaustive
Idea 3.1
Idea 3

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Formulation of the Idea 3.2
basic question to be
resolved should be as
specific as possible Complete but Further levels of
non-overlapping detail for ideas,
list of conceivable also complete and
solutions non-overlapping

Level of detail
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No gap, no overlap, no flap

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MECE
Mutually Exclusive Comprehensively Exhaustive

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?

No gaps No overlaps No irrelevant flap

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Two main types of logic trees

Description Why use it? When to use it?

Issue tree
? • Decomposes an • Addresses the • Early in the
issue into smaller entire solution problem-solving
? ?

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sub-issues (e.g., space process, when you
measures, criteria) • 'Slow, but steady,' know little about the
?
Question • Sub-issues answer reliable approach to problem
the question 'What?' problem-solving
?
or 'How?'
?
?
"What?" or "How?"
Hypothesis-driven tree

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Hypothesis 1 • Proposes a potential • Focuses early on • When you know
solution and identifies part of the solution enough about the
the arguments space, which problem to formulate
Hypothesis Hypothesis 2 needed to prove or accelerates sound hypotheses
disprove it problem-solving

Hypothesis 3
"Why?"

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Hypothesis-driven tree 1 – Reducing travel expenses

Why? Why?

Where time and place are known, teams can use

Team planning cheaper advanced booking fares
often disregards

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relevant cost- For engagements with frequent changes in location
reduction levers that are difficult to plan, teams can reduce travel
expenses by condensing their agenda

Travel expenses Office leadership can increase the number of studies

Office leadership in the home office
can be reduced leaves room for
primarily by improvement Policy decisions can be made to focus on a few
teams and office service providers and thereby cut prices

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leadership
All the relevant information on prices and specials is
The transportation available and exploited fully
department's
The Firm already has favorable discount agreements
scope for exerting
with relevant service providers
influence is already
exhausted Further price reductions (e.g., by concentrating on
few contractual partners) are not possible under
current office policy

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Hypothesis-driven tree 2 – Saving money

Why? Why? Why?

Hypermarkets
Key spending
categories have Price Club
competition in Home Depot
Savings are new formats

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Auto mall
feasible New formats offer
same quality at
Comparison lower price
shopping is
an interesting Opportunity cost of additional time
The best way for opportunity Additional
taken up by comparison shopping
me to have more investments
money at the end do not wipe
Savings in $

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of the month is to out savings
spend less through
comparison
To compensate for demanding workload, I need to invest in
shopping
weekly visits to the spa and the opera
Changing my
My profession does not allow me to wear lower quality
lifestyle is not
clothes
an option
To balance the junk food I eat during the week, I need at
least one three-course meal on the weekend

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Why use logic trees?

• Divide and allocate work

• Sort out logic and conduct analysis

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• Set priorities

• Maintain the integrity of the problem-solving approach

• Solving the parts will really solve the problem

• Gain a common understanding within the team

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• Help focus on key frameworks and theories

• Can even be used to structure some communications

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Tips for structuring problems

Tip Why
• Use your whole team, no 'lone wolf' • Group brainstorming and problem-
approach solving sessions tap everyone’s

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creativity
• If stuck, try building the tree • It is sometimes easier to think up sub-
backwards from the 'twigs' in addition issues and analyses and then to
to forward (from the 'trunk') – Focus on group them, than to work linearly
10 most critical sub-themes

• Try multiple trees; update and revise • Different trees provide new perspectives
on the problem

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• Don’t invest a lot of time to make 'the' • Trees change as more facts come to
issue tree light – keep adjusting. Keep simple

• Spend time on the structure – not • Agreeing on the structure – and top
only on the details 10 – is key

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Problem-solving approach

Identify what you should

study further – Which
issues are most important?

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

Communicate

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The 80/20 rule

Percent

Benefit achieved in
solving the problem
Perfect
100

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80 Useful

Cost effectiveness

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20 100
Time and effort invested

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Prioritize: Cut off the less important issues

• Focus on key issues

Issue A • Base all decisions on facts
• Make sure cuts are not pre-

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matured
• Prioritize your effort on what is
most important
Issue B • Ask 'so what'
Problem
• Look for gaps
• Get agreement in the team

Issue C

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Issue D

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How to prioritize

Use judgement/intuition Involve your client

Be practical!

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20

Polishing 80

80

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Focusing
on impact 20

Time and Benefit for

effort problem
solving

Do back-of-the-envelope
calculations Take risks

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Issue trees evolve into hypothesis-driven trees –

STEP 2
saving money example POSSIBLE SOLUTION
Do not play lottery

Unlikely to receive Not expecting to

additional money inherit anytime soon

Changes to Not planning to

I am not willing to do anything illegally

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my income
invest in riskier
stream would
bonds to get higher
take months
returns
to secure Too many temporary workers
Limited overtime
It will take several in current role Decline in demand for overtime
months to increase
size of my paycheck Better paid job Certification costs X
I can have requires certification Certification takes 6-9 months
NOK X
left at the end
of the month
• Food
• Clothing

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by cutting my
expenses
Buy lower quality • Utensils
items • Entertainment
• Travel
I can pay less for • Other
same amount of
items (NOK X) • Food
• Clothing
I can cut Shop around for • Utensils
expenses by specials • Entertainment
NOK X • Travel
• Food • Other
• Clothing
I can buy fewer • Utensils
items? • Entertainment
• Travel
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Issue trees evolve into hypothesis-driven trees –

