11. All Work and No Play Makes Jack a Dull Boy (Part 3)

For all of you who would like to know what the life of a consultant is like, I would like to recommend you to read The McKinsey Way. 

The link I provided shows you the outline of the book. This book is very nice to read because the author has good sense of humor. If you have a leisure time, please take a look at the book.

Right, let's continue where we left off last week. Market-sizing questions are also known as mini-case studies. They serve to test your quick calculation ability, analytical thinking, business acumen in making assumptions, and also your communication skills in describing your though process and making summary. These questions can be quite nasty because you are expected to give a sensible solution given minimal data. These questions are very popular and often asked during interview process with management consulting firms and also other top firms such as Google.

Here are some examples of market sizing question

1. How many laptops/personal computers are being used in Singapore today?
2. How many people are there at Changi Airport on Saturday 1 p.m.?
3. How many airplanes are there in the sky of London right now?
4. How many newspapers are sold in Indonesia every Monday?  

These questions are insane, aren't they? Well, believe it or not, sometimes consultants are asked this kind of questions too by their client, for example, demand forecast of their new products. Remember these questions are not asking for exact number. They just want some sensible number because the interviewers also do not know the exact number ! Let me answer the first question for an example.

How many laptops/personal computers are being used in Singapore today?

1. We can start by estimating the size of Singapore population, say 5 millions.
2. Next, we make an assumption about about average household size to calculate the number of households in Singapore, say 4 people per household, so we have 5 mill / 4 = 1.25 million households.
3. We continue by estimating the number of computers used  in each household. Given today's technology advancement, let's say it is 3 computers per household (1 for parents and 1 each for the children)
4. So we have about 3 x 1.25 = 3.75 millions of laptops/personal computers used in Singapore today.

Next, we have case interview. The case presented to you is usually a business situation where the hypothetical client is facing a difficult problem with the company/product/competitors or is thinking of a new opportunity to explore and asks you to help address some of the issues. The case can be a problem, a situation, a riddle, an example of a real client situation (based on the interviewer's experience) or a contrived scenario. It is an exercise for the firms to test your analytical thinking and to examine how well you can handle problem-solving questions. At the same time, it is also a great opportunity for you to determine whether consulting is right for you. If you do not enjoy problem solving then the likelihood that you will enjoy consulting is very small.

The interviewer does not expect you to give the right answer. They are looking at the method you use to derive your answer, the questions you raise, the assumptions you make, the issues you identify, the areas of exploration you prioritize, the frameworks you use, the creativity involved, the logical solution you recommend, and the confidence and poise you present.

As usual, let me give you an example of a case which involves profitability framework. Imagine that you are now a management consultant. Your client's company has made losses over the past 2 years and you are hired to fix this problem. The interviewer stops here and then look at your eyes. That's all the information s/he has for you at the moment.

Since you have studied Introduction to Economics, you know that

Profit = Total Revenue - Total Cost

Since the company is making losses, you know it means that revenues have been declining and/or the costs have been rising. So, you ask the interviewer what happened to the company's revenues and costs over the past 2 years. He tells you that both revenues and costs have been rising. Now, mathematically, it means costs increase more than revenues does. Before you start recommending the firm to fire their unproductive labors, you suddenly remember that

Total Cost = Fixed Cost + Variable Cost

You proceed to ask, what happened to both components and then the interviewer tells you that the variable cost has not changed much since the past 5 years but there has been a sudden surge in fixed cost. I am not going to continue any further, but you should get the idea what the interviewer is trying to get from you using case interview.

There are still lots of other cases which involve more sophisticated frameworks such as the Porter's Five Forces, Kotler's Four P's, Value Chain Analysis, BCG Matrix etc. I am not sure whether you learn those in UOL 107 Introduction to Business Management. But don't you think it is fun to learn what those MBA students learn at business school? In fact, I suggest all of you regardless of what degree you are studying to take part in practising case interviews if someone ever set up a consulting club in your school. Not only your business acumen will be sharpened but also your communication skills will be improved. 

"Yes! That sounds very interesting but where can we get more information about case interviews and the business frameworks ?" For starters, you can try www.caseinterview.com . The registration is free !

If you are getting serious, then you may want to take a look at this book.

Consulting club is very common in business schools. But it does not mean that you cannot set up one eventhough you are not studying at a business school. Gather your friends who have similar interests especially those students who study BSc. Business or Mathematics or Economics or Management related degrees. In addition, you may want to give some cold calls to consulting firms, ask them to make presentations or even conduct case interviews in your school. 

Next week, I will give some ideas to some of you who want to set up a Finance/Investment Society and probably wrap up this series. 

Have a nice weekend !