Mastering the Business Situation Case Interview Framework (Part 7 of 12) | caseinterview

Summary

The video script offers a comprehensive guide on utilizing a business situation framework to analyze various client or company scenarios. It emphasizes understanding the market, customer segments, product differentiation, company capabilities, and competitive landscape. The speaker illustrates the framework's application with examples, such as the NBA's potential entry into the Chinese market, and provides a step-by-step approach to identifying key issues and formulating strategic recommendations.

Takeaways

• 📈 The business situation framework is a versatile tool applicable to a wide range of client or company situations, from new market entries to growth strategies and turnarounds.
• 📝 It's essential to decide on the orientation of the framework (vertical or horizontal) based on space needs to avoid confusion when flipping pages or running out of space.
• 🛰️ The framework involves understanding four key areas: customers, products, company, and competition, which are crucial for making informed business decisions.
• 👥 Starting with the customer is a preferred approach as it provides insights into market dynamics and can have implications for various business strategies, including M&A.
• 🤔 The purpose of asking questions within the framework is not to solve the case immediately but to gather baseline information and make the case interview feel more like a real-life business scenario.
• 🔍 Questions about customers involve identifying segments, understanding their needs, and assessing their willingness to pay, which helps in tailoring market strategies.
• 🏪 Distribution channel preferences are vital as they can affect how products are sold and accessed by customers, impacting the overall market approach.
• 💰 Understanding the cost structure of a company is critical in determining its competitive position, whether as a low-cost or high-cost producer, and the barriers to entry in the market.
• 📊 Market share analysis provides insights into the competitive landscape, helping to identify if the market is monopolistic, oligopolistic, or highly competitive.
• 🛒 Complementary goods and substitutes are important to consider as they can influence demand and the company's positioning in the market.
• 🏭 The organizational structure of a company should align with market demands; misalignment can create inefficiencies and missed opportunities.

Q & A

What is the purpose of the business situation framework?

The business situation framework is used to understand a wide variety of client or company situations, including market entry, product launches, growth strategies, and turnarounds. It helps to identify the key issues driving and impacting the business overall.

Why is it important to consider the orientation of the framework when applying it?

The orientation of the framework is important to ensure there is enough space to record information without running out of room or flipping pages, which could lead to confusion. It's about choosing a layout that best suits the needs of the case at hand.

What is a typical case scenario that might be presented using the framework?

A typical case scenario could involve a major airline company considering starting a low-cost airline provider, or the NBA evaluating whether to enter the Chinese market and televise its games there based on the success of a pilot program.

Why is it recommended to start with the customer when using the framework?

Starting with the customer is recommended because all businesses are driven by customer needs. Understanding the customer base, their preferences, and behaviors provides a solid foundation for further analysis and helps in making informed decisions.

What are the four key areas to consider when analyzing a business situation?

The four key areas to consider are customers, products, the company itself, and the competition. These areas provide a comprehensive view of the market and business environment.

What does the question 'Who is the customer?' aim to uncover in the framework?

This question aims to uncover customer segments, helping to identify specific groups of people and their characteristics, which is crucial for understanding the market and tailoring strategies accordingly.

Why is it important to understand the needs of different customer segments?

Understanding the needs of different customer segments is important because it can influence how a company should target and serve these markets differently, potentially leading to more effective marketing and sales strategies.

What does the framework suggest about the importance of distribution channel preferences?

The framework suggests that distribution channel preferences are crucial as they can reveal how customers prefer to access vendors and make purchases, which can significantly impact a company's sales strategy.

How does the framework address the issue of customer concentration of power?

The framework addresses the issue of customer concentration of power by considering the 'Walmart effect,' where a single large customer can significantly impact the profitability and dynamics of an industry, necessitating tailored strategies for such customers.

What role does the understanding of a product's lifecycle play in the framework?

Understanding a product's lifecycle is important in the framework as it helps determine if the product is in its infancy,成熟期, or nearing the end of its life. This can influence decisions on investment, marketing, and potential product retirement or replacement.

How does the framework incorporate the concept of complementary goods?

The framework incorporates the concept of complementary goods by recognizing that the success of a product can be tied to the success of related products. Understanding this relationship can provide insights into market trends and potential opportunities or threats.

What insights can be gained from analyzing a company's cost structure within the framework?

Analyzing a company's cost structure within the framework can reveal whether the company is a low-cost or high-cost producer, the proportion of fixed versus variable costs, and potential barriers to entry or competitive advantages.

Why is it necessary to compare a company's organizational structure to market demands?

Comparing a company's organizational structure to market demands is necessary to identify any misalignment that could lead to inefficiencies or missed opportunities, such as serving customers in a way that doesn't meet their preferences or expectations.

How does the framework consider the competitive environment?

The framework considers the competitive environment by examining market shares, competitive behaviors, barriers to entry, supplier concentration, and the industry's regulatory environment to understand the dynamics at play and potential strategies for success.

What is the significance of understanding the industry lifecycle within the framework?

Understanding the industry lifecycle is significant as it provides context for the current state of the industry, whether it's in a growth phase, maturity, decline, or a cyclical pattern, which can inform strategic decisions and predictions about future trends.

