Thinking
Spring Analytical 2007
Economics Accountin g Marketing Finance Strategy Statistics MLO Operation s
Analytical Thinking boasts and supports technical Thecompetence SMART person applies these skills to business
problems. The SUCCESSFUL person persuasively communicates a point of view based on sound logic and judgement.
Smart or Smart & Successful?
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Benefits of Analytical Thinking
Break down and structure complex problems Reveal gaps in your thinking Approach problems broadly and deeply Find evidence-driven solutions Make powerful, persuasive recommendations
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Practice Case: The Call Center Case Your company has a customer service call-center with limited capacity. It is planning to add significant volume by rolling over call volume from another business unit. What should you do in order to prepare the callcenter for the additional volume? Start with your solution and then give your
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The Basics
Analytical Thinking and Persuasive Communication
Why use Pyramids? / Plus other available methods
Why use trees Help you collect and organize random thoughts Allow you to see errors/omissions Help you to recognize patterns Allow you to present your analysis in a clear logical manner Allow you to build on your analysis for future Appreciation so what technique questions Fishbone analysis map out cause and effect SWOT analysis Strengths, Weaknesses, Opps, Threats Mind mapping diagram your brain and link The method is not important it is how you use it that really counts!
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Other methods
Step 1: Defining the Problem
Define the Problem as a Performance Gap Buckets = root causes or potential barriers Evidence = data & facts
*Freely adapted from: Minto, Barbara: The Minto Pyramid Principle Logic in Writing, Thinking and Problem Solving (Minto International, Inc. USA, 1996)
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Step 1: Defining the Performance Gap A Performance Gap is the space between where you are and where you should or aspire to be. Performance gaps identify existing problems and then look for their root causes or potential barriers to getting there.
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Step 2: Defining the Buckets Finding Root Causes or Potential Barriers
Define the Problem as a Performance Gap Buckets = root causes or potential barriers Evidence = data & facts
*Freely adapted from: Minto, Barbara: The Minto Pyramid Principle Logic in Writing, Thinking and Problem Solving (Minto International, Inc. USA, 1996)
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Step 2: Defining the Buckets Finding Root Causes or Potential Barriers
An accurate assessment of the true root causes or potential barriers is critical to solving the right problem. Develop hypotheses using theories, logic, and insight. Test your theories with evidence & data (qualitative or quantitative) Buckets must be MECE: Mutually Exclusive Collectively Exhaustive
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Step 3: Test your Hypothesis with Data
Define the Problem as a Performance Gap Buckets = root causes or potential barriers Evidence = data & facts
*Freely adapted from: Minto, Barbara: The Minto Pyramid Principle Logic in Writing, Thinking and Problem Solving (Minto International, Inc. USA, 1996)
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Work back and forth between the evidence and your hypotheses.
Step 3: Test your Hypothesis with Data
Use theories, logic and evidence not unsupported assumptions or anecdotes based on small samples Clarify your arguments How do you know that? Go back to the data (whether quantitative or qualitative) - what surprised you, what does not fit, what dont you understand?
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Determine Solution and Action Plan
Structure Solutions to address root causes/ barriers Step1 Step2
Action
Step 3
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Step 5: Check for Robustness
Will my actions directly address the root causes / barriers? Are all my assumptions reasonable & correct? Are my actions likely to be effective & efficient? Will my actions cause unwanted repercussions?
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Your company has a customer service call-center with limited capacity. It is planning to add significant volume by rolling over call volume from another business unit. What should you do in order to prepare the callcenter for the additional volume? Start with your solution and then give your
The Call Center Case Revisited
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Projected Call Volume
Understand the combined total call volume and its characteristics
Total Call volume Time of day and day of week volume Volume by call type Projected changes in call volume Estimate call time by type of call Estimate non-call related time Call type which consumes the highest percentage of total time
Understand our staffing and productivity
Understand Technology
Staff shift scheduling Match of staffing to time of day call volume Flexibility of staff to handle different types of calls Productivity/best practices Incentives
Level of automation Can calls be reduced by any changes to systems, IT, etc. If changes can be made - how quickly?
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Practice the Pyramid: Suntan Lotion Case
Your company is a start-up venture in Southern California. They market a single tanning lotion product to beach-goers from San Diego to Los Angeles. Although sales volume is large, it has not reached anticipated levels. You need to find out why, and what can you do about this problem. This is the companys second summer in business. What is the potential causes of the problem?
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Why isnt sales volume meeting targets?
Is it PRICE?
Is it customer Satisfaction?
Are the current customers satisfied with the product? Are there other customer segments? What are competitor s supplying? What do market research results suggest? How does the product sell? Competitive impact on sales (including promotions? Seasonalitys impact sales? Where is the product sold?
Is it product availability?
How replenished (at store)? How often? Communicatio n patterns with stores and manufacturer? Who manages the distributor? Outsourcing options? How restocked (on shelf)? Frequency? Who is responsible? How is the product displayed on the shelf?
