The 5 Ways To Be MECE In Case Interviews — Transcript

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1. 0:00Have you ever noticed how everyone tells you you should be MECE when structuring your cases,
2. 0:05but no one actually shows you how to do it beyond a few simplistic examples.
3. 0:10Back when I was a candidate, I got so frustrated because all the case interview experts would
4. 0:18lecture at me and say, "you should build your own structures and learn how to do that" or
5. 0:23"just make sure you're not copy pasting your structures", but when they were actually teaching
6. 0:29me, then the story was different.
7. 0:31It was something like, here's one example of a structure or just learn my two frameworks
8. 0:38and you'll be fine for 90 percent of the cases, nevermind the other 10 percent.
9. 0:42You're probably not going to get them anyway, and when I went to my interviews at McKinsey,
10. 0:48at Bain, what I found instead was that the majority of cases could not be solved using
11. 0:56this pre-made frameworks from case interview books and that you actually needed to know
12. 1:01how to create your own MECE structures for that.
13. 1:05So I'm here to change that.
14. 1:07Hey, my name is Bruno.
15. 1:09I'm an ex McKinsey consultant and the co-founder of Crafting Cases, where we teach you how
16. 1:13to stand out in your case interviews by thinking like a top management consultant, and in this
17. 1:19video I'm gonna show you the five ways to be MECE.
18. 1:23If you learn these techniques well, you're going to learn how to create customized structures
19. 1:27from scratch for your cases, for your business problems, and that will help you stand out
20. 1:32in your case interviews and you'll never get stuck in a case again.
21. 1:37Now in this video I'm going to give you an overview of the five techniques just so I
22. 1:41can get the big picture and then I'm going to make other videos and put in sequence of
23. 1:46this one each detailing and give you the nuances of each technique so that you can actually
24. 1:53put that in practice in your cases well.
25. 1:56So the ideas from this video came from a nine part article series that I wrote, and that's
26. 2:01on our website at crafting cases.com/MECE.
27. 2:06So if it gets you interested, check it out.
28. 2:09So without further ado, let's jump right into the first way to be MECE.
29. 2:14We call the first way to be MECE Algebra Structures, but you can simply call them math equations.
30. 2:21Math equations are a way to structure any numerical problem, so you've probably heard
31. 2:27about the profitability framework.
32. 2:30Profits equals revenues minus costs, and that's just one type of Algebra Structure, but many
33. 2:36people don't realize is that whatever numerical metric you have to structure, you can always
34. 2:42break it down into a math equation.
35. 2:46And math equations are always MECE because each variable must be independent from one
36. 2:52another.
37. 2:53I mean they are different which means that there are no overlaps, so they're mutually
38. 2:58exclusive.
39. 3:00But also if you take all of the metrics together, they must equate the end results or the variable
40. 3:08that you're breaking down.
41. 3:10It's an equation after all, so there are no gaps, which means they are collectively exhaustive.
42. 3:16So let me show you examples of Algebra structures and I'm gonna do it for a case that is not
43. 3:22too rare in case interviews.
44. 3:24I got a case like this in my McKinsey final round, but that you won't find in any case
45. 3:30interview book probably because they don't have a framework for that.
46. 3:34And the case is what are possible reasons for Nespresso's market share drop in the London
47. 3:41coffee capsules or coffee pods market.
48. 3:45I want a structure that's based on our Algebra or on a math equation for this.
49. 3:52Now a lot of people would come up with "revenue has declined", but we're not sure of that.
50. 3:58We just know that market share has dropped.
51. 4:00So here are four Algebra structures that you could have come up with.
52. 4:05First you could have come up with Nespresso's market share in capsules equals its share
53. 4:13in machines, so the percentage of machines have coffee machines that are are Nespresso
54. 4:17machines times the share of capsules, of Nespresso capsules, within those machines.
55. 4:26So I broke down a certain percentage of machines are Nespresso and then a certain percentage
56. 4:32of capsules that are used within those machines are Nespresso capsules.
57. 4:36And that's Nespresso's market share.