Outlines

00:00

📈 Business Situation Framework Overview

The script introduces the business situation framework, a versatile tool for analyzing a wide range of client or company scenarios. It discusses its application in various situations, such as entering a new market, launching a product, or developing a growth strategy. The framework helps to identify the key issues impacting a business. The speaker shares personal preferences for using the framework, including orientation and layout, and emphasizes the importance of practice. An example scenario involving a major airline company considering a low-cost airline venture is presented to illustrate the framework's application. The framework is structured around four key areas: customers, products, company, and competition, with an emphasis on understanding the customer as the foundation of business strategy.

05:01

🏀 Customer Analysis in Business Strategy

This paragraph delves into the first key area of the business situation framework: customers. It stresses the importance of customer segmentation, understanding qualitative and quantitative aspects of different customer groups, and the significance of nicknames in market research. The NBA's potential entry into the Chinese market is used as a case study to illustrate how to analyze customer segments, their size, demand share, and growth rate. The speaker discusses the importance of understanding customer preferences, such as distribution channels and the concentration of power within the customer base, using the 'Walmart effect' as an example. The paragraph outlines a series of questions typically asked during customer analysis to gather essential information and form hypotheses about market dynamics.

10:02

🛍️ Distribution Channel Preferences and Customer Power

The speaker continues the discussion on customer analysis, focusing on distribution channel preferences and the impact of customer concentration. It highlights the importance of understanding how different customer segments prefer to be served and the potential mismatch between a company's distribution channels and customer expectations. The 'Walmart effect' is revisited, emphasizing the influence a single dominant customer can have on an industry. The speaker suggests that recognizing such concentration early can help in formulating strategies that consider the unique dynamics of serving large customers versus a fragmented market.

15:05

🔄 Adjusting Business Strategies for Dominant Customers

This paragraph explores the implications of having a dominant customer like Walmart in the supply chain. It discusses the strategic decisions a company must make when a significant portion of its sales comes from one customer, affecting the rest of the market. The speaker uses the example of a company with 50% sales from a single customer and the challenges of maintaining a competitive edge in such a scenario. The paragraph suggests analyzing the entire market and the company's position within it, considering the unique dynamics of dealing with a dominant customer and the strategies needed to succeed in the broader market.

20:08

🛠️ Product Analysis in Business Framework

The focus shifts to the product aspect of the business situation framework. The speaker outlines a series of questions to understand the product's purpose, customer value, and differentiation from commodities. It discusses the importance of recognizing complementary goods and the impact of substitutes on the product's market position. The lifecycle of the product and packaging strategies are also considered as factors that can influence product success. The paragraph emphasizes the need for a thorough qualitative and quantitative analysis of the product to inform business decisions.

25:08

🏭 Company Strengths and Cost Structures

The script moves on to the company element of the framework, emphasizing the need to understand a company's capabilities and areas of expertise. It discusses the importance of aligning the company's strengths with market opportunities and the potential pitfalls of mismatched distribution channels. The cost structure of the company is examined, including the proportion of fixed to variable costs and the implications for barriers to entry. The speaker uses Amazon's early strategy as an example of increasing fixed costs to deter competition. The paragraph also touches on the significance of intangibles like brand loyalty and organizational structure in relation to market demands.

30:12

📊 Competitive Analysis and Industry Dynamics

The final paragraph in the script addresses the competition aspect of the business situation framework. It starts with an examination of market share and the concentration of competitors, which can indicate the nature of the competitive landscape. The speaker mentions the importance of understanding competitive behaviors, best practices, and the barriers to entry in the industry. The influence of supply concentration, such as the Intel effect, is discussed, along with the overall regulatory environment and the lifecycle of the industry. The paragraph concludes by emphasizing the importance of a thorough competitive analysis in formulating effective business strategies.

Keywords

💡Business Situation Framework

The Business Situation Framework is a structured approach used to analyze various client or company scenarios, such as entering a new market or launching a new product. It helps in understanding the driving and impacting issues of a business. In the video, the framework is applied to a case study involving an airline company considering a low-cost airline provider and the NBA's potential market entry in China.

💡Market Segmentation

Market Segmentation is the process of dividing a market into distinct groups of consumers with similar needs or characteristics. It is crucial for understanding customer behavior and tailoring products or services to meet those needs. The script mentions segmenting customers for the NBA games in China, identifying distinct viewer demographics and their preferences.

💡Porter's Five Forces

Porter's Five Forces is a model used to analyze the competitive forces within an industry and its overall profitability. The forces include the threat of new entrants, the bargaining power of suppliers, the bargaining power of customers, the threat of substitute products, and the intensity of competitive rivalry. The script references this model when discussing customer concentration and the potential 'Walmart effect' on the industry.

💡Customer Needs

Understanding customer needs is fundamental to business strategy as it drives product development and marketing efforts. The video emphasizes the importance of identifying what each customer segment wants and is willing to pay, using the NBA's potential viewership in China as an example to illustrate different needs among age groups and gender.

