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DO YOU ROUND NUMBERS IN CASE INTERVEWS?

28 de March de 2017 craftingcases

Interviewers sometimes want to see you do full calculations. They might want to
see how you perform, or maybe it is important to them that the value is precise
at that moment. At other times, however, they want to see that you can do
efficient math with conscious sacrifice of precision. There are several
techniques that make your math more efficient. The most common one is rounding
the numbers.

Since you can’t tell beforehand whether the interviewer wants you to find the
precise answer or not, you always need to ask for permission before rounding
anything. There are, however, many ways to do so.

Tell the interviewer by how much your final answer will change

You should always keep in mind the effect each rounding will have in the final
value. If it is going to change way too much, then it is likely that the
interviewer will not allow you, unless the change to the conclusion of the case
is insignificant. If the difference is too large, you probably shouldn’t even
ask for it.

305/12 -> 300/12 = 25; ~2% change

360 x 13 -> 400 x 13 = 5,200; ~10% change

When asking to round your number, it is better if you mention what the effect is
going to be. You may say, for example, “this will change my final value by only
two percent, so it should be fine”.

Acknowledging the changes is even more important if you are rounding several
items in a structure, so that the roundings don’t get out of control and
collectively change your final result by too much.

(105 x 31 x 1.6)/(1.4 x 295) = 12.6 -> (100 x 30 x 1.5) / (1.5 x 300) = 10

Offer to round your answer back after the calculations

It is even better if, along with knowing how much you are changing the final
result, you make up for it in the end. If you do so, sometimes you might not
even need to ask (although you need to communicate the whole thing): sometimes,
there will be no precision loss.

360 x 13 -> 400 x 13 = 5,200 -> 5,200 – 10%x5,200 = 5,200 – 520 = 4,680

This will show the interviewer that you are able to do efficient math and have
him trust that you are also fully aware of the impacts of this over your case.

To sum up this already short article: if you are going to round, ask. If you are
going to ask, tell the magnitude of the rounding effect. If you already know the
magnitude of the effect, you might as well reverse it by the end of the
calculations.

Julio

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UNEXPECTED WEAKNESSES

20 de March de 2017 craftingcases

One of the most frustrating experiences in case interview preparation is to deal
with an unexpected weakness. An unexpected weakness is, as the name goes, a
weakness you have that is counterintuitive and thus not expected. We’ve seen
economists and engineers that couldn’t get quantitative analyses right and
business students from top schools that were weak in business sense. This issue
is frequent and can be catastrophic for a candidate’s performance.

Harm comes from two sources. The first and most important one is denial.
Candidates with unexpected weaknesses deny that the issue is really an issue.
They brush mistakes off as minor incidents or just assume they’ll naturally
improve those skills since it comes so easy to them. Unfortunately, as we’re
going to see next, they’re rarely right. The second cause of trouble coming from
this type of weaknesses is that interviewers will unconsciously be setting a
high bar for you on that specific skill – it is arguable whether they should do
it or not, but they are human and it happens.

There are three main reasons why unexpected weaknesses exist: the specific skill
means something different in consulting than in the candidate’s field, the
candidate lacks a specific part of the skill that is important in consulting and
less important in their own field, and the candidate does not practice and apply
that skill with as much diligence as they do with other skills because they
think it’s a strength already. Let’s tackle one at a time.

1) Semantical Differences

The first reason is a lack of awareness of the consulting skill-set.
The candidate is so used to use a concept (such as analytics, brainstorming,
creativity, structuring and so on) in one context and infers that it might mean
the same thing in management consulting. The skills they have are unlike the
ones consultants need but the wording they use to describe it is the same. It’s
a semantical difference.

We’ve once helped a candidate with an econometrics background to overcome
challenges in analytics. Although econometrics is very math heavy, the
statistics involved are so abstract that the practical skills required to solve
them (mainly statistics and programming) won’t help you with arithmetic, algebra
and break-even curves. This candidate surely considered himself analytical and
I’m sure he was in his context. Nevertheless he was making mistakes in about
half his quantitative analyses.

Another situation happened to me when I was preparing. I consider myself to be a
creative guy. Business ideas come to my head several times a day (and some of
them are even good ) and I’ve had friends call me specifically to get ideas for
business and otherwise. Given that, I was confused when the McKinsey partner I
had just interviewed with called me saying I wasn’t getting an offer due to lack
of creativity the first time I applied (I didn’t get an offer the first time I
applied, but that’s a tale for another day). Looking back, I didn’t deserve that
offer and now I understand why. They don’t need people who get ideas out of free
intuition, but people who can be creative under structure.

2) Lacking a Specific Sub-Skill

Other candidates face unexpected weaknesses when they lack a specific sub-skill
that is critical for the use of that skill to consultants. They are very close
to having the full skill and shining on interviews but they still need that
extra work. Usually awareness of what constitutes the complete skill-set is the
key missing factor that makes candidates not work on this and ultimately fail
their processes.

An example of this is a bright candidate we’ve coached who had tremendous
business intuition, yet would fail his cases due to a lack of business intuition
every single time. How can this be possible? The gap lies in the subcomponents
of business intuition: he was able to use conceptual knowledge of business
theory and how industries are structured to quickly generate hypotheses of what
was happening, but when in need of more pragmatic solutions he was unable to
generate these ideas. Good business sense needs both the theoretical and the
pragmatic, and he lacked one of those.



A common issue we’ve seen several times are engineers who make arithmetic
mistakes so frequently they miss more than half their quantitative analyses. The
missing link here is commonly not having the habit of reality checking their
calculations (most engineers are used to have calculators available and don’t
need to do that), an easy to learn technique that can be mastered in a couple of
days.

