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Case Interview Secrets
Victor Cheng
INDEX
1. INTRODUCTION
2. THE VALUE OF AN INDEPENDENT PROBLEM SOLVER
3. THE CORE PROBLEM SOLVING TOOLS
a. Hypothesis
b. Issue Tree/Framework
c. Drill-Down analysis
d. Synthesis
4. THE HYPOTHESIS
5. THE ISSUE TREE
a. Issue Tree Validity Test #1: Your Hypothesis
b. Issue Tree Validity Test #2: The MECE Test
c. Issue Tree Validity Test #3: The “conclusiveness” test
6. DRILL-DOWN ANALYSIS
a. Tips for the Process-of-Elimination Process
7. SYNTHESIS
1. INTRODUCTION
How can you prove your worth and be taken seriously as a consultant?
● Ask clients thought-provoking questions they hadn’t considered previously.
● Analyze data to discover new insights that clients haven’t seen before.
● Develop data-supported conclusions (especially counterintuitive ones) that lead the
client toward a different set of decisions.
The two most common screwups are the following:
● Offending a client (even junior clients and administrative staff) by being rude, arrogant,
or dismissive.
● Stating a conclusion you can’t support with data.
How Client Billing Works
● In most consulting firms, each client and each of the client’s projects has its own profit
and loss statement (P&L).
● Each consultant on the team has two billing rates:
○ One for what the client is billed for that consultant’s contribution (typically an
hourly or daily rate)
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○ One for the consultant’s “cost” to the firm (typically salary; benefits; other
allocated expenses, such as rent, electricity, etc.).
● To “force” engagement teams to take on brand-new first-year consultants, the
engagement team can bill out that consultant to the client while showing a $0 cost on
the engagement’s P&L. (In these situations, the cost of the first-year consultant on his
or her first assignment is billed to the training department.)
2. THE VALUE OF AN INDEPENDENT PROBLEM SOLVER
Doing as Little as Possible vs. Boiling the Ocean:
If you want one cup of hot water, there are two ways you can get it:
● Get one cup of water, put it on the stove, and boil it.
● Boil the entire ocean and then scoop up one cup of the boiling water.
Accurate Enough vs. Precisely Accurate:
If you talk to a consultant about the likelihood of something, he will typically give you a ballpark
answer that deliberately has a margin of error of +/- 35 percent. This is because clients ask for
“directional” answers: “Yes, it’s a good idea” or “No, it’s a bad idea.” Because of this, consultants
typically don’t have to make extremely precise math computations.
Often Right but Never Without Factual Justification
In consulting, you always pick and choose your words carefully, because you need to be able to
back up anything you say.
If you say a client should take X action, you’d better be able to explain why.
● If a client asks you a question you don’t know how to answer, reply confidently that
you do not have the facts to provide an accurate answer.
● If a client asks for your opinion, say you suspect X would be a good idea and then
clarify, “But I don’t have the facts to be 100 percent certain.”
● If you don¡t know the answer, tell the client confidently that you don’t know the
answer.
Choose Your Words Carefully
Clients nitpick every word you say.
“Under most circumstances, the client should do X.” It’s much easier to defend “under
most circumstances” than “always.”
Sometimes long debates can arise to determine whether the recommendation should be
described as “necessary,” “highly recommended,” or “strongly recommended.” The tendency
was to make the case that the recommendation was “necessary,” but we debated whether we
had enough proof to substantiate that particular adjective.
It goes back to the principle of “often right but never without factual justification.” There are
two ways to stick to that principle:
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● (1) Get more factual evidence to support your argument, which takes more time.
● (2) Soften the language of your argument and use the facts you already have.
Being Right vs. Being Right “Diplomatically”
Always pay attention to how you present your conclusions. Your analysis and conclusions
aren’t automatically “right.” You need to communicate those recommendations
diplomatically— in a way that’s client-friendly.
If your clients don’t follow your argument, guess whose fault it is? If you’re a super-brilliant
consultant but you make the senior client feel dumb because he couldn’t follow your argument,
guess what? Someone’s getting fired from the relationship, and it won’t be the client.
The Airplane Tast (aka Don’t Be an Asshole)
The test: Would I want to spend three hours sitting next to you on an airplane?
IMPORTANT: be extremely respectful with everyone, including assistants, concierges,etc.. If
you’re a jerk, administrative assistants can make life much more difficult for you. If you treat
them with the kindness and respect they deserve, they can use the clout of the CEO’s office to
get people in the organization to respond immediately to your requests.)
Process Excellence
Process excellence is when a candidate is consistently able to follow a problem-solving process
successfully over and over again.
3. THE CORE PROBLEM SOLVING TOOLS
There are four tools to solve clients’ biggest problems:
● Hypothesis
● Issue Trees/ Frameworks
● Drill-down analyses
● Synthesis
a. Hypothesis
Hypothesis comes from the scientific method, which a scientist uses to test an idea she has
about what might be true in our world.
The next step in the scientific method is to construct an experiment to test this idea, or
hypothesis, conclusively to determine if it is true.
The reason to use this hypothesis led approach is because clients already have plenty of
opinions about what to do; they don’t need outside consultants to get opinions. Clients need
proof as to which opinion is correct.
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b. Issue Tree/Framework
Scientist uses an experiment to test a hypothesis; a consultant uses an issue tree. An issue tree
lays out a set of logical conditions that, if proven correct, prove the hypothesis correct.
Figure 1. Issue Tree Diagram
If some of the conditions aren’t met, you’ll have to revise your hypothesis and consecutively
your issue tree, so that once again if all conditions are met, your hypothesis can be proven
correct.
c. Drill-Down analysis
Once you have a logical argument, you’ll need to analyze the data to prove or disprove each
condition of the hypothesis.
