Algebra Structures: The 1st Way To Be MECE In Case Interviews
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- เผยแพร่เมื่อ 15 มิ.ย. 2018
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The MECE principle (Mutually Exclusive, Collectively Exhaustive) is the most famous principle in management consulting.
It is used every single day by McKinsey, BCG and Bain consultants to structure their client's problems just like you see in case interviews.
When I was preparing for my case interviews I was constantly afraid I was not being MECE when solving my cases. Everyone told me that I should be MECE: Victor Cheng, Case in Point, and all the other "experts".
But one thing they did not tell me was HOW to be MECE.
In this video, I'm sharing with you The 1st Way To Be MECE: Algebra Structures. This is basically using math equations to structure your numerical problems.
This video is a follow-on from another video, The 5 Ways To Be MECE, which are 5 practical techniques you can use to create your own customized frameworks.
Algebra Structures are the most basic form of structuring, and one of the most important as well. They form the basis of how management consultants from McKinsey, Bain, BCG and other top consulting firms solve anything that has a numerical component to their clients: Profitability problems, Revenue growth problems, Cost-cutting problems, and so on.
Algebra structures can be amazing, but you have to know how to use them to best solve your case study problem. Otherwise, you're no better off than you were before.
Tell me in the comments if you've liked this video and what you've liked about it.
Table of contents (so you can find stuff later in the future):
01:40 - Examples of Algebra Structures
06:53 - How to use Algebra Structures
14:11 - Things to be aware of when using Algebra Structures
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Hope the best for your case interview preparation and I'll see you on the next video :)
Bruno
Music in the video:
"Funk Game Loop" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0 License
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Thank you, Bruno. Great video (and your free course as well). Actually my first thought was to divide revenue by # of salespersons.
Thanks Bruno these videos are awesome!
Thank you Bruno, your video and courses are really INSIGHTFUL, they help a lot in my preperation !
Superb Bruno!
Very helpful! Many thanks!
Thanks so much for this :)
this is amazing!
i'll appreciate if you can explain how you arrived at the components of the breakdown for each question or objective. you mentioned what the breakdown is but not how or why you arrived at the component
Thanks for the great video Bruno!
You’re welcome Martin!
Hey Bruno,
1. Thank you.
2. Cost per hire should also have a bucket number of candidates who got selected cause the less you select the higher the per hire cost would be, don't you think?
Still can't believe this course is free, thank you so much!
You're welcome!
Are you referring to the 5 ways to be MECE series or our free course, Case Interview Fundamentals?
@@CraftingCases yes, they are very helpful, thank you :D
Hi Bruno. By ad revenues, did you mean sales generated by ads or revenue from the sales of advertising time? At 4:16, you have segmented tv ad revenues into # of people who watch etc., but wouldn't # of people who watch TV be a factor of a bigger bucket?
The way I structured it is as follows:
1. Price/ minute of ad time
2. Time for tv ads
broken down into - tv time x * tv time used for ads
I feel that # of people who watch could be a way to explain why the pricing of ads have changed which would result into lower revenue, but directly factoring it into calculation for ad revenue would make it complicated? i.e you'd have to factor in change in price/change in tv viewership
Thank you for your content and your approach to casing has been the best i've seen.
Amazing
Hey Bruno, amazing video! I have one question: the last layer of the structure, usually the hypothesis statement, should be writen on my paper or I can just say it to my interviewer ? I'm afraid about the lack of time to think, create, and even write all this in a couple of minutes.
Parabéns pelo conteúdo!
Hey Rafael, glad you liked it. You can choose to write it or not. What I used to do is to write "H: (a few words to remind me of the hypothesis)".
So with just 4-5 words the thought is captured.
But you don't need to, you're being more evaluated for the words you say than what's written. You paper should be structured/organized, but it doesn't have to be complete.
Hi Bruno, really amazing content and by far the best I've found on case interviews !
A question regarding the issue tree at 11:30 : do you present all the levels directly to your interviewer right when you present the framework ? It would seem to be heavy on the interviewer if we had to present such a complex tree.
If we only present some levels, how far in depth would you advise to go ? When would you present the other deeper level ? Do you state them explicitly as you go down that particular branch ?
Thanks again, and congratulations on these videos !
I think 2 layers is the minimum for the first questions of the interview, and it's often better to do a 3rd layer as well. For questions within the interview anything between 1 and 2 layers. I usually do the upperside number and I recommend doing that if you're quick to structure (which you should be when you're interviewing).
For the specific hypotheses in the last layer, you can just develop them as you talk to the interviewer.
@@CraftingCases Thanks for the clear answer !
Hi Bruno, thank you so much once again for your great resources! For the market share(MS) problem, if the question is to find why a company's MS is decreasing, why is Revenue/Market size not insightful? I would have thought the nuance depended on the question. Thank you so much once again!
Hey Charles,
Love the question!
The problem with Revenue/Market Size is that for your market share to decrease you must either decrease Revenues or increase Market Size.
You can't really say that you lost Market Share because of an increase of Market Size as that's actually a good thing.
So, if you use that equation you're basically saying that the problem is that your Revenues decreased or at least didn't increase while the rest of the market grew.
Now, is a Revenue decrease case the same as a Market Share decrease case? Not really, because in the second one you need to decrease Revenues MORE SO than your competitors.