58. 4:39Another example could be Nespresso's market share is the percentage of capsule customers
59. 4:45that buy Nespresso, huh, eventually.
60. 4:49So they, they're customers, they're not necessarily exclusive customers times the percentage of
61. 4:57capsules that these customers buy that are Nespresso capsules.
62. 5:02A third way to do an equation for Nespresso's market share in this market would be well
63. 5:08how much percent of the points of sales of coffee capsules is Nespresso present in and
64. 5:16I'm going to multiply that by the market share within those points of sale so we might have
65. 5:21a problem of not being enough points of sales or a problem of people not picking up our
66. 5:29product and the fourth way to break down market share, of course, is Nespresso's revenues
67. 5:37divided by the market size.
68. 5:40Now, this is probably the way most people would structure this problem and there's a
69. 5:44problem in this last one.
70. 5:46I'm going to leave this problem to to see it in depth in the next video in this series,
71. 5:52which is specifically on Algebra structures, but the thing is this formula is mathematically
72. 5:58correct, but because this is the very definition of market share, it doesn't really help us
73. 6:04solve our problem.
74. 6:06Now, math equations are an amazing way to structure a problem.
75. 6:12Because math is really precise, when you structure a problem via a math equation, it becomes
76. 6:18pretty clear to everyone how is the problem broken down, how is the going to be solved?
77. 6:23But it has a strong limitation to it, which is you can only use it for math or numerical
78. 6:31problems.
79. 6:32Also, there are two factors that have to be very aware in your mind when using math equations.
80. 6:38I'm going to leave the details of those for the next video, but the gist of it is the
81. 6:44first thing when you have a strategic, complex, long-term problem, even if it's a numerical
82. 6:51problem, it's often best not to use math equations because they can get too simplistic.
83. 6:58And the second thing is, uh, when you use a math equation and you focus on the numbers
84. 7:05alone, on the variables alone, you run the risk of not being insightful enough.
85. 7:11So you don't want to be the consultant who has all the equations in their mind but can
86. 7:16never talk about real world stuff.
87. 7:19So if you want to know how to use Algebra structures correctly, check out the video
88. 7:25specifically on it.
89. 7:26It's an amazing way to structure a problem if you do it correctly, and if you do it for
90. 7:32the right types of problems.
91. 7:34Now let's move onto the second way to be MECE.
92. 7:37We call these Process Structures.
93. 7:40This is probably the most underutilized structure type by candidates, and you can say that it
94. 7:46might be one of the most useful also, it's so simple, it's so effective, and I used to
95. 7:52use them probably every day at McKinsey.
96. 7:54The underlying logic is this: when you have a problem that has an underlying process to
97. 8:01it, you can be MECE by simply breaking down this problem into the stages of the process.
98. 8:08And this must be MECE because processes have stages.
99. 8:12They have a beginning, a middle, and an end.
100. 8:16That means that each stage is different from each other, so it's mutually exclusive.
101. 8:20There are no overlaps, but also if you take all the stages together, you have the whole
102. 8:28problem.
103. 8:29You have the whole process.
104. 8:30That means that there are no gaps.
105. 8:32So it's collectively exhaustive.
106. 8:35So to show one example of a process structure, I'm just going to use the same case, Nespresso's
107. 8:41market share has been dropping in the London's coffee capsules markets.
108. 8:48And this is not the best case to use a process structure with.
109. 8:54It's better to use it for manufacturing cases, hiring cases, sales, anything that involves
110. 9:00a process, but if you can see an underlying process for market share and I can see one
111. 9:06here which is the customer journey to buy our product.
112. 9:11That's kind of a process.
113. 9:12We can come up with a structure even for this kind of problem.
114. 9:16So we can say that the first step of the process of the customer buying our product is that
115. 9:23they have to have the required machine.
116. 9:26So maybe market share has been dropping because less customers have the required machine.
117. 9:31Then the next step is that they have to find Nespresso capsules in their local stores.
118. 9:37Wherever they shop for capsules.
