cCrack the case workshop review

(1)

Workshop Preview

Crack the

Master the most feared part of the

selective process at consulting

companies

(2)

Agenda of Training

•

Theory



Introduction - Cases &

Introduction - Cases & frameworks

frameworks



7 commandments of a case interview: application

examples



Market Sizing framework: impress your interviewer

applying the 3 golden rules



The Profitability framework and an application example



The “Core Three” framework: Customers

(+ market), Company (+ product),

(+ market), Company (+ product), Competitors

Competitors

•

(3)

Cases & frameworks (simplified view)

Three main categories of cases:

1. Market Sizing

–

Always use the Market Sizing framework

2. Business Situations

–

85% of the time: General Business Situation

framework

–

15% of the time: M&A / PE or Capacity frameworks

3. Other cases types

(4)

Cases & frameworks (detailed view)

Reduce costs Pure Market Sizing Market Sizing framework

Market entry New product

Operations strategy Business turnaround Increase sales Competitive response Business Situation framework

Industry analysis New business

Pricing & Valuation

Private

equity M&A M&A / PE

framework _{Supply &}

Demand Capacity change Capacity framework Finance HR Others No specific framework Brainteasers

(5)

Reduce costs

Pure Market Sizing Market Sizing

framework

Pricing & Valuation

Private

equity M&A M&A / PE

Demand Capacity change

Capacity framework

No specific framework

•

Assess the financial health of

Swatch

•

How should Coca Cola define

the salaries of their overhead?

•

What economical consequences

would a change in traffic

direction in Britain have?

Finance HR Others No specific framework Brainteasers

•

Why are gully covers round?

(6)

Finance HR Others No specific framework Brainteasers Reduce costs Pure Market Sizing Market Sizing framework

Pricing & Valuation Private equity M&A M&A / PE framework

Capacity framework

•

For what price could Intel sell the i5 processor if

they increased their units production by 25%?

•

What is the best diamond extraction and

commercialization volume per year for De Beers?

Supply &

Demand

chart

Supply & Demand Capacity change Capacity framework

(7)

Supply & Demand Capacity change Capacity framework Finance HR Others No specific framework Brainteasers Reduce costs Pure Market Sizing Market Sizing framework

M&A / PE framework

•

How much is facebook worth?

•

Bain Capital wants to buy 10% of Dropbox for

US$300 million. Is that a good deal?

•

Should UPS really merge with TNT?

•

Should GM buy its windshield provider (vertical

integration)?

Use Business

Situation

framework

with focus on

synergies!

Pricing & Valuation Private equity M&A M&A / PE framework

(8)

Pure Market Sizing Market Sizing framework Pricing & Valuation Private equity M&A M&A / PE

Business Situation framework

•

C&A has been facing a steady decrease in

sales…

Detailed

discussion

after break!

•

Henkel wants to diversify its business and enter

the packaging industry. Is that a good idea?

Reduce costs Operations strategy

Business turnaround Increase

sales Competitive

response

Industry analysis New business Market entry New product Business

Situation framework

(9)

Industry analysis New business Pricing & Valuation Private equity M&A M&A / PE

Reduce costs Operations strategy

Business turnaround Increase sales Competitive response Business Situation framework

Market Sizing framework

•

How many golf balls fit in a Boing 747?

•

How many shoes are sold in Brazil per year?

•

What is the market of hearing aids in Europe?

•

For how much would you sell the Golden Gate

bridge?

•

How heavy is Manhattan?

Pure Market Sizing Market Sizing

framework

Detailed

discussion

after break!

(10)

The commandments: Opening the case

1. Listen actively

–

Fully concentrate!

–

Note down ALL information

2. Pause, paraphrase problem and clarify all

questions

–

“So, if I understood it well, I’m the CEO of a company…”

–

Double check on objective

: “Is reducing production

costs our only goal in this case?”

–

Don’t be afraid to ask: make sure you understood

(11)

The commandments: Opening the case

3. Plan the solution structure (roadmap)

–

Ask for 1 minute to gather your thoughts

–

Identify case type and corresponding framework

–

Describe and draw framework for interviewer

–

Organize your notes (consultants are supposed to be

always “client

-

ready”)

+ point: You don’t need to call your structure a framework! Interviewers always complain that candidates force-fit

their cases into off-the-shelf frameworks

Profit

Revenue

-

Costs

(12)

The commandments: Cracking the case

4. Be answer-first

–

Always list a few possible hypotheses and set

out with one of them

–

Start with corresponding branch of framework

–

Refine/rebuild hypothesis as you find out more

Example: Coca-

cola’s

profit has been declining in the last 2 years.

Hypotheses:

Profit

Revenue

-

Costs



Revenues have decreased



Costs have increased



Both

+ point: Use your general culture to help choose initial hypothesis

(13)

The commandments: Cracking the case

5. Keep structured throughout the case

–

Always refer to structure

–

Don’t jump around framework branches

–

Consistently explore branches and exclude them if

they are not relevant

–

Summarize findings when switching major branches

–

Be MECE!

