Structured Problem Solving & Hypothesis Generation

1. Structured Problem Solving & Hypothesis Generation

2. Goals of this module • Lay out a systematic approach to solving business problems –“Structured Problem Solving ” • Establish a common “modus operandus” for Consulting teams • Practice the suggested process on a real-life example © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 2

3. Defining the issue is the first step in the journey to final recommendations Form Hypotheses Gather Data Analyse Data Find Insights Develop Conclusions and Make Recommendations to Implement Define the Issues What are the questions keeping you awake at night? Statements that provide direction and structure for the analysis Factual information gathered to prove or disprove hypotheses Analyse what the data tells us So what? —aha, new thought What you should do… and how © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 6

4. Hypothesis formation ensures that our analysis is focused on our client’s problem Form Hypotheses Gather Data Analyse Data Find Insights Develop Conclusions and Make Recommendations to Implement Define the Issues What are the questions keeping you awake at night? Statements that provide direction and structure for the analysis Factual information gathered to prove or disprove hypotheses Analyse what the data tells us So what? —aha, new thought What you should do… and how © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 7

5. Hypotheses are developed in three steps 1 Define the question • What are the real strategic issues? • What is the impact on the organisation? • What are the priorities? Is there a market for white label insurance products? 2 Review and Describe Multiple Assertions • We believe this to be true . . . • A series of statements, not yet backed by data • Based on initial data search or expert opinions • Direct channels are growing • Retailers have a strong channel and brand • There are existing products 3 Form the hypothesis • We think . . . • It looks like . . . • The right answer may be . . . • The options could be . . . Chubb Insurance can access new business by using the brand strength of Tesco resulting Is low cost of acquisition and profitable business A number of assertions need to be true for a hypothesis to be valid. © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 8

6. A hypothesis should identify not only the issue but also the cause and the impact Think through these three stages as you create a hypothesis to help you plan out how you will test it: • What is the issue? • What is the underlying opportunity? • Where is the advantage? • What do you think causes the issue? • What are the key drivers of the process? • What is the impact of the issue? • How can we tell there is an opportunity? • Why do we care? “x is an opportunity ...” “…due to...” “…resulting in...” © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 9

7. Our problem solving approach produces results through answering a simple series of questions • Is there a problem or opportunity? • If so where does it lie? • Why does it exist? • What could we do about it? • What should we do about it? DEFINE THE PROBLEM STRUCTURE THE ANALYSIS FIND THE SOLUTION Fine, but IWIK H2 do this... © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 12

8. Why problem definition matters “If you don’t know where you are going, any road will take you there.” -Anonymous © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 16

9. In structuring a problem, break it into smaller, easier-to-handle components AND start with the right definitions US Car Market Light Trucks Passenger Cars Big 3 Mini Vans Sport Utility Vehicles Ford GM Chrysler But be careful — why does this not work? © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 17

10. The most important rule for any structure you impose "Mutually Exclusive and Comprehensively Exhaustive" © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 18

11. DEVELOP A HYPOTHESIS What differentiates a good hypothesis from a bad one? Good Hypotheses Are Bad Hypotheses • On target: • Answers the core question on the clients’ mind • Accurate: • Embraces the entire range of competitive or profit drivers • Minimal: • “Occam’s razor” • Actionable: • Can be quantified and tested • On time • Cannot be refuted • Cannot possibly be quantified • Require you to “Boil the Ocean” • Are so obvious that nobody can intelligently disagree with it • Or look like an abstract model of a process consisting of boxes, arrows and clouds © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 31

12. DEVELOP A HYPOTHESIS How to find a good hypothesis • There are proven processes to generate hypotheses: • Talk to lots of people about the core problem • Have a brainstorming case team meeting • Taguchi method — ask “5 Why’s” • Start with general validity checks for your hypotheses: • Assume perfect rationality — how ought the business system to behave? • Look for analogies (other industries or problems) • Imagine that you had perfect information — what would the ideal analysis look like? • Try Lateral Thinking: • Think about the problem from a different angle © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 32

13. DEVELOP A HYPOTHESIS What if your hypothesis is proven wrong? • You Win! • Hypothesis-driven thinking requires frequent reviews of the prevailing and current hypotheses: • Do we still think they are right? • Are we making progress towards disproving them? • Are they at the right level of generality/predictiveness? • Having proven a hypothesis wrong means you have made a big step towards answering your question! “A wise man sometimes changes his mind, but a fool never.” -Arabic Proverb © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 33

14. Summary • To be developed – thank you!! © 2004 Capgemini - All rights reserved Xxx/yymmdd - Structured Problem Solving and Hypothesis Generation, Author / 34