How to Match Problem Solving Frameworks with Case Interview (Part 5 of 12) | caseinterview

Summary

The video script discusses strategies for tackling case interviews, focusing on the importance of understanding different types of business problems and the frameworks used to address them. It outlines three primary categories: profit problems, business situations, and supply-demand issues, each with its specific triggers and approaches. The speaker emphasizes the need to be flexible and adapt frameworks based on the case's context. They also provide a profitability framework as a starting point, encouraging viewers to memorize and then adapt it to their style. The script highlights the common progression from a profit problem to a business situation and occasionally into a supply-demand analysis, especially in industries with high fixed costs. Practical tips include practicing with a whiteboard and handling the logistics of case interviews, such as taking notes and presenting findings.

Outlines

00:00

📚 Introduction to Case Interview Frameworks

The speaker begins by discussing the structure of the day's session, which includes an overview of case interviews, mindsets, and frameworks for problem-solving. The focus will be on matching specific case situations with the appropriate frameworks. The session will cover profit problems, business situations, mergers and acquisitions, and supply-demand frameworks. The speaker emphasizes the importance of understanding the context of the problem before applying a framework and provides a caveat that there are multiple ways to approach case interviews, but they prefer to use a few frameworks well rather than many poorly.

05:01

💡 Identifying Case Types and Frameworks

The speaker elaborates on the categorization of business problems into four types: profit problems, business situations, mergers and acquisitions, and supply-demand issues. Profit problems are identified by discussions of revenues, costs, or profits. Business situations encompass a broader range of issues, including company strategy and market entry. Mergers and acquisitions are straightforward to identify when the case mentions these terms. Supply-demand frameworks are used when the case discusses industry capacity or provides numerical data related to supply and demand. The speaker also discusses the process of identifying triggers within the case that help determine which framework to apply.

10:03

🔍 Deep Dive into Profitability Framework

The speaker provides an in-depth look at the profitability framework, which is used when the case involves discussions of profit, revenue, or cost. They explain that this framework is mathematical and provides a reason for the business's struggles but lacks context. As interviewees become more proficient, they learn to blend frameworks and adapt their approach based on the evolving understanding of the case. The speaker also advises on the importance of practicing with the framework, including memorizing steps and eventually internalizing them to the point where the written guide can be discarded. Additionally, they touch on the practical aspects of case interviews, such as using a whiteboard and handling the transition from mathematical analysis to understanding the broader business context.

