The McKinsey Way – A Strong Primer on Problem Solving

Way back in 1999, Ethan M. Rasiel (full disclosure: a business school colleague of mine) penned The McKinsey Way: Using the Techniques of the World’s Top Strategic Consultants to Help You and Your Business. In the book, Rasiel reveals the ways and methods by which the renowned management consultancy, McKinsey & Company, analyzes and solves problems for its clients.

Problem solving requires you to be fundamentally skeptical about everything

  • Why is something done this way?
  • Is this the best way it can be done?
  • Drill down in problem solving with the five whys – start with a why question, to every answer ask a why question, repeat five times and you finally come to the underlying cause to the problem which is what needs to be solved.

Three Keys of Problem Solving

  1. Fact-Based
  2. Rigidly Structured
  3. Hypothesis – Driven

1.  Fact Based

  • Do the analysis to let the facts do the talking instead of gut instinct
  • As Wharton Management Professor, Peter Cappelli has said:

    I tell my MBA students that whenever you are going with your gut, you are doing something wrong. In most cases, you can actually figure it out. So, you should sit down and figure it out.

2.  Rigidly Structure the Problem

  • Think in threes
  • Be MECE – Mutually exclusive, collectively exhaustive
    • As an example, our competitive problem results from
      • Poor quality
      • High purchase material costs
      • Poor labor efficiency which results (in turn) from
        • Constantly changing work requirements – volume and product changes hinder production scheduling and learning curve
        • Lack of formal training guides / education
        • Still up learning curve in terms of trying to find faster and better ways to assemble product
  • By being MECE and thinking in threes, you can organize the critical elements of the problem that need to be addressed and keep them in mind so that they can be solved.

3.  Hypothesis – Driven

  • Figure out the solution to the problem before you start – define the initial hypothesis
  • How to define the initial hypothesis
    • Break the problem into its component parts
    • Look at the key drivers
      • Improve return on investment
        • Improve marginal contribution
          • Increase sales
          • Increase sales price
          • Reduce variable costs
        • Reduce net assets (net investment)
          • Reduce working capital
          • Sell off fixed assets
          • Delay new investments
        • Reduce fixed and overhead costs
    • Look at the actions and payoff required to affect the key drivers
  • Test the Initial Hypothesis
    • Dig for the facts to test whether the hypothesis is right or wrong
  • Adjust the hypothesis to match the facts
  • Then, repeat the process
  • Of course, this is the crux of the scientific method which we see so often on the CSI TV shows. But, as Rasiel points out, it has worked to create centuries of scientific progress and thus certainly works in business.

Problem Solving Approaches

  • The problem is not always the problem
    • Use the five whys and keep an open mind to ensure that you are addressing the cause and not the effect of the problem.
    • This parallels Toyota’s management principles of spending relatively more time and effort on defining the problem and relatively less time on finding solutions.
  • Do not re-invent the wheel
    • Contrary to most companies’ way of doing business, see if someone else already knows the answer. Ask them as the first step.
      • Employees
      • Suppliers
      • Sister companies
      • People in your network
    • Legal plagiarism is good
  • Gain momentum in problem solving
    • Pluck the low hanging fruit first; solve the easy problems
    • Continue to hit singles, not home runs. The way to success is to solve hundreds of little problems.
    • Make sure that the solution to the problem can be implemented by the people who need to implement the solution.
  • Look at the time element in problems and problem solving; think critical path
  • Remember the 80 / 20 Rule
    • 80% of the value you create comes from 20% of the time you work
    • 80% of the orders come from 20% of the customers
    • The 80 / 20 rule allows you to see key “leverage” items where a little change goes a long way
  • Remember the 30 second test
    • Know your solution (or product or production method) so thoroughly that it can be explained clearly and precisely in 30 seconds
    • If not, then
      • You may not fully understand it yourself
      • Or, it will not be clearly communicated to the people that need to work implementing the solution.
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About David Shedd

David has been a President - CEO - COO of an up to $350M group of manufacturing, distribution, specialty retail and services companies, having led 22 different businesses from turnarounds to start-ups to fast growth companies.
This entry was posted in Business Acumen, Improve / Turnaround, Perform / Execution and tagged , , , . Bookmark the permalink.

2 Responses to The McKinsey Way – A Strong Primer on Problem Solving

  1. It’s in point of fact a great and useful piece of information. I am glad that you simply shared this helpful information with us. Please keep us informed like this. Thank you for sharing.

  2. John Martinez says:

    Very useful summary which has encouraged me to do much more research.

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