We hope you will find this video helpful. Let us know what do you struggle with the most in your career/business. And as you are building your skills with FIRMSconsulting content please also focus on building a skill set that will serve you for the rest of your life, versus only focusing on achieving a short term goal.
Until FC, I would just blurt out some hypothesis and hope that it is the right one. Now, I look back and wonder who came up with that advice in the first place! Now I see why I struggled with drawing the insights that needed to be drawn out of the case. Thanks!
Really detailed information on the differences between McKinsey, BCG and Bain case type. Of course they all can follow different types of interview, but understanding that there are certain ways to behave when dealing with those types can certainly helps. As always, great approach to solve the case, Michael.
Very useful session to understand the nuances of different styles from McKinsey/Bain and BCG. And indeed it fixes the problem of building hypotheses which are both MECE and follow the 80/20 rule. I will surely revisit this one! Thanks for sharing it.
Hi, thank you for your video but Iam confused whether you should take competitor into account in this case besides the segmentation of food, alcohol and non-alcohol ?
I guess the "Inventory" expansion should be dependent upon a few clarifying questions as well. When they say they expanded the menu, they probably mean they added some more recipes for budget customers. So to cook these new menu items, were they using the inventory available to them for budget items that was probably going to waste? or did they cherry pick cheaper ingredients used to make premium items to satisfy the demand? or did they have to procure simply more volume of ingredients to satisfy the demand? answer to each of these questions will generate different costs..sometimes no added cost and sometimes more added cost
Really enjoyed this video. One question though: why is labor a fixed cost and not a variable cost? I understand that labor can be either depending on the situation, but particularly because the change in opening hours of the restaurant may have been a key driver of decreased profitability, exploring labor as a variable cost could prove helpful in this case. In any case, thanks for this video!
My understanding is that costs are variable with reference to the units produced. So in a typical manufacturing situation where a certain amount of labour hours is required per unit, labour is a variable cost. In the context of this example, the unit is a meal. Thus, the raw ingredients are a variable cost. However labour is not as (to an extent) it is not directly correlated to the number of meals produced.
Thanks for the great tutorial, this is extremely helpful for my upcoming interview with McK. My question for you is about the time it takes to create such a detailed framework. I read in most cases it should take no longer than a minute come up with something like what you've done in the video. However, your frameworks seems that it might take a bit more. Is this ok? is so, whats the longest time you suggest to spend on a framework of this sort? Thank you
BoomerE30 Hi Boomer, The reason it is fine to use such detailed frameworks is that we NEVER encourage clients to pause for 1 to 2 minutes up front. We encourage them to talk through their thinking on the framework with the interviewer. In this way, there is no awkward pause. Michael
Hi, I understand that the Hypotheses shown in this example are not meant to be exhaustive but still, the first thing I would check in this situation is the number of daily customers coming in before and after the change. Given the sharp drop in the profits, most likely the revenues have gone down sharply. This could be due to the restaurant's new image of being a regular place instead of the exclusive place it was before. Or, more importantly, maybe a new high-end restaurant just opened up about the same time this restaurant changed its menu & image and is now pulling away most of its old customers. The impact of the competition must be part of the analysis.
considering how all of the background information pertaining to the case is relevant to company changes, id start with company first. take into account the context of the scenario first and try to deduce the direction the McKinsey interviewer is trying to point you toward before going off on your own ideas
sample response: thank you for the information. i noticed that the context given is company-based. based on this information ill structure a framework around the company and in the case i find that the solution is not within this scope, ill expand it to include a more indepth customer and competitor analysis
Loved the video. Very informative !! Just a doubt, there could be few other things which can directly impact the revenue like number of customers, competition (some other restaurant might have opened), decrease in service quality because of targeting low budget customers which prevent high end customers( thus high profit ) from coming, could also be because of increase in low end customer there is a decrease in parking space and since the restaurant is on the busy street, it's a major issue or chef might have changed which altered the taste. How should we catogerize these possibilities. I am sorry, i am a beginner. Not aware of many frameworks. TIA
Dividing revenue into Non-Alcohol and Food violates MECE. I guess those must be combined into one. Revenue could be broken into type streams such as Appetizers , Main course , Beverages and Desserts . Other ways such as timing is good way to stream and break the problem further apart. firmsconsulting
If violating MECE saves some time then it makes sense. For example, We can divide Revenue into Food and Drinks and then further divide drinks into Alco & non-alco, or we may just skip one and divide food, alco & non-alco.
