Have you ever noticed how everyone tells you
you should be MECE when structuring your cases, but no one actually shows you how to do it
beyond a few simplistic examples. Back when I was a candidate, I got so frustrated
because all the case interview experts would lecture at me and say, "you should build your
own structures and learn how to do that" or "just make sure you're not copy pasting your
structures", but when they were actually teaching me, then the story was different. It was something like, here's one example
of a structure or just learn my two frameworks and you'll be fine for 90 percent of the cases,
nevermind the other 10 percent. You're probably not going to get them anyway,
and when I went to my interviews at McKinsey, at Bain, what I found instead was that the
majority of cases could not be solved using this pre-made frameworks from case interview
books and that you actually needed to know how to create your own MECE structures for
that. So I'm here to change that. Hey, my name is Bruno. I'm an ex McKinsey consultant and the co-founder
of Crafting Cases, where we teach you how to stand out in your case interviews by thinking
like a top management consultant, and in this video I'm gonna show you the five ways to
be MECE. If you learn these techniques well, you're
going to learn how to create customized structures from scratch for your cases, for your business
problems, and that will help you stand out in your case interviews and you'll never get
stuck in a case again. Now in this video I'm going to give you an
overview of the five techniques just so I can get the big picture and then I'm going
to make other videos and put in sequence of this one each detailing and give you the nuances
of each technique so that you can actually put that in practice in your cases well. So the ideas from this video came from a nine
part article series that I wrote, and that's on our website at crafting cases.com/MECE. So if it gets you interested, check it out. So without further ado, let's jump right into
the first way to be MECE. We call the first way to be MECE Algebra Structures,
but you can simply call them math equations. Math equations are a way to structure any
numerical problem, so you've probably heard about the profitability framework. Profits equals revenues minus costs, and that's
just one type of Algebra Structure, but many people don't realize is that whatever numerical
metric you have to structure, you can always break it down into a math equation. And math equations are always MECE because
each variable must be independent from one another. I mean they are different which means that
there are no overlaps, so they're mutually exclusive. But also if you take all of the metrics together,
they must equate the end results or the variable that you're breaking down. It's an equation after all, so there are no
gaps, which means they are collectively exhaustive. So let me show you examples of Algebra structures
and I'm gonna do it for a case that is not too rare in case interviews. I got a case like this in my McKinsey final
round, but that you won't find in any case interview book probably because they don't
have a framework for that. And the case is what are possible reasons
for Nespresso's market share drop in the London coffee capsules or coffee pods market. I want a structure that's based on our Algebra
or on a math equation for this. Now a lot of people would come up with "revenue
has declined", but we're not sure of that. We just know that market share has dropped. So here are four Algebra structures that you
could have come up with. First you could have come up with Nespresso's
market share in capsules equals its share in machines, so the percentage of machines
have coffee machines that are are Nespresso machines times the share of capsules, of Nespresso
capsules, within those machines. So I broke down a certain percentage of machines
are Nespresso and then a certain percentage of capsules that are used within those machines
are Nespresso capsules. And that's Nespresso's market share. Another example could be Nespresso's market
share is the percentage of capsule customers that buy Nespresso, huh, eventually. So they, they're customers, they're not necessarily
exclusive customers times the percentage of capsules that these customers buy that are
Nespresso capsules. A third way to do an equation for Nespresso's
market share in this market would be well how much percent of the points of sales of
coffee capsules is Nespresso present in and I'm going to multiply that by the market share
within those points of sale so we might have a problem of not being enough points of sales
or a problem of people not picking up our product and the fourth way to break down market
share, of course, is Nespresso's revenues divided by the market size. Now, this is probably the way most people
would structure this problem and there's a problem in this last one. I'm going to leave this problem to to see
it in depth in the next video in this series, which is specifically on Algebra structures,
but the thing is this formula is mathematically correct, but because this is the very definition
of market share, it doesn't really help us solve our problem. Now, math equations are an amazing way to
structure a problem. Because math is really precise, when you structure
a problem via a math equation, it becomes pretty clear to everyone how is the problem
broken down, how is the going to be solved? But it has a strong limitation to it, which
is you can only use it for math or numerical problems. Also, there are two factors that have to be
very aware in your mind when using math equations. I'm going to leave the details of those for
the next video, but the gist of it is the first thing when you have a strategic, complex,
long-term problem, even if it's a numerical problem, it's often best not to use math equations
because they can get too simplistic. And the second thing is, uh, when you use
a math equation and you focus on the numbers alone, on the variables alone, you run the
risk of not being insightful enough. So you don't want to be the consultant who
has all the equations in their mind but can never talk about real world stuff. So if you want to know how to use Algebra
structures correctly, check out the video specifically on it. It's an amazing way to structure a problem
if you do it correctly, and if you do it for the right types of problems. Now let's move onto the second way to be MECE. We call these Process Structures. This is probably the most underutilized structure
type by candidates, and you can say that it might be one of the most useful also, it's
so simple, it's so effective, and I used to use them probably every day at McKinsey. The underlying logic is this: when you have
a problem that has an underlying process to it, you can be MECE by simply breaking down