3) Lack of Diligence in Practicing and Applying

Some candidates assume they’ll be good at something they supposedly should be
good at and don’t practice it nor apply the same level of attention when using
that skill during a case as they do with other skills. While the other two
sources of unexpected weaknesses are caused mainly by lack of awareness this one
has a more perilous origin: a proud ego.

We’ve seen people from quantitative fields carelessly doing math in a way that
was difficult for the interviewer to understand as well as incorrect in the
results. We’ve also seen people from a business background inferring conclusions
about the case based on another business situation they’ve seen, again rendering
bad answers. The common issue here is they didn’t follow the right procedure nor
gave as much attention as that analysis or conclusion required.

The best piece of advice I have to people who belong here is to drop any
preconceptions about what should you know. Learn the right procedure and apply
as much focus to your areas of strengths as you do with your weaker skills.
Being highly structured, systematic and careful with what you’re good at will
give you extra points in that skill (interviewers will say you have a “spike”
there). Missing the mark will get you a rejection. I have never heard of anyone
being rejected for being structured and systematic.

Overcoming Unexpected Weaknesses

Unexpected weaknesses are slightly different in kind than other issues because
it is much harder to know you have them and it may require some unlearning of
what you already do. Overcoming these issues, thus, starts with identifying the
issue and then requires diligent practice. There are three things you need to do
that: awareness of the skills being evaluated, data-driven practice and diligent
practice of the right technique.

The first step, awareness means understanding what exactly does each skill mean.
When consulting firms say they’re looking for candidates with structured
thinking, for example, what they mean is they’re looking for people who can (i)
break down issue trees, (ii) structure a quantitative analysis before performing
it (iii) plan analyses ahead of time, (iv) systematically follow your own plan,
(v) build conceptual frameworks for solving unique, complex problems, (vi)
follow the hypothesis-driven approach to problem solving and (vii) communicate
in a structured way. Although there’s some overlap between those skills, they
are each different in essence and the optimal way to learn those is to learn
each individually and then in combination. If you don’t show any of those
sub-skills, your feedback will be an ambiguous “you weren’t structured enough
for us to make you an offer”. All other skills can be broken down in a similar
fashion.

The second step is what I call data-driven practice. That means recording key
information about every case or practice drill you do. It’s harder to deny data
than impressions.  While it takes work, do this at least for the areas where you
assume you’re good at given your background – your potential blind spots. If you
come from a quantitative field, for example, keep track of how many of your
quantitative analyses did you get wrong and the reason why. There is a chance
you find you’re making mistakes often. If the mistakes are always driven by the
same cause the root cause is likely a missing technique; if the cause is varied,
lack of attention. Data-driven practice takes work but saves time in the long
run: you’re always focused on improvements you need and never on improvements
you don’t.



Finally, drop your ego and diligently practice the right technique for your
weaknesses. You’re learning a new way of solving problems that requires a
specific skillset. If Michael Jordan were to play Football, I don’t think he
would assume he knows anything just because he’s a sportsman. If some of your
previous skills do transfer to case interviews, that’s great; just don’t assume
they will until you’ve learned the proper way to do so for case interviews
specifically. Dropping your ego and pride will also make you a better consultant
in the long run, as well as being humble about what you can’t do.

Bruno

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GEOMETRY AND CHARTS: ILLUSTRATIONS AS A TOOL FOR BUSINESS CASE ANALYTICS

15 de March de 2017 craftingcases

Some analyses are simple to do and tough to communicate. Some are tough to do
and tough to communicate. In fact, few are easy to communicate: numbers are
hardly ever palatable. Of course, one can always turn those numbers into
concepts – such as price premium, gross margin, etc –, and communication might
get simpler. Another tool might help even more: converting numbers and concepts
into illustrations. Charts and geometric forms are often more intuitive than
equations, numbers, words and business concepts.

I could now categorize analyses in several ways and create a complex taxonomy.
It would tell you when to use charts and when not to, and when to use each kind
of chart or geometrical tool. You would spend hours trying to memorize it. If
you were lucky, you would remember all of it during your interviews. Three
issues stand between us and the fantasy world I just described. Number one: I
wish I could do that. Even if I am able to solve all possible business case
analyses, being able to list all of them is certainly out of my league. Number
two: once that taxonomy exists, interviewers would be bound to create either
different problems that it does not cover or new ways to test your analytical
abilities, and this list would suddenly be less useful than initially promised.
Number three: it would be incredibly boring to both of us.

I believe that if you know some examples charts aiding the resolution of a case
as a starting point and practice thoroughly, you will soon create your own tools
and use them spontaneously. Thus, my goal in this article is merely to show some
of the simple tools I use applied to specific concepts. Your role, afterwards,
is to practice analyses in business cases and try hard to use illustrations,
even if cases take longer or sound harder in the beginning.

--------------------------------------------------------------------------------

Mario’s Bar
Example 1

A bar in Santa Fe, Mexico City, has been long considering a risky tactic to
increase their profits. While you were there having a beer, Mario, the owner,
stopped by your table to ask for your help in analyzing it.

He wants to decrease the price of beer in order to increase the number of
customers and, therefore, increase sales in other products (food and other
beverages), which have a higher gross margin. You mention to him that there are
several complex aspects he needs to take into consideration, like his
competitors’ reactions and his bar’s capacity of selling more food and other
beverages, which often include preparation. Mario says he can take care of all
that, but wants your help specifically with the math.

He then supplies you with some data: they currently buys beer for $6 a liter and
sell it for $10. The other products’ COGS is, on average, 1/3 of their price,
and consumers spend, on average, $30 on those. They currently sell 120 liters of
beer per day to 60 clients.

Mario’s plan is to decrease the price of beer to $8. He estimates his bar will,
then, sell 200 liters of beer per day to 90 clients. You still need some pieces
of data to complete your analysis. Before moving on, think of what they are.