The graph prompts a question - what would have happened to the margin if the menu did not change? In other words, is the new menu alone driving the margins down, or is there another external factor that is directly affecting the drop in profits, independently of the menu
Hi Jess, Thanks a lot of your comment. We have over 5,000 episodes so we cannot recall the details of this particular case and therefore not able to answer case specific questions. One point that maybe helpful is generally it is important to remember that nothing in business is static. If you change one thing it changes many other things. Cheers, Kris
Does this idea of keeping your hypotheses very strict to your structure contradict Victor Cheng's idea of a hypothesis-driven approach? He is an Ex-McKinsey consultant and recommends that candidates state a hypothesis early on in the case (first 5 mins). The approach in this video makes more sense to me, but I was wondering if Victor Cheng's recommendation is any different?
Hi Purva, Both approaches can work. But coming up with hypotheses without thinking through the structure allows much more room for error because it is much harder to come up with good hypotheses. In a real study, if you do come up with hypotheses immediately you need to keep your mind open to adjust it. Any many people struggle with that. They start searching for data to support their hypotheses. As you probably know, this is called confirmation bias. Generally, the way Michael teaches cases works very well so I would go with that. Also in TCO II we have Kevin Coyne (former McKinsey senior partner and world wide strategy practice co-leader) teaching cases. He has a slightly different view in that Kevin likes to immediately come up with hypotheses when serving a client. Even before he returns client's call he comes up with hypotheses. But the reason he can make it work is he is able to make adjustments and not feel married to hypotheses he came up with. Kevin also teaches his technique in more depth in How to Solve Big Problems (one of our FC Insider programs on StrategyTraining.com/apps). Good luck with your preparation. Cheers, Kris
how's labor a fixed cost... if you're paying waiters by the hour, since you're only open for lunch and dinner, then changing their working hours from around 7 a day to 15 a day (10am - 1 am), labor costs will almost double
My understanding is that costs are variable with reference to the units produced. So in a typical manufacturing situation where a certain amount of labour hours is required per unit, labour is a variable cost. In the context of this example, the unit is a meal. Thus, the raw ingredients are a variable cost. However labour is not as (to an extent) it is not directly correlated to the number of meals produced. - Jason Yeoh
We hope you will find this video helpful. Let us know what do you struggle with the most in your career/business. And as you are building your skills with FIRMSconsulting content please also focus on building a skill set that will serve you for the rest of your life, versus only focusing on achieving a short term goal.
This episode is very comprehensive and will help a lot of people in building up their thinking muscle and delivery style.
A great FC video that in my view is applicable to solving cases in any industry and problem type, hats off to Michael for teaching us this approach!
You seem wierd. I have seen your comment on almost all videos I have seen. Also, 2-3 comments per video with a gap of 2-3 months?
Until FC, I would just blurt out some hypothesis and hope that it is the right one. Now, I look back and wonder who came up with that advice in the first place! Now I see why I struggled with drawing the insights that needed to be drawn out of the case. Thanks!
Thanks for putting this quality material for free.
You are very welcome, Jose.
Really detailed information on the differences between McKinsey, BCG and Bain case type. Of course they all can follow different types of interview, but understanding that there are certain ways to behave when dealing with those types can certainly helps. As always, great approach to solve the case, Michael.