💡Distribution Channels

Distribution Channels refer to the methods through which a company delivers its products or services to customers. The script discusses the importance of aligning these channels with customer preferences, which can significantly impact sales and market penetration, as seen in the example of different customer segments preferring various buying methods in China.

💡Competitive Dynamics

Competitive Dynamics involve understanding how a company's actions affect its competitors and vice versa. It is about recognizing the strategies and behaviors of competitors in the market. The video script mentions analyzing the NBA's potential competitors in the Chinese market and their behaviors as part of the framework.

💡Market Entry Strategy

A Market Entry Strategy outlines the approach a company takes to enter a new market. The script uses the NBA's consideration of entering the Chinese market as a case to discuss various aspects of market entry, including understanding the local audience, distribution preferences, and competitive landscape.

💡Growth Strategy

Growth Strategy is a plan for expanding a business, often involving increasing market share, launching new products, or entering new markets. The video mentions growth strategy in the context of the airline company thinking of starting a low-cost airline provider, indicating a strategic move to grow their business.

💡Turnaround Strategy

A Turnaround Strategy is implemented when a company is underperforming and needs to improve its performance. The script briefly mentions this as one of the situations where the business situation framework can be applied, suggesting it as a tool for analyzing and addressing business challenges.

💡Business Acumen

Business Acumen refers to the ability to grasp and understand the business environment, including market trends, customer needs, and competitive dynamics. The video emphasizes the importance of business acumen in analyzing cases and making logical conclusions, particularly when using the business situation framework to solve complex business problems.

💡HBS Case Method

The HBS Case Method is a teaching approach used at Harvard Business School where students analyze real-life business scenarios to develop problem-solving and decision-making skills. The video script mentions making the case interview feel more like an HBS case, indicating the interactive and analytical nature of using the business situation framework.

Highlights

The business situation framework is introduced for a wide range of client or company situations, including market entry, product launches, growth strategies, and turnaround scenarios.

The framework helps to understand the driving and impacting issues of a business, emphasizing the importance of practice and orientation on paper or digital space.

A case study approach is used to demonstrate the framework, starting with a scenario of a major airline company considering a low-cost airline provider.

The NBA's successful pilot program in China is presented as a case to analyze market entry and television broadcasting strategies.

Four key areas are identified for analysis: customers, products, company, and competition, with a focus on understanding each aspect deeply.

The importance of starting with customer analysis is emphasized, as it provides insights into market dynamics and can impact other business decisions.

Segmentation of customers is crucial, with the need to understand qualitative and quantitative aspects of each segment.

The framework suggests asking specific questions about customer segments, such as their needs, willingness to pay, and distribution channel preferences.

Understanding the concentration of power among customers can reveal the 'Walmart effect' and its implications for business strategy.

Product analysis includes understanding its utility, differentiation, complementary goods, and potential substitutes.

The company's capabilities and cost structure are vital to assess, including whether they are a low-cost or high-cost producer.

Investment costs and intangibles like brand loyalty are considered under company analysis to understand market position.

Competitive analysis involves understanding market share, behaviors, and best practices, as well as barriers to entry and supply concentration.

The importance of the industry's regulatory environment and lifecycle is noted for a complete competitive analysis.

A step-by-step approach to using the framework is provided, with an emphasis on adjusting the process based on insights gained during the analysis.

The framework is flexible and can be tailored to different situations, with the importance of recognizing when to deviate from standard questions for deeper insights.

The transcript concludes with advice on how to evolve the use of the framework, emphasizing the balance between mechanical application and creative analysis.