this problem into the stages of the process. And this must be MECE because processes have
stages. They have a beginning, a middle, and an end. That means that each stage is different from
each other, so it's mutually exclusive. There are no overlaps, but also if you take
all the stages together, you have the whole problem. You have the whole process. That means that there are no gaps. So it's collectively exhaustive. So to show one example of a process structure,
I'm just going to use the same case, Nespresso's market share has been dropping in the London's
coffee capsules markets. And this is not the best case to use a process
structure with. It's better to use it for manufacturing cases,
hiring cases, sales, anything that involves a process, but if you can see an underlying
process for market share and I can see one here which is the customer journey to buy
our product. That's kind of a process. We can come up with a structure even for this
kind of problem. So we can say that the first step of the process
of the customer buying our product is that they have to have the required machine. So maybe market share has been dropping because
less customers have the required machine. Then the next step is that they have to find
Nespresso capsules in their local stores. Wherever they shop for capsules. If they're shopping on the Internet, they're
going to find it anyway, but maybe less customers can find it. So that's the second step because the customer
has decided they want coffee, they have the machine, now they go to the store, but they
can find Nespresso. The third step here of the process would be
that customers need to, when they go to their stores, they need to get interested to buy
capsules. So maybe less customers are interested to
buy capsules, capsules, coffee capsules Nespresso's. The fourth step is that even if they're interested,
they still need to pick up the capsules so maybe the capsules are locked up somewhere
or they are not easily accessible or not attractive enough. So they got interested at buying them, but
they won't buy them, uh, or maybe it's too expensive. And then finally the last step of this process
is they're buying capsules, but they're buying less capsules than they used to. So I'm following the customer journey to understand
why Nespresso's market share has dropped. And this is a Process Structure. For more structures like that, just check
out the video on process structures. There are going to be problems that fit more
with this. But you can use this technique for a variety
of cases. Now I had to stretch my thinking a little
bit to make market share fit into a process. It wasn't the most elegant way to structure
this case, but it could be done and there are many types of problems where the most
elegant way to structure them actually our process structures. So as I've said in the in the slides, sales,
manufacturing, hiring, things with an underlying process to them. Now this type of structure has a severe limitation,
which is if there are no processes underlying the problem, then you can't use them at all. Also, even for process-like problems, in case
it's a very strategic problem, this may or may not be the best way to structure them,
and the reason is when it changed our strategy, does the process stay the same? Does the process even exist? So in strategic problems you may consider
using conceptual structures, which is the next part of this video. If your problem does not come out of a process,
nor is it numerical, you'll probably need to use a conceptual framework, which is the
third way to be MECE. Now, conceptual frameworks are basically qualitative
structures that come out of grouping concepts together. Some commonly known ones are the 3Cs or Porter's
five forces or the 4Ps of marketing, but it can actually create your own conceptual frameworks
from scratch by grouping together ideas into broader concepts. So let me give you an example here. Same case, Nespresso's market share, drop
in the London's coffee capsules market. One conceptual framework we can use to figure
this out is, well, maybe this happens because our customers have changed or our competitors
have changed or our company has changed, so one of these three players must have changed
something and then we can detail that something in deeper layers of our structure. Another example is assuming that there was
no shortage of production of the capsules, then either our product became less attractive
or our distribution channels are harder to find or our price is too high or new customers
are unaware of our product. So I'm just using traditional frameworks here,
the 3Cs on the left and the 4Ps of marketing on the right, but notice how in the 4Ps actually
adjust the wording to be more specific to this problem. Specifically in the last bucket, which traditionally
would be called promotion, but I called it an awareness. Anyway. I'm just using the traditional frameworks
here, but you can actually develop your own and be more specific to your cases. Because you can quantify the parts of your
structure, it's hard to eliminate the parts that might not be important. So if you're using an Algebra structure or
a Process structure, you can get some numbers and see which parts matter and which ones
don't. But when you're using a conceptual framework,
you can't do it because you can't put numbers into the parts of your structure. I mean you can't quantify customers or competition. So this qualitative approach forces you to
look into every area, which is not very good for efficiency, but that's pretty good. If our overall goal is to get the whole context
of the situation, which is exactly the case when you have a complex long-term strategic
problem. So you want not use, in most cases, you want
to use conceptual frameworks in those types of cases, even if they have a numerical problem. For example, a long-term, corporate revenue
growth case could be more useful to use a conceptual framework than a price times quantity,
revenue type of structure, so you still quantify whatever you can in this long term complex
strategic cases, but you also want to look things at the qualitative side more on this,
on the specific case or each technique specifically the one on conceptual frameworks, but bear
this fact in mind. A conceptual framework will force you to look
at everything you can't eliminate with that, which is bad if your goal is efficiency, but
it's good if you actually need to look at everything and you can't really get numbers
to make the decisions or to make the whole decision. Now, before moving onto the other two ways
to be MECE, let's pause for a minute here. We just went through what we call the three
core structuring techniques, Algebra structures, Process structures, and Conceptual Frameworks. Now, this three structure types are much more
insightful than the other two, and so they should be the base of your structure. Whenever possible use them and you can actually