(…)

Upon your request, the bar’s owner lets you know that he does not expect the
price he pays for beer to decrease due to the increase in volume purchased, and
that he expects the additional clients to spend 1/3 less than the current ones
in non-beer products – while relative COGS would persist.

Before you look at Image 1, try solving this problem for the increase (decrease)
in profits Mario should expect.

(…)





--------------------------------------------------------------------------------

TelCo.
Example 2

A telecom operator in Argentina called TelCo. currently earns its revenues from
two different plans, their only two products: a mobile phone line with unlimited
access to calls and text messages, which costs $50 every month, and unlimited
internet access, with a monthly cost of $75. Currently, 80,000 clients have a
telephone line, and 50,000 have internet access – all of whom also have a phone
line from TelCo.

Recently approved regulation will force them into having only one product. After
much studying and discussing, the board has reached their decision regarding the
new plan: it will include a phone line and internet access and it will cost only
$100.

They expect to lose only 10,000 clients after that. All of the remaining will
convert into the new plan. Your objective is to estimate their change in
revenues.



--------------------------------------------------------------------------------

Industrial Goods Inc.
Example 3

Industrial Goods Inc. is considering launching a new, revolutionary product.
Your firm has been hired to estimate the total costs with that product, and you
have been allocated to estimate the storage costs from start of production until
the beginning of distribution. Industrial Goods’s production capacity is of 667
units per month, and the S&OP department has determined they need to have, at
least, 8,000 units in stock before distribution starts. You have already
assessed that each unit costs, per month, $5 to store.



What will be their total storage costs prior to distribution?



--------------------------------------------------------------------------------

Besides using drawings to structure and perform the analyses, you could also use
them to simply communicate. You could exemplify the behavior of one or several
variables with any of the following charts, for example.





There is not as much of a conclusion to this article as there is a plea attached
to its ending: practice analysis. While you are at it, try using geometry and
charts whenever possible. Of course, it will not be the most effective way to
solve the analysis if you’ve never done it before. Just as the correct form to
throw a baseball is not the way a beginner would throw it without prior
instruction. Master the use of this tool and you will show the interviewer (a)
you can convey complex ideas in simple ways and (b) no matter how complex a
problem is, you can simplify it and solve it.



Julio

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RECRUITING MISTAKES HAPPEN FREQUENTLY

6 de March de 2017 craftingcases

McKinsey, Bain, BCG and all top-tier consulting firms make a lot of recruiting
mistakes. There might be more misses than hits. And they don’t care, because
they’ve designed their recruiting practices for that.

In statistics, there are two types of error: type I and type II. In consulting
recruiting, there are also two types of error. Either the firm has recruited a
candidate not able to do the job or they’ve rejected a good (or even great)
candidate. All major firms design their recruiting for avoiding the first as
much as possible and allowing for the later.

There are three reasons for that. First, having a bad consultant working for
them is expensive. Second, rejecting a good candidate has little consequence.
Third, humans (even MBB partners) make mistakes and a firm either designs the
process to make one mistake more likely, or the other. The more you avoid one
type of mistake, the more likely the other type becomes.

Reason #1: Having a bad consultant is very very costly

To fully understand this, let’s examine the first reason: the costs of having a
bad consultant. For the sake of the argument let’s say a bad consultant is one
that doesn’t deliver, is not autonomous and doesn’t treat the client and the
rest of the team well.

The most obvious cost is they won’t deliver enough compared to the investment
the firm makes. Firms invest a lot on new hires, specifically on training.

A more important cost is less tangible: because project teams are sized assuming
everyone is delivering, if one person is not delivering either the firm doesn’t
deliver or the rest of the team takes the burden. The later is always the chosen
option and everyone works more – good consultants work late, satisfaction drops
and some might leave the firm.

A third, even more important and even less tangible cost happens when the bad
consultant doesn’t handle an interpersonal situation well with a client – the
consulting firm weakens the relationship with that client. This may lead to
increased need of partner time to restore relationships, losing projects to
other firms or, in the extreme case, a complete break-down of relationships that
leads to losing the client forever.

A fourth cost is even less tangible: the bad consultant stays with the name of
the firm on their resumé until the end of their working life, weakening the
reputation of that firm. A very bad thing to happen when what you sell is trust.

Imagine these effects in large scale and you get the picture: great consulting
firms avoid bad hiring at all costs.

Reason #2: It’s ok not to hire a good candidate

Now let’s tackle the second reason: the lack of consequences in passing good or
great candidates.

The main reason for this to occur is that due to career attractiveness and a
strong brand, these firms are overloaded with qualified applicants. These firms
mainly recruit very bright, well-educated people with little work experience.
There is ample supply of these talents when your brand is so strong, you have
access to all the suppliers (i.e. top universities) and you can tap the global
talent market and relocate people.

Some even say there is a positive effect on rejecting a good candidate, due
to signaling (i.e. people meet the bright people who didn’t get in and assume
the consultants who did get in are even brighter). While I don’t think
this signaling effect directly affects the recruiting strategy of these firms,
all things conspire to not caring too much when this type of error happen.



Finally the last reason: heavy avoidance towards one error increases the chances
of the other error happening. This is due to imperfect judgement and limited
resources. If partners could perfectly assess candidates, they would not make
mistakes at all. But they do err, and guess what will they do when they’re in
doubt? They say no. There are very important reasons not to hire people who
might not perform; not so many forces pulling towards giving them a chance.

The Ideal Recruiting Process

Given these realities of consulting, we can infer some attributes of an ideal
recruiting process. If I were advising a consulting firm, I would say:

First, due to the large supply of people wanting to work for you and limited
resources to interview, you should have strong pre-interview filters. These
filters should lean towards analytical skills for early-tenure positions and
people skills for more senior people, given the difference in job requirements.

