EY Approach to Structured Problem Solving

27/ 01/ 2017

Author: Anna Grygorash, tutor, cosultant of EY Academy of Business If I had an hour to solve a problem Id spend 55 minutes thinking about the problem and 5 minutes thinking about solutions. Albert Einstein We face different problems every day, so problem solving is a really useful skill not just for consultants, but for everybody. In this article, you will find a brief overview of EY’s point of view on complex problem solving. It is summarized in the model called SOLVE. Problem solving is generally an iterative process, especially between the first two phases. Let us consider first three phases devoted to problem solving on an example of a newspaper corporation MediaCorp Co. Fourth and fifth phases are mostly concerned with problem of communication and require other skills, i.e. business writing, preparing and performing presentations, etc. ‘State’ phase aims to define that we are addressing the right problem. It can be finalized with problem definition worksheet (PDW). Example 1. Problem definition worksheet of MediaCorp Co Basic question to resolve: What measures need to be taken in order to improve the EBIT (earnings before interest and tax) in MediaCorp’s newspaper companies from 1.2% to 5% within 12 months? Context and trigger: EBIT in national daily newspapers is not sustainable. Circulation is decreasing. Customers’ advertisement spending is decreasing. Decision-makers: MediaCorp management. CEO Edward Times. CFO Christian van der Hall. Solution threshold: EBIT of 5% within the next year. Strategic fit of proposed solutions. Minimum operational disruption. Constraints: Sales or shut-down of newspaper companies are not an option. Cost-cutting initiatives already underway in print/logistics. Scope of work: The project will only focus on national newspapers — it will not focus on regional and local newspapers because their performance is acceptable. ‘Organize’ phase aims to impose a logical framework on real-world complexity, identify all possible questions/issues related to the problem and prioritize them. Different types of logic trees are a useful tool to generate solutions and check their appropriateness and efficiency. Direction of solutions can be generated with ‘HOW? trees’. The ‘HOW? tree’ works by decomposing a problem by asking “how?” until you have actionable options. It can be used when you have defined your problem, but there are no or few obvious hypothetical solutions to it. In case of MediaCorp Co the ‘HOW? tree’ of improving its EBIT would start with two branches: increasing revenue and optimizing cost. The revenue branch would then be divided into rising circulation and prices, and the cost optimization branch could be divided into different types of costs, functions and others. The next step is a hypothesis — a potential solution to the problem, which we may have gotten from a ‘HOW? tree’, or it may have been obvious as soon as we defined the problem. Let us use a ‘WHY? tree’ as a way of proving this hypothesis. We build the tree by working left to right asking, “Why would this be a solution to the problem?” until we have either proved or disproved our hypothesis. Analysis of MediaCorp’s performance and industrial trends provided the basis for solution hypothesis, which were summarized in the ‘WHY? tree’. Example 2. ‘WHY? tree’ of MediaCorp Co A ‘WHY? tree’ should disprove other hypotheses as well as prove our primary hypothesis. In case of Media Corp Co we proved the hypothesis of the way of improving company’s EBIT by reduction of costs in core and supporting functions. An important rule for creating trees is following the principle that they are mutually exclusive, collectively exhaustive — MECE. MECE is a grouping principle that says that data in a group should be divided into subgroups that comprehensively represent that group. When a tree is MECE, it covers all possible issues or solutions and ensures that the issues and sub-issues are not intertwined. In other words no gaps — ensures that you do not forget important areas – and no overlaps — ensures you find clear cause-and-effect relationships and do not “double count” the issues. On the analysis phase we redefine the storyline and develop data analysis plan. Then we gather and analyse data in order to support the storyline and iterate our storyline based on our findings. EY approach to structured problem solving can be used consistently by phases or partly with instruments appropriate for particular situations. List of the recommended sources: 1. Barbara Minto. The Pyramid Principle. Logic in Writing, Thinking, & Problem Solving. Person Education Limited. 2009. 2. Edward Tufte. The Visual Display of Quantitative Information. Graphics Press. 2001. 3. Gene Zelazny. Say It with Charts. McGraw-Hill. 2000. 4. Peter M. Senge. The Fifth Discipline. Doubleday. 2006.

