Lecture Notes

Understanding Problem & Formulating Hypotheses

In any business, you have a wide variety of activities running parallel to each other. You will come across
various situations like seeking new clients, coming up with a new marketing plan, solving internal
inefficiencies, hiring new employees and more. In such situations, you will always be asked to make decisions
during which you will come across multiple problems.

Session: Understanding Business Problem

The image below provides a flow of how you should approach to solve problem.

Fig. 1 – Problem Solving Approach

This part is about the first step to solve a problem, i.e., to understand it completely. To understand a
problem, first, you need to familiarise yourself with the company. If you are solving an internal problem, you
would already know a lot of things. However, it is still advised to verify your understanding with the
respective departments. But if it is an external client, you should spend the time to know about what the
company does, the industry it is involved in, the market it caters to, its consumers and all the information
that will help you to understand the problem better.

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 Interviewing

After you have done plenty of self-research, you need to understand the problem from the ones who are
facing it. Here comes the part which is termed as “Interviewing”. To understand a problem completely, you
will always need to interact with multiple people in the company. You need to interview people to gather
information. Different job roles will require you to interact with a different set of individuals, but the task of
interviewing will remain across all of them.

Before any interview, you should have the answers for these three questions:
• Why this interview?
• What will I do next?
• Why this person?

Fig. 2 – First steps of Interviewing

After self-research and interview preparation, next thing in line is the interview itself. In an interview, you
should:
• Turn off all the distractions (Mobiles, laptops, etc.) around you.
• Use pen and paper to prepare notes.
• Be patient. Don’t be anxious to reply.
• Pause. Think. Ask.
• Playback your understanding in front of the interviewee for their validation.

All the points mentioned are basic, but people often tend to ignore them when they are interviewing
someone. You should keep them in mind and practice them till they become your regular habit.

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 Interviewing: Frameworks
When you are trying to solve a problem, you don’t want to leave any stone unturned as it may be the actual
cause of the problem. To gather all the relevant information, people have developed specific patterns of
asking questions over the years, which we call as “frameworks”. As a part of this course, you have learnt
some of the very popular frameworks and how you can apply them in different cases.

Following frameworks for interviewing were covered in the course:

• 5 WHYs
• 5 HOWs
• So What
• 5W
• SPIN Selling

5W
This generally is a first step to as it provides the context of the problem. It is used in combination with other
frameworks to solve the problem. You just need to write down the answers for these five questions to get a
clear picture of the problem:

Fig. 3 – 5W

5 WHYs
It is a very helpful in identifying the root cause for a problem. You go on with a flow of why’s and continue
the process until you have reached a dead end. At the dead end, you would identify the root cause that has
caused the problem. The nested form of this framework helps you to cover multiple aspects of the problem
as well.

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 Fig. 4 – 5 WHYs

Important points to note here are that while using this framework:
• It may take time to explore multiple branches
• Include all the teams affected by the problem
• There is a risk of landing on a false root cause

5 HOWs
An extension to 5 WHYs is the 5 HOWs framework. It is a handy tool to drill down a solution that will resolve
the root cause identified using the WHYs. Once you have determined the root cause, you need to ask, “How
will we resolve the root cause?”. You will have a specific answer that the team comes up with. You drill down
into the solution with a series of HOWs until you have a set of steps that will be needed to complete the
task. An example has been attached below:

Fig. 5 – 5 HOWs (Example)

So What
This framework helps you quantify the “BAD” in the situation. Like the 5 WHYs, you create a flow by asking
“So what?” after each level. This provides you with the flow of how things are going wrong because of the
existing problem. It will help realize the problem areas in the process that the client or team is performing.

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 Fig. 6 – So What

SPIN Selling
The SPIN framework is a very useful framework as it helps to understand the problem and the expectations
from the solution together. The SPIN framework starts with asking about the current situation and helps you
visualise the entire journey from when the problem exists to what will happen when the problem is solved.

Fig. 7 – SPIN Selling

Some key points should be kept in mind while using the framework:
• The result of the framework highly depends on the quality of the questions that are asked.
• Include some open-ended questions as there is a possibility that you may miss on some vital
information since you didn’t ask a question about it.
• The questions should not make the interviewee uncomfortable.

