McKinsey: Problem Solving: Individual Assignment 1

Rajdeep Banerjee
DM22151

The word ‘Problem Solving’ intrinsically carries in itself a variety of different meanings,
however almost all of them unilaterally focus on working out an answer to the said
‘problem’, without giving much thought to the process behind it. The session we attended on
the 5th of September fundamentally altered our approach to the same, helping us embark on a
new journey when it comes to solving issues at hand, simultaneously appreciating how
mastering the art of solving problems aids us in managing time efficiently and helping us
become better managers.
At the very beginning, we were taught that any problem should be approached keeping a
logical mental framework intact and one should ascribe to an impact-driven, focused and
fact-based approach while attempting to solve the problem. This basic understanding was
followed by a schematic representation wherein the different steps to solving problems
efficiently was enumerated. The first step was defining the problem, or in other words,
coming up with the problem statement. This helps people understand fundamentally what is
expected of them and resources can be spent in a similar direction. It was conveyed to us that
a good problem statement was incorporate the elements of Specific Measurable Action-
oriented Relevant Time-bound (SMART). Thereafter, one should break up the problem into
various issues; this helps to ensure solvers working to target the individual issues inherently
affecting the problem at hand, utilizing a practical approach rather than theoretical
frameworks, finally creating a pareto-optimal solution. Conducting analysis and identifying
solutions is the next step, wherein probable resolutions of the given statement are highlighted
and its applicability is verified. Out of these probable resolutions, non-key issues are
eliminated and the focus is drawn squarely on the essential aspects. Subsequently, findings
are collected to form a basic argument, on the basis of which the given problem maybe
solved. This step is of paramount importance because it serves as the primary building block
for our final solution statement. At the penultimate stage, one must create a proper execution
plan, detailing key activities for each initiative, even mentioning singular actions that must be
taken and using the aid of time-based milestones and assigning individual owners and their
corresponding responsibilities. The final step in this process is communicating to
stakeholders, the decisions that have been taken by the team dedicated to solving the said
problem, incorporating recommendations as well to ensure that the case is equivocally
solved.
Perhaps, the most important aspect we learned about solving problems using a predetermined
method is creating an ‘Issue Tree’. It as a schematic diagram that plots all possible outcomes
that may occur when a series of events are set in motion by a singular decision.
With the knowledge of solving problems in a structured manner inculcated, we proceed on
trying to solve the cases allotted to us.
Case 1: Save-a-Penny
We proceed by first analyzing the context of the case, wherein Save-a-Penny experiences
decreasing market shares and revenues and our objective is to improve the same. Setting the
criteria for success as improvement in non-food sales (since it is the leading product with
majority share in proceeds) and working in the same sphere of influence, possible problems
are first highlighted, such as improvement of existing stores, considering new stores cannot
be constructed and floor space dedicated to non-food items is around 50%, possible solutions
are drafted, noting that Mr. R is the stakeholder along with the board of the company.
Correspondingly, various probable solutions emerge, which have been highlighted in the
issue tree below:
Increasing revenue
of Sales-a-Penny

Increasing purchase
Increasing number
among existing
of customers
customers

New customer Existing customer Affecting price level Non-price levers for
touchpoints touchpoints of Non-food items non-food items

Push-marketing: Pull-marketing:
Accepting orders Home Delivery of Marekting within
store employees Attractive discounts Direct discounts Cross sales Ease of access
online products stores
pitch for product for customers

Better customer
Increase in stock
service

The above chart visualizes the different methods that Save-a-Penny may undertake while
solving their problem, i.e., increasing revenue of non-foods sector.
Case 2: GoodFoods
The task here is made easier by the fact that the problem statement has been provided to us
beforehand: “What actions must GoodFoods undertake to increase operating margins to 3.5%
annually?” We proceed by invoking the same plan of action mentioned earlier, beginning with
understanding the context behind the situation, characterized by price-based competitors rapidly
gaining market share and consumer demands changing towards services and convenience.
Clearly, the criteria for success is an operating margin of 3.5%, and in order to achieve that, a
definite solution space is created where the focus is squarely upon the Spanish grocery retail
market. Before proceeding, some problems are identified, such as regulation restricting size of
stores and law disallowing prices below costs. Finally, key stakeholders are identified to whom
the final set of probable solutions are presented. The solutions are highlighted in an Issue Tree
below:
Policies of GoodFoods to achieve
Operating Margin of 3.5%

Increasing revenue Reducing Costs

Increase total number of Increase average basket

Fixed Costs Variable Costs
purchases size

Increase percentage of
Increase level of
Increase conversion rate Increase basket size for shoppers making
penetraion among Raw food items Manufacturing costs
among customers each department purchases from each
customers by area
department

Increase frequency of
Distribution costs Retail costs
visits to shop