Case Interview 101: What Is A Hypothesis Driven Approach?
How to adapt your problem solving approach to get the consulting gig
There is plenty of advice on the Internet on how to “Ace the Case” at your upcoming management consulting interview. Many involve math tips, examples of issue trees, walk-throughs of a mock interview and the sage advice of practice, practice and practice some more. Having spent the last five years on the other side of the table, coaching candidates through the process, one commonality of successful candidates is that they truly understand and can flexibly demonstrate efficient problem solving.
Why problem solving? How do I show it in a case interview?
What management consultants do from day to day is solve unique problems. Generally, as newly-minted consultants, these are problems that you have encountered for the first time. On top of the lack of familiarity with the domain, these problems are challenging! Otherwise a client would not be paying a consulting firm to come in to help them with it. So testing aspiring management consultants for their ability to solve problems, of the analytical and the people variety, is essential. The case interview seeks to check for a candidate’s “intellectual horsepower”, the analytical side of problem solving.
Now, there are many ways to “analytically problem solve”. Generally, consulting firms aren’t concerned with your ability to use statistics, create models on Excel or use Pivot Tables. What top tier consulting firms are interested in is your ability to break down a problem into its component parts and identify an analytical approach to the problem. As you may expect, there is no one way to break down a problem despite what some case interview guides will have you think. What makes candidates stand out is finding and communicating an approach that is logically sound (i.e., avenues for analysis are mutually exclusive), considers the most pertinent issues at hand (i.e., together, the issues being investigated are collectively exhaustive) and is well-adapted to the situation (i.e., avoiding stock or canned approaches to ‘the profitability problem’ or the ‘new market entry problem’).
What does good problem solving look like?
One phrase you will hear being thrown around is a “hypothesis-driven approach”. If you’re like me when I was preparing for consulting interviews, the last time you heard the word “hypothesis” was high school sciences or an introductory statistics course. What does this have to do with a case interview? Let me explain.
Consultants analyze data to help organizations make decisions. In solving the problem at hand, it is impossible, impractical and a big mistake to be blindly looking at all the data sources to try to find “interesting insights”. On the job, the consulting team needs to be making real progress from Week 1 at the client and cannot afford to be stuck in a rabbit hole of analysis. That is why efficient analysis is important. Being efficient at problem solving boils down to designing a good analytical approach.
This is where “hypothesis-driven approach” comes in. Being hypothesis-driven in problem solving means working on trying to debunk (or prove) each component of the problem at a time, starting with components that resolve as much of the problem as possible and subsequently prioritizing the most likely culprits.
A useful analogy is if you are searching for a needle in the haystack, it would be most efficient if you can throw away half the haystack, reducing the search space by half. Doing that a couple of times at the very beginning could leave you with a small haystack that you can search through in detail. This is where the concepts of mutually exclusive and collective exhaustive becoming important.
- Mutually exclusive: When we break down the issue and are considering parts to “throw away”, we want to make sure that the piece being discarded isn’t somehow related to the pieces that are remaining.
- Collectively exhaustive: The issues that are being tested for validity need to be all of the pertinent concerns. In our analogy, the haystack we are looking at needs to be the full haystack. Otherwise, we run the danger of finishing the entire analysis and still not identifying where the needle is.
What does this look like in a case interview?
- The issue tree is your haystack: The issue tree that you are building at the beginning of a case interview, after the case prompt, is your haystack. Each branch of your issue tree is a way to carve out the haystack. For instance, if the case prompt asks for you to identify the reasons for and possible recommendations to remedy declining revenue in a retail business, a good way to carve up the haystack in half is to identify whether the client is unique in declining revenue or whether the entire sector market size has declined. You can imagine that on a real consulting case study, a consultant would be able to research market reports and/or annual reports of competitors to answer this question. Answering this question helps eliminate or at least tailor subsequent analyses, leading to efficient problem solving.
- Use your business acumen to identify the most promising areas for analysis, given the situation: Continuing with the example of revenue loss, your first guess or “hypothesis” as to what the issue could be should adapt based on the sector or industry of the case study. If we are talking about revenue decline in brick-and-mortar retail, there is a higher likelihood that it is a sector-wide problem. If we’re talking about revenue decline in on-demand video streaming, it is more likely to be an issue unique to the “client” in the case study. This is where incorporating pre-existing knowledge to focus areas of questioning and analysis helps make the problem-solving process efficient.
Being able to flexibly use these approaches under stress in a live case interview is not easy. Beyond landing the job though, learning to problem solve efficiently pays off on the job. Some of the best consultants I had the pleasure to work with, who worked the most sustainable hours and led the most high performing teams were those who were able to effectively design an approach to the problem at hand. It is definitely a worthwhile skill to learn and comes with deliberate practice.
What other case interview buzz words have been confusing and what other questions do you have? Let me know in the comments.
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