119. 9:40If they're shopping on the Internet, they're going to find it anyway, but maybe less customers
120. 9:44can find it.
121. 9:45So that's the second step because the customer has decided they want coffee, they have the
122. 9:50machine, now they go to the store, but they can find Nespresso.
123. 9:55The third step here of the process would be that customers need to, when they go to their
124. 10:00stores, they need to get interested to buy capsules.
125. 10:05So maybe less customers are interested to buy capsules, capsules, coffee capsules Nespresso's.
126. 10:13The fourth step is that even if they're interested, they still need to pick up the capsules so
127. 10:19maybe the capsules are locked up somewhere or they are not easily accessible or not attractive
128. 10:25enough.
129. 10:26So they got interested at buying them, but they won't buy them, uh, or maybe it's too
130. 10:32expensive.
131. 10:33And then finally the last step of this process is they're buying capsules, but they're buying
132. 10:39less capsules than they used to.
133. 10:43So I'm following the customer journey to understand why Nespresso's market share has dropped.
134. 10:49And this is a Process Structure.
135. 10:52For more structures like that, just check out the video on process structures.
136. 10:56There are going to be problems that fit more with this.
137. 10:59But you can use this technique for a variety of cases.
138. 11:03Now I had to stretch my thinking a little bit to make market share fit into a process.
139. 11:09It wasn't the most elegant way to structure this case, but it could be done and there
140. 11:15are many types of problems where the most elegant way to structure them actually our
141. 11:20process structures.
142. 11:22So as I've said in the in the slides, sales, manufacturing, hiring, things with an underlying
143. 11:29process to them.
144. 11:31Now this type of structure has a severe limitation, which is if there are no processes underlying
145. 11:38the problem, then you can't use them at all.
146. 11:41Also, even for process-like problems, in case it's a very strategic problem, this may or
147. 11:49may not be the best way to structure them, and the reason is when it changed our strategy,
148. 11:55does the process stay the same?
149. 11:57Does the process even exist?
150. 12:00So in strategic problems you may consider using conceptual structures, which is the
151. 12:05next part of this video.
152. 12:07If your problem does not come out of a process, nor is it numerical, you'll probably need
153. 12:13to use a conceptual framework, which is the third way to be MECE.
154. 12:18Now, conceptual frameworks are basically qualitative structures that come out of grouping concepts
155. 12:25together.
156. 12:27Some commonly known ones are the 3Cs or Porter's five forces or the 4Ps of marketing, but it
157. 12:35can actually create your own conceptual frameworks from scratch by grouping together ideas into
158. 12:42broader concepts.
159. 12:44So let me give you an example here.
160. 12:46Same case, Nespresso's market share, drop in the London's coffee capsules market.
161. 12:51One conceptual framework we can use to figure this out is, well, maybe this happens because
162. 12:57our customers have changed or our competitors have changed or our company has changed, so
163. 13:06one of these three players must have changed something and then we can detail that something
164. 13:12in deeper layers of our structure.
165. 13:14Another example is assuming that there was no shortage of production of the capsules,
166. 13:21then either our product became less attractive or our distribution channels are harder to
167. 13:28find or our price is too high or new customers are unaware of our product.
168. 13:34So I'm just using traditional frameworks here, the 3Cs on the left and the 4Ps of marketing
169. 13:42on the right, but notice how in the 4Ps actually adjust the wording to be more specific to
170. 13:48this problem.
171. 13:50Specifically in the last bucket, which traditionally would be called promotion, but I called it
172. 13:57an awareness.
173. 13:58Anyway.
174. 13:59I'm just using the traditional frameworks here, but you can actually develop your own
175. 14:05and be more specific to your cases.
176. 14:08Because you can quantify the parts of your structure, it's hard to eliminate the parts
177. 14:13that might not be important.
178. 14:15So if you're using an Algebra structure or a Process structure, you can get some numbers
179. 14:20and see which parts matter and which ones don't.
180. 14:24But when you're using a conceptual framework, you can't do it because you can't put numbers
181. 14:30into the parts of your structure.