Transcripts

all right we talked early on this

morning about the case interview

mindsets how to open analyze and close

the case what are the generic steps and

what we do now is talk about actual

framework so what I call out matching

specific case situations the specific

problem-solving frameworks we'll go

through each one demonstrate those that

will take sort of till lunch we'll break

a lunch at 12:15 be about an hour so

come back and afternoon finish up

different kinds of cases and then finish

off the day on how to practice and

prepare for interviews as well as some

final tips okay any other sort of

administrative questions okay okay so we

talked earlier about opening a case and

and the last step in opening a case is

structuring it which is defining how

we're going to approach the problem

solving of the case so when talk about

common case types my favorite frameworks

which cases go with which frameworks and

then we're gonna demonstrate all this

all right here sort of in terms of the

business situation cases you don't need

to write this down but you're welcome to

if you want to there's like a whole

bunch of business problems out there

okay the general thing is they sort of

fall into four categories it's more

important number the categories I'll

talk about in a sec the first one which

I talked a lot about this morning is a

profit problem it's a very common way to

start off a case you know profits are in

the tank what do we do you know cost out

of control what we do revenues down what

do we do okay and so you're going to

have a lot of variations on those if

it's an if it's like in a financial

services industry there's like different

terms for revenue so you want to clarify

what they mean by certain terms

sometimes it'll be sort of a pricing

driven problem so prices the declines or

a costs have gone up fixed costs have

gone up very cost have gone up but

basically there's a whole class of

problems around revenues and costs so I

always think of it the framework as

profit equals revenue minus cost if I

mention any of those three things you

know usually it's a it's a profitability

problem okay

the next category cues ation and I

should also mention that the frameworks

I use tend to be a lot different than

some of the things you see out there I

mentioned earlier a lot of ways to be

right this is not the only way it's

simply a way so I just want to put that

as a caveat you'll find that I tend to

like if you look at the case interview

books that are out there they have like

all kinds of ideas like a laundry list

of frameworks you could use I only have

like four and they're really only like

three and the reason I have three is

because I can't remember like ten and I

figure it's better to know three really

well and like sort of forget half of ten

and sort of you sort of caught off guard

the second category of cases is probably

the most common one and I just call it a

business situation and that incorporates

what's this company strategy what should

it be and incorporates entering a new

market incorporates you know your your

nephew asked you to start a new business

because you're some hotshot Harvard MBA

what you did you how do you build

eliminates dance okay I actually have

that his case that was the case I bombed

by the way the only one I really bombed

was lemonade stand and because I thought

it was like too simple and in fact they

had that the right answer had demand

curve supply curves and tired demand I

had like very complicated he an entire

model built behind a lemonade stand I

sort of assumed there was a simple one

so don't get caught off guard don't

assume you know Thanks

use the data in the case still got the

job we got that one so business

situations entering new markets

introducing a new product competitor

that is X should you do Y so any sort of

business situation type of case I I sort

of lump into business situations mergers

and acquisitions big company wants to

acquire a small company should they

acquire this particular small company ok

that's emergence and acquisitions it's

really a variation of a business

situation so you know the business

situation approach then emergent

acquisition works and then last one is a

supply demand framework also sort of

often used as sort of a way to explore

issues around industry capacity okay

so in a lot of industries with high

fixed costs so airplanes for example

the behaviors in that industry sometimes

seem crazy but it's because of this high

fixed cost and and we'll talk a little

about that but it's an interesting issue

they probably are listed in the order

that in the order frequency so you

probably see profit fairly often

business situation quite often as well

often times cases we'll start off as a

profit problem and then move right into

a business situation okay because this

is purely math right isolate

mathematically what's the numerical

driver of the problem but then you have

no business context so a business

situation is all about under in the

context of the market place competitors

customers as well as the companies up in

terms of supply demand sometimes the

supply demand or capacity type problems

are acquisition related okay if they're

trying to like acquire a company to like

eliminate it sometimes a big company

will eliminate by competitor just to

take the capacity off the market

sometimes because of the way the funny

way that the supply demand curves are in

that industry so if the acquisition is

driven by the diminishe you then you

would want to use a supply demand

framework it's more like we've decided

we're going to acquire somebody should

it be this company that company that's

more of like a business situation and

that's how I sort of define me to any

type of problem around building down

building up building or shutting down a

factory which adds capacity and then any

kind of capacity shift in response to

demand so if the issue is you know the

markets really sort of structurally

change its tracted by twenty percent

likely be contracted for a long time a

twenty percent should we shut down the

factory sort of sounds like a business

situation but it'll probably end up

being a supply demand okay so what

you're looking for what in this process

is you're looking for the triggers to

figure out which category of problem it

is so you know which framework to match

it to and and I'll just show you how to

go back and forth real fast here the

four court forms I have matched those

categories so I have a profitability

framework I'll show you business

situation mergers and acquisitions and a

supply demand frame

as well so I'll give you the telltale

signs the reason I use fewer frameworks

and criticize it's like less debate as

to which one to use

you know if they mention profit revenues