Glad it was helpful
Good point Mahit. Perhaps with the introduction of the new menu even the chef could have been changed. I enjoyed the video though. Thanks guys.
I find it difficult to generate Great quality hypothesis early on in the case. This has greatly helped me. Thank you!
You are very welcome, Lucas
Really appreciate how you seamlessly breakdown decision trees. This helps me explain with clients easier specially its very MECE.
amazing demonstration with systematic approach. Thank you very much!
Very useful session to understand the nuances of different styles from McKinsey/Bain and BCG. And indeed it fixes the problem of building hypotheses which are both MECE and follow the 80/20 rule. I will surely revisit this one! Thanks for sharing it.
You are very welcome, Hercule
Hi, thank you for your video but Iam confused whether you should take competitor into account in this case besides the segmentation of food, alcohol and non-alcohol ?
I guess the "Inventory" expansion should be dependent upon a few clarifying questions as well. When they say they expanded the menu, they probably mean they added some more recipes for budget customers. So to cook these new menu items, were they using the inventory available to them for budget items that was probably going to waste? or did they cherry pick cheaper ingredients used to make premium items to satisfy the demand? or did they have to procure simply more volume of ingredients to satisfy the demand? answer to each of these questions will generate different costs..sometimes no added cost and sometimes more added cost
Really enjoyed this video. One question though: why is labor a fixed cost and not a variable cost? I understand that labor can be either depending on the situation, but particularly because the change in opening hours of the restaurant may have been a key driver of decreased profitability, exploring labor as a variable cost could prove helpful in this case.
In any case, thanks for this video!
My understanding is that costs are variable with reference to the units produced. So in a typical manufacturing situation where a certain amount of labour hours is required per unit, labour is a variable cost. In the context of this example, the unit is a meal. Thus, the raw ingredients are a variable cost. However labour is not as (to an extent) it is not directly correlated to the number of meals produced.
Thanks for the great tutorial, this is extremely helpful for my upcoming interview with McK. My question for you is about the time it takes to create such a detailed framework. I read in most cases it should take no longer than a minute come up with something like what you've done in the video. However, your frameworks seems that it might take a bit more. Is this ok? is so, whats the longest time you suggest to spend on a framework of this sort?
Thank you
BoomerE30 Hi Boomer,
The reason it is fine to use such detailed frameworks is that we NEVER encourage clients to pause for 1 to 2 minutes up front.
We encourage them to talk through their thinking on the framework with the interviewer. In this way, there is no awkward pause.
Michael
Hi, I understand that the Hypotheses shown in this example are not meant to be exhaustive but still, the first thing I would check in this situation is the number of daily customers coming in before and after the change. Given the sharp drop in the profits, most likely the revenues have gone down sharply. This could be due to the restaurant's new image of being a regular place instead of the exclusive place it was before. Or, more importantly, maybe a new high-end restaurant just opened up about the same time this restaurant changed its menu & image and is now pulling away most of its old customers. The impact of the competition must be part of the analysis.
considering how all of the background information pertaining to the case is relevant to company changes, id start with company first. take into account the context of the scenario first and try to deduce the direction the McKinsey interviewer is trying to point you toward before going off on your own ideas
sample response: thank you for the information. i noticed that the context given is company-based. based on this information ill structure a framework around the company and in the case i find that the solution is not within this scope, ill expand it to include a more indepth customer and competitor analysis
Well, after watching this again, it clears all doubt: there is no way I am going to ever blurt out a hypothesis off the top of my head ever again.
Loved the video. Very informative !! Just a doubt, there could be few other things which can directly impact the revenue like number of customers, competition (some other restaurant might have opened), decrease in service quality because of targeting low budget customers which prevent high end customers( thus high profit ) from coming, could also be because of increase in low end customer there is a decrease in parking space and since the restaurant is on the busy street, it's a major issue or chef might have changed which altered the taste.
How should we catogerize these possibilities. I am sorry, i am a beginner. Not aware of many frameworks.