Transcripts

the business situation framework is used

for wide variety of client situations or

company situations everything from a new

market entering a new product starting a

new business opening a lemonade stand

growth strategy divestiture in some

cases strategy turnaround how's the

company doing in general okay it's just

a good way to understand what issues are

driving and impacting the business

overall and so let me walk you through

what each of the pieces are and actually

draw it out like I would in a case

here's one you might want to think about

whether you seems kind of silly when you

have paper depending on the framework

you use you actually want to practice

whether you want to have it sort of

vertical orientation horizontal

depending on what space you need because

the sort of weird if you run out of

space in it to flip pages you'll get

confused so you sort of have a

preference but know it in advance so in

this case I applied for this for me I

would probably normally do it sort of

landscape style but I can't show it so

I'll do it this way so what I usually do

is that let me just give you the demo

the opening a little bit and then we'll

talk about the actual framework so the

way the case is usually presented is you

work for a major airline company and

they are thinking of it's going they are

now there's some capacity issues on the

way that's gonna say they're entering

they're thinking of starting like a a

low-cost airline provider okay but

problem at that is there's a fixed

constitute you are working with a okay

so you're working with the National

Basketball Association and they recently

successfully completed a pilot program

showing MBA final games in in China and

they had five times more viewers in

China for those games than the United

States

okay NBA commissioner comes to you

you're working on that as a client

should NDA enter the China market and

televise its games in China and if so

how should they do it okay that would be

fairly typical of a case like that

and and it's a guy that's interesting

the probably four key areas when you

look at to understand whether the MBA

should enter that market and if so how

you certainly want to look at the

customers look at the products that

you're providing to that marketplace you

want to look at the company itself the

MBA and I'm on za slide D here and then

you want to look at the competition

those are sort of the four key areas in

this case because it's entering a new

market and obviously these all these

issues are important I probably want to

start with the customer first and that's

what I usually do you'll find in in some

of the case prep books I've seen out

there they they tend to like for

particular situations skip the customer

and I just have a preference for always

wipe I just feel a lot more comfortable

knowing what's going on in the

marketplace and the customers have the

money if they're changing their minds I

want to know about it because that's

implication so everything else it was an

M&A situation but customers want

customer needs have changed as

implications for M&A has implications

for Cassity so I personally just like

starting with a customer because all the

businesses are driven off the customer

okay not everyone does that lots of ways

to be right you can come back to it

later but I just have a preference for

starting with a customer that's what I

usually do okay so that's how I usually

lay it out and then depending on which

branch I'm going through I'll use these

sort of standard opening questions and

again the purpose of these questions is

not to solve the case it's very

important the purpose of these questions

is to get you sort of baseline

information to make this case interview

feel more like an HBS case see if data

okay blank sheet of paper hard to solve

the case how to be protagonist when you

have no idea what's going on when you

have data it's a lot easier so the

purpose of this is really kind of get

you through about 1/3 to 1/2 the way

through the case ok and then the rest is

really sort of based on what you

discover so judgment business acumen

sort of logical conclusions all sort of

matter some creativity tends to matter

at sort of middle of the case opt for

and it tends to be sort of mechanical ok

so I'm gonna go through the mechanical

stuff and show you the kind of questions

I typically ask

okay so our first question I'll list all

of them and I'll get saying what each

one means so the series of questions I

typically ask are who is the customer

what is each customers doesn't want what

did you seventh willing to pay in terms

of price

what distribution channel does each have

and sort of what's the concentration of

customers in that marketplace so sort of

Porter's five forces but like a fifth of

it right so with customers I always ask

who is the customer and what I'm looking

for I'm looking for segments okay so I

want to know customers overall that's

sort of very misleading I want to know

we know what are the segment's the

important questions there are to figure

out what the segments are okay and

usually I should be prepared for this

when when consultants do and market

researchers do segmentations of

customers

they tend to sort of like give them

nicknames okay so it's like actually

this what happened with the minivan

right the minivan has this association

for being with soccer moms right that's

because the guy who person who did the

original marker we should study says it

tends to be like women with like one and

a half kids with who are aged five

attentively attracted minivans let's

call them soccer moms okay so that names

stuck so they will have nicknames and

they're used to sort of amusing because

otherwise it's kind of boring to sort of

work with them all then and it's also

easier to visualize who that customer is

okay and so the segment's you want to

know the segment's how big they are what

share the total demand comes from each

segments and then the growth rate of

each and all of this is like on that

first bullet if you would work should be

bullet but I guess just missing a bullet

but that first line item on this

framework sheet okay so who are the

customers what are the segment's you

want to understand them at a qualitative

level so who are these people

right and then you want to understand it

mathematically so for example I'll make

stuff up for for China it could be it

turns out there are three major segments

of there were three major segments of

viewers in China for the NBA games about

80 percent were men 20 percent were

women okay let's do school right great

and that's sexual and within the men do

we have any more information on what

kind

maybe age demographic and how old were

they younger older were they interested

in sports was a novelty thing what they

play basketball and the interviewer

might say what's a good question amongst

the man 80% were under the age of 20 oh

that's interesting okay so it's a youth

market that's watching and amongst that

well are these kids are they playing are

they playing basketball or was it sort

of a novelty thing turns out eighty

percent of the eighty percent actually

play basketball okay

turns out by the way Michael Jordan is

extraordinary popular in China I'm like

my brother visit is sort of rural China

in the middle and they call them Michael