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 • Do your share of research before asking questions so that you have some context when the
interviewee is providing you with the information about the process or the company.
• The implication and need payoff should not trigger any unrealistic targets for the people facing the
problem.

Interviewing: Points to Remember

Till now, you have learnt about the process of interviewing. One important thing that should be clear in your
mind is that interviewing is a data collection process. You should not generate a final hypothesis during one
particular interview. There are different stakeholders involved in any problem, and each of them could have
different perspectives.

While you are in an interview, you should:

• Have a sceptical mindset while you are listening to the interviewee.
• You should keep on probing what the interviewee is stating.
• While probing, you should always be careful when you are dealing with any sensitive topics. You
should always make the interviewee comfortable.
• Always try that the interviewee replies with the information that can be tested or verified.

Tailoring the Conversation

In real world when you are interviewing to solve a problem, you will come across people with different
traits and the same approach will not work for all of them. The chart below summarises how to handle
different interview types.

Fig. 8 – Types of Interviewee

If you can identify the type of the interviewee, tailoring the conversation according to their type can result
in good information source. This is a skill that you will have to practice and develop over time.

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 You should be able to:

• Understand the business problem with the help of interviewing

• Apply frameworks while you are collecting information to structure the interview
• Tailor your conversation according to different types of interviewee

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 Session: Formulating Hypotheses

Now, you would have a clearer idea about the way you should ask the questions in an interview. When you
understand the problem, you need to explore the reasons that may be behind it. After the interviewing
process if you think that you have identified the problem, you are mistaken. It is just one possible reason
for the problem that the company or client is facing. There can be multiple reasons for the problem.

Also, even if you believe that you found the correct reason, first you need to verify whether there is any
data that supports it and then employ your resources to solve the issue. This test is required because if
there was a different reason behind the problem, all your efforts would then go in vain.

Therefore, you need to realise two things:

• When you are exploring possible reasons for any problem, you need to cover all the aspects of it.
For this, you will again come across various frameworks that can be applied to follow a structured
approach.
• Also, the possible reason that you discovered is what you call a hypothesis. A hypothesis is a
possible explanation which has been prepared based on limited evidence and needs to be validated
by further investigation.

Business Model Canvas

Business Model Canvas is a strategic management template for developing new or documenting existing
business models. It helps you cover all the aspects on a sheet of paper in a structured format. It is
distributed under a 'Creative Commons license' from Strategyzer and can be used without any restrictions
for modelling businesses.

The business model canvas is a very popular tool due to the following features:
• It covers multiple domains of the business in a simple and efficient manner. At the end of the
model, you are aware of the firm's or product's value proposition, infrastructure, customers and
finances.
• Your business understanding increases at an accelerated pace.
• This model is adaptive to all businesses.
• Finally, all you have at the end is just a piece of paper.

The model is summarised in the image below. (To read the text, you can zoom-in on the image)

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 Fig. 9 – Business Model Canvas

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 Formulating Hypotheses: Frameworks
After the interviews, you will have possible reasons or causes for the problem that your company or the
client was facing. The focus point is that it is still a "possible" cause. Therefore, we use the term
'hypothesis'. Now, you will learn the process of formulating the hypotheses using multiple frameworks.

Issue Tree Framework

Issue tree framework is one of the most effective methods to approach a problem. It works by
disintegrating the problem into sub-components. The big complex problem is continuously decomposed
into simpler issues. At last, you will end up with a bunch of hypotheses. This will be clearer with the image
below.

Fig. 10 – Issue Tree Framework

You should keep the following points in mind with the Issue Tree Framework:
• You should always ask the question: "How?". It helps you break the problem into simpler
components.
• You proceed from the main problem to the lower branches based on the response of the question
'How?'. You need to analyse the response at each level and keep drilling down into the problem.
• The best issue trees are mutually exclusive and collectively exhaustive (MECE). Mutually
exclusive means there is no overlap between the different branches you have broken the problem
in. Collectively exhaustive means that the sub-components of your issue tree cover all the potential
causes of the problem.
• You should always try to reach a logical hypothesis at the end of the branch. You should not use any
arbitrary assumptions during the entire process and analyse the interviewee's response to proceed
ahead.
• Always follow the practice of prioritising the hypothesis that you have at the end of the branch. It
helps you to identify the root causes that need to be dealt with first to reduce the problem. The
Pareto rule (80:20 rule) can be used to prioritise them.
• Another way to check whether the problem lies in a component is to ask for the past trend for it.