or cost I mean you never go on starting

with the profitability framework but

you'll find that you go through the

primer pretty fast if you know what

you're doing so usually it's like five

seven maybe ten minutes max if you've

never seen it before you don't only have

a business background you'll be in

profit and revenue minus class like all

day long because you won't realize

profit it's driven by Bevin your cost

and so on and so forth so that's the

easiest one because it's just pure pure

math okay and that's I mean complicated

math either business situations are all

as basically the default one if you

don't know what to do start with

business situations it helps you

understand the context of the external

environment the internal environment and

so forth mergers and acquisitions those

are very easy to tell because they'll

say merge will require hear the words

the keyword phrase it's emergent a

question case the only tricky one is

whether it's sort of like a a fit issue

so should we acquire this particular

company versus is is it a good idea to

acquire someone in general given

capacity constraint so that's the only

one that's sort of a little tricky and

then the other ones around supply and

demand are when they mentioned the word

supply when they mentioned the word

demand and they give you numbers that's

a big sign if they give you numbers

around supply that's usually a sign that

they want to do the math and a supply

demand curve and literally plot out a

curve an example might be your clients

I'll make it up your client is the mines

coal okay and their cost to produce is I

don't know 50 bucks per metric time I

have no idea that's even remotely close

and their nearest competitor has this

cluster they can produce a metric ton at

forty dollars per metric time okay they

start mentioning words like that $1.00

dollars to produce that's like a

capacity issue red flag you might start

thinking about supply and demand

okay that make sense any questions from

this morning I did Rick

all right let's you out see frameworks

here you should all have a handout we

don't the more handouts up front I'm

going to talk first about the

profitability framework so I'm going to

pull out your handout and the the five

pages in the handout are where

essentially my I don't my crib sheet if

you would things I would sort of

mechanically go through before I begin

to view it's what's having one of your

own welcome to use mine if it doesn't

quite work for you change it do you want

entirely different up to you it's good

to just have one thing and what I would

do is when I practice I would have it in

front of me so I could remind myself of

the steps and then I work on memorizing

the steps so I can throw it out okay so

it's an initial again I mentioned

earlier that if you're brand new to

cases it's very mechanical early on and

then you start getting more flexible and

by flexible actually a good example is

so someone who's mechanically good at

cases well I say oh that's a profit

problem I must use the profit framework

and I can only use the profit for I'm

looking I can't do anything else and

they're going to find that that has

limitations because the profit frame

only gives you the mathematical reason

why the business is sort of flailing but

not any context as to why okay so the

flexibility when you're sort of getting

a little more creative is in the middle

the profitability framework you realized

okay something like why are these why is

revenue is like why's pricing falling

through the floor

I know that's what is mathematically but

why and then all of a sudden you roll

into a business situation okay and it

might be as the process of going through

the business situation you might realize

well this industry has really changed a

lot they're these entire new growth

segments that the client is not in

participating at all maybe they ought to

acquire somebody okay and then the

question is what would that happen to

industry supply and will that shower

that change the economics of the

industry so then you roll into like a

supply demand framework so that's sort

of you know I wouldn't say the ants but

sort of medium to advanced is you start

intermingling between these two and I'll

like make up frameworks to I'll show you

how it's sort of a little bit how to do

that when nothing else fits yeah sure

you better you should it's impossible to

do it well without it also often you

want to UM do if you're using oh if they

want sometimes it's hurting the

interview will hand you a like a like a

dry erase board marker and start asking

you to sort of talk doing the case while

standing okay so you actually practice

like you know drawing on the whiteboard

taking notes and you won't have your pen

and paper there right so you want to

take your own notes so you're going to

have two white numbers on the side and

then you have to do that your notes on

one side and then the official

presentation if you would in the middle

so there's a lot of sort of just

logistical stuff you want to get used to

yes yes

moving having situations that sort of

span across categories types of cases

you'll see that in the first round last

one all kinds of nouns and the most

common one is really it's a profit

problem and then okay you figure out

mathematically what's wrong but you

don't know why it's wrong and then you

don't know what to do about it so then

you have to blow into business that's

sort of by far the most common one and

then the other ones much less common

sometimes you move into a supply demand

that tends to be by the way it tends to

be in really high fixed cost industries

it's another size so airplanes airlines

they do all kinds of bizarre stupid

stuff in their lives because the cutback

of the capacity structure and the high

fixed cost of that business is just

ridiculous I mean I find interesting

like I personally made more money than

the entire US airline industry in its

history of 50 years because I have have

at least net worth of a buck hey that

business has not made a dollar like in

half a century

that they have they keep going right

because of it and it's because of this

demand and supply issues so that's a

typical one if it's what if it sounds

like like big heavy things are involved

when it then that's like a high fixed

cost business and that's typically a

sign that it's likely to be supplied

north the possibility for it to be a

supply demand is likely you almost never

see supplied in any case for us service

of businesses so really high margin low

fixed cost and high variable cost

businesses

almost never have a supply manager

sometimes it's demand which is more of a

business situation but not really around

supply because because supply can scale

very easily in that business that's what

happens

you