Strategic Problem Solving

Session 1
Jared Lee
McGill University
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© Richard Donavon
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What is strategy, anyways?

A set of integrated, purposeful choices

Made for the future in the face of uncertainty

With the goal of creating and capturing value

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How to solve any problem

STEP 1 STEP 2 STEP 3 STEP 4

Define Structure Analyze Decide

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Great problem definitions are SMART

Generic problem definition:

We should decide if we need business

analytics.
Make problem statements:
– Specific
SMART problem statement:
– Measurable
Will a $10M investment in predictive
– Action-oriented analytics reduce our annual operating
– Relevant costs by 15% within 2 years?

– Time-bound And how can we make that decision

with 80% confidence in the next 6
weeks using our team and resources?

Define
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Problem definition worksheet

Problem Statement

1 3
What is the context? What are the constraints?

2 4
What are the success criteria? Who are the stakeholders?

Start thinking of potential sources of data analysis

Define
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Exercise: Create a problem definition

In breakout groups

Consider the following problem definition:

What should the Ritz Carlton in Montreal

do to make more money?

How can we SMARTify this definition?

Constrain the problem as makes sense to you

Define
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Structure a “MECE” solution path

Structuring a problem means… MECE

• Breaking it down into manageable pieces
• Ensuring that the universe of solutions is
Mutually
complete
Exclusive
• Creating "workstreams" or discrete
pieces of work that can be handled
independently Collectively
• Making sure that greatest efforts are put
towards highest potential solution areas
Exhaustive

Structure
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Issue trees are problem solving tools

ISSUE TREE
– Comprehensive overview of all the
factors impacting the problem
– Breaks big issues / decisions into
Question
smaller ones
– Used for new problems, project
starts, opening discussions with
stakeholders
– Defines the questions to be
answered
WHAT/HOW?
– This is not about developing a
solution, but rather developing a
path to a solution
Structure
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Exercise: Structuring the problem

In breakout groups

Consider the following challenge:

How can the Ritz Carlton in Montreal

increase its operating profits by 10% over the
next 12 months?

How do they do it? Let’s structure the problem

with the help of an issue tree!

Assume normal, pre-COVID context

Structure
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High-level issue tree

Over-arching questions Data we can find

How can the Ritz

Montreal increase
profits by 10% over
the next 12
months?

It doesn’t matter whether you build this from the top-down or

the bottom-up – both will get you to a useful structure
Structure
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Use the structure to plan work

When building a work plan,

Use the issue tree to build your plan
make sure you are...
...
PRECISE
What is your output supposed to look like?

REALISTIC
... ...
Blue Team Red Team
Can your teammates cope with their tasks?

COLLABORATIVE
Are you involving everyone?
... ... ... ... ...
ITERATIVE Marta Bob Janis Sam Louise
Are you updating your plan?
Make sure each teammate knows their objective,
as well as the overall goal!

Structure
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Early & Agile Answers

80/20 Rule Prioritization Matrix

High
Probability / Feasibility
Hypothesis
Impact
1
80%

Medium
2

Low
20% Low Medium High
Effort
Impact / Importance
BE PRACTICAL! Focus on the 20%
that will get you 80% IMPACT Keep stakeholders in mind

Less data Analyze

More data
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Diverge to gather data, then converge

Diverge first… …then converge

Traditional Expert
data sources opinion

Brainstorm for non- Descriptive PROVISIONAL

HYPOTHESIS
traditional sources statistics RESULT

Reason by Simple
analogy visuals

Analyze
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Use rigorous analysis to refine results

What to do Why
Plan the – Ensure appropriate resource allocation
approach – Align on the analysis pathway – Uncover logical errors and debug
– Build in traceability (e.g. comments, instructions) – Increase agility and reusability
– Build trust
Check for – Compare sample / training data to problem
– Establish scope limits for insight
relevance conditions
applicability
– Check that algorithms are optimizing for the goals
– Save time early
you want
– Validity (e.g. data type constrained)
Clean the
– Accuracy (e.g. true to reality) – “Garbage in, garbage out”
data
– Completeness (e.g. all is known) – Expand range of data sources
– Consistency (e.g. internally logical) – Build trust
– Uniformity (e.g. same units)
Perform
– Avoid propagating errors and
detailed – Separate analysis from the raw data
corrupting data
analysis – Use the right tools for the job (e.g. R, Python, SQL,
– Avoid unnecessary overcomplication of
Machine Learning, etc.)
simpler problems