When you structure the case as Revenues/Market Size you're basically taking that nuance (of decreasing MORE THAN your competitors) out of the game, and that is an important nuance. You lose insightfulness because you left that nuance out and now you're solving a Revenue decrease case or even worse, a case where your revenues grew less than the market.
It's circular reasoning in essence.
@@CraftingCases That's very clear now Bruno, thank you!!
@@CraftingCases This is clear, thank you. But then, how would you structure the market share decrease problem?
Hey Bruno, Thank you, amazing video.
I have one question though: At the end of the video you advise us not to use definitions to create our structure. I understand what you say
but aren't we using the definition of the profit when we write 'Profit = Revenues - Costs' ?
Good question. Every formula is a definition, so I don’t think I expressed myself as precisely as I could’ve. The problem is when the definition brings in circularity.
The problem with the traditional market share formula is that you break it down into two parameters, but one is completely outside of your control (market size).
The profit formula is fine because you have some control over both revenues and costs. This makes it nor circular.
Good video. Not sure about the market share equation problem. The regular equation to answer why market share is decreasing = (Change in revenue/ change in market revenue) helps you to focus on the issues around growth being less than the market. At the 1st level, change in revenue can be broken into quantity and price and market revenue is driven by change in revenue of your competitors. I don't see the problem here. Please can you clarify? I also have a question on the formulae used in the first video which I've posted on that vid. Thanks
It's mathematically right, but it doesn't bring you any insights. Half of the equation is outside of your control, and you're left with "why haven't we grown sales?", when the right questions is "why haven't we grown sales AS FAST AS our competitors.
If you use that equation you'll know a bit of what's happening more than before (because it's mathematically right), but you'll never get to the core issue of the case.
Hey Bruno ! Thanks for the very insightful video. I have a question for you. Would it be wise to have an optimistic and pessimistic value range as your answer? For example, at 4:55, you have # of sales per sales-person which is an equation of # of clients visited per salesperson multiplied by conversion rate. If I were to assume that an optimistic conversion rate would be 90%, and a pessimistic conversion rate would be 80%, that would give me a range of value in revenue per salesperson. Would this be more insightful for the interview, or would the interview prefer a more precise value? Thanks in advance.
You can do that in an estimation case, but you can also use this type of structure in non-estimation cases, where you just get data from the interviewer or generate ideas without even getting data at all!
@@CraftingCases Brilliant ! Thanks again !
Hi Bruno, where can we practice more algebraic drills/problems? I'm struggling to find targeted algebraic structure practices!
did you ever find a resource to practice?
@@michaelifidon643 not specifically. i just ended up going through case books myself or casing more with friends
Alright thanks, did it help?
Hello sir, thanks so much for amazing information. I have one question can you please tell me in Market share problem, if we have question why market share is decreasing ? Than without using Revenue/Market size method. How should we solve this type problem ?? How should we go for this problem ??
It really depends on what drives market share in each specific market... You could use the 4Ps or numerical drivers of market share specific to each market, or hundreds of other structures... For each answer I gave you I could find a counter-example where it doesn't work!
@@CraftingCases sir, can you please give me some examples where it works and where it doesn't works ??
Hi Bruno, amazing video! Just one question, how do we solve the question related to a market share if not using the formula?
Did you even watch the video lol
Hi Bruno, thanks for the great video! I'm curious about the TV ad revenue equation on 3:52 is it true that the revenue of ads on TV is based on the number of minute people watch? So if the people don't watch then the brand doesn't need to pay for the ads even though the ads already aired?
I also have the same question. My assumption is that there is a basic fee for ad play on TV; but as more people watch this channel, the ad will be more expansive
Bruno, I didn't get the name of the equation you said at 2:11. Could you write here, please?
Gui Almeida sure! It’s the “# of trees per acre” * “ of harvested apples per tree”. That’s showing on the video by the way, were you not able to see it?
Yes, I can. However, I'm talking about the finance equation that you said at the 2:11 minute of the video, which is a way to break down return on equity. Thanks!
Got it! It's called the Dupont Equation (Dupont, the company, developed it in the early XX century).
It's ROE = Profitability * Asset Turnover * Leverage (or [Net Profit/Equity] = [Net profit/Sales] * [Sales/Assets] * [Assets/Equity])
It's great for business strategy because it takes a look at the business from the shareholder's eyes (that is, return on equity) and breaks it down into margin, asset efficiency and financial leverage. So if you're a retailer for example, you can give more return by either (1) increasing your profitability per dollar sold, (2) increasing sales per store or per square meter or (3) getting more debt. It basically breaks down your options to increase return and thus stock price.
9:02 11:10 14:47
Adjust the playback speed to 1.25x. Thank me later
Thanks, I'll thank you later
I wish that TH-cam did 4x.
1.5 is perfect
Hi Bruno, along the clip, you mentioned about the video to select algebraic equations so that one can get more insights or even the the answer faster. Not sure if you could direct me to that video please? Thank you very much.
Hey Chakkaphan, could you mention the "minute:second" I mentioned that so I can see what you meant?
CraftingCases Hi Bruno, it’s at 24:40. Thank you so much.
Hi, Bruno! I was thinking the same. Do you already have that url?
Hey Chakkaphan, I had missed your reply. I just updated the video with the link to that video. Here's the link for convenience: th-cam.com/video/DaMpVgs0wAI/w-d-xo.html
Gisele, I just answered in Chakkaphan's comment! Hope it's helpful :)