Structured Problem Solving & Hypothesis Generation

Structured Problem Solving &
Hypothesis Generation

4
DEFINE THE
PROBLEM
STRUCTURE
THE ANALYSIS
FIND THE
SOLUTION
Our problem solving approach begins by answering a simple series
of questions
• Is there a problem or opportunity?
• If so where does it lie?
• Why does it exist?
• What could we do about it?
• What should we do about it?
IDENTIFY
ROOT CAUSE
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7
Start with the right definitions – Is this Chart MECE?
US Car MarketUS Car Market
Light
Trucks
Light
Trucks
Passenger
Cars
Passenger
Cars Big 3Big 3
Mini VansMini Vans
Sport
Utility
Vehicles
Sport
Utility
Vehicles
FordFord GMGM ChryslerChrysler
Clarity of the problem up front will set your subsequent analysis up to succeed!
-

10
Hypothesis generation ensures that we get to the Root Cause of our
business problem
Form
Hypotheses
Form
Hypotheses
Define the
Issues
Define the
Issues Gather DataGather Data Analyze DataAnalyze Data Find InsightsFind Insights
Develop
Conclusions and
Make
Recommendations
to Implement
Develop
Conclusions and
Make
Recommendations
to Implement
So what? —aha,
new thought
What you should
do… and how
What are the
questions
keeping you
awake at night?
Factual
information
gathered to
prove or
disprove
hypotheses
Analyze what
the data tells us
Statements that
provide
direction and
structure for the
analysis
“Hypothesis: a Tentative Assumption made in order to draw out and test its logical
or empirical consequences” Webster’s Dictionary

14
How to find a good hypothesis
Think outside the Box:
Start by Asking Questions:
• Talk to lots of people about the core problem
• Brainstorming during case team meeting
• Ask “5 Why’s”
Validate Your Initial Hypothesis:
• Assume perfect rationality — how should the business system behave?
• Look for analogies (other industries or problems)
• Imagine that you had perfect information — what would the ideal analysis look like?
• Think about the problem from a different angle
• Talk to people who think differently

17
Exercise 1: Hypothesis Generation

20
To structure our Root Cause Identification, we can use the Fishbone
Technique
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step7
Problem/
Effect
Problem/
Effect
Cause 1Cause 1
Cause 2Cause 2
Cause 3Cause 3
Cause 4Cause 4
Cause 5Cause 5
Cause 6Cause 6
Sub-cause 1
Sub-cause 2
Sub-cause 1
Sub-cause 2
Identify
Major Root
Causes
Identify
Major Root
Causes
Identify the
Problem
Identify the
Problem
Brainstorm
Sub-Root
Causes
Brainstorm
Sub-Root
Causes
Gather
Data
Gather
Data
Identify
Most Likely
Causes
Identify
Most Likely
Causes
Choose
Most Likely
Cause
Choose
Most Likely
Cause
Select and
Test the
Best
Solution
Select and
Test the
Best
Solution

23
Step 3:
Brainstorm
In the team:
– Brainstorm a list of sub-causes (follow the rules of brainstorming)
– Add the sub-causes to the fishbone diagram, using post-it notes
Problem/
Effect
Problem/
Effect
Theme 1Theme 1
Theme 1Theme 1
Theme 3Theme 3
Theme 4Theme 4
Theme 5Theme 5
Theme 6Theme 6
Sub-cause 1
Sub-cause 2
Sub-cause 1
Sub-cause 2

26
Step 5:
Identify most likely causes
In the team:
– Analyze the data and information gathered
– Through open discussion, clarify and identify most likely causes
– Challenge each other’s ideas as necessary
– Rank most probable root causes through voting (each person ranks
each probable cause on a 1-5 basis, where 1 is lowest, and 5,
highest probability) [See left-hand graphic.]
– Circle the top vote-getters on the fishbone diagram as probable root
causes [See right-hand graphic.]
Proble
m/
Effect
Proble
m/
Effect
Theme 1Theme 1
Theme 1Theme 1
Theme 3Theme 3
Theme 4Theme 4
Theme 5Theme 5
Theme 6Theme 6
Sub-cause 1
Sub-cause 2
Sub-cause 1
Sub-cause 2
Probable Causes:
Keywords
Probable Causes:
Keywords
AA
RankingRanking
11 22 33 44 55 TotalTotal
BB
CC
DD
EE
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29
Let’s use Caterpillar’s Issue as an example of how it works
Poor knowledge
about Caterpillar’s
overall products
Significant time
delays across
Caterpillar’s
divisions in
responding to
the customers
requests for
bids
Significant time
delays across
Caterpillar’s
divisions in
responding to
the customers
requests for
bids
ProcessProcess
Corporate
structure
(different P&Ls)
Corporate
structure
(different P&Ls)
Poor
system
support
Poor
system
support
Divisional as
opposed to
holistic view
Divisional as
opposed to
holistic view
Blurred
understanding
of market
Blurred
understanding
of market
TrainingTraining
No dedicated
CRM processes
in place
No integrated
customer
database
available
No single point
of contact
across the
divisions
Market
segmentation
outdated / not
appropriate
“Divisional
egoisms”
Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural
gas engines and industrial gas turbines. The company accepts bids for its equipment.
Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural
gas engines and industrial gas turbines. The company accepts bids for its equipment.

32
Let’s Practice on Time Warner’s Issue – Each Team Select 3 Sub-Root
Causes and 1 Diagnostic
Joey Smith – CEO
Time Warner Sales are
Down by 20%
Joey Smith – CEO
Time Warner Sales are
Down by 20%

35
Helpful hints
Do Root Cause Analysis with a team of
people who are owners or stakeholders
in the process (who will see the
benefits of solving the problem)
Follow brainstorming rules when
generating initial ideas:
– Generate as many ideas as possible and list
them under main headings as possible
causes
– Do not allow criticism of any idea initially (no
idea is a bad idea)
– Build on the ideas of others
Avoid working the solution of any
cause early in the process
Don’t be hindered by excessive neatness
during the construction of the diagram.
Ideas must flow freely
Verify root causes through data
gathering and testing
Rewrite or restate the problem statement
if the group is derailing and needs to
refocus
Identify the criteria against which you will
evaluate the final solutions in advance
Challenge the solution
Agree, in advance, how you will measure
the effectiveness of the solution in the
pilot

1
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