Verify the
– Triple check for errors – Increase team effectiveness
results
– Contextualize and sanity check – Generate actionable insights
– Double-check relevance to the big decision – Build trust
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Exercise: Plan an analysis for The Ritz

In breakout groups
• For the case problem (How can the Ritz Montreal increase its
operating profits by 10% over the next 12 months), what data would
you gather to reach a provisional result in:
• 1 hour?
• 1 week?
• 1 month?
• How would you prioritize the information and quickly test the
hypothesis?
• What detailed analyses would you do?

Formulate Detailed
Preliminary
and test analysis
prioritization High-level hypotheses Re-
data prioritize
review

Analyze
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Five elements of problem analysis

Formulate Detailed
Preliminary
and test analysis
prioritization
hypotheses
High-level Re-prioritize
data review

Always remember to take a step back…

– Focus on the end goal – what are we being asked to do/to solve?
– What level of certainty is required for the answer?
– Make sure you’re looking at the right data
– Test and re-evaluate your hypotheses by testing against the data
– Check-in with the team for the bigger picture development

Analyze
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How to make “good” decisions

The WRAP Model

STEPS DESCRIPTION

WIDEN YOUR OPTIONS A narrow view leads you to neglect potential options

REALITY-TEST YOUR ASSUMPTIONS Avoid confirmatory patterns – question everything

Shift your perspective: What would I tell my a good

ARMS-LENGTH WHEN POSSIBLE
friend to do? A client? A stranger?

Beware of your tendency to be overconfident in your

PREPARE TO BE WRONG
conclusions

Review your decisions and incorporate your

LEARN & ADAPT
reasoning in a decision report

Decide
Source: Karyn Hall, PhD 17
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Industry analysis: The 5 Forces framework

Threat of entry
by potential
competitors

Rivalry
Bargaining Bargaining
Among
power of power of
Established
suppliers buyers
Firms

Threat of
substitute
products

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Threat of Entry
Potential
entrants
• Capital requirements (-)
• Economies of scale (-) Suppliers
Internal
rivalry
Buyers

• Product/brand differentiation (-)

• Switching costs (-) Substitutes

• Control of distribution (-)

• Threat of retaliation by incumbents (-)
• Strength of established competitors (-)
• Access to government subsidies (-)
• First mover advantages (-)
KEY
• Industry growth (+)
(+) increases threat
(-) reduces threat
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Threat of substitutes
Potential
entrants

Internal
Suppliers Buyers
rivalry

• Rate of improvement in Substitutes

price/performance trade-off (+)

o Along comparable
performance dimensions
• Switching costs (-)
KEY
(+) increases threat
(-) reduces threat
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Power of buyers/suppliers
Potential
entrants

• Relative concentration (+) Suppliers

Internal
rivalry
Buyers

• Number of buyers / suppliers (+)

• Impact on supplier sales volume (+) Substitutes

• Impact on buyer cost (+)

• Impact on buyer quality (+)
• Threat of forward / backward integration (+)
• Product differentiation (-)
• Switching costs (-)
KEY
(+) increases threat
(-) reduces threat
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Intensity of Rivalry
Potential
entrants

• Industry growth (-) Suppliers

Internal
rivalry
Buyers

• Industry concentration (-)

Substitutes

• Fixed costs and storage costs (+)

• Differentiation (-)
• Switching costs (-)
• Barriers to exit (+)

KEY
(+) increases threat
(-) reduces threat
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Exercise: Putting all the pieces together

MURAL LINK: https://tinyurl.com/PGSSFiveForces
Exercise – in breakout teams
• You are a consultant in the pre-COVID era
• A client is thinking of launching a new airline and asks you to assess the
airline industry to understand whether or not to launch a new carrier
• Your task:
➢ In breakout teams, conduct an analysis for one of the Five Forces
(one breakout room per force)
➢ Deliverables:
1) Identify the main drivers for each force and whether they
contribute to increase or decrease the threat from that force
2) Then, for each force, assign a Low, Medium or High score
3) Recommendation: should client Go / No go based on your
force?
4) If Go, what should the client do to maximize success?
➢ Be ready to report back to the client in 20 min.

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 Thank you!

© Richard Donavon