Example: Coca-cola

Profit

Revenue

-

Costs

Answer first: Costs have increased

Raw

material Labor Distribution Others

+ point: Mention that your structure is MECE

(14)

The commandments: Cracking the case

6. Gather data the right way

–

ALWAYS segment your data!

–

Proactively ask for relevant data

–

Don’t be too vague

–

Quantify whenever possible

–

Go for the trend (this year vs. last years)

(15)

The commandments: Closing the case

7. Close the case properly

–

Ask for a minute to gather your thoughts

(and draw them up)

–

It’s

all about actionable recommendations!

–

Choose a side and stand by it!

–

First conclusion/recommendation then justification

–

People like 3: give the interviewer 3 reasons!

Conclusion + recommendation Reason 1 Reason 2 Reason 3 + point: Always apply the pyramid

(16)

Market Sizing framework

–

the 3 golden

rules

1. Always use a tree to structure your problem

2. Find the trade-off between pragmatism and

accuracy

(17)

Always use a tree to structure your problem

•

How structured

you are, that’s what matters!

•

First the structure (downward from top) then

the numbers (upward from bottom)

1 Example: How

many golf balls can

you fit in a Jumbo?

# golf balls in Jumbo Golf ball volume (m3₎ Jumbo volume (m3₎

/

x

Filling constant Radius2 (m2₎

x

π Sectional area (m2₎ Length (m)

x

+ point: always explicitly write the

units of the variables being estimated 10 3 30 1500 Diameter3 (m3₎ 125.10-6 125.10-6 1.2 12M . 1.2 ≈ 14M 50

(18)

Find the trade-off between pragmatism and

accuracy

•

Rounding numbers is an art that must be used

•

But… ask the interviewer if he’s fine with

it!

•

Round some up and some down

2 + point: if you are able to make the exact calculation, round

up the answer instead of the inputs. Ex:

Right: 4 * 3.8 =

15.2 ≈ 15

(19)

Find the trade-off between pragmatism and

accuracy

•

Work with averages when the problem is

complicated enough, otherwise segment!

•

MECE is essential in segmentation

•

Don’t make

implicit assumptions

2 Example: How many

shoes are sold in

Brazil per year?

# shoes/year in Brazil

+ point: try to segment in three categories. Anyone

can understand 3 categories, which is not

true for 4 or more

# shoes class B / year # shoes class A / year Class A population # shoes / person / year + _{class C /}# shoes year x + Class B population # shoes / person / year x … x …

(20)

Do sanity checks along the way

•

Problems are not easy: you might make mistakes

•

Take a step back, be critical, use common sense

•

Do sanity checks for major branches

3 Example: How many

people can stand together

on an airport runway?

# people on runway # people / m2 Runway area (m2₎

x

Width (m) Length (m)

x

+ point: don’t worry if your check is off by 2

times. But do

something if it’s off by 10 times or more

50 1,000

50,000 5

(21)

•

Only profitability problem (quantitative focus)

•

Only conceptual problem (qualitative focus)

•

Combined problem (quantitative + qualitative)

Business Situation compound framework

–

3 different combinations

Profitability framework “Core Three” framework Profitability framework “Core Three” framework

(22)

•

Profit: number 1 reason for consulting projects

•

Almost half of Business Situation cases start with

a profitability problem

–

Sales falling

–

Costs rising

–

Both

The Profitability framework and an

application example

profit costs revenue -revenue / unit # units sold

x variable_cost + fixed cost

cost / unit _x # units_sold

+ point: focus on isolating the problem by applying the commandments

(23)

Actionable recommendations

Competitors Company (+product) Customers (+ market)

The “Core Three”: Customers (+ market),

Company (+ product), Competitors

•

First and foremost the

customer: the

company’s raison

d’être

•

The company and its

products

•

Competitors and

competitive landscape

The “Core Three” framework

(24)

The “Core Three” –

Customers (+market)

•

Who are our customers?

–

How can we segment them?

–

How big are the segments? What is our

market share?

–

Customer concentration (bargain power)?

•

What does the customer expect (per segment)?

–

Do we understand it?

–

Do we fulfill it?

–

Which distribution channels do they like?

•

Is the market growing? Is it profitable?

Competitors

Company (+product)

Customers (+ market)

(25)

The

“Core Three” –

Company (+product)

•

What is our product?

–

Is it differentiated or a commodity?

What’s the pricing?

–

Can we cross-sell add-ons to it (bundles)?

–

Is there a substitute threat?

–

If portfolio: what does the BCG matrix look like?

•

What is the client’s company?

–

What are the company’s

core competences?

–

Which distribution channels are used?

–

What are the main

cost blocks

(use the

value chain

)? Is

there supplier concentration (bargain power)?

–

What are the company’s main

assets (brand value,

customer loyalty) and liabilities (legal problems, debts)?

Competitors

Company (+product)

(26)

The

“Core Three” –

Competitors

•

Who are our competitors?

–

How is the competition structured

(fragmented, monopoly, oligopoly etc.)?

–

How do they behave? Is there a price war?

–

Best practices: are they doing something better than

us? Do we do something better than them?

•

How does our cost structure compare with our

competitor’s?

•

Are there barriers to entry?

•

Is the market regulated? If so, how?

Competitors Company (+product)

(27)