182. 14:32I mean you can't quantify customers or competition.
183. 14:36So this qualitative approach forces you to look into every area, which is not very good
184. 14:42for efficiency, but that's pretty good.
185. 14:45If our overall goal is to get the whole context of the situation, which is exactly the case
186. 14:51when you have a complex long-term strategic problem.
187. 14:56So you want not use, in most cases, you want to use conceptual frameworks in those types
188. 15:02of cases, even if they have a numerical problem.
189. 15:06For example, a long-term, corporate revenue growth case could be more useful to use a
190. 15:12conceptual framework than a price times quantity, revenue type of structure, so you still quantify
191. 15:21whatever you can in this long term complex strategic cases, but you also want to look
192. 15:28things at the qualitative side more on this, on the specific case or each technique specifically
193. 15:36the one on conceptual frameworks, but bear this fact in mind.
194. 15:40A conceptual framework will force you to look at everything you can't eliminate with that,
195. 15:48which is bad if your goal is efficiency, but it's good if you actually need to look at
196. 15:54everything and you can't really get numbers to make the decisions or to make the whole
197. 15:59decision.
198. 16:00Now, before moving onto the other two ways to be MECE, let's pause for a minute here.
199. 16:05We just went through what we call the three core structuring techniques, Algebra structures,
200. 16:11Process structures, and Conceptual Frameworks.
201. 16:14Now, this three structure types are much more insightful than the other two, and so they
202. 16:20should be the base of your structure.
203. 16:23Whenever possible use them and you can actually structure any type of problem by either using
204. 16:30one of them or by combining each of these three into an issue tree, so you might start
205. 16:35a problem with an Algebra structure and make an equation.
206. 16:39Then get one variable of this equation and build a process structure to detail it.
207. 16:46Another variable you might want to explore with a conceptual framework, so that's something
208. 16:50that's possible.
209. 16:52The other two types of structures are still useful, mainly because they're so easy to
210. 16:57do so you can make your structures better with them or they can get you unstuck of certain
211. 17:04situations.
212. 17:05So let's take a look at them.
213. 17:07The fourth way to be MECE are called segmentations.
214. 17:11Now, segmentations are the favorite way that case interview "experts" or case interview
215. 17:16book writers use to explain the MECE concept and segmenting basically means that you're
216. 17:23slicing up the problem according to some criteria.
217. 17:27For example, I could say that a pizza is divided into the crust and the center and that's a
218. 17:34way to segment the pizza or a pizza segments into slice number one, slice number two, slice
219. 17:42three.
220. 17:43Now let's get into our case from this video just to see what segmenting looks like in
221. 17:48Nespresso's market share example.
222. 17:51So you could say that Nespresso has lost market share either because they lost market share
223. 17:57in the household market or in the corporate market or in the hotels and restaurants markets.
224. 18:03Or can say that they lost market share among low income customers or mid income customers
225. 18:09or high income customers.
226. 18:11OPr they lost market share either because they lost market share in the e-commerce channel
227. 18:15or the own stores channel or among retailers.
228. 18:21Or did lost market share because they lost market share with customers who drink less
229. 18:26coffee or more coffee.
230. 18:28So these are some ways to segment Nespresso's market share loss and they're all MECE because
231. 18:36you're considering the whole market and separating them in different ways or in independent parts.
232. 18:44Segmentation can be useful but only as complements of other types of structures.
233. 18:50Because they're tracking the same metric across segments, so in our case, we're still tracking
234. 18:55market share in the household market, in the, uh, the corporate market or the hotels and
235. 19:02restaurants, markets we went from market share to market share in each market.
236. 19:07Because of that, they can lead you to a direction but they can never tell you why your market
237. 19:14share is dropping.
238. 19:15This is because, and this is the reason why they're not as insightful as other structure
239. 19:20types can be.
240. 19:22Because the segmentations lead you to hypotheses but never to a root cause, they can never
241. 19:28get to the root of the problem.
