Ask a consultant when they use any of the 12 magic frameworks from Case in Point in their daily work. The answer will be “never”, 100% guaranteed. This fact in itself should raise alarm bells. What's wrong with pre-packaged frameworks? They lead you to force-fit a case into one of the frameworks and build your solution based on the thoughts of a random strategy guru rather than the client's priorities!
Since pre-packaged frameworks will hardly make you shine on their own, you will have to craft a tailored framework for every case. It might require more effort and be more time consuming, but this is what consultants (including your interviewer) do in their real projects and what they want you to do.
RULE 1: PRIORITIES, FIRST
When faced with a question about a business problem, your focus should be “what is the single, key, most important success criteria for the client?". That should be your rising star and focal point of your structure. Start building your framework only when that question is clear in your mind and make sure that the framework itself answers that question.
initially, this concept looks pretty intuitive. However this is radically different from the typical one size fits all framework approach. Let’s examine why with a simple case question.
Our client is PharmaCorp, a Dutch pharma company specializing in researching, developing, and selling “small molecule” drugs. This class of drugs represents the vast majority of drugs today, including aspirin and blood-pressure medications. PharmaCorp is interested in entering a new, growing segment of drugs called “bionics”. These are complex molecules that can treat conditions not addressable by traditional drugs. R&D for Bionics is vastly different from small molecule R&D. PharmaCorp wants to jumpstart its biologicals program by acquiring BioHealth, a leading bionics startup from the Silicon Valley with a promising drug pipeline.
Should PharmaCorp acquire BioHealth?
We’ll use nothing else but the Victor Cheng framework on Mergers and Acquisition. A diligent Victor Cheng student would frame the problem in the following way:
In order to assess whether it makes sense for PharmaCorp to acquire Bio Health we will first look at how the two companies would complement each other, across 4 key areas:
Who are their target customers
What products (medicines) they have, both developed and in pipeline
What capabilities and expertise the two companies have/can share
Which competitors the two companies have
In addition to that we will compare the acquisition price with a fair estimate of future earnings and evaluate potential takeover alternatives.
We identify the CEO's priority and build a tailored framework that is answers his strategic question:
The main objective of management is assessing whether the net present value, or expected profitability of the acquisition, is positive. Net present value is given by the difference between: present value of future earnings (profits) and acquisition price. Present value (PV) of future earnings is the sum of:
Present value (PV) of earnings from existing drugs
Present value (PV) of expected earnings from pipeline drugs. Since drugs are in the development pipeline we are not fully sure that they will be commercialized. Therefore in order to assess expected earnings we weight potential earnings in case they get FDA clearance to be commercialized by their probability of getting it (usually based on which stage of the development process they are in)
Synergies, potentially coming from e.g. sales force, R&D
This analysis would enable us to estimate net present value of this acquisition, which we should compare to the one from other acquisitions to make sure we are not forfeiting better opportunities.
WHAT IS THE DIFFERENCE BETWEEN THE TWO FRAMEWORKS?
There is one fundamental difference:
The Priority-driven framework identifies the CEO’s priority and builds the whole framework on that
The standard framework tries to structure a problem in an abstract way (or the way Mr. Cosentino/Cheng thought about it), then at the end bridges the gap with the CEO’s question
Other differences between the priority driven and the standard framework are:
Adaptability to data: in the priority driven framework all factors are linked. In case the interviewer has data about the earnings or synergies, it is very straightforward to calculate the net present value of the acquisition, since all calculation steps are already there. Doing so with the standard framework is simply impossible
Logic: while the standard framework is basically a laundry list of relevant but loosely connected factors, in the priority driven framework all factors are interconnected in compelling logic. This means that it will be easier for you to get to the next step and for the interviewer to be engaged
Relevance: in the priority driven framework everything is connected to the question the CEO has in his mind. Everything is relevant and useful: you could hand in the framework to someone else and she would know clearly all the factors of the equation. In the standard frameworks, since areas are vague and not tailored to this specific case, further refinement will be required in the analysis phase
Bottom line: when using the priority driven framework you’ll have to think about the client as if you were in a real consulting project, while if you use the standard framework, you’d have to think about the last casebook you read. If you are working in consulting for real you would not even consider using the standard framework, you would use a priority-driven framework. And, since your interviewers are consultants, guess which one they would prefer?
Existing frameworks are good study aids, they should just be used in the right way. Some concepts are basic strategy ideas that are good to keep in mind, such as the difference between value based pricing and cost based pricing. In other situations they can be useful as a check list to make sure you don't leave anything off your radar, such as the Porter 5 forces when analysing a market (although it's better to never tell the interviewer you are using them). In summary, frameworks should just be used for what they are: (overly) simplified methods of solving generic problems.
However cases are usually not generic and each of them requires a tailor-made structure that you will build on the spot, based on:
Proper understanding of the objective of the case. Ask yourself: "What is the single crucial piece of advice that the client absolutely needs?"
Identification of the drivers: Ask yourself: "What are the key forces that play a role in defining the outcome?"
The difference between My Consulting Coach and other preparation websites is that our case interview coaching programmes don't teach you frameworks, they teach you to think like a consultant. This includes the ability to create frameworks that are simple, effective and, most of all, relevant to the case you are dealing with. It definitely requires more hard work than just learning standardized frameworks, but that's what they are expecting from the 2% of applicants that make it into consulting.