Do you have evidence that customers will buy more if the price is changed? Is pricing at a premium or a discount? Compared to competitors? Would competitors respond if you changed your price?
What do customer satisfaction surveys suggest? Explore data on anticipated levels Are customers comfortable with availability?
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Cool Whip Case
You've been hired by the Kraft Desserts Division Manager to help solve a problem with Cool Whip (the non-dairy dessert topping). Cool Whip has been a cash cow for Kraft. It has an 80% share of market, low production costs and extremely high margins. Sales of Cool Whip have been flat for the past three years despite aggressive sales efforts. The divisional manger believes sales have peaked (80% share) and is ready to sit back and milk the profits. Before presenting his recommendation to the company president he hired you to determine if there are: 1. Opportunities to increase revenues in the US 2. Opportunities to enter a non-US market
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Cool Whip Case Sample Analysis
International
Consumer behavior Start with countries with similar tastes and consumer behavior Etc. Manufacturing
How do we increase revenues? US
Competition Improve revenues from current product Create new products Offer new flavors Offer new uses
Distribution
Consider manufacturing costs Consider similarity of manufacturing environment
Consider distribution channels if US/ non-US
Tradeoff between using US factories and shipping oversees
Start in countries Use our Improve where with capabilities in products less different ways sales competition License advertise and fewer technology Test more. substitutes. price to nonStudy sensitivity competitors new Bundle Use extra channels with other capacity to serve other products companies
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Hiring Decision
You and a co-worker were assigned to hire a summer intern for your work group. The Human Resource manager sends up a group of applications for you to consider. As you go through the pile, you notice that one of the applicants has the same name as an Executive Vice President of the company (but with a Jr. appended). That afternoon the EVP, whom you never met before, stops by your office, introduces himself, and asks how the hiring process is going. You mumble something about just receiving the applications. He smiles and says that he hopes a decision will be made soon. What should you do?
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Hiring Case Sample Analysis
Personal considerations
Should we hire the candidate?
Organizational considerations
My current working relationships * Relationships with my peers * Relationships with my fellow interviewer
My future career in the firm * Relationship with the EVP * Relationships with other executives * Relationships with HR
Organizational Issues * Nepotism norms what are the rules? Recruit based on talent? * Avoid creation of dysfunctional power cliques. Allow control of employees What is the EVPs role? What is the role of the internship position?
Candidate Skills & attributes Is the candidate the best fit for the job? What are candidate qualifications is s/he adequate? What are alternatives?
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Made in Germany Case Sample Analysis
You have just joined the Central European Marketing Group of your consumer goods firm. Your first task is to review marketing of a detergent that has been on the market for about a year. You notice that the packaging states Made in Germany, but you know that the detergent is actually made in England. You ask your boss about the discrepancy; he says that company the is building a plant in Germany and the product will be sourced from there in a year or so. We didnt want to confuse the customer by changing the packaging, he says. You know that Central Europeans view German production as a quality signal. What do you do?
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Packaging info is discrepant
Made In Germany Case Sample Analysis
Marketing * Germany makes product attractive and induces trial. *Positive perception of brand. * Confusing to customers to change packaging later Financial * False country of origin may increase sales. Ethical personal Marketing * If the public will learn about the misinformation on the packaging it could be destructive for the product and the company brand name. Ethical Knowingly stating wrong facts in advertising is unethical as well as illegal. It has implications for the firms reputation At the end the customers always find out. personal My integrity And reputation is at stake
Benefits
Risks
* It is not a big deal; it is only for the short run. Eventually we will * Utilizing UK manufacture in plant may Germany. minimize expenses.
It is than going against my superior
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Making Copies Case
The SEC filed a civil fraud injunction action in the US District Court against KPMG LLP and four KPMG partners, including the head of the firms department of professional practice, in connection with audits of Xerox Corp from 19972000. The complaint alleges that KPMG and its partners permitted Xerox to manipulate its accounting practices to close a $3 billion gap between actual operating results and results reported to the investing public; the defendants are charged with falsely representing to the public that their audits were conducted in accordance with generally accepted auditing principals (GAAP). In the current environment there is substantial pressure to present the appearance that the company is doing its best to eliminate any chance of inappropriate reporting. Assume that you are a member of the Board of Directors of a publicly traded company that is audited by KPMG, and you are about to attend a meeting of the audit committee to discuss whether to recommend that KPMG be reappointed as the independent auditors. You are also about to attend the annual meeting of shareowners at which shareowners will vote on the reappointment of KPMG as the auditors. Will you support the reappointment of KPMG as the companys auditors?
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Making Copies Case Sample Analysis
Support Impact on the Company * KPMG has worked with us for a long time and has a good understanding of the company. It will take a lot of time to establish such knowledge with a new auditor. * We have very good experience with KPMG. It would be a shame to lose such a professional auditor.
Should you support or object to the reappointment of KPMG?