242. 19:31So you can use them to spice up your structures.
243. 19:34But if you base your whole problem solving approach in segmentations, you'll always have
244. 19:40hypotheses, but you'll never be able to understand WHY things are happening, which is a bad trait
245. 19:46for a consultant, by the way.
246. 19:48However, there is one situation in which if you don't use segmentations, you never get
247. 19:55to the root of the problem and we call that situation the Mix Effect.
248. 20:00We estimate that about 30 percent of case interviews have them and they have them because
249. 20:05there's a lot of strategic business problems that have this problem and because it's a
250. 20:12bit long to explain here we're gonna leave that to the video on segmentations, but just
251. 20:17be aware that you usually use segmentations to spice up your problem solving approach,
252. 20:23find better hypotheses, show better hypotheses, but they are actually necessary when you have
253. 20:30a Mix Effect problem and can never guess when you get those so use segmentations as complements
254. 20:36to make better at hypothesis, to spice up your structures and to get to the mix effect
255. 20:44problem when you have it, but use it as a complement for a core structure that's actually
256. 20:49going to be looking into deeper reasons of why something's happening or of why you should
257. 20:55do something.
258. 20:57And finally, the fifth way to be MECE is to use opposite words.
259. 21:02These are staples that you can use whenever you want them and they're pretty easy to use.
260. 21:08So in our case, for example, we could say that Nespresso's market share has dropped
261. 21:13because of internal factors or external factors or we could also say that it's because of
262. 21:19breaks in supply, so products are not reaching the market or because of loss of demand or
263. 21:26we could say that it's because of marketing related reasons and non-marketing related
264. 21:32reasons.
265. 21:34So you can use opposite words to divide the problem into two and make it easier to solve
266. 21:40them and to explain, uh, your approach and your ideas.
267. 21:45And of course I could have started this video by showing that there are two ways to be MECE.
268. 21:50You can use opposite words or you can not use opposite words.
269. 21:54And if I did that, I would have lost all the insightfulness, all the nuance.
270. 21:59So one mistake that I see a lot of candidates doing is to over rely on this type of structure.
271. 22:06So they always use internal, external, financial, nonfinancial factors, supply and demand.
272. 22:13And by doing so, they lose all their insightfulness and they seem they seem a little bit dull
273. 22:19to their interviewer.
274. 22:21So, opposite words have their place, they're great for quickly having structure to communicate
275. 22:29or even to get you unstuck of certain situations.
276. 22:34Just be careful not to over rely on this type of structure.
277. 22:37So this is it for this video.
278. 22:39These are the five ways to be MECE.
279. 22:42You can read more in our nine part article series at www.craftingcases.com/MECE or even
280. 22:48better, you can just keep watching and I'm going to put a series of videos in this playlist,
281. 22:54one for each technique so that you can see other examples of these techniques in practice,
282. 23:00in different types of cases so that you can see how to properly use this techniques so
283. 23:06that you can get their full potential and so that you're aware of common pitfalls and
284. 23:12just things you should be aware of when using each of these techniques.
285. 23:16At the end of the playlist, I'm going to put up a video on how to combine these five techniques
286. 23:22so that you can create issue trees.
287. 23:24A lot of people have asked me how to create customized issue trees for their case interviews,
288. 23:30just like a McKinsey consultant would, and in that video I'm gonna show you how, but
289. 23:35it basically is putting together these five techniques into a cohesive structure for your
290. 23:42case.
291. 23:43If you've liked this video, please like and hit subscribe so you can subscribe to this
292. 23:48channel.
293. 23:49Also, if any of these techniques from this video has transformed or changed how you see
294. 23:56case interviews, how see structuring your cases, I'd love to know about it.
295. 24:01So please write in the comments I'm going to read and respond to each one of them because
296. 24:06I love to know how candidates transformed their approach after using these types of
297. 24:12techniques.
298. 24:13So I hope you've liked this video and I'll see you in the next one, which is on Algebra
299. 24:18structures.
300. 24:19So stay tuned and go to the next video because it's a really good one.