Second, interviews should test the cognitive and interpersonal skills that will
be used on the job, in the closest simulation to the real work you can do. The
structure of these interviews should be standardized and well tested to
guarantee consistency. Because you need to constantly learn as a consultant, it
doesn’t have to test for specific knowledge, but do test for general business
knowledge and the candidate’s ability to learn quickly.

Third, you really don’t want to make mistakes. You should have several people
interviewing and invest a lot of partner time in the process (but only at later
stages so partners don’t waste valuable time). Ask different questions and
present different types of problems throughout the process so you’re as sure as
possible.

Finally, know that even with this process there’s still some risk you’ll hire
people that don’t perform well. Have a process for having them out of your firm
soon. Remember, poor performers are very expensive, even if intangibly.

In the end you have the same process that is established today. You get in after
heavy CV screening, tests and networking. Then you give lots of case interviews
to candidates – these cases will have been very well thought out. Finally, you
have an up-or-out policy for current consultants. That the process is well
optimized should be no surprise; recruiting is perhaps the most important
internal process of a high performance consulting firm.

Advice to Candidates

The process is not a nightmare. I have roughly described how the sausage is made
and that sounds a bit bad because it only mentions the benefits of that kind of
process from the firm’s side. But you get benefits too: to know how the work is
before you get in, to meet many people from the firm and see if it’s a good fit,
to work in a place with a vast majority of brilliant, driven people. Even
up-or-out has advantages – there’s always room to grow your career within the
firm.

In practice, I’ve really enjoyed my interviews and most consultants I’ve met say
the same. One key ingredient for me to have enjoyed them was that I was well
prepared. I knew what I was doing and I could solve each and every problem
presented with fluency, if not ease. That was not the case the first time I
applied, 2 years earlier. The first time was stressful and I wasn’t successful.

Being unprepared when I first applied made me feel stressed, uncomfortable and
not perform well. Being prepared in my second try made me feel excited, curious
and high performing. I had no more IQ and very little extra business knowledge
the second-time around. What I had in abundance was experience – I had been
through the process once and I knew how it was going to be like.  I used that
experience to prepare extensively.



My advice to candidates who want to get in is to use the experience of others
who have gone through it and prepare well. Being great is not good enough to get
the offer: you should leave them no doubt about hiring you.

Bruno

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DEVELOPING BUSINESS SENSE: HOW TO FIND KEY ISSUES

2 de March de 2017 craftingcases

You’ve started a strategy case on the airline catering market, an industry you
have heard about before but don’t know very well. You’ve developed your
framework in a MECE way. You’ve used it to guide you through the problem and you
found interesting insights. You’ve developed a sound recommendation and
communicated it concisely. You get the call back from your interviewer.

“Hey there, how are you doing? I have to say we were very happy to interview you
and found your structuring and communication skills very impressive. You also
did a good job analytically. Unfortunately we cannot give you an offer – you
didn’t touch some of the key issues of the case so we do no think you’re ready.
Good luck with other firms! Bye”

You feel a mix of anger and disappointment. What does he mean I didn’t touch the
key issues? He’s told me at the end of the case that I got the answer right. You
decide to ask a friend who works at MBB to interpret this cryptic piece of
feedback.

He says: “well, in your initial structure did you mention ‘food safety’ under
operational issues or product mix?”

“No”, you answer.

“Hmm, and did you segment your products into first-, business- and economy
class?” – “Not really”, you say. “Okay, I’m guessing you did not consider
additional costs airlines bear to serve food to their clients, such as in-flight
weight and space, am I right?”

He is right.

Starting a case depends on how well you structure your ideas, how well you
communicate them, but also what ideas you have. What kind of issues you can
think about. Most people start cases with generic frameworks. As a rule of
thumb, if your starting framework could be used for another type of situation or
a different industry, it’s not specific enough.

Candidates from technical backgrounds tell me if only they had been to business
school they’d be able to come up with these issues. That may be true, but they
have no idea how many MBAs do not think about key specific issues in each  and
every case. You need both the exposure and the practice applying to do well.

So, how do you know that “food safety”, “first- vs. economy class” and
“indirect, associated costs” are key issues for the airline catering industry?
It seems obvious after seeing them, but could you know it beforehand?

Unfortunately there’s no quick fix. It comes with a mix of experience and
practice. There is, however, a step-by-step practical drill that may help you
develop this skill by yourself, at home.

A Practical Drill to Learn to Identify Key Issues

This drill takes about one hour to do. Done once a day, most people start
feeling results in about a month. It is the fastest way I know to develop
business sense. You can do it with full cases or brainstorming questions – any
structuring question that requires creativity and breadth of thinking.

Step 1 – Structure: Get a case from a good casebook and structure it

Step 1 is to structure a case from a good casebook. Take your time to do so.
You’re learning to do, not practicing to be efficient. Do the best structure you
can and think of as many important issues you can think of. Use as much of the
case context as you can – which industry, in which country, when? Circle the
issues you think are more important. Take 10-15 minutes here – think as hard as
you can to find hidden issues.

Step 2 – Review: Check the casebook’s answer



Step 2 is to review your structure. Check the casebook’s answers and see if you
didn’t consider any issues that were included in the answer. Make certain that
you understand why that’ issue is important and add it to your framework. Now
see which issues you did consider that were not considered in the casebook. Can
you justify why these issues are important for the solution of the problem at
hand? Can you see how they can change the answer? If so, keep them.

Step 3 – Read: Find new knowledge

Casebooks are not good sources of knowledge. Search the theme of the case on
Google or reputable sources (WSJ, HBR, consulting firms websites). If your case
is on two steelmaking companies merging, look for the past few times that has
happened globally or in your country. Read articles. You should be focused on
finding hidden issues here – things specific to that industry that you hadn’t
thought about and that the people who made the casebook hadn’t thought about
either. Then understand why these issues are important.

