11.1 Profitability
Start with the basic relationship:
Profit = Revenue − Costs
Break revenue into price and volume, then segment further by product, customer, geography, or channel when useful. Break costs into fixed and variable costs or relevant cost categories.
Goal: Identify which driver changed, why it changed, and what actions could improve profitability.
11.2 Revenue Growth
Revenue growth generally comes from increasing price, increasing volume, or changing mix.
Consider growth from existing customers, new customers, existing products, new products, new channels, and new geographies.
Key question: Which growth opportunities are large, profitable, achievable, and consistent with the client’s capabilities?
11.3 Cost Reduction
Begin by identifying where the client spends money and which cost categories are large enough to matter. Separate fixed and variable costs where useful.
Potential levers include procurement, labor productivity, process efficiency, footprint consolidation, automation, overhead reduction, and product redesign.
Important: Evaluate implementation costs and the potential impact on customers, quality, capacity, and growth.
11.4 Market Entry
A market-entry structure typically considers market attractiveness, competition, customer needs, the client’s capabilities, economics, entry options, and risks.
Decision: Determine whether the opportunity is attractive, whether the client can win, and whether expected returns justify the investment and risk.
11.5 New Product Launch
Consider customer needs, target segments, market size, competitive alternatives, product differentiation, pricing, distribution, launch capabilities, economics, and risks.
Key issue: A good product is not enough. The client must be able to reach customers, earn acceptable economics, and sustain an advantage.
11.6 Pricing
Pricing cases often require several lenses:
- Customer value: What is the product worth to the customer?
- Competition: What alternatives exist and what do they cost?
- Costs: What economics must the price support?
- Demand response: How might volume change if price changes?
The goal is usually to understand profit impact, not simply maximize price.
11.7 Growth Strategy
Growth can come from expanding the core business, entering new segments, adding products, developing new channels, entering new geographies, or making acquisitions.
Evaluation: Compare opportunities based on size, profitability, strategic fit, capabilities required, investment, timing, and risk.
11.8 Competitive Response
First understand what the competitor has done and why it matters. Then evaluate the likely impact on customers, pricing, volume, market share, and profitability.
Possible responses include pricing changes, product improvement, marketing, channel actions, cost reduction, or no immediate response.
Discipline: Do not assume the client must react simply because a competitor acted.
11.9 Market Share Decline
Determine whether shares fell because the client declined, competitors grew faster, or both.
Investigate customer segments, products, geographies, pricing, product quality, distribution, service, marketing, and competitor actions.
Focus: Find where share is being lost before trying to explain why.
11.10 Mergers and Acquisitions
Evaluate the strategic rationale, target attractiveness, standalone financial performance, synergies, purchase price, integration feasibility, and major risks.
Key question: Does owning the target create more value than the client could create through other options?
11.11 Commercial Due Diligence
Commercial due diligence typically focuses on the market, customers, competition, company performance, growth potential, and risks.
Pay particular attention to whether the investment thesis depends on assumptions about market growth, market share, pricing, customer retention, or margin improvement.
Investor mindset: Identify what would need to be true for the investment to succeed.
11.12 Capacity Expansion
Start by comparing current and expected demand with available capacity. Determine whether the constraint is equipment, labor, facilities, throughput, or another bottleneck.
Then evaluate alternatives such as improving utilization, removing bottlenecks, adding shifts, outsourcing, or investing in new capacity.
Decision: Choose the lowest-risk option that meets required demand economically.
11.13 Operations Improvement
Map the process, identify bottlenecks, and examine throughput, cycle time, utilization, productivity, quality, and waste.
Potential solutions include process redesign, automation, staffing changes, better scheduling, quality improvement, and capacity balancing.
Principle: Diagnose the constraint before proposing solutions.
11.14 Supply Chain
Consider sourcing, suppliers, manufacturing, inventory, warehousing, transportation, and customer delivery.
Evaluate cost, service levels, lead times, reliability, inventory, and risk.
Trade-off: The lowest-cost supply chain is not always the best if it creates unacceptable service or disruption risk.
11.15 Organizational Effectiveness
Organizational cases may involve structure, roles, decision rights, incentives, capabilities, staffing, processes, or culture.
Key question: What organizational factor is preventing the business from achieving its objective?
Avoid discussing organization in abstract terms. Link each issue to measurable business performance.
11.16 Digital Transformation
Clarify the business objective before discussing technology. Then examine customer needs, processes, data, systems, capabilities, economics, and implementation.
Common mistake: Treating technology as the objective rather than as a tool for improving revenue, cost, service, speed, or decision making.
11.17 Turnaround
Turnaround cases usually require immediate stabilization and longer-term performance improvement.
Examine liquidity, profitability, revenue deterioration, cost structure, operational problems, portfolio choices, and competitive position.
Priority: Address threats to survival first, then build a path toward sustainable performance.
11.18 Public-Sector and Nonprofit Problems
These cases may optimize outcomes other than profit, such as access, service quality, health outcomes, educational achievement, or social impact.
Clarify the mission, stakeholders, budget, constraints, and success metrics.
Adjustment: Replace purely financial objectives with the outcome the organization is actually trying to maximize.
11.19 Building Structures for Unfamiliar Case Types
When a case does not match a familiar framework, return to first principles.
Ask:
- Objective: What result or decision does the client need?
- Drivers: What factors determine that result?
- Evidence: What information would test those drivers?
- Priorities: Which drivers are most likely to change the answer?
- Constraints: What limits the possible solutions?
Final principle: Frameworks are valuable because they teach recurring business logic. Use them to accelerate your thinking, but never allow familiarity to replace judgment. The strongest structure is the one that best explains the client’s specific problem and guides you toward the decision that needs to be made.