Jordan for like a week and they have

like no TV dirt poor but they all know

who Mike is it means pretty crazy and so

you can start getting a flavor right for

who this customer is it's kids a lot of

ways like like American kids I'm again

making all this up and that gives you

some sense of okay I understand the

context what's going on here all right

next question is what does each customer

segment want ok oftentimes the needs are

very different and you may want to

tackle the markets in a very different

way you might want to target one segment

over another you might want to ignore

one you might want to sort of attack

both but in a different way so using the

tunnel the whole China example it could

be that you know half of them half that

half the viewers were like young kids

and half of them were like sort of

adults well that's interesting why they

don't swatching why the kids watching

what are they getting out of it

kids are watching because they get to

learn new moves right adults are

watching cuz you know they're really

into sports in general so they're like

the sports widows of China

sorta like Americans like okay that's

interesting now sort of an idea of

what's driving them okay now probably

not appropriate for this case but if it

was more of a product purchase rather

than the media viewership you know what

is the price each segment is willing to

willing to pay so in this case if this

was the China NBA saying I might want to

know who the advertisers okay are these

American companies or the you sort of

you know local companies the big

companies and small companies why they

advertising what's driving their need to

advertise so it might be that

P&G China you know has a really tough

time reaching sort of the younger age

market because the way there's not as

much media there I thought you and and

so that's the and companies like that

are driving the bulk of advertising

sales in the pilot program

okay that's useful to know those whole

time we're doing is we're sort of just

gathering information you don't want to

you want to sort of synthesize sort like

do a little mini summary as you go you

don't want to just like gather

information for like forty minutes okay

you want to sort of refine what you're

thinking think out loud yeah just like I

was interesting oh so these are like

like like sports kids who just want to

be like Mike but they want to be like

Mike in Chinese okay I got that that's

one group and then they're sort of like

the sports waiter okay know kind of what

that is I'll make the analogy and then I

might say what seems like so far my

hypothesis is that the market break out

in China seems to be very similar so far

to a mini-computer ship as I understand

it okay that might be or hypothesis and

so if I'm favoring and that the

underlying tone is so far favoring that

this seems like a good fit so far but we

have looked at other factors but my

hypothesis so far is that looks like

might be a good thing to worth

considering

well he's testing further for the other

questions I usually ask our distribution

channel preferences free segments so

again in China the they do a lot of like

Avon lady stuff you know so person the

person selling which is like not so

popular here and more but it's really

populated because more of leadership

culture so in every market there's like

always big biases in terms of how

customers want to be served in certain

technology markets so like really

expensive software packages fortune

finders CIOs they tend to like to deal

with one person so they want to deal

with one person from some one person

from HP one person from I don't know

Apple whatever or IBM and that may be

different than how these companies are

organized right so you may have an issue

where you're losing market share because

the customer wants to deal with one

person but your company is organized by

product line so the CIO of Pepsi has to

deal with five sales people and their

complaint is

one person from your company knows my

entire system okay and I find an

acceptable and that's why I'm going with

IBM something like that so by

understanding the distribution channel

preferences or actually that's why bad

example for this particular point but

maybe it's like I like working with my

system integrator partners so I want to

buy my hardware on and buy my software

through my Accenture consulting partner

because that guy knows everything and I

trust him I don't want to deal with IBM

directly I want I want you to go through

that guy okay that's my preferred way of

doing business for some younger segments

I prefer to buy things on the internet I

don't want to go to I don't want to go

see talk someone in person right for

certain kinds of things I want to buy

over like SMS right or texting or

whatever and I can see sort of on the

internet a lot of younger kids want to

buy through Facebook like this one all

the time and Facebook that kind of thing

so there's preferences as to how they

prefer to buy how they want to access

vendors and it's useful to know that in

advance particularly by segments so

virtually everything here you want to

sort of break it out by segments

whenever you can

especially customers and then the final

one is the customer concentration of

power and we're looking for here is what

I call the Walmart effect is there one

big customer right that P&G cannot

afford with nor do they have so much

power that driving out all the

profitability earlier in the value chain

so this is sort of from Porter's five

forces that's really useful not because

if that happens in an industry it has

implications for you might want to do

okay you react differently if you knew

that were to be the case if you miss

that fact that there's a Walmart

customer out there your recommendations

could be off okay because they're not

they don't work as well in that kind of

situation so those are sort of like the

five questions I typically ask and

usually if I honey get through the five

I got a good feel for what's going on on

the demand side and again you can add

your own in there or I suggest you do

but sort of have your stock opening four

or five questions in each category that

gets you sort of information you need

and I found these five tend to work well

for me yes question

yes so the question is you always want

to just or while you're asking for more

information and you want to sort of

continue dress apply each step actually

in a business situation context you get

a little more leeway okay so in a clear

plan for ability case you want to be

high pot it's very mathematical right so

it's clear case hypothesis data test

refine and keep going in this there's

there's a lot of contextual information

you need so you can actually start

asking you get a little more leeway you

can go a couple questions without saying

why you want it

but it's good once you sort of reach a

sort of an interim conclusion to

actually state that because then you're

sort of sympathizing in little steps yes

yeah actually that's a good point should

in that prior example I sort of compare

the Chinese market the American market I

did make some assumptions I'm gonna make

it I should state it but it's actually

better to ask it seems to mean it seems

like it's similar to the American market

do we know that's true or not okay so