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Specialised Frameworks

One issue with the issue tree framework is that it requires a thorough knowledge of the firm and the
industry. You need to know all the factors that can have an impact. But that may not be the case. In those
cases, you will either need domain-specific frameworks or frameworks where domain is covered. All the
frameworks covered have been summarised here for this purpose.

Framework Description Utility Limitations

Strategy/Finance
Porter's Five -Helps in understanding the
Forces strength of a business in
terms of the competitive
position
- Components:
1. Bargaining power of
suppliers
2. Bargaining power of buyers
3. Existing competitors
4. Threat of substitutes
5. Threat of new entrants
Business - Useful when the company
Segmentation or client has a spread over
multiple businesses
- Is used as an extension to
the issue tree framework
Profitability - Is used as an extension to
Analysis the issue tree framework
- Segmentation based on the prioritising the high
profitability of the products
or services
Operations
3Ps - Helpful in analysing the
manufacturing process of a
product
- 3Ps:
1. People
2. Product
3. Process
- Useful to understand
the competition
- Useful when launching
new product or service
- Prevents the effort to
analyse multiple
domains at the same
time
- Facilitates the analysis
of each domain
according to its
characteristics
- Helpful to control
revenue loss by
profiting segments first
- Analyses the
manufacturing process
to check the cost and
operating efficiencies
- Doesn't include the
external environment
factors like government
policies
- Requires understanding
of multiple businesses to
analyse each domain
- If the problem lies in
the low profit segments,
the solution will be
delayed
- Significant time
required

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SWOT Analysis - Segment the processes in - Points out the critical - Requires a lot of
the company based on the concern areas for the research beforehand
capabilities company (Weakness,
- Branches in SWOT analysis: Threats)
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
The Balanced - Helps to assess the business - Analysing each domain - Requires complete
Scorecard by looking into four key to generate hypotheses knowledge of the
areas: business
1. Financial - Takes time to gather
2. Customer the information in each
3. Internal Business Processes domain and map the
4. Learning and Growth implications on the
business
Sales
BANT Framework - Helps you identify good - Helps you measure the - Many factors are left
leads from the customer pool quality of sales prospects unaccounted. For
- Full-form: and analyse their example, lack of
1. Budget likelihood of converting information about the
2. Authority into successful lead due to their online
3. Need customers research restricting the
4. Timeframe human connect with the
lead
Marketing
4Ps or Marketing - Helps you to analyse the - Useful to check if the - Significant cost and
Mix Model marketing strategy of the product/service offered time required
company by the company is:
- 4P: 1. solving the problem
1. Product for the customer
2. Price 2. priced correctly
3. Promotion 3. is promoted
4. Place effectively
4. accessible to
customers
5Cs - Helps to understand the - Analysing each domain - Requires knowledge of
internal and external to generate hypotheses all the aspects of the
environments of business - Can be applied in other business
- 5Cs: domains as well - Significant time
1. Customer required
2. Company
3. Competitor
4. Collaboration
5. Context

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 Market - Helps you to analyse the - Validates whether the - Very niched model:
Segmentation - marketing strategy of the product/service offered Works well when there
STP Model company to the customer matches are variants of products
- STP: the respective segment targeted to different sets
1. Market Segmentation of audience.
2. Market Targeting
3. Product Positioning
Fig. 11 - Frameworks

These frameworks should help you reach the final hypotheses at the end of the interviewing process. Apart
from these frameworks, there are other models available which you can apply according to your problem
case. So, try and explore different frameworks based on the problem you are provided.

The main aim of interviewing any person is that you have hypotheses to test at the end of the interview. As
you interact with multiple members of different teams, you will end up with multiple hypotheses for the
same problem. They will be termed as a hypothesis until you have validated them using some data.

The next step that follows the hypothesis formulation is to collect data to validate them. Once you have
validated the hypotheses, you can start working on a solution around that root cause.

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 You should be able to:

• Understand all the aspects of the business using the Business Model Canvas
• Formulate hypotheses using the frameworks

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