MODULE: FRAMEWORKS

The Fundamentals of Frameworks

How to choose which type to apply? => rules of thumb

 Issue tree: short-term, problems can be traced to root cause (profitability case to fix recent drop in
profit); prefer to have a focused solution; have a well-defined metrics
 Conceptual frameworks: long-term strategy problems; prefer to have more awareness of all the
nuances that involve it; need more context of the situations (there are no 1 or 2 things that can be
isolated to reach a reliable recommendations)

Example:
  Boost next year profit: simple problem but not easy; there are few moving parts and isolating few
best alternatives would do the job of solving the problem => use issue tree
 Become low-cost player in the market in long-term => need to think strategically about their whole
business and find the lowest cost weight to deliver what they do  need to look at the system at
a whole -> use conceptual framework (ex: manufacturing technology, infrastructure, R&D,
product design, org. culture, etc.) -> not exhastive

Understand Conceptual Framework

 Context-driven frameworks: Gather contexts about situation

- Ex: 4Ps breakdowns marketing plan into 4 major levers to market a product
- Porter’s 5 Forces -> breakdown an industry’s potentials for being profitable into the 5 players
ưhwo may harm that industry’s profitability
  Objective-driven frameworks: more hypothesis-driven, to the point
 Other types
This module focuses on context-driven frameworks:
 Easiest to learn
 Use them along with issue trees -> be able to solve 98% of cases
=> Not the best but good enough

3Cs => why? Study at least one good framework so we can understand what makes a framework good
Why these are 3 key players/factors to consider? => every market is intersection of D and S; customers
represent demand sides, supply side has many businesses competing to gather shares of demand (one
is own company and others are competitors)
 It puts yourself in the mind of the 3 key decision makers in most markets:
- Customers get to decide from whom do they buy from if anyone at all
- Competitors always have a choice about what they can do to serve the customers; and your
company have the same choice
- Every transaction in the market happens given the choice of each of these 3 decision makers
did and because the whole market is the sum of all transactions => by studying these 3
decision makers, can understand the whole market => TO KNOW what you as a company
should do, you must understand what is logical for the other 2 decision makers to do as well
=> This will help to you understand for actions that have the desired effect and any likely
reactions wants to implement your strategy
 Because there are many types of customers and many competitors in most market => segment
customers and competitors in the way that makes sense to the market you study -> find
opportunities in some pockets of the market, not in the market as a whole
 To use 3Cs or any other frameworks effectively -> need to know what specific questions to ask in
each category -> key questions (2 steps)
- Step 1: have the role of that category in the competitive system you study in mind
- Step 2: use 5W2H to come up with good contextualization questions; are lists of open-ended
questions -> can always ask about the right things in the interview
+ What, why, when, where, who, how, how much
Ex: want to analyze customers because want to whether to launch a new product in the market
 Who are your customers, and how much do they buy -> market segment and size
 What they buy and what they want in the products (features/benefits) -> what should sell to buy
 Where and when do they buy -> good sense of distribution strategy you should follow when
launch the products
 How do they buy, how do they use the products -> know whether or not the product design you
have in mind makes sense
 Whyssss? -> reach insights on the problem => ask why to anything that is relevant
FRAMEWORKS: 4-STEP APPROACH

 Define and structure is important -> enable to come up with a good structure for the case
 Raise key issues -> ask relevant insightful questions for each category to understand the
problems
 Create hypotheses
 Create tests for hypotheses -> confirm/disprove with data

STEP 1: DEFINE AND STRUCTURE

Ex:
 In the 2nd case, need to clarify and
define the case much more than the
1st one

Clarifying questions:
 Explain the objective in detail -> BCG (concerned with customer retention?)
 Business model -> at the minimum, understand how business generate revenue, so anything
related to products, marketing, and how they sell, and also how the business operates ->
determine cost structure (manufacture, transport, etc.)
  Specifics to generic statement -> incl. asking for critical numbers, definitions of words that you
may not know (Ex: how to grow client sales -> ask how much and which time frame, in dollar
amount or %; customer churn has risen -> understand exactly how customer churn defined in that
client and by how much it has risen, even if don’t know what churn means -> ask, if know -> still
need to know how that specific client defines churn cuz different industries define the number
differently)
 Density -> each question must add a lot of value in understanding of the situation

Build the structure:

STEP 2: RAISE KEY ISSUES

Two reasons why we need hypotheses:
 Cuz you want to be effective and efficient in your work; each question must be important enough
to potentially change the final recommendations -> need to explain to interviewer why you’re
asking each question
 Need to answer the question in a very tangible, specific way -> actually need to answer them
data-driven, fact-based, specific way -> and to show interviewer you can do that, need testable
hypotheses
Ex: airline strategy case

STEP 4: CREATE TESTS FOR HYPOTHESES

(only do this step as prompted by your interviewer; in the candidate-led case, you might prompt yourself
and choose the test the specific hypothesis right after presenting the framework so as to drive the case
forward but still, doing it as prompted and only 1 hypothesis at a time)

Ex: airline strategy case

 Build a list of segment in different ways (ex: reasons for traveling, routes they take, how many
flights these segments flight /year, demographics, etc.) and try to find a segment that is large and
high-paying => ensure that they’re highly profitable
 Look at both the number of tickets sold and revenue they generate and double check price
sensitivity by looking at how much they pay per ticket versus the average ticket price on the same
flight
 Ex of a segment: last-minute flight by executives and business travel routes; high networth
individuals who travel every weekend to their leisure home

The point: show the interviewer that I can find the way to analytically prove that hypothesis and
quantify the impact instead of knowing what is obvious to everyone

Got a piece of paper, you’ve defined the case clearly and have clarified any questions you have and have
asked the interviewer a couple of minute to structure your case
  Create the category -> 15 - 30 seconds
 Think about key issues for each category -> jot down short nibbits of text help you remember the
key questions -> when present, speak in full phrases (5 – 10 seconds/each issue) => 12 key
issues/a minute or 2
 As you write down the key issues, should also think about the hypotheses; however, don’t need
to write down -> no extra time (your mind will come up with the hypotheses at the same time as
you think through the issues)
 Don’t need to spend time even to think about to test each hypothesis -> only do after present the
framework
IN A FEW MINUTES you have in silence -> think through the problem

Communicate the framework to the interviewer

 First, walk them through each of category and explain why they’re important -> half a minute cuz
they give a high level view of the structure
 Then, go category by category, explain the key issues; go through all of them but a few
hypotheses of the most important (others just put in the head in case they ask) => don’t want to
go through all hypotheses cuz take too much time, show them you are hypothesis-driven,
purposeful about the question you’re asked, there are some thinking behind the issues (2 – 4
minutes)
 Testing? -> make sure hypotheses are testable but don’t have to come up with specific tests to
use and it will come after presenting the framework
 Pick 1 or 2 critical hypothesis and test them and reveal critical information to help clients solve
their problems
HOW TO ADAPT YOUR FRAMEWORK? (3Cs)

In some markets, in most markets, there are more going on; adding those other things going on that may
impact the transactions as extra categories in your framework is one of powerful ways to make framework
super specific to the problem you solve => adapt the 3Cs
How to add new categories -> find other things besides customer, competition, and your company that
can affect how transactions are made in the market and which transactions will be made => 3 types
 Other decision makers
 Direct interfaces
 Structual factors (“rules of the game”)

These 3 players should always be understood well if the problem is the business, competitive, strategy
problems
But some problems have more relevant players to be understood too