structure any type of problem by either using one of them or by combining each of these
three into an issue tree, so you might start a problem with an Algebra structure and make
an equation. Then get one variable of this equation and
build a process structure to detail it. Another variable you might want to explore
with a conceptual framework, so that's something that's possible. The other two types of structures are still
useful, mainly because they're so easy to do so you can make your structures better
with them or they can get you unstuck of certain situations. So let's take a look at them. The fourth way to be MECE are called segmentations. Now, segmentations are the favorite way that
case interview "experts" or case interview book writers use to explain the MECE concept
and segmenting basically means that you're slicing up the problem according to some criteria. For example, I could say that a pizza is divided
into the crust and the center and that's a way to segment the pizza or a pizza segments
into slice number one, slice number two, slice three. Now let's get into our case from this video
just to see what segmenting looks like in Nespresso's market share example. So you could say that Nespresso has lost market
share either because they lost market share in the household market or in the corporate
market or in the hotels and restaurants markets. Or can say that they lost market share among
low income customers or mid income customers or high income customers. OPr they lost market share either because
they lost market share in the e-commerce channel or the own stores channel or among retailers. Or did lost market share because they lost
market share with customers who drink less coffee or more coffee. So these are some ways to segment Nespresso's
market share loss and they're all MECE because you're considering the whole market and separating
them in different ways or in independent parts. Segmentation can be useful but only as complements
of other types of structures. Because they're tracking the same metric across
segments, so in our case, we're still tracking market share in the household market, in the,
uh, the corporate market or the hotels and restaurants, markets we went from market share
to market share in each market. Because of that, they can lead you to a direction
but they can never tell you why your market share is dropping. This is because, and this is the reason why
they're not as insightful as other structure types can be. Because the segmentations lead you to hypotheses
but never to a root cause, they can never get to the root of the problem. So you can use them to spice up your structures. But if you base your whole problem solving
approach in segmentations, you'll always have hypotheses, but you'll never be able to understand
WHY things are happening, which is a bad trait for a consultant, by the way. However, there is one situation in which if
you don't use segmentations, you never get to the root of the problem and we call that
situation the Mix Effect. We estimate that about 30 percent of case
interviews have them and they have them because there's a lot of strategic business problems
that have this problem and because it's a bit long to explain here we're gonna leave
that to the video on segmentations, but just be aware that you usually use segmentations
to spice up your problem solving approach, find better hypotheses, show better hypotheses,
but they are actually necessary when you have a Mix Effect problem and can never guess when
you get those so use segmentations as complements to make better at hypothesis, to spice up
your structures and to get to the mix effect problem when you have it, but use it as a
complement for a core structure that's actually going to be looking into deeper reasons of
why something's happening or of why you should do something. And finally, the fifth way to be MECE is to
use opposite words. These are staples that you can use whenever
you want them and they're pretty easy to use. So in our case, for example, we could say
that Nespresso's market share has dropped because of internal factors or external factors
or we could also say that it's because of breaks in supply, so products are not reaching
the market or because of loss of demand or we could say that it's because of marketing
related reasons and non-marketing related reasons. So you can use opposite words to divide the
problem into two and make it easier to solve them and to explain, uh, your approach and
your ideas. And of course I could have started this video
by showing that there are two ways to be MECE. You can use opposite words or you can not
use opposite words. And if I did that, I would have lost all the
insightfulness, all the nuance. So one mistake that I see a lot of candidates
doing is to over rely on this type of structure. So they always use internal, external, financial,
nonfinancial factors, supply and demand. And by doing so, they lose all their insightfulness
and they seem they seem a little bit dull to their interviewer. So, opposite words have their place, they're
great for quickly having structure to communicate or even to get you unstuck of certain situations. Just be careful not to over rely on this type
of structure. So this is it for this video. These are the five ways to be MECE. You can read more in our nine part article
series at www.craftingcases.com/MECE or even better, you can just keep watching and I'm
going to put a series of videos in this playlist, one for each technique so that you can see
other examples of these techniques in practice, in different types of cases so that you can
see how to properly use this techniques so that you can get their full potential and
so that you're aware of common pitfalls and just things you should be aware of when using
each of these techniques. At the end of the playlist, I'm going to put
up a video on how to combine these five techniques so that you can create issue trees. A lot of people have asked me how to create
customized issue trees for their case interviews, just like a McKinsey consultant would, and
in that video I'm gonna show you how, but it basically is putting together these five
techniques into a cohesive structure for your case. If you've liked this video, please like and
hit subscribe so you can subscribe to this channel. Also, if any of these techniques from this
video has transformed or changed how you see case interviews, how see structuring your
cases, I'd love to know about it. So please write in the comments I'm going
to read and respond to each one of them because I love to know how candidates transformed
their approach after using these types of techniques. So I hope you've liked this video and I'll
see you in the next one, which is on Algebra structures. So stay tuned and go to the next video because
it's a really good one.