Object Evaluation of KPMG KPMG has a good reputation. * They are not proven guilty. * Do we have obligations to a service provider who has been good for us? * All auditing firms get investigated occasionally. * Terminating KPMG may signal the market we believe they are guilty. Personal Liability * What are the liability implications on me as a board member if we retain KPMG and later we are investigated for accountingrelated fraud?
Impact on the company
* There may be a negative impact on the market. * There may be a negative impact on employees morale.
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Outpatient Facility Launch Case You are the Chief Strategy Officer in a for-profit healthcare service provider that has been experiencing diminishing profits in an increasingly competitive industry; they are also trying to evaluate growth opportunities. Your top priority project is to evaluate the possibility of growing either by acquiring or building outpatient facilities (physician offices, outpatient surgery centers, alternative medicine centers, etc.) somewhere within 60 miles of the companys existing hospital. There are many existing outpatient facilities already in existence in the 60-mile target area. How would you go about deciding whether to pursue this new venture?
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Outpatient Facility Launch Sample Analysis
Evaluate Profitability
What are expected profit margins from the different outpatient centers & services? How quickly can we generate additional income? Create a pro-forma income statement including revenue from potential new customers. What are the health care trends in our region? Analyze current referral volume by physicians at the hospital to outpatient services.
To expand or not?
Market Issues
What are the economic characteristics (population growth rates, average per capita income, unemployment rates, birth rates, planned entry by a major employer, etc.) of the counties? What is the competitive landscape?
Company Capabilities
Does the company have enough capital to proceed? What are the companys existing strengths in outpatient services? Does this growth effort fit with the companys current strategic plans? Are there enough clinicians in the area and can we attract them?
What will the impact be on our reputation?
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Merger Integration Case
Your company, a womens apparel manufacturer with $1.3 billion in sales, has acquired another company in the womens footwear and accessories business. That company has about $1 billion in annual sales. Both companies sell primarily to department and select specialty stores and also operate retail stores in outlet malls. The company being acquired has twice as many outlet stores as your company. Your companys brands include its own brand, which is well established, some smaller brands targeted at specific customers, and licensed name brands. The acquired company has several major established brands in footwear and is developing its accessories brands. It operates with each brand as an operating division, but all of retail is combined. Both companies have headquarters and distribution facilities in the same state. Both companies have showrooms in NY. Manufacturing is in Asia, Mexico and Brazil. Both companies have both wholesale and retail systems. In developing its acquisition plan and price, the company has assumed there are significant cost savings in corporate overhead and opportunities on the brand and marketing sides to build revenue. You have been asked by the COO to head the merger integration team and to ensure that the projected benefits are achieved. What issues will you need to address to achieve a successful integration and obtain the expected benefits?
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How do you maximize the mergers benefits?
Merger Integration Case: Sample Analysis
Short-run Issues Long-run Issues
Internal Issues
Organization structure
* Which units can be consolidated and to what extent? * Analyze common business processes. *Analyze salary and benefits.
External Issues
Investors
* How can we manage investors expectations?
HR
* Analyze salary and benefits and headcount reduction. * Plan to retain key employees. * Make the integration process seamless.
Operations
*Distribution network, store and facility rationalization * Integrate IT * Review sales, marketing, design and manufacturing structures
Customers
* Notify customers; rationalize terms and conditions. * Can we obtain sales in areas where only one company has outlets?
* Brand strategy; use current Suppliers brands to create products complementing existing brands * Use * How will strategic competitors sourcing react? and * How can the contract rationali- new company zation for compete; did the merger introduce all nonnew competitors? product items
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Double Or Nothing Case
You are part of a team of consultants working on a proposal for one of your firms major clients. The teams job is to conduct an analysis of the clients practices, identify cost savings opportunities, and write a proposal to work with the client to lower their cost structure. This was a difficult client, and cost savings were hard to find. Nevertheless, your team has done what you believe to be a very thorough job of researching processes, analyzing data, and as a result, formulated an achievable plan. In fact, you believe it is a very strong and creative proposal given the constraints of the current market. When your team met with the partner in charge of the account and submitted the proposal, she glanced at the summary and replied, These cost savings are simply not significant enough to get an engagement from a client of this importance! I dont care how you do it, just double the savings target. We need the engagement! Then, she left the 31 room. You and your team were stunned. How will you respond?
Double Or Nothing Case Sample Analysis
How do you respond to the demand?
Agree Principal Reasons * It is just a proposal. We are not committing to anything. * We might find ways to cut costs further as we go. * We will be able adjust the target later. * We need the engagement! Personal reasons * I am just a young consultant. I cant go against my partner. * It is not up to me to set the companys policy regarding what we promise. * If I wont do it the partner will find someone else and I am the only one that will lose. Principal reasons * Though it is only a proposal it is one we will need to live up to. * What if we do not find new ways to cut costs later? * Getting the engagement will maximize our firms benefit at the expense of the client. Refuse Personal reasons * Though I am only a consultant, I am part of the organization and have loyalty to it. * I need to be true to my own ethical standards.
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