TYPE 1: ADD OTHER KEY DECISION MAKERS

 Ex1 (distribution channels): consumer good industry -> distribution channels are important link
between S and D; not only involved in every transaction, they also take decision to maximize their
own profit
 Ex2 (distribution channels): the airline industry
- It is feasible to think that one airline can outperform others cuz they work so well with their
distribution channels such as the website that sell air tickets; it is also feasible to think it
would take just one of these websites to stop selling your ticket to severely harm an airline
business
 Ex3 (suppliers): while do they rarely change the competitive positioning of shampoo
manufacturer or an airline, important in automotive industry. Any auto companies want to make
cars at a lower cost with more predictability in the supply chain and at a higher quality have to
work long-term with their suppliers and are exposed to decisions they make for themselves. For
example, if an auto supplier decides to skim on quality control -> could disrupt the chain of
production of an auto manufacturer and cost millions of dollar. If another company wants to
launch a new, innovative car design that has unique parts -> need to worry about finding
suppliers to make these new unique parts and there are many reasons why making this specific
part would not be feasible or any make sense to any supplier available.
- Suppliers are also important in other industries: smartphone manufacturing, high-end
restaurants (Michellin-star restaurants industry)
- Distribution channels rarely are relevant to strategic decisions; not that auto companies don’t
need distribution channels but because they usually control them -> rarely have real leverage
on whether an auto company’s gonna sell more cars or not => auto companies don’t need to
carefully study that specific part of the system
 Ex4 (employees): having an enough competence is important in any industry but just a few have
to think of their workforce as a key source of threats and opportunities => consulting (consulting
firms: quality of professionals force -> key strategic component -> why they spend so much time
and effort to find high-quality consultants; reason why they promise so much professional
 development after you get in -> attract the best people and help them reach their full potential in
their careers), software development, biotech, professional sport teams (i.e., football teams)
 Ex5 (government): important in any highly-regulated industries (i.e., utilities, airline, pharma,
basic education, etc.). If don’t take gov into consideration -> take high risks that their strategies
won’t work out.
- There are some industries where the Gov is the single most important player to consider (i.e.,
military defensing industry, pharma industry with high realize in public healthcare) =>
Government plays a dual role: regulator and major buyer of the G&S being offered
 Ex6 (investors): important in scenarios such as startups, companies working on a project
finance-based (i.e., companies specialized in building private infrastructure project)
 Ex7 (Academia): relevant to biotech firms, high-tech fields
 Customer’s customers: B2B market
 Doctors: key to markets of pharmaceutical drugs, especially specialized drugs
 Teachers: key to publishers of textbook

Tips: find key decision makers in the supply side, or in the demand side, or making the bridge between
supply and demand => for these decision makers to be key, they need to be out of their own interests, be
able to make or influence decisions that would affect a large portion of transactions in your market. If they
can’t do that, can’t make decisions or influence decisions for a large portion of transactions in your market
-> have no control over your market -> can safely ignore it

TYPE 2: DIRECT INTERFACES BETWEEN DECISION MAKERS

Usually worth to make a category for Product -> cuz this is usually the most important consideration
customers take into account when deciding to buy from you or from your competitors; mulfaceted enough
to ask about

 Ex1 (product interface): case about revenue growth in an electricity distributor -> just a couple of
considerations that a customer has to choose among 2 electricity providers has about the product
(i.e., downtime, the volatility of frequency and the price) => can be explored as 1 issue within the
company and 1 issue within the competitors bucket -> make more sense to do so because these
are more related to infrastructure and cost curve of this company
 - This wouldn’t be true at all if it’s smartphone manufacturer. In this case, the customers will
interact way more with the product itself than with the company in general => Your structure
will be stronger if separate Product category from the Company category (i.e., iPhone
different from Samsung)
 Ex2 (unions -> interface between employees and company and its competitors): in some specific
situations, such as the downsizing of large manufacture -> would include unions as a category for
the analysis because they may have the power to limit our options
 Ex3 (Cartel -> interface between the company and its competitors): Oil company -> ignore OPEC
-> risk of giving bad advice; diamond market: a few companies control the production and price
 Ex4 (regulatory agencies): governmental bodies that control specific market (i.e., banking, airline,
telecommunications)
Note: You don’t always have to include these interfaces in the framework; framework with key decision
makers is OK enough but if there is a critical interface that could change the recommendation if studied in
depth -> should use

TYPE 3: STRUCTURAL FACTORS (“RULES OF THE GAME”) (less important than interfaces)

Making your category options even more specific

Think of which traditional categories make sense to your case but then name them into an expanded,
more specific meaning to solve the specific problem
Ex1: client makes plastic packaging for food products -> indirect competitors would be companies make
aluminum packaging for food products
Ex2: in some early stage, high-growth industry -> new entrants

MECE STRUCTURE? => Guarantee mutually exclusiveness and achieve a right balance between being
exhaustive and being 80/20
 No overlap and is mutually exclusive because a key decision maker is never an interface; an
interface is never a structural factor
  No gaps => add all categories and then some more
 Relevant (80/20) is as important as MECE => focus on what really matters

