- In this video, I'm going to teach you a key consulting methodology
that is being used by almost all management consulting firms, including MBB consulting
firms like BCG or Bain. But the best thing is you do
not need to work in consulting to make use of this approach. It is helpful in whatever
context you operate in if you are position to solve
problems for your employer. In today's video, I'm
talking about the theory and practice of hypothesis-driven
problem solving, and trust me, guys,
this is really crucial. It is one of the most important concepts. So sit tight, listen until the end, because in the end, I'm
going to give you some nice, practical tips as well,
and let's do this together. Welcome to another coffee break here on this channel with me. My name is Heinrich, and on
my channel, Firm Learning, I want to help you to become successful in the first years of your career. As you know, I started my own consulting
career at Accenture. I worked for the company
during my university studies, and then, after university,
I joined McKinsey and spent six years with the firm, in the end, serving as a project lead. So, let's start by better understanding what hypothesis-based
consulting actually is, and I have a couple of
slides prepared for you guys, so let's jump into it. So, what is hypothesis-based
problem solving? So, it is an approach to
divide a project into tasks. It is way of thinking, an approach to define the
project scope and outcome, a prerequisite to focus data
collection and analysis, an approach to solve unstructured
and complex problems. So, I hope this already
gives you the impression, helps you to understand that hypothesis-based problem solving is really at the core of
most consulting projects, but let's get a little bit more tangible. And to me, it is important to stress that this is not only a process that is strictly limited to consulting, but you can pretty much use and apply it to every other business
problem that you have. So, what do we see here? And indeed, it always starts
with the business problem. There's a challenge that management of your company is facing. Maybe profits are down,
maybe costs are exploding in a specific business area. And here now, often this is a situation where companies then engage a consultancy to help them figure out the solution, or they also my task and
internal team to look into it and to come up with solutions. And now, to move from the
problem to the solution, you will need to have facts. You will need to conduct analysis. Now, of course, in this way,
from problem to solution, you often already have some facts. There are some things
that you already know, but of course, there are gaps. There are things that you do not yet know, and that will be required
to really verify a solution or just come up with
it in the first place. And now, what many young graduates, also more unexperienced
business professionals, will do is where they will say, "Until I have closed these gaps, until I've really looked at everything, until I really did my thorough research, no way I can come up with a solution until I did all of this, right?" And this, my friends, is not the way how you should operate
in the business world. This is more of an academic approach. You need to look into everything,
you do all your research, and then, maybe in the very end, you can come up with a solution. But, and you will already know this, if you have watched my video
on top down communication, that I will link now
here, somewhere above, the key to being successful in business is always to already
having some kind of goal, some key message, some key
result already in your head. It is important to very
early on in the process, to have an hypothesis-based
solution in your mind for the problem that you are
now testing and analyzing for, instead of now starting with nothing and needing to look at everything before you can come up with a solution. So, indeed, what you
will do when you follow this hypothesis-driven problem
solving approach is that, from day one, you close
the gaps with hypothesis. So, when you're faced
with a business problem, now, before starting
to look into anything, before starting to conduct
any analysis at all, ask yourself, "What do I already know?" And now, what are the likely
hypothesis that you can make, and based on that, what is your day one
answer to the project? Once you've established such
an hypothesized solution, then based on that, you can now test it, you can now refine it
into an iterative way, come to a better solution. So, let's look into a tangible example. Let's imagine there is a
mobile payment service provider who wants to enter the Brazilian market, and as a consultant, on day one, maybe you sit together with your team. Maybe there is a more
senior guy in the room, a partner, or some
experts from the clients. You just sit together
and you ask yourself, "Okay, what is my hypothesis?" What the answer should be? In which country the market
entry is recommended? Now, based on this very
first session, on day one, you hypothesize four key factors. First, the growth, so you want to be in the
market with the highest growth. Second, the affinity to mobile payment, so which markets are more affined to mobile payments than others? Third, the attractiveness of the offering, so for which countries do you
have an attractive offering? And then, fourth, where is competition? Where is small and little competition? So, these are the factors
that you believe are relevant, and now, from your hypothesis, from your first knowledge
that you already have, you believe that Brazil
indeed might be a good fit due to these factors. But now, of course,
this is only the start, and now, indeed, you
need to collect the data. You need to look into it
and understand and verify whether this is actually the case or not. So, now you do conduct the research, and now you indeed find that Brazil, at least in terms of the market size, maybe not the growth,
