Business Consulting Services Jeffrey M. Kurtz

Agenda Problem Definition discussion Problem Definition Exercise Objectives: 1.Understand the Problem Definition Process 2.Be Able to Define a Client’s Problem

Ultimate Goal “Here” How Do You Get “Here”? Get Here

5 Fatal Flaws of Consulting 1.Projects not defined in terms of client results 2.Unrealistic solutions – beyond the resources 3.Unrealistic solutions – one big change 4.Non-collaborative consulting 5.Labor intensive use of consultants (instead of leveraged use)

Good Consulting Techniques 1.Project goals are defined in terms of measurable improvements in client bottom-line results. 2.Project scope determined by assessing what the client organization will be willing and able to absorb and implement. 3.Projects divided into steps to produce rapid results and experience that lay foundation for further progress. 4.Client and consultant work together as partnership at every stage of the project. 5.Client teams take major responsibility for the project, and consultants provide unique, focused support.

What’s a Problem? Something that isn’t right that has finally reached the point that it can’t be ignored any longer.

Ultimate Goal “Here” How Do You Get “Here”? Get Here

Problem Definition Excellent Consulting begins with Accurate Problem Definition

Problem Definiton What is the difference between The Symptoms and The Problem?

Presenting Problems = Symptoms Symptom - Back Pain Ask questions: Where? In the middle of my back & sometimes my neck. How long? About 2 hours. When does it hurt? It started when I was shoveling snow. It goes away if I sit down and rest. Are there any significant medical issues in your family? Dad died from a heart attack. Do Research: Check Pulse – rapid Check BP – high Check Breathing – labored and shallow Check Skin – pink, cool and damp Hypothesis: Heart attack. Treatment: Immediate cardiac care. Symptom - Back Pain Ask questions: Where? In the middle of my back. How long? About 2 hours. When does it hurt? It started when I was shoveling snow. It goes away if I sit up straight and don’t turn my head. Are there any significant medical issues in your family? No. Do Research: Check Pulse – normal Check BP – normal Check Breathing – slightly elevated and shallow Check Skin – pink, warm & dry Hypothesis: Strained back muscles. Treatment: Ibuprofen, heat, relaxation.

Presenting Problems = Symptoms Symptom - Back Pain Ask questions: Where? In the middle of my back & sometimes my neck. How long? About 2 hours. When does it hurt? It started when I was shoveling snow. It goes away if I sit down and rest. Are there any significant medical issues in your family? Dad died from a heart attack. Do Research: Check Pulse – rapid Check BP – high Check Breathing – labored and shallow Check Skin – pink, cool and damp Hypothesis: Heart attack. Treatment: Immediate cardiac care. Symptom - Back Pain Ask questions: Where? In the middle of my back. How long? About 2 hours. When does it hurt? It started when I was shoveling snow. It goes away if I sit up straight and don’t turn my head. Are there any significant medical issues in your family? No. Do Research: Check Pulse – normal Check BP – normal Check Breathing – slightly elevated and shallow Check Skin – pink, warm & dry Hypothesis: Strained back muscles. Treatment: Ibuprofen, heat, relaxation.

Presenting Problems Presenting Problem – Profitability Ask Questions: What has happened to sales? Remained steady. What has happened to expenses? Increased What areas have increased the most? Cost of Goods Sold (COGS) Why? I’m not sure. Research:  Industry Norms  Historical – COGS% up  Break down components of COGS – shipping costs 30% above industry norm. Hypothesis: Examine ways to lower shipping costs of raw materials. Presenting Problem – Profitability Ask Questions: What has happened to sales? Declined. What has happened to expenses? Increased slightly. What products have declined the most? Our pink widgets. Why? I’m not sure. Research:  Industry Norms  Historical – Pink & Striped widget sales are down  Competition, trends, pricing, etc. Hypothesis: Competition has increased in the Pink widget business and technology has made Striped widgets unnecessary.

Presenting Problems Presenting Problem – Profitability Ask Questions: What has happened to sales? Remained steady. What has happened to expenses? Increased What areas have increased the most? Cost of Goods Sold (COGS) Why? I’m not sure. Research:  Industry Norms  Historical – COGS% up  Break down components of COGS – shipping costs 30% above industry norm. Hypothesis: Examine ways to lower shipping costs of raw materials. Presenting Problem – Profitability Ask Questions: What has happened to sales? Declined. What has happened to expenses? Increased slightly. What products have declined the most? Our pink widgets. Why? I’m not sure. Research:  Industry Norms  Historical – Pink & Striped widget sales are down  Competition, trends, pricing, etc. Hypothesis: Competition has increased in the Pink widget business and technology has made Striped widgets unnecessary.

Defining the Problem 1. Uncover the Presenting Problems. 2. Identify the key questions to ask and investigate further. 3. Answer the key questions and define the overall issue. 4. Define a course of action.

Issue Decomposition Issue Decomposition = A tool to define/structure key questions to be answered to solve a business issue (i.e., Issue Tree) Issue Tree Enables You to: Clearly state a business problem Understand the business problem’s key drivers and components Identify interrelationships between factors Comprehensively answer/address the business problem Organize efforts to collect relevant information Communicate your approach, and, eventually, your recommendations in a logical fashion

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE Problem: How can the Acme Widget Company increase profits from its existing business lines?

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE How can Acme increase profits from existing business lines? from McKinsey Consulting

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE How can Acme increase profits from existing business lines? From Widgets From Thrum-mats From Grommets Which Business Lines? from McKinsey Consulting

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE How can Acme increase profits from existing business lines? From Widgets From Thrum-mats From Grommets Increase Revenues Decrease Expenses Which Business Lines? How? from McKinsey Consulting

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE How can Acme increase profits from existing business lines? From Widgets From Thrum-mats From Grommets Increase Revenues Decrease Expenses Decrease raw material costs Decrease labor costs Decrease overhead costs Which Business Lines? How? from McKinsey Consulting

FRAMING THE PROBLEM – ISSUE TREE EXAMPLE How can Acme increase profits from existing business lines? From Widgets From Thrum- mats From Grommets Increase Revenues Decrease Expenses Decrease raw material costs Decrease labor costs Decrease overhead costs Negotiate wage concessions Implement a labor-saving production process Which Product Lines? How? Negotiate higher productivity quotas from McKinsey Consulting

Issue Tree- MECE The number of primary questions and the number of question tiers is dependent upon the business issue being addressed. ME = Mutually Exclusive = Ensure that that no overlaps exist. CE = Collectively Exhaustive = Ensure that all aspects of the business issue are considered.

MECE example

Case Practice as Team STC As a team, work for 30 minutes to 1. Define the Problem 2. Present it to the class

Reminder Client presentations will be held on: ENG – Wednesday class time. BA - Thursday evening from 6:30 to ~ 8 p.m. Please dress “business casual” for that session.

Thanks!