TIA
for your hypotheses based off of budget customers, id just organize them under 'budget' as hypotheses
Very useful! Thanks!
I like this channel. Thank you FC.
Dividing revenue into Non-Alcohol and Food violates MECE. I guess those must be combined into one. Revenue could be broken into type streams such as Appetizers , Main course , Beverages and Desserts . Other ways such as timing is good way to stream and break the problem further apart.
firmsconsulting
If violating MECE saves some time then it makes sense. For example, We can divide Revenue into Food and Drinks and then further divide drinks into Alco & non-alco, or we may just skip one and divide food, alco & non-alco.
Agree with you here. (Both of you in principle.) I think he should have written "non-alcoholic beverages".
Great content!
how do you communicate the time based hypothesis if you choose to show the food and drink breakdown? time based doesn't fit in any of the branch?
This is really helpful! Thank you
You are very welcome, Daniel
The graph prompts a question - what would have happened to the margin if the menu did not change? In other words, is the new menu alone driving the margins down, or is there another external factor that is directly affecting the drop in profits, independently of the menu
Hi Jess, Thanks a lot of your comment. We have over 5,000 episodes so we cannot recall the details of this particular case and therefore not able to answer case specific questions. One point that maybe helpful is generally it is important to remember that nothing in business is static. If you change one thing it changes many other things. Cheers, Kris
This is amazing. Very helpful. Thank you!
Great video, it will help me in my studies, thank you
Glad to hear it was helpful. You are very welcome.
Does this idea of keeping your hypotheses very strict to your structure contradict Victor Cheng's idea of a hypothesis-driven approach? He is an Ex-McKinsey consultant and recommends that candidates state a hypothesis early on in the case (first 5 mins). The approach in this video makes more sense to me, but I was wondering if Victor Cheng's recommendation is any different?
Hi Purva, Both approaches can work. But coming up with hypotheses without thinking through the structure allows much more room for error because it is much harder to come up with good hypotheses. In a real study, if you do come up with hypotheses immediately you need to keep your mind open to adjust it. Any many people struggle with that. They start searching for data to support their hypotheses. As you probably know, this is called confirmation bias. Generally, the way Michael teaches cases works very well so I would go with that. Also in TCO II we have Kevin Coyne (former McKinsey senior partner and world wide strategy practice co-leader) teaching cases. He has a slightly different view in that Kevin likes to immediately come up with hypotheses when serving a client. Even before he returns client's call he comes up with hypotheses. But the reason he can make it work is he is able to make adjustments and not feel married to hypotheses he came up with. Kevin also teaches his technique in more depth in How to Solve Big Problems (one of our FC Insider programs on StrategyTraining.com/apps). Good luck with your preparation. Cheers, Kris
@@firmsconsulting Thank you!!
simple answer: H1 - Rollback the changes made a year before.
+Clive Adams The answer is to roll back four changes when only one caused the drop in revenue?
Good to know, thanks!
You are very welcome
Thanks for sharing!
You are very welcome, Thao
Good job!
very good and very helpful.
Glad to hear!
Am leaving a time stamp for myself 9:45
You are AWESOME !!
thank you! :-)
how's labor a fixed cost... if you're paying waiters by the hour, since you're only open for lunch and dinner, then changing their working hours from around 7 a day to 15 a day (10am - 1 am), labor costs will almost double
My understanding is that costs are variable with reference to the units produced. So in a typical manufacturing situation where a certain amount of labour hours is required per unit, labour is a variable cost. In the context of this example, the unit is a meal. Thus, the raw ingredients are a variable cost. However labour is not as (to an extent) it is not directly correlated to the number of meals produced. - Jason Yeoh
man that was amazing
Thank you, Saleh. We sincerely appreciate your kind words. Cheers, Kris
👍👍👍
Glad you found it helpful
Thank you very much for sharing this great video! Really learn tons!
Glad it was helpful!