that would be a better way of phrasing

so you see it's good because subtle word

changes right make a difference in how

in terms of housing interpreted so make

no assumptions at all and if you do

state you're thinking about making one

and see if they think it's a good idea

that sometimes I'll say I don't think

that's a good idea when they tell you

it's not a good idea it's not a good

idea for a variety of reasons either

it's wrong or they're not prepare to

talk about it or they have no data

what's sort of logically inconsistent

cuz they made up the case and they want

you to go somewhere else take the lead

and go somewhere else yes

so thing is it almost always just focus

all your effort now your recommendation

around that my first instinct is when

that's happening that the problem tends

to be sort of the problem what do you do

with Walmart and versus everyone else so

that's my initial reaction of how I was

at segmenting my my analysis in the way

my approach because they got there's one

big elephant that the rules are really

different for them so the questions

could be okay if I'm a small company and

I got a Walmart type customer sort of

down my demand chain if you would what

do I do

they have 50% of the buying comes from

that one customer the remainder are the

other 50% and that's fragmented over by

other customers or a thousand or five

thousand customers what should we do

well so we could look at each one

separately let's first analyze the whole

Walmart thing are we likely to win that

game lots a byte used to a segment sort

of customers competitors for Walmart

competitors for everybody else products

sold to Walmart product sold everybody

else right what are our efforts as a

company towards Walmart towards

everybody else it's still a business

situation framework right the same key

issues but when I know there's a Walmart

type customer

I started splitting everything along

that segment because it seems relevant

that's just my first impression and so

in that situation you might have a we

should devote all resources to Walmart

okay or we already are devoting all

resources to one more and we're getting

crushed okay and it could be that

there's a capacity issue which would be

like a creative framework as you realize

that why we're being crushed okay and

turns out we have we don't have a

low-cost position well we don't have

low-cost position and there's a

structural issue with the market we're

in the mansion there's one big customer

then you seems like you can't win that

game okay so let's look at our other

options around the normal more customers

where's our position there who else is

in that market in terms of competitors

and again same framework with sort of

you just sort of split it and you may

find that with Walmart it's a losing

proposition everyone else other than

Walmart it seems like you can win and

there's some segments in there and

that's how you tie sort of have that

conversation okay next up is is the

product let me back up for one second

there are a lot of a lot of general

frameworks out there

that's that are sort of similar to this

like three C's forces whatever C's and

what you'll find is they all tend to

cover the same thing but they tend to

organize a little differently so I

broken out product just out of habit you

could very easily lump product in with

company for example some companies some

frameworks have cost as a separate

category it's like the four C's is like

paying customer company cost and

competition I tap on the role cost

underneath company because I think the

classes within a company and it's an

interesting cost issue

I'll have treat that separately inside

of competition so it's all fairly

flexible sort of more ways a lot of ways

to be right you sort of it's good to

pick the way you like and sort of stick

to it so you sort of get process

repetition and get used to it okay so

for product my sort of four or five key

questions I typically ask is at purely a

qualitative level I just want to

understand the product like what does it

do why do people buy it why is it useful

and and sort of put on my customer hat

and make sure I understand that because

you will get some insights particularly

combined with other information as to

well maybe if the product is is very

good at being fast you know it's faster

than the other the competitive offerings

are there other segments that value fast

if you don't understand it qualitatively

it's hard to do that so that's the first

thing I ask is just really understand

the product at a customer level a second

thing I want to know is this kind of

widget is it like a commodity good like

rice or is it a differentiable good like

a service so you want to know how much

flexibility do I have in changing the

product itself so if I'm selling coffee

beans hard to change okay if I'm selling

coffee at a Starbucks lot you can change

okay

so it's useful to know what kind of

product you're dealing with usually you

get like an actual product sometimes you

get like a widget right but either way

it's worth asking to what degree is

there variation differentiation amongst

the parts that are in the marketplace

next thing I usually ask are I want to

understand what the complementary goods

so selling if I'm selling ketchup I want

to know what's happening to french fries

right and vice versa

because I tend to go together and if my

compliment is is that markets getting

beat up that has implications for me so

way if all of a sudden the government

decided that french fries will like kill

you in a month

then I'm sure ketchup sales will fall

okay so you want to know that because if

you don't know that sometimes you're

solving this you saw with the ketchup

industry problem what the problems in

potatoes okay and so you're going to

miss the whole point and you're a

synthesis in your conclusion is going to

be off substitutes as well again this

from Porter's five forces are there

other things people can use other than

our product so this is really sort of

indirect competitors right so maybe the

substitute I don't know for ketchup is

honey mustard I don't know the

substitute for traditional MBA could be

a online MBA okay anybody that didn't

exist before so it really is useful to

them to get some sense of how vulnerable

you the company is to substitute

products again it changes your

conclusion sometimes I've known about

the product lifestyle is this product on

its last legs that we have to sort of

retire it anyway or is it sort of in its

infancy sometimes it sort of Allens last

legs

then you you're more apt to sort of kill

the product because you know you got to

do it anyway soon and so I'm making

investment something to replace it might

make more sense but it sort of wants

early stages maybe it's better to try to

get to fix the marketing in that

business for example get it to work then

to kill it because it takes a little bit

long it's like a long cycle for develop

new products like cars to get a new car

out the door it's like four or five

years or something like that so if

you're in the first year and you want

say well there's a flaw on the product

well you can't fix it you can't fix the

platform to like from now five years

from now well then let's not look at

there because we need some something

better to make some improvements more

