1. Problem solving approach in Management consulting projects To understand and improve on results of eBay case competition April 2010

2. 1 AGENDA 30 min 15 min 20 min ▪ Problem solving approach overview ▪ Practical exercise. Lets improve the eBay LOPs ▪ Practical exercise. Lets assess the eBay LOPs ▪ Q&A

3. 2 Synthesis & recom- mendations Problem definition Structu- ring Prioriti- zing Issue analysis PROBLEM SOLVING PROCESS STRUCTURES YOUR WORK COMMUNICATION

4. 3 STEP 1: DEFINE THE PROBLEM Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Think IMPACT: What is the question you are trying to answer?

5. 4 PROBLEM STATEMENT Characteristics of good problem statement ▪ Thought-provoking question, not a fact ▪ Specific, not general ▪ Debatable (not a statement of fact or non-disputable assertion) ▪ Able to be acted upon ▪ Focused on what the decision maker needs to move forward Clear statement of problem to be solved

6. 5 PROBLEM STATEMENT EXAMPLE: OILCO REFINERY The Oilco refinery is suffering from poor profitability despite a strong market niche position. Should the Oilco refinery improve its deteriorating position? Can the Oilco refinery be managed differently to increase profitability? Statement of fact Not disputable Too general

7. 6 GOOD PROBLEM SOLVING: OILCO REFINERY What opportunities exist for Oilco to improve performance through overhead rationalization, operational improvements, or asset/ownership restructuring, either as a growth platform or as a low- cost local operator? Oilco should shift to a low-cost local operator approach, cut overheads, redesign operations, and restructure non- core assets to improve profitability by $40 million per year OR Specific, action- oriented

8. 7 Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION STEP 2: STRUCTURE THE PROBLEM Think DISAGGREGATION and HYPOTHESIS: What could the key elements of the problem be?

9. 8 WHAT IS A LOGIC TREE? Problem A problem- solving tool that breaks a problem into discrete chunks Issue 1 Issue 2 Issue 3 Issue 4 Issue 5

10. 9 TWO MAIN TYPES OF LOGIC TREES Issue tree Issue 1 Issue 3 Issue 2 Hypo- thesis- driven tree Argument 1 Argument 2 Argument 3

11. 10 ISSUE TREE – SAVING MONEY How? How can I have more money at the end of the month without incurring a debt? Can I increase income? Can I reduce expenses? Can I receive a windfall? Can I pay less for same amount of items? Can I earn more $ from investments? Can I receive more $ from work? Can I buy fewer items? Legally Illegally Work more hours Make more per hour Buy lower quality items Shop around for specials ▪ Food ▪ Clothing ▪ Entertainment ▪ Travel ▪ Other Inherit Win lottery Overtime Additional job Higher job level Better paid industry

12. 11 HYPOTHESIS-DRIVEN – TREE SAVING MONEY Why? The best way for me to have more money at the end of the month is to spend less through comparison shopping Comparison shopping is an interesting opportunity Changing my lifestyle is not an option Savings are feasible To compensate for demanding workload, I need to invest in weekly visits to the massage parlor and the opera Additional investments do not wipe out savings To balance the junk food I eat during the week, I need at least one three-course meal on the weekend Why? My profession does not allow me to wear lower quality clothes Key spending categories have competition in new formats New formats offer same quality at lower price Opportunity cost of additional time taken up by comparison shopping Savings in $ Hypermarkets Price Club Home Depot Auto mall

13. 12 TWO MAIN TYPES OF LOGIC TREES Issue tree Issue 1 Issue 3 Issue 2 Hypo- thesis- driven tree Argument 1 Argument 2 Argument 3 DescriptionWhy use it?When to use it? ▪ Decomposes an issue into smaller sub-issues (e.g., measures, criteria) ▪ Sub-issues answer the question "What?" or "How?" ▪ Addresses the entire solution space ▪ Early in the problem solving process, when you know little about the problem ▪ Postulates a potential solution and identifies what arguments are necessary and sufficient to prove or disprove it ▪ Arguments answer the question "Why?" ▪ Focuses early on part of the solution space, which accelerates the problem solving process ▪ When you know enough about the problem to formulate sound hypotheses

14. 13 Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION STEP 3: PRIORITIZE Think SPEED: Which part of the tree seems most important to the problem?