STEP 3
saving money example POSSIBLE SOLUTION
Do not play lottery

Unlikely to receive Not expecting to

additional money inherit anytime soon

Changes to Not planning to

I am not willing to do anything illegally

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my income
invest in riskier
stream would
bonds to get higher
take months
returns
to secure Too many temporary workers
Limited overtime
It will take several in current role Decline in demand for overtime
months to increase
size of my paycheck Better paid job Certification costs X
I can have requires certification Certification takes 6-9 months
NOK X
left at the end
of the month
• Food
• Clothing

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by cutting my
expenses
Buy lower quality • Utensils
items • Entertainment
• Travel
I can pay less for • Other
same amount of
items (NOK X) • Food
• Clothing
I can cut Shop around for • Utensils
expenses by specials • Entertainment
NOK X • Travel
• Food • Other
• Clothing
I can buy fewer • Utensils
items? • Entertainment
• Travel
• Other McKinsey & Company | 32
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Hypothesis-driven trees continue to evolve...

STEP 4
POSSIBLE SOLUTION

Skip premium brands

I can pay less for
same amount of Shop around for specials

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Revised problem items ($ X)?
I can reduce Buy in bulk
statement
grocery expenses
by $ X
Buy only items on grocery list
I can get $ X to go
I can buy fewer Use up storage
on skiing holiday by
items ($ X)?
cutting my grocery
and clothing Freeze leftovers for later

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expenses consumption

I can pay less for

same amount of
I can cut clothing items ($ X)?
expenses by $ X
I can buy fewer
items ($ X)?

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Example of framework for prioritizing ideas

High Discard Recommend for

later action

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(Possibly
recommend for
later action) Other potential criteria:
▪ Cost to execute
Difficulty of ▪ Time to impact
implementation ▪ Risk
Do now Do now
▪ Management focus
(Low priority) (High priority) (perceived or real?)

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Low
Low High
Potential impact

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Tips for prioritization

Tip Why

• Be transparent!!! • Ensures agreement and clarity

•

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Reduces risk!

• Start out with quick and simple • Gives 80% answer

prioritization techniques, e.g., • Structures your discussions and
prioritization matrixes ensures alignment

• If necessary use some supporting • Not ‘either or’ – themes may be

analyses to prove the ‘cut off’ important but not ‘above the bar’

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• Revise the ‘cut offs’ regularly • Your perspective may change

• Draw on internal and external experts • No need to reinvent the wheel

Effective prioritization
increases your
impact… and saves
you time!
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Methods for prioritizing

Approach Example methods

• Take a reasonably quick, informal • Percentage of total ‘X’

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approach to get started
• Estimated potential increase/
• Remember that sometimes a ‘back of an decrease (sensitivity analysis)
envelope’ calculation is all that’s needed
• Simple ratios
• If new information emerges, you can
• Quick industry benchmarks
always reprioritize and switch your efforts
to another part of the tree • Qualitative input from interviews

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• Use likely impact to decide where • Ease of implementation
to go first
• Timing
• Use readily available data whenever
• ‘Quick wins’
possible; avoid major data requests
• Available resources
• Do not create massive spreadsheets or
other computer models if you can move • High/low risk
forward with less complete information

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Problem-solving approach

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

Communicate

Structure your activities –

Where and how should
you spend your time?

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Issue analysis sets the stage for action

Logic tree
after prioritization of issues Analyses

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2

3 To dos
Mon Tue Wed Thu Fri
Issue analysis

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1

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Issue analysis worksheet

Supporting
Issue Hypothesis Analysis Source
rationale

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Printed 08/03/2011 12:07:20 a.m.
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Workplan

Issue analysis worksheet

Supporting
Issue Hypothesis Analysis Source
rationale

Workplan

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End product Responsibility Timing

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Tips for work planning

Tip Why

Early • Do not wait for data, critical mass, or anything else

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Often • Revise, update, and improve your hypotheses as you work
through the data

Specific • Be very specific on analysis and source

Alignment • Get everybody pulling the same direction

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Milestones • Be disciplined – hit your timing targets using 80/20

Simple and • Push detailed work plans out only to a reasonable future
practical date (e.g. 2-4 weeks ahead)
• Be flexible where appropriate

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Problem-solving approach

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Define Structure Prioritize
Problem
problem problem issues

Communicate Develop
work
plan

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Develop
Conduct
recommend- Synthesize critical
ation findings analyses

Communicate

Leverage resources – Who

has the knowledge and
expertise to assist you?

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DEFINITION OF AN INTERVIEW

Working Draft - Last Modified 11/15/2010 9:38:03 PM

Guided dialogue to

Gain
information
+ Build a
relationship

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To help solve the problem
and implement change

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 SPO-USZ021-20100416-MO6 Prob def Slide

AN EFFECTIVE INTERVIEWING PROCESS

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Printed 08/03/2011 12:07:20 a.m.
Prepare Conduct Share

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 SPO-USZ021-20100416-MO6 Prob def Slide

THREE PHASES OF CONDUCTING AN INTERVIEW

Working Draft - Last Modified 11/15/2010 9:38:03 PM

Opening

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Prepare Share
Core

Closing
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