immediately and last thing and this is

sort of depends on the nature of the

product sometimes I ask packaging

questions what's included what's not

included sometimes you can differentiate

the product by based on what's bundled

in so it's like razors with razor blades

actually what computers go it was like

cell phones with service planes so you

drop the cell phone price to close to

free

but you bundle in a mandatory service

plan and that really drove a lot of

adoption okay same product same fitna

that you didn't change manufacturing

right you just change the nature of the

packaging and that dramatically changed

market penetration adoption and

ultimately sales okay if you didn't sort

of think about that you that industry

would have missed a very big opportunity

okay so you're seeing this is really

sort of like a checklist you know I sort

of think of it like you're trying to fly

an airplane standard questions you ask

every single time just to sort of cover

your bases and usually what happens is

when you ask these questions it flushes

out useful information that will lead

you in the right direction okay

so again this is really the open that's

my standard opening night sort of wick

with middle nights I have my five

questions for customer my five for

products and so on and so forth and it's

just to sort of get you in the right

direction get enough information to sort

of use your Annika breezing skills to

kind of continue

so that's product next up is sort of

company or clients and key questions

there are what is the company good at ok

this is sort of like a squishy

qualitative thing you want to know what

are the company's capabilities and

expertise and and this is where some

some interviewees and actually some

consultants to this is where they kind

of get screwed up because you know in

like a in a theoretical business case

the answers are very clean okay in a

real world situation it's not all about

the hard data in fact a lot of its the

soft data ok so one of the things you

want know what the company is what are

they good at doing sort of as

individuals at and as an enterprise and

the reason it's important is sometimes

it will you'll have an opportunity where

a client where market opportunity exists

there's a competitive vacuum but the

company is not good at what that market

wants a customer segment so then

theoretically business plan wise you

know maybe it's a good opportunity to

pursue but not let's say for that

particular company so you have to know

what they're good at and I'll give you

an example that a little bit because

we've asked customers what the tribution

channels they prefer you want to know

for your client or for the company but

distribution channels do you got and

what's the mix between them so

if there's a mismatch this helps you

flush out the mismatch so while the

customers want channel a but all your

resources and channel being that's a

mismatch okay so that's an insight and

then you can start brainstorming about

how you'd fix that I understand why it's

that way

historically and then we make some

changes along the way okay a cost

structure so this is sort of embedding a

little bit of our leader framework in

here the general questions are sort of

you know are you the low-cost producer

II the high cost producer sometimes if

you're dealing with a case that's just

kind of conceptual that's all you need

to know you know like the precise cost

structure like the number but that that

we're the leading low-cost producer in

the market okay and and that's that's

good enough for this family if they gave

you information around well at this wall

meaning we can produce at this cost at a

higher volume you can produce at that

cost that's like a cost curve that's

more of a supply curve and that's

usually a hint you got a switch to

potentially switch the supply demands

okay so conceptual you keep it here

merely specific you switch to supplying

man other things with costs a - just to

do certain more notes rather than

questions but the understanding the

proportion of fixed cost versus

available cost is very important because

it indicates a barrier entry issue okay

some example I I sort of I gave kind of

time is Amazon early on when they first

started the online bookstore it was a

low it was a low fixed cost business

totally virtual high margins they sort

of had a websites and then they had a

drop shipping relationship with a number

one wholesaler in books Ingram books or

whatever they are and and besos in 98

did an interesting thing where he

deliberately decides when even of the

cup was bleeding money decided to build

out 300 million dollars worth of

warehouses okay pissed off Wall Street

to no end because you can like make the

margins like worse for like four years

it's like damn straight I am here's why

number one I don't want to be tied to my

one supplier okay so there's like an

industry concentration issue right so

it's what it's a reverse of the Walmart

effect it's the Intel effect all right I

gotta buy all my chips of Intel so

they're getting all the profits and

they're sucking it out of all like you

know Dell and HP and compact wake up

actually I need a favor what did I just

say I lost my train of varied entry okay

so when when the fixed costs are are

very high that indicates a barrier to

entry so you have to deal with what's

existing competitors are the barrier to

entry is low then you're gonna get new

entrance that's what happened with

Amazon so they're like a thousand and

one bookstores that within the year okay

so he said well screw you I went I

didn't IPO I raised a billion dollars

boom $300 and chips on the table you

want to come play with me

put in three million bucks okay and it

kind of was pretty effective right and

then so Amazon in particular has been

very good at sort of adding various to

entry so they went from physical

warehousing infrastructure was sort of

one barrier to entry so they raised the

fixed cost that business be much higher

much more difficult to compete and then

did a lot of things on the rebel costs

like with book reviews scanning scanning

scanning now scan a lot of the books so

you can kind of keyword search them they

play up a couple hundred thousand books

sort of scan so if you want to compete

with Amazon you gotta go out and scan a

hundred thousand books

another big fixed cost so they're just

adding it up so you want to go play ball

Amazon you need like a half a billion to

a billion big payment but no one does it

so they got the business to myself okay

so that's why that's important another

thing one do is you want to compare the

cost structure of the company to again

to the marketplace so this class is over

a little bit and you just want to

understand are you in line higher or

lower and sometimes there's an insight

there and again all this was just trying

to flush out an interesting insight that

sort of puts together a paints a picture

what's going on and how you can what

what options you have for trying to fix

the situation if there is sort of the

case of sort of investment oriented you

would want to include investment cost

intangibles are useful sort like a brand

effect and those are sort of a strong

emotional loyalty customers have to the

product that's would the hard to con

that sort of analytically right so

analytically it ought to work but