It’s called drill down analysis because you start at the top of your issue tree and drill down
through all the logical branches and sub-branches, gathering data to factually prove or
disprove that branch (or sub-branch).
Drill-down analysis is essentially a process of elimination. You drill down one branch of
analysis, disqualifying or qualifying its relevance. If you’re doing the analysis correctly, you are
constantly drilling down one branch, discovering it’s not valid, revising your hypothesis (and
often the branches of your issue tree), and then drilling down an entirely new branch. You do
this over and over, all day long.
d. Synthesis
Synthesis involves stating your conclusion in a way that:
● Tells the client what to do.
● Tells the client what you discovered and what it means.
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● Couches your recommendation in the context of the overall business, not just in terms
of the single decision the client asked you to assess.
Review Guidelines The Pyramid Principle
4. THE HYPOTHESIS
When you take a hypothesis-driven approach, your initial hypothesis often is not correct, but
you’re able to determine quickly and with extremely high confidence what is not true. This
shortens the problem-solving process by reducing the range of possible conclusions.
You want to delay stating a hypothesis long enough to establish some basis for it but not so
long that you forget to state it at all.
5. THE ISSUE TREE
The logic of an issue tree and a hypothesis is analogous to the “if/then” statement common in
logic arguments and proofs:
Issue tree branches = if
Hypothesis = then
A well structured issue tree passes the following three validity tests:
● Your hypothesis
● The MECE Test
● The “conclusiveness” test
a. Issue Tree Validity Test #1: Your Hypothesis
The only reason you use a framework or issue tree is to test a hypothesis! The hypothesis is
more important than the framework.
Ask yourself: Is your Issue tree testing the hypothesis?
b. Issue Tree Validity Test #2: The MECE Test
Is your Issue Tree Mutually Exclusive & Collectively Exhaustive?
c. Issue Tree Validity Test #3: The “conclusiveness” test
The final test of a valid issue tree is to ensure that using it will produce relatively conclusive
results. What I mean by this is that the following statement should be true about your issue
tree structure: If all the branches of the issue tree turn out to be true, I can’t imagine a
scenario in which the opposite of my hypothesis would be true.
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6. DRILL-DOWN ANALYSIS
Every issue tree or framework consists of components that, in aggregate, can prove or disprove
your hypothesis. You need to use a process-of-elimination approach to analyze the
components of your issue tree or framework.
As you work through each branch of the issue tree, you must determine if the analysis of that
branch is consistent with the hypothesis. If it is, the hypothesis might be correct, so you should
continue analyzing the remaining branches of the framework.
If analysis of a branch disproves the hypothesis, you should revise your hypothesis, reconsider
what framework or issue tree is needed to test the new hypothesis, and then (and only then)
continue your analysis.
Example Hypothesis: Client should not enter XYZ market.
Arguments:
● Fifty percent of the market is shrinking.
● Client has a modest and temporary competitive advantage.
Are the arguments conclusive? No.
When neither hypothesis passes the “beyond a reasonable doubt” test, two things have
happened: (1) Not enough data has been obtained, and (2) the two extreme positions (enter the
market versus not enter the market) have been oversimplified. The likely “right” answer is
probably some nuanced option between the two extremes, and you find this answer by using a
process of elimination.
Revised Hypothesis: The client should enter one segment of the XYZ market.
Arguments:
● One segment of the market is growing and attractive.
● Client has at least a modest competitive advantage in this segment that can be
strengthened over time.
● Competition in this segment is weak or modest.
If these three supporting statements are true, they provide reasonable support that the
hypothesis is correct and thus should be considered a logical conclusion. Before we can
positively conclude this, we need additional data to validate the supporting statements.
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This is what we call a process-of-elimination approach, you use the facts you’ve discovered to
eliminate different hypotheses systematically.
We use this process because clients commonly misunderstand their own problems. They
sometimes incorrectly assume that a visible result they do not like, such as a decline in sales or
profits, is the problem, not realizing that the visible issue is just a symptom of the underlying
problem.
Clients probably have a lot of intuitive problem solvers on staff already, and each employee has
his or her own opinion. But clients need someone to use facts to determine which of those
opinions are the best.
Not only that, they need everyone on the client team to agree on the solution. Recommending
a solution to a client is completely different than having the entire client team agree on it. If
you involve all the client team members in your approach—and thereby your process of
elimination— they’ll see you systematically tackle each branch of an issue tree and cross out
certain branches as you eliminate them. In doing this, you not only show the clients your
process but also involve them in it directly.
Remember, don’t just tell the answer, but rather lead to the answer.” People support what they
help build.
a. Tips for the Process-of-Elimination Process
Tip #1: Start with the Branch That Eliminates the Most Uncertainty First
Identify all the branches you intend to analyze, and then arrange them in the order in which
you plan to analyze them.
Tip #2: Use Both Quantitative and Qualitative Analyses
Tip #3: Don’t Stop Drilling Down a Branch Until You Reach a Conclusion
Majority of the time spent is not spent on solving the client’s problem—it’s spent on isolating
the underlying cause of the client’s problem.
Never, ever propose a solution to a case until you’ve isolated and defined the problem. Then and
only then can you propose a solution. Drill down far enough into the branch of an issue tree to
prove your hypothesis correct or incorrect, because either conclusion is useful.
Tip #4: When to Stop Analyzing—The Minimally Necessary Data
You don’t want to overanalyze a branch of analysis beyond what is minimally necessary to test
your hypothesis. To grasp this concept, we refer to the 80/20 rule.
7. SYNTHESIS
Review Guidelines The Pyramid Principle