Step 4 – Restructure: redo your structure with newfound knowledge

Now you should know more than before about that specific business issue or
industry. How would you restructure your initial case? Do that. You may want to
add certain issues, take some issues out, reprioritize and even change the
overall conceptual structure that governs the case. Do your best job here, and
make sure to have a prioritized list of 3-5 key issues at the end of the
exercise, so you can do “Step 5”.

Step 5 – Generalize: find other situations where the key issues would be
important as well

Steps 1-4 will help you understand what are some key issues of some industries
in some situations. Helpful, but not a game-changer when you don’t know what
cases will be in the interview that defines your professional future. Step 5
handles this problem.

Get the key issues from your last (and close to ideal) structure and make sure
you understand why they’re so important in that situation. Then, find as many
other situations where that key issue would’ve been critical as you can. Doing
this exercise will help you recognize patterns, which will help you with unknown
cases.

Say you had a case on a manufacturer of cars and a key issue was developing good
suppliers. Why is that a key issue? Well, because car manufacturers are
assemblers – they design and assemble parts, but don’t build most of the parts
themselves. However, because the parts are expensive, it’s important to have
them at the lowest possible cost. They also determine the final quality of the
product. Which other industries are assemblers of products that have parts as a
big cost and quality driver? I can think of aircrafts, consumer electronics and
high-end restaurants.

Then you move on to other issues relevant to that case and find other industries
or situations in which those issues are important.

One important issue in the car industry is launching new products (or new models
of traditional ones) every year. Why is that? What other industries share this
same issue?

Bruno

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THE ROLE OF INTUITION

22 de February de 201722 de February de 2017 craftingcases

Consulting firms openly talk about looking for candidates with great analytical
skills. What less people are aware of is that they are also looking for people
who have great intuition.  “Business-sense” or “business judgement” is
consulting-speak for intuition in a business situation.

Fact-based, data-driven analytical reasoning is always preferred, all
things being equal, because it leads to truth. The trouble is all things are
rarely equal. Analytical reasoning requires time and data. These are scarce
resources and hence business judgement is used to fill in the gaps.

Judgement is used in three key moments during the problem-solving process: (i)
to select and prioritize analyses, (ii) to fill in data gaps and (iii) to
validate results and conclusions. It is not a substitute for a structured
analytical approach, but a complement. Many candidates with great business sense
fail interviews because they don’t get the last phrase.

Let us see how can you use intuition in each of the three key moments.

Selecting and Prioritizing Analyses

A typical case interview initial framework has 4-6 categories of analyses (“key
questions” or “buckets”) with ~5 analyses in each category. This means a
candidate’s initial approach has about 25 analyses to be done. Don’t expect to
do that in a 30-minute interview.

To avoid this, use your intuition first. Select the questions you should answer
first and then determine how exhaustive should you be in each of those analyses.
A proven method is to create hypotheses. Notice that in a pure analytical
approach you should answer (almost) every question and the answer should be
fully exhaustive, leaving no margin for error.

There are analytical techniques to prioritize analyses and determine the level
of exhaustiveness required, but intuition plays a huge role here.

Business judgement can also help you gain speed through shortcutting specific
analyses. Imagine you need to calculate the total investment required to switch
a factory’s production process from technology A to technology B. You already
know the maximum investment your client can afford. If your intuition tells you
that the required investment is much larger than the threshold, you can find an
alternative analysis that is much faster to solve and will yield a result that
is a part of (and thus less than) the true one. If that result is higher than
the threshold you’ve just saved yourself some time; if not, you’ve wasted a
little time and can now move on to the more time-consuming and precise analysis
with confidence that you really need to do it.

Using intuition to select and prioritize analyses is how consulting firms are
highly efficient. It should also be the main way for you to go through difficult
cases in the short timespan of a case interview.

Filling in Data Gaps

Often a pure analytical approach is impossible because the data required is
unavailable. Real consultants fill in data gaps, numerical or not, with
reasonable assumptions every single day. This is why this skill is tested during
the recruiting process.

While there are several techniques to find these assumptions, judgement plays an
important role.

The most basic type of assumption you have to make is to assume a number to a
numerical analysis or estimation. This requires understanding the impact of
making a wrong assumption to the answer as well as common sense to choose a
number that is close to reality.



A slightly more complex type of assumption you need to be successful in case
interviews (as well as on the job) is to understand what facts are likely to be
true or what actions are likely to have real impact within an organization.
These assumptions come in many flavors but a few examples of questions are:
“what do you think are the major costs in this industry?”, “which of these
possible actions to solve problem X are more likely to work?” and “how do you
think the customer will react to this change in our sales process?”.

A third, much more complex and difficult type of assumption is one regarding the
evolution of complex phenomena, such as “how do you think the shipping industry
will evolve in the next 5 years?”, “how does large scale smartphone adoption
affect the retail industry?” and “how profitable is the insurance industry?”.
These complex questions could be full cases on themselves but sometimes they
arise in the middle of a discussion of another complex case. Great candidates
are able to formulate a quick hypothesis of the answer to drive the original
discussion forward (as well as to find a more analytical approach to answer
these questions if required).

Being able to have assumptions grounded on common sense for these three types of
questions is key for good consulting work because it allows for driving
discussions forward in the absence of data and information. When well done, it
helps consultants help their clients decide between trade-offs and get decisions
made. It is, therefore, a highly desirable trait in candidates.

Validating Results and Conclusions

How do you know if an analysis is correct or a recommendation sound? While this
is a million-dollar question (and, perhaps, a billion-dollar question), an
imperfect answer is: is the result intuitive?

Don’t get me wrong; there is room for counterintuitive answers in consulting
work and in case interviews. They are rare, however. Most answers and
recommendations are mundane and should make sense to the client and even to a
layperson.