customers just really love I don't know

aunt jemima like maple syrup and then

they just refuse use anything else

because it would be like heresy in the

South I have no idea

then shal situation and then

organizational structure I talked about

the example I give here is you know if

you're organizing your company by

product line but customers want to be

served sort of a sort of a cross product

lines so one point of contact are you

out of sync with what the market wants

so if you if you ask the so in the

customer portion of framework you're

asking how do they want to be served

what the district and channels are what

do they want if that's an issue they'll

any what if eclis mention it so when you

come back to the company you want to ask

what the organizational structures are

you in sync with the marketplace if

you're out of sync okay that's an

insight what we do about it that's where

the conversations sort of begins okay

last one is around competition I usually

ask around

I start with market shares so who are

the competitors and what's the market

share mix how concentrated is it is it a

monopoly oligopoly was it highly

competitive

because the competitor names for vastly

different in those situations okay well

funny story at McKinsey we were actually

banned from talking about pricing in the

context of price fixing we had really

had antitrust attorneys because we were

work with fortune 500 so you know and

oftentimes we work with all the key

companies in an industry and if profit

sucks in one business you know it

would've been very easy to say lunch

nudge wink wink over lunch you tell your

CEO Tom I see we should open price of 10

percent that's like highly illegal so I

just sort of came to mind so you can't

talk about that and actually I actually

got reprimanded for talking about it

because we really applied about that

so but knowing the concentration helps

you understand the competitive dynamics

that's very different Porter's five will

get I've sort of incorporated elements

of Porter's five forces in here if

you're not familiar with its worth sort

of reading competitive strategy of the

book or even just googling it and

getting a summary of it very useful

I mean I've sort of just very insightful

framework I sort of very impressed with

it I have sort of used it a lot and

let's see competitive behaviors what the

competitors doing what so basically

think of all the company questions you

asked and you want to know for the

competitors same deal

best practices do they really excel at

something that we stink that useful to

know again barriers to entry for the

industry overall we talked about and in

supply a concentration so the Intel

effect you got one supplier that kind of

controls it are they suck in I always

think

as the porters light forces is you got

the suppliers the company competitors

and then the customers and it's like

it's one big vacuuming sort of like suck

profits out you suck it out of the man

chain is suck it out of supply chain and

it's useful to know that if you have

that that pressure on your business it's

useful to know them and then last one

just to be complete or complete her or

more complete rather industry regulatory

environment in like lifecycle of the

industry so we sort of been in a trough

it is it a cyclical business so like in

mortgages I work in finance for a number

of years right now we're sort of in a

credit crunch thing and it's highly

predictable goes back 50 years every ten

years this happens

banks do you do stupid things ask for

bailout just crazy and then you know

people borrow more than they should

market tanks because all bleeding they

got a write-off loans and then there's

no credit and and they come comes back

next seven years later okay so that's

sort of the the checklist I use you have

questions yes on you here's please start

you try to figure out where the issue is

likely to be given what information you

have okay if you don't know so it would

no I wouldn't get I wouldn't do what I

just did I would not do what I just did

in the real case okay yeah you don't do

that I'm just explaining it does it

would be very boring what you are what

you want to do is I typically service

customer first unless unless dive

information that's just it's like a

competitive issue and in my sort of

competition okay so you sort of figured

what information you have initially

before you even touch the framework and

use that as your starting point and I

tend to go on each of these I might

spend five ten minutes but usually what

happens is I almost never get through

the whole thing before I discover

something really interesting that's very

indicative what's going on what's

driving the problem and at that point

this is where the creativity comes in

okay see if your mechanical get good at

this you'll do what I just did just bang

bang I gotta ask these 40 questions and

and and the interview will drop useful

information that if you're paying

attention is insightful but if you're

mechanically going through it and you

miss it it's clearly just

cramming through a framework okay and

that's like not good because it doesn't

show your palm something you're sort of

regurgitating stuff so we look what

you're looking for is you're looking for

an opportunity to branch off from this

okay so you're looking for the critical

insight in each piece and that tells you

what's going on tells you starts telling

the story what's going on and then you

might sort of go ahead and sort of skip

certain things alright so if the nature

of the business is such that I sort of

clear there's not like a Walmart effect

an Intel effect

I wouldn't use Porter's five forces all

right once I understand the nature of

the color of the customers are who the

competitors I would sort of skip some

those things so you start tailoring

these things based on the information

you get and that's where I don't know

call-out minute fifteen a minute twenty

you start deviating from the framework a

little bit or you start breaking things

out doing things within the framework so

it's still organized but it's not part

of like the standard questions so this

is where the whole you know talent comes

in it's less mechanical it's more about

look at the situation in analyzing it

laid out you told them like I want to

talk yeah customer product company yep

competition and you got an insight on

customer which is where you start it do

you dig deep then or do you go ahead and

still get a broad picture before you go

it depends on that sort of actually more

of a judgement question like if if I

sort of got the aha and I'll keep moving

if that's intriguing unexpected

counterintuitive I don't understand why

it's happening I'll keep digging okay

sometimes there's underlying there's

like underlying trends as to why things

happen so it's important I'm saying not

just what's happening but why okay so

this sort of gets the frameworks get you

to what right and as you get drilled

down lower and lower you start getting

the why and once you know why then it's

a lot easier know what to do about it

and then that sort of becomes more like

the HBS cases you've got all the

information you know what's driving the

whole situation now what are you guys

protagonists do and so that's sort of

how that process tends to attends to

evolve

you