Author: Anna Grygorash, tutor, cosultant of EY Academy of Business

If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.

Albert Einstein

We face different problems every day, so problem solving is a really useful skill not just for consultants, but for everybody. In this article, you will find a brief overview of EY’s point of view on complex problem solving.

It is summarized in the model called SOLVE.

Problem solving is generally an iterative process, especially between the first two phases. Let us consider first three phases devoted to problem solving on an example of a newspaper corporation MediaCorp Co. Fourth and fifth phases are mostly concerned with problem of communication and require other skills, i.e. business writing, preparing and performing presentations, etc.

‘State’ phase aims to define that we are addressing the right problem. It can be finalized with problem definition worksheet (PDW).

Example 1. Problem definition worksheet of MediaCorp Co

Basic question to resolve:

What measures need to be taken in order to improve the EBIT (earnings before interest and tax) in MediaCorp’s newspaper companies from 1.2% to 5% within 12 months?

Context and trigger:

EBIT in national daily newspapers is not sustainable.
Circulation is decreasing.
Customers’ advertisement spending is decreasing.

Decision-makers:

MediaCorp management.
CEO Edward Times.
CFO Christian van der Hall.

Solution threshold:

EBIT of 5% within the next year.
Strategic fit of proposed solutions.
Minimum operational disruption.

Constraints:

Sales or shut-down of newspaper companies are not an option.
Cost-cutting initiatives already underway in print/logistics.

Scope of work:

The project will only focus on national newspapers — it will not focus on regional and local newspapers because their performance is acceptable.

‘Organize’ phase aims to impose a logical framework on real-world complexity, identify all possible questions/issues related to the problem and prioritize them. Different types of logic trees are a useful tool to generate solutions and check their appropriateness and efficiency.

Direction of solutions can be generated with ‘HOW? trees’. The ‘HOW? tree’ works by decomposing a problem by asking “how?” until you have actionable options. It can be used when you have defined your problem, but there are no or few obvious hypothetical solutions to it. In case of MediaCorp Co the ‘HOW? tree’ of improving its EBIT would start with two branches: increasing revenue and optimizing cost. The revenue branch would then be divided into rising circulation and prices, and the cost optimization branch could be divided into different types of costs, functions and others.

The next step is a hypothesis — a potential solution to the problem, which we may have gotten from a ‘HOW? tree’, or it may have been obvious as soon as we defined the problem. Let us use a ‘WHY? tree’ as a way of proving this hypothesis. We build the tree by working left to right asking, “Why would this be a solution to the problem?” until we have either proved or disproved our hypothesis.

Analysis of MediaCorp’s performance and industrial trends provided the basis for solution hypothesis, which were summarized in the ‘WHY? tree’.

Example 2. ‘WHY? tree’ of MediaCorp Co

A ‘WHY? tree’ should disprove other hypotheses as well as prove our primary hypothesis. In case of Media Corp Co we proved the hypothesis of the way of improving company’s EBIT by reduction of costs in core and supporting functions.

An important rule for creating trees is following the principle that they are mutually exclusive, collectively exhaustive — MECE. MECE is a grouping principle that says that data in a group should be divided into subgroups that comprehensively represent that group. When a tree is MECE, it covers all possible issues or solutions and ensures that the issues and sub-issues are not intertwined. In other words no gaps — ensures that you do not forget important areas – and no overlaps — ensures you find clear cause-and-effect relationships and do not “double count” the issues.

On the analysis phase we redefine the storyline and develop data analysis plan. Then we gather and analyse data in order to support the storyline and iterate our storyline based on our findings.

EY approach to structured problem solving can be used consistently by phases or partly with instruments appropriate for particular situations.

List of the recommended sources:

1. Barbara Minto. The Pyramid Principle. Logic in Writing, Thinking, & Problem Solving. Person Education Limited. 2009.
2. Edward Tufte. The Visual Display of Quantitative Information. Graphics Press. 2001.
3. Gene Zelazny. Say It with Charts. McGraw-Hill. 2000.
4. Peter M. Senge. The Fifth Discipline. Doubleday. 2006.