In most cases, then, you can use good old business judgment (or intuition, or
common sense) to validate your answers and recommendations. If the answer
doesn’t make sense, you are more likely to have made a mistake than to be facing
one of the rare occurrences of counterintuitive answers. Start from the first
assumption and review your work. If there are no mistakes, you might have found
a rare situation where the answer is indeed counterintuitive – make sure your
analysis is robust before you make that kind of recommendation.

Using intuition for validating answers is insurance against bad advice. This is
hugely valuable when you’re in the business of giving good advice to decision
makers.

Final Thoughts

So far we’ve seen that good business intuition will help you save time, drive
the discussion forward in the absence of data and reduce the risk of bad advice
both in the case interview as well as during real-life studies. Who doesn’t want
that?

MBB firms certainly do, and that’s why their interviews are heavily skewed
towards testing for this skill (much more than other firms, in our perception).
Yet, few candidates focus part of their preparation on improving business sense.

This is alarming. Among candidates we’ve coached 20-30% have a lack of business
sense that severely hinders their performance. Less than 5% have a level of
business sense that could be considered a huge strength (i.e. interviewers would
recognize these candidates’ level of judgement as better than that of most
consultants in his team).

Candidates in the middle fall into two main groups. Either they don’t have
enough business intuition or they don’t know how to properly apply their
business intuition in the case interview format. The second issue is usually
easier to resolve than the first. To an interviewer they seem the same issue.



We think candidates don’t try to improve business sense for one of three
reasons: (i) they don’t know how important it is, (ii) they don’t have enough
time because they’ve started to prepare late and (iii) they don’t know how to
improve it.

We hope to have eliminated the first reason with this text. If you have at least
6 months before your interviews, starting to prepare right now can solve issue
number 2 – improving judgement takes a lot of time. Issue number 3 is a topic on
it’s own and would take a much larger text to go through, but the short answer
is: read about business and apply the newfound knowledge in mock cases.

Bruno

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KEY FUNDAMENTAL SKILLS FOR SOLVING CASES

22 de February de 2017 craftingcases

If you’ve been reading what we write you know that Julio and I firmly believe
candidates should be developing their fundamentals – skills that are of utmost
importance for solving cases. From our experience as case interview coaches we
see a very clear pattern: candidates who have mastered the fundamentals can
quickly learn how to solve cases well, while candidates who struggle in at least
one of these skills are always struggling and seldom get offers.

Your practice should consist of both learning and training these skills as well
as integrating them doing back-to-back cases with other candidates. Generally,
when starting you should focus more on the first and as you advance, shift more
and more of your attention to the later.

Recently a few candidates have asked me what are these fundamental skills, so
we’ve decided to build this list. It is by no means a comprehensive list of all
the skills you need to do well in cases, but rather of the few skills that if
not mastered will hinder your learning curve to the extent of almost certainly
not getting an offer.

Skill #1: Structuring Calculations

The skill of building an algebraic formula that solves a problem or an
estimation before getting the inputs is the most important analytical skill for
case interviews. Not doing this well (or even at all) is the cause of many
candidates’ failures. I’ve seen over and over the mistake of thinking you can do
this in the real interview and neglecting during the practice. Don’t do this –
incorporate in your mock interviews and be diligent about it. It pays off.

Skill #2: Structuring and Prioritizing Issue Trees

Any case that has a numerical goal can have the underlying issue found using the
help of issue trees. They’re an excellent tool for efficiently eliminating
non-issues and thus diagnosing problems. Most candidates learn how to use them
but few learn how to properly build custom issue trees from scratch. Since
pulling out frameworks won’t work in most interviews, being fully proficient in
this becomes a core pillar of your learning.

Skill #3: Structured Communication

Your communication should be clear, concise and well organized. Knowing how many
points you have to make about an issue and stating them in an organized,
prioritized manner is a skill that doesn’t come easy for many candidates.
Additionally, it requires tons of practice, since fluency is a requirement in
any communication skill.

Skill #4: Basic Business / Microeconomic Understanding

Consulting is (mostly) about business. It is paramount for candidates to have a
basic understanding of how a business works, how different cost structures
affect strategic decisions and what kind of revenue models are common for
different types of businesses. It also helps a lot to have a basic understanding
of how different industries are different and how are they similar (e.g. how is
a bank different from a telco and how are they similar?).

This fundamental is usually well developed in people with MBAs, not necessarily
so in candidates with other backgrounds.

Skill #5: Generating Ideas / Options

Consulting firms look for creativity and one way they test for it is by asking
candidates to generate ideas or options to solve a problem. Most people are
either very good or very bad at this. Fortunately it is something you can
develop with good technique and loads of practice.

Skill #6: Contextualizing / Probing



You can only solve a problem you understand, so a key skill is to be able to
interview your interviewer in order to gather contextual information on the case
and be able to probe deeply into the important parts. Most cases need a deep
conceptual / qualitative understanding of the situation and it is this skill
that enables you to get it. Asking ‘why’ and ‘how’ goes a long way here. Being
curious about the situation also helps tremendously.

Skill #7: Reading Charts

Every analysis in consulting becomes a chart – usually a graph or a table.
Charts are to a consultant as sketches are to architects.

Know how to read them, how to find patterns in them, what to do with outliers
and how to conclude what they say driving the case forward and you’re in the
right path. Combining this skill with skill #9 will make you shine.

Skill #8: Categorizing Ideas

Ideas and hypotheses need structure, as everything else in consulting.
Categorizing them is the basis of building conceptual structures (commonly known
as frameworks) and a great enhancer of efficiency and communication in solving
the problem.

Skill #9: Data Conclusiveness

As a working consultant you need to know what you know and what you don’t know
yet. What can you conclude with the data you have in hands and what is still
missing? What one piece of information will make your conclusion stronger if you
can only ask for one piece? Strong hypothesis-testing logic and creativity to
analyse scenarios are the key to mastering this skill, the most difficult
fundamental for most people.