but in terms of the size, it is very attractive, because it has a population
of 200 million people, and all these numbers are just made up. And on top of that,
Brazilians are also very open and interested in mobile payment, making it very interesting as well, because the affinity is quite high. Maybe you were also able
to confirm that actually our product offering is
attractive to Brazilian customers. Though, in the end, you
came to the conclusion that, no, in Brazil, there is
actually a lot of competition. There isn't little competition, so you see that now you need to cut out the point of little competition, because you were not able
to verify the hypothesis, but still, based on these three factors, now you were able to confirm. You still feel confident in
making the recommendation that the mobile payment service provider should indeed enter the Brazilian market for these three reasons. Now, I hope that you are
already can understand why this hypothesis-driven
approach is very helpful, because on day one, you
are asking yourself, "Okay, what would it mean for a country to be an attractive
target for market entry?" This now enables you to
give a day one answer, so back to the top-down
communication approach, if now the CEO walks in
on day one and asks you what your current status, where
do you stand with a project, you can already give a
very first hypothesis without having looked
into any data at all. And now, once you move to the next stage, to the data analysis stage, now you do not need to
look at everything, right? The only things that you need
to look at are your hypothesis and try to verify or
falsify your hypothesis, because you already know if you came up with a good
and logical structure. So, now let's break it down even further. How would this really look like? And indeed, at some point, management will confront
you with an objective, so you need to ask yourself, okay, what does management
actually want to achieve? Next step is to translate
these management objectives into your project objectives. So, again, doesn't matter
if you're a consultant or just an internal team working on it, ask yourself, what does
your specific project really needs to accomplish? Then you're breaking down the project into its individual sub-parts,
into its key drivers. Different consulting firms
give different names to this. Some like to call it modules, others like to call it workstreams, others just project areas. But you often like to break it down into different sub
areas that are relevant. And then, offer your staff, every team member on
one of these key areas, or maybe one team member also addresses two of these key drivers. But these are kind of the
key areas that you look at, that you can structure the project in. And here, now, of course, the MECE principle is super important. I talked about this
principle in another video. I will link it also somewhere above here. The MECE principle is now the principle that you need to apply
when you now break down the overall project
into its sub-components. Now, once you have defined the key drivers that will lead you to a result, now is the time you need to
come up with a hypothesis. And then, once you've
noted down your hypothesis, and of course, some things
you might already know right? But for the things that
you do not know yet, ask yourself, "What are the key questions? What are the analysis
that I need to do now in order to falsify or
to verify my hypothesis?" Because from this, you will
know exactly what analysis do you need to do. This will also tell you what
data you need to collect, so this really is now your
roadmap for the project in order to get to the objective
where you want to get it. And in this sense now, I
hope that you recognize this two-tiered structure,
this two-tiered approach of this hypothesis-based problem solving. So, first you structure the problem. This really crucial, and
it's an essential part of the whole problem solving process, and this is also why consulting firms put so much emphasis on
getting the structure right, on coming up with MECE structures, because of course, if you mess up this up, then likely your whole analysis
structure will be messed up and you will not get to the right results. So, once you've completed your structure and you defined all
your required analysis, this is, then, when you move to the second phase of your work, and this is really the
whole analytical work. Based on these facts that you collected, of course, you will find
some hypotheses to be true, so you verified them, but some other hypotheses,
now you need to reject. You will not find them to be true. And in this sense, now this
is an iterative process, that whenever you falsify an hypothesis, you need to ask yourself
whether the conclusions that you hypothesized now are still valid. So, if I take this hypothesis away, can I still defend my conclusion or do I need to iterate and change it? Revise my hypothesis,
conduct some new analysis and then review and update my conclusions and
recommendations based on that. I hope this video was insightful. If you took any value
out of this video at all, please hit the like button
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ask me whatever question you still might have, and I'm happy to answer every
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video description below. And now, I want to take
a moment to say thank you to all the members of this channel. Thank you so much, guys. You're really making a difference for me in supporting me in running this channel. And if you want to
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to some member-only perks if you become a member. Again, thank you so much for watching. I really appreciate it. My name is Heinrich, and next Saturday, I will be back with
another video for you guys. Looking forward to that and until then, good weekend to all of you.