15. 14 CUT OFF BRANCHES Problem statement Issue 1 Issue 3 Issue 4 Issue 2 ▪ Keep tightening focus ▪ Prioritize your effort on what is most important ▪ Helps to ask "so what"... but also ask what you have forgotten ▪ Is the key to working efficiently

16. 15 HOW TO PRIORITIZE Use judgment/intuition Do back-of-the- envelope calculations Involve your team Take risks Time and effort Focusing on impact Polishing Benefit for problem solving Be practical!

17. 16 METHODS FOR PRIORITIZING ▪ Take a reasonably quick, informal approach to get started ▪ Remember that sometimes a "back of an envelope" calculation is all that’s needed ▪ If new information emerges, you can always reprioritize and switch your efforts to another part of the tree ▪ Use likely impact to decide where to go first ▪ Use readily available data whenever possible; avoid major data requests ▪ Do not create massive spreadsheets or other computer models if you can move forward with less complete information Key ideas PRESENTATION Example methods ▪ Percentage of total "X" ▪ Estimated potential increase/decrease (sensitivity analysis) ▪ Simple ratios ▪ Quick industry benchmarks ▪ Qualitative input from clients, CDs, etc. ▪ Ease of implementation ▪ Timing ▪ "Quick wins" ▪ Available resources ▪ High/low risk

18. 17 Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION STEP 4: ISSUE ANALYSIS AND WORK PLAN Think EFFICIENCY: How and on what should the team spend its time?

19. 18 IssueHypothesis Supporting rationale AnalysisSource Example Key issue or unresolved question that elicits a "yes" or "no" answer and upon which specific action depends Statement of the likely resolution of the issue. It includes the reason for answering yes or no. Elements you have to believe for the hypothesis to be true Detailed supporting rationales make the transition to analysis easier. Models that should be explored in order to confirm or refute the hypothesis Likely location or means of obtaining data to carry out analysis Should ABC invest $20 million in new manufacturing technology? Yes– ABC costs will become uncompetitive without new investment Competitors’ manufacturing costs declining Industry leaders are investing in new technology Pay off is very short Comparison of manufacturing costs Review of competitive investment Cashflow: NPV Specialist magazines/ reports Manufacturing and customer interviews Accounting Department ISSUE ANALYSIS WORKSHEET

20. 19 EXTEND THE ISSUE ANALYSIS WORKSHEET TO CREATE A WORK PLAN Issue analysis work sheet Issue Hypo- thesis Support- ing rationale AnalysisSource Work plan End productResponsibilityTiming States the analysis’s output Identifies the team member who will under-take the analysis Sets the time (in work days) necessary to answer the key issue Example Breakdown of competitive costs and reasons for differences Competitors’ investment trends and areas of focus Value of investments Fuentes, P.F. Shaw, B.R. Lun, C.A. 10 5 7

21. 20 Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION STEP 6: SYNTHESIZE FINDINGS AND DEVELOP RECOMMENDATIONS Think POTENTIAL SOLUTION: What should be done?

22. 21 SYNTHESIS ADDS AN INSIGHT THAT ADVANCES YOUR THINKING Summary I have lost my keys and passport and am behind on my tax return Synthesis I have been sloppy Facts ▪ I have mislaid my keys ▪ My passport is not where I thought it was ▪ I am 2 months behind on my tax return

23. 22 SYNTHESIS PYRAMIDS HELP YOU ORGANIZE YOUR DATA AND DEVELOP AN INSIGHTS "So what?" Synthesize Data

24. 23 PROBLEM SOLVING IS AN ITERATIVE PROCESS Analysis Synthesis & recom- menda- tions Problem definition Structu- ring Prioriti- zing Issue analysis COMMUNICATION

25. 24 STRATEGIC PROBLEM-SOLVING LOOP Problem definition Problem structuring Prioritization Issue analysis and work plan Synthesis and recommen- dations Analysis Think next iteration: what are the team’s next priorities? Problem ?