FULL EXAMPLE

Step 1: Define and structure

 Do they have a specific reason to buy this company? => suppose the interviewer tells me that
they think the healthy, organic snack segment will be relevant in the future; want to involve in it for
strategic reason => define objective better (WHY)
 Do they want to expand this company’s products outside Europe or just stay in European market?
=> could expand outside of Europe in the future but for now, they just want to play in the
European market with new company => limit the scope of the case (1 market instead of multiple
market)
 Are they looking at all their targets as well? => they might consider other targets later but for now,
just want to know if acquiring this specific company makes sense => limit the scope of the case (1
target instead of multiple target)
Clarifying question: business model (no needed) -> fairly confident about how the packaged food industry
works and how the company in this industry makes money

Go with a conceptual framework because the problem is strategic and the company’s not just looking at
increase the profit or any other metrics for that matter; more long-term; more contextual; make more
sense to look at the whole market and the players involved
THE LANDSCAPE TECHNIQUE

Already know the Landscape technique => adapt the 3Cs to business cases
Break the picture into important elements
Group ballons into 1 group -> even though different but conceptually they are the same
Structure any cases in a customized ways by breaking down the elements of that problem’s landscape if
you can only learn to look at the problem the right way

Ex: how to win a football match -> think of the landscape of a football match
Context need to breakdown: in the field & off the field => not a structure yet; generic but helpful to
organize the information in our head and not miss anything (i.e., land and air) => think of what are the
elements of this landscape (football match)
Well a football match is a social system; there are people trying to achieve a goal so we can think about
who are these people and who has the power to change the system => these are decision makers; you
can also think about how do these people interact directly with one another (direct interfaces) and we
could also think about the rules of the game (structural factors that affect the match)

Ex2: How to make urban city cleaner? -> talk about solid waste only, not sewage or air pollution
In this case, in every city there’s someone supplying things to be cleaned (people who make city dirtier)
and there are people demanding things to be cleaned (people cleaning up after them) => not a very
intuitive way to think about it -> adjust phrasing: producers of waste and cleaners of waste
 Producers of waste:
- Citizens
- Businesses
- Nature: tree discarding leaves, animal’s waste, etc. -> structual factors (not decision maker)
but it’s still part of the city cleaning landscape
 Cleaners of waste: a good way to understand the side that cleans the waste of a city is to think of
a simple value chain
- Collectors
- Transporters
- Processors
 Now, in the middle, intermediating both sides, there’s a key decision maker -> the government.
Also there’s a bunch of direct interfaces between producers and cleaners of waste in the form of
infrastructure (trash cans, spaces reserved for discarding the waste)
 In the broader world, there are 3 main factors affecting the city’s waste management:
- Culture -> influence how everyone thinks and acts about what’s acceptable for how clean the
city should be
- Law -> determine what can be done to change the situation
- Weather -> which can make it easier or harder to clean this city
Ex3: Public sector case -> Public education

1. Think of the most basic structure of an educational system: is it someone offering a service
to someone else like the city cleaning example; is that something happening within an arena with
external arena that serves as context as in football match example. To me, education is basically
supply and demand => rename: educator and learner
  School => can think it as decision maker if think about people who run these schools; or it as
needed infrastructure -> important is to know that school is critical to educational system
 Educator side: suppliers supplying school materials; school administrators; government
 Learner side: families of the students
 Key interfaces:
- Transportation (for students to reach the school -> this can make or break a developing
country’s educational system)
- Whatever tools the teachers use to teach students -> textbooks, materials, and
methodologies
- Public budget -> give school financial resources they need

2. Select which ones will become actual categories in the framework

 Just want the key elements that can change the system. For example, I don’t think suppliers
qualify for that; the government can find suppliers for school materials and textbooks and that
should be no problem.
 I also put some of these things together. For example, teachers and school administrators should
probably be grouped together as this is difficult to completely separate their actions.
 Same for students and families, especially for basic education which is mostly children and
teenager
 I also group schools and transportation as these are pieces of infrastructure; and government and
budget for obvious reason.

Now translate these into the categories for the framework:

 Teachers and administrators: their key role is to teach of course and to do that, the system needs
to have the right people with the right attitude and the resources to teacher
 Students and families: their key role is to be in school and make efforts to learn. To do that, they
need to have the right attitude and the resources to go to school
 Infrastructure: school and transportation => their role is to support teaching and to fulfill its role,
we need enough infrastructure in good conditions
 Textbooks, materials and methodology => should have materials and methods for teachers and
students
 Government and public budget: needs to send enough money and oversee the system to help it
work well

3. Key issues/questions
4. Generate hypotheses

That’s it!!!