Which of these skills are hindering your development? Answering this question
honestly will help you find ways to improve your whole performance by working on
the most critical parts.

Bruno

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THE VALUE OF CONSISTENCY

22 de February de 2017 craftingcases

Consistency was admired at McKinsey. It was a high form of praise to call
another consultant consistent in both their actions and ideas. The funny thing
is someone who’s consistent is not necessarily right. Maybe they are
consistently wrong, or have consistently bad behaviour. I think consistency was
a desirable trait because teamwork was another valued characteristic. People who
are consistent but are also flexible enough to adapt their ideas and behaviours
to the environment tend to do excellent work.

As case interview coaches, Julio and I are eager to understand why some
candidates get offers while others don’t. More than half of our clients get
offers from a top firm, a strong result in such a competitive field. But what
about the people who don’t get in? What are the main causes for them not getting
offers?

After examining our previous clients, the major explanation we found is lack of
practice consistency.

There are other causes as well, and we can go through them in the future. Being
consistent is so important, however, because it is challenging for a lot of
candidates (I would guess more than 30%) and it is under your control. You can
become more consistent in your practice and that depends on you and only you.
We’ve found three sources of inconsistency that will hinder your improvement:
consistency of time, consistency of procedure and consistency with feedback.

Consistency of Time

This is the most common one. There is a clear divide between candidates who have
a set practice schedule and those who practice “when they have the time”. The
first group practices more and with regularity. They learn faster and have an
easier time finding practice partners. The second group has an unpredictable
learning pattern – they go through periods of time with no practice and try to
crunch a lot of practice in small periods of time. A big chunk of this time is
spent recovering skills they had before, instead of learning new ones. They also
get more anxious because the interviews are getting much closer every time they
practice.

Diligence pays off in many ways and although difficult, is a simple skill to
obtain. There are many different ways to deal with lack of organization and
procrastination – one can read them in websites about fitness, exam preparation
or even meditation. This is a problem that happens in many fields. If you have
this kind of problem, my best piece of advice to you is to set aside a time of
your day to prepare as you do with other high priority activities. Turn off your
cellphone if you must. Schedule with other partners ahead of time.

You will have to organize your time well once you are a consultant. Might as
well starting to learn this skill now.

Consistency of Procedure

In the medical field there are procedures for everything. How to write a
prescription, how to ask a patient’s history, how to store and handle surgical
instruments. Doctors learn this until it becomes second nature so it frees their
mind to solve the patient’s problem.

Consultants too have procedures. They communicate frameworks in similar ways.
They structure analyses in similar ways. They read charts in similar ways. Many
of these procedures can and should be used in case interviews. It will make the
interviewer more comfortable with your communication and you will reap the
benefits of using these best practices, which exist for good reason.

Procedures exist for three main reasons. The first one is it frees your mind to
think “what”, instead of “how”. You get to solve the problem instead of
bickering about how to present a structure or other petty matters. The second
reason for using procedures is that someone has figured out the best way to do
something and you get to enjoy it without having to figure it out yourself.
Surgeons need to know the best way to store their tools, but they don’t need to
develop their own methodologies – they can borrow it fromsomeone whose job was
to do just that. Similarly, consultants read (and write) charts in a certain way
because it works with partners and it works with clients. The third reason
procedures are used is that they increase efficiency and communication clarity
by developing common ground. Surgeons get to receive scalpels from other
surgeons quickly and with no risk of cuts. Consultants get to understand and
analysis’ conclusion (or “so-what”) without having to ask for it and no risk of
misunderstanding.



You should adopt the main procedures used in case interviews and apply them
until they become second nature. Then you can devote your efforts to learn how
to solve the problems. If you learn both you will get an offer.

How should you learn it? Learn the step-by-step approach from someone who knows,
understand why each step is important and practice diligently. Don’t change the
rules unless you know why they’re there in the first place. Any good coach or
consultant with interviewing experience can show you how to do these.

Consistency with Feedback

This one is less common, but it troubles me when I see it. Some candidates
practice things unrelated to what their feedback suggests they should be working
on. There are two common reasons for this: emotional blockages and lack of
focus.

Emotional blockages happen when candidates are unwilling to admit they don’t do
something well or when they are resistant to make mistakes. I’ve seen people
with business degrees denying they have business sense problems and I’ve seen
engineers turn down the idea that they make analytical mistakes. I get it, you
are smart and studied this your whole life – you can’t have this type of
problem. But the reality is many people do. Lots of business people can’t apply
their business intuition into certain cases and lots of engineers can’t apply
their analytical reasoning into case interviews. This is magnified by the fact
that interviewers will have higher expectations of you in the areas you should
be stronger.

A practical way to deal with this is to be data-driven. Of the past 10 cases
you’ve solved, how many times did you raise two of the three main issues of the
case? How many quantitative analysis did you get wrong? Data doesn’t lie.

Lack of focus is a more common issue, however. Most candidates don’t solve cases
with one single purpose.

When I first started working out, my friend who was teaching me how to lift
weights asked what my goal was. I answered as many beginners do: “to get
fitter”. He then asked me what my specific goal was, and gave me a few options –
to get leaner, to get bigger or to get stronger. The obvious question I had for
him was: “can’t I get all three?” and his answer was “yes, but only if you focus
on one at a time”.

Same is true for case interviews. Every time you start a case, take a minute to
think what is the one thing you want to improve by practicing that case? Maybe
it’s structuring, maybe communications, maybe creativity. It should be something
you get improvement feedback about. Tell your partner about this one thing and
ask them to give you specific feedback about that one thing.

Every project I worked on when at McKinsey started with a team meeting where
every consultant, fromanalyst to partner, would declare among other things what
was their learning or improvement goal for that project. It was usually a skill
that, if mastered, would make all the difference in that person’s performance
evaluation. Everyone would share it with the team so they could get specific
work that would work those development needs as well as useful feedback as the
project went. You’ll work on specific feedbacks everyday when you’re a
consultant because it works to improve job performance; it will also work for
you to get an offer.