26. 25 AGENDA 30 min 15 min 20 min ▪ Problem solving approach overview ▪ Practical exercise. Lets improve the eBay LOPs ▪ Practical exercise. Lets assess the eBay LOPs ▪ Q&A

27. 26 THE RULES OF THE GAME. HOW TO SET UP THE PROBLEM DEFENITION Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

28. 27 PROBLEM DEFINIOIN. Problem definition Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

29. 28 ISSUE TREE STRUCTURING Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? Нужно ли выходить сейчас или можно подождать? Каковы ключевые проблемы в value chain? (Customer base acquisition, sales platform, payment, goods delivery, client service and repeat purchase) Есть ли необходимость в партнерстве с российскими игроками на каждом этапе value chain? Кто является ключевым игроком на каждом этапе value chain? Каковы возможности по партнерству с данными игроками? Какие возможности имеет EBay в построении собственной компетенции на каждом этапе value chain? Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? Есть ли приоритетные географические регионы? Есть ли приоритетные продуты и сервисы к развитию? Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? Какие из проблем являются ключевыми (решающими)? Как преодолевались такие проблемы в прошлом? WHEN? HOW? WHAT TO DO? Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

30. 29 PRIORITIZING. THE RULES WERE SET Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

31. 30 PRIORITIZING. THE RESULT Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Prioritization based on the task (see previous page) 1.Why is it important to work now 2.Demonstrate the market knowledge 3.Interest the client at showing first results Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? Нужно ли выходить сейчас или можно подождать? Каковы ключевые проблемы в value chain? (Customer base acquisition, sales platform, payment, goods delivery, client service and repeat purchase) Есть ли необходимость в партнерстве с российскими игроками на каждом этапе value chain? Кто является ключевым игроком на каждом этапе value chain? Каковы возможности по партнерству с данными игроками? Какие возможности имеет EBay в построении собственной компетенции на каждом этапе value chain? Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? Есть ли приоритетные географические регионы? Есть ли приоритетные продуты и сервисы к развитию? Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? Какие из проблем являются ключевыми (решающими)? Как преодолевались такие проблемы в прошлом? WHEN? HOW? WHAT TO DO? 1 2 3 4 5 6 7 8

32. 31 ISSUE ANALYSIS BEST EXAMPLES Team QUANTS answer Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? Есть ли приоритетные географические регионы? 1 2

33. 32 ISSUE ANALYSIS BEST EXAMPLES Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Team USA answer Каковы перспективы роста в России по сравнению с другими рынками, еще не охваченными eBAy? Есть ли приоритетные географические регионы? 1 2 Есть ли приоритетные продуты и сервисы к развитию? 3

34. 33 ISSUE ANALYSIS BEST EXAMPLES Team QUANTS answer The only team explicitly talked about value chain partnership Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Кто является ключевым игроком на каждом этапе value chain? 4 Каковы возможности по партнерству с данными игроками?

35. 34 ISSUE ANALYSIS BEST EXAMPLES Team Dr. Pepper Consulting answer. The team set up the full list of problems, but did not prioritize them Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Какие из проблем являются ключевыми (решающими)? 6

36. 35 ISSUE ANALYSIS BEST EXAMPLES Team Economics Engeeniring answer. The team set up the full list of problems, but did provide any details and prioritization Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Какие из проблем являются ключевыми (решающими)? 6

37. 36 ISSUE ANALYSIS BEST EXAMPLES Team USA answer. The team clearly identified the 2 major issues and addressed solutions for both (the example shows the second set of issues) – further analysis path is clear Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Как можно преодолеть ключевые проблемы в value chain? 7 В какие сроки? Какие инвестиции?

38. 37 SYNTHESIS AND RECOMMENDATIONS. STORYLINE Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION Prioritization based on the task 1.Why is it important to work now 2.Demonstrate the market knowledge 3.Interest the client at showing first results Какая стратегия Ebay будет наиболее успешна для выхода на российский рынок в настоящее время? Выходить надо сейчас, фокусируясь на Москве и центральном регионе. EBay должен стать площадкой для малого и среднего бизнеса План развития бизнеса в России с описанием возможных следующих шагов в анализе Возможно сотрудничество для acquiring users. Нет партнеров для площадки и оплат. Необходимость плотного сотрудничества по логистике (в начале). Нет партнеров в customer service Крупных игроков на всех этапах кроме логистики практически нет (Molotok мал), либо бизнес еще слишком молод в России (Yandex money) Собственный опыт EBay значителен на всех этапах, кроме логистики. Доставка товаров EBay всегда осуществлялась партнерами Российский рынок интернета растет и будет расти (#3 CAGR в мире, #8 по числу пользователей) Высокая концентрация в Москве и других миллионниках (50% пользователей в Центральном регионе) Рассмотреть B2B, B2C, C2C. Определить фокус (на revenues) Как можно преодолеть ключевые проблемы в value chain? В какие сроки? Какие инвестиции? – выдвинуть гипотезы Разбивка проблем на внутренние и внешние, выделение ключевых проблем Как преодолевались такие проблемы в прошлом? – интервью, анализ рынка WHEN? HOW? WHAT TO DO? 1 2 3 4 5 6 7 8

39. 38 SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE Team QUANTS answer The team clearly answered the major question as well as showed the road map to success The team clearly demonstrated its knowledge and a promise for further insights down the consulting project Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

40. 39 SYNTHESIS AND RECOMMENDATIONS. BEST EXAMPLE Team Dr. Pepper Consulting answer The team outlined the possible strategies and outcomes as well the major problems to be solved on the way to success Synthesis & recom- mendations Issue analysis Problem definition Structu- ring Prioriti- zing COMMUNICATION

41. 40 AGENDA 30 min 15 min 20 min ▪ Problem solving approach overview ▪ Practical exercise. Lets improve the eBay LOPs ▪ Practical exercise. Lets assess the eBay LOPs ▪ Q&A

42. 41 WHAT ARE THE ASSESSMENT CRITERIA? * Example. Actual assessment criteria might differ significantly Assessment criteria* Content ▪ Structure ▪ Logics ▪ Creativeness and depth of recommendations Communication ▪ Slides quality ▪ Language ▪ Consistency Orientation to the client ▪ Problem understanding ▪ Knowledge of client situation

43. 42 HOW THE TEAMS PERFORMED ACCORDING TO THE CRITERIA LIST? * Example. Actual assessment criteria might differ significantly Content ▪ Structure ▪ Logics ▪ Creativeness and depth of recommendations Communication ▪ Slides quality ▪ Language ▪ Consistency Orientation to the client ▪ Problem understanding ▪ Knowledge of client situation Assessment criteria* IKNOW Quants USA Dr. Pepper Consulants Economics and Engineering 100% McK Lack of facts, only statements Content and headers not connected Lack of priority The strongest Great ideas, no time? Out of blue aggressive But can you keep the promise Too theore- tical, can you keep the promise Overloaded slides Headers are not statements English Extremely promising ending Lighter to the end Depth decreased Consistently shallow Lighter to the end Omitted Pay Pall discussion Consistently shallow

44. 43 AGENDA 30 min 15 min 20 min ▪ Problem solving approach overview ▪ Practical exercise. Lets improve the eBay LOPs ▪ Practical exercise. Lets assess the eBay LOPs ▪ Q&A

45. 44