Final Thoughts

Have a schedule, learn and follow the main procedures and always focus on
improving one thing at a time. If it sounds simple, it’s because it is simple.
Simple doesn’t mean easy, however – few people do these three things. Because I
want to be consistent with what I said, I encourage you to start doing these
things one at a time.

Start with having a preparation schedule and following it. Prioritize
preparation according to how important you think this is to your life. Then,
learn the main procedures from more experienced people. Learn one procedure at a
time. Get feedback along the way on how you solve cases. Then, when you’ve
internalized the main procedures and know what errors you’re consistently
making, prioritize those and tackle one at a time.



Doing these three things with diligence is hard, but it will help you get an
offer. It will also help you become a great consultant. Who knows what else will
this help you with?

Bruno

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IS MORE PREPARATION GOOD OR BAD?

22 de February de 201722 de February de 2017 craftingcases

Many current consultants tell candidates that too much preparation impairs your
performance in case interviews. I’ve even heard some rules of thumb that you
should do between 10 to 20 cases in order to get used to the format, but no more
than that so that you sound robotic. I think this is terrible advice. Let me
explain why.

In almost every learning endeavor, more preparation correlates strongly with
better performance. It is not a huge leap of logic to say it causes better
performance. Either there is something inherently different with learning to
solve cases or there is something else going on here.

Before we dive into this, I want to tell you a story.

When I was in high school, I went to the United States to study for a year.
There were other foreigners in my school as well, including one guy who could
barely speak english when he first got there. Everyone else could speak english
fairly well, although most weren’t fluent yet.

Every single one of us became fluent between the 3rd and the 6th month there,
including the guy who had not studied english before. There was one major
difference between him and the rest of us, though: his english, although fluent,
was very very poor. In fact, there was another difference – in the remaining six
months everyone got better and better speaking the language, except for him.

What he lacked were the fundamentals. His brain would learn all the words and
how to think without translating, but he still didn’t speak well. He didn’t know
the grammar, probably because he didn’t study it or didn’t infer it, as young
children do. He didn’t know how to pronounce the sounds that english had but his
mother tongue didn’t.

I don’t think he ever learned proper english – it would be a huge effort to go
back to the basics when he was able to (barely) communicate with people.

Now, back to the case preparation issue. Some interviewers advise candidates not
to prepare too much because they’ve seen candidates who “overprepared” being
obviously not good at problem solving. Much like my old friend, who was a very
extroverted guy, was obviously a bad english speaker. When you’ve prepared a lot
and still didn’t do well it is very clear the the preparation didn’t help, but
that doesn’t mean it doesn’t help anyone.

The problem with less preparation is that if you are not naturally very good at
solving problems the way consulting firms solve problems, you’re not going to
learn it by doing nothing. You will learn it by understanding what you’re
supposed to do and why. Only then you practice it.

The solution is, thus, quality preparation.

Quality preparation always improves your game. I’ve been doing cases for a long
time (it is my profession) and I am still getting better, even if marginally
better. I didn’t get “overprepared” at any time. I’ve coached candidates who’ve
prepared intensively for several months and they would always get better.

If you’re worried you’re training too much, you’re worried about the wrong
thing. Shift the question from“should I prepare more?” to “how can I prepare
better?”

For a majority of people out there, the answer lies in mastering the
fundamentals.

Bruno

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ANY NUMBER BY ITSELF IS MEANINGLESS

28 de September de 2016 craftingcases

Most cases have numbers. Nearly all of the cases Bruno and I use have numbers.
Yet, candidates sometimes struggle to use them as a tool to get insights.

Here is an example:

A couple of weeks ago, an exceptional candidate got himself in a tough situation
in a financial analysis during one of our coaching sessions. After structuring a
payback analysis perfectly and asking for all the necessary data, he concluded
that the payback period of the project – the purchase of some equipment – would
be of four years. That, however, did not answer the question that ensued the
analysis: “Is this investment financially viable?” He couldn’t tell whether this
was a good investment or not – even though he had the number he sought – because
that number, by itself, was meaningless. And so are all others.

In this specific case, he would have reached a satisfying conclusions if he knew
the lifetime of said equipment. He would have even better insights had he asked
for the expected payback time of the company based on their costs of capital and
relative risks of the project.

One might say a Net Present Value analysis would prove this article wrong, for
all you need to compare it to is zero. That is not true because (i) the analysis
itself is a comparison between the cashflows of the investment and its weighted
average cost of capital; (ii) one would need to compare the net present value of
the project with that of other projects that might compete with that one; and
(iii) unless one compares the net present value of the project with the actual
value of the company, they can never know how much of a difference that project
is going to make and thus how important it is.

The need for comparisons to turn numbers into insights holds true for other
metrics, too. A percentual decrease in costs is always positive, but in order to
understand how much difference it would make, one must compare it with the
current profit margin. Capacity of supply can only be large or small when
opposed to the available demand. Average expenditure per consumer in a specific
market must be compared to either the average consumer’s income or the average
consumer’s expenditure in other markets or categories. The percentual change in
revenues can only be judged as good or bad if compared with the market growth.
More specifically, in most cases the price increase must be compared with that
of the industry, and the volume increase with the market growth in number of
units. Changes in costs must be compared, first, with changes in the revenues,
and later with the change of costs in the industry.

Whenever you stumble upon a value, whether a product of your analysis or data
provided by the interviewer, remember it only has meaning if you can compare it
to some other number. Of course, if the interviewer can’t provide you with data
for comparison, you can use your business sense to try and evaluate the
magnitude of what you are dealing with, but using hard data to interpret your
numbers shows that you are data-driven, like all consultants must be.

Julio

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