How do the famous consulting firms solve complex problems?
Hypothesis-based problem-solving is the most popular approach. All major consulting companies use it.
The good thing is that you don’t need to work in consulting to use it. It’s helpful in any context.
I have applied this system for the last 10 years as a consultant and manager. I have converted it into a personal problem-solving framework.
Today, I leverage it as a release train engineer, team lead, entrepreneur, and in my private life.
Whatever challenge I face, I structure it with hypotheses. This elegantly guides me to the best solution, helps me communicate clearly, and convinces others.
Here is how.
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What Is Hypothesis-Based Problem-Solving?
I have used it for all kinds of problems, from strategic business questions to personal queries such as Should I buy a house?
So, what is hypothesis-based problem-solving? It is:
- A framework for dividing complex problems into smaller ones.
- A way of thinking and working.
- A prerequisite for focusing on data collection and analysis.
How to define the problem
The approach starts with a clear problem. To frame it correctly, you can use the TOSCA framework.
TL;DR: You collect all of the information to grasp the problem fully:
- Trouble: What’s the symptom or trouble that makes this problem real?
- Owner: Whose problem is it?
- Success: How and when do we know we have effectively solved the problem?
- Constraints: What limits must we consider when solving the problem? e.g., resources, time, skills, preexisting commitments, etc.
- Actors: Who is concerned with how we solve the problem, and what do they want?
Once you have collected all of the above, you can write the core problem statement as a How might we — question.
For example, How might we expand our business internationally?
Once you have the right problem singled out, you begin working on solving it.
Fill the gaps with hypotheses
Usually, you don’t start from zero but already know some facts. But there are gaps. That’s where hypotheses come into play.
From day one, you close the gaps with hypotheses. Having some ideas is important, especially when you work for clients.
So before conducting any analysis, check the following: What do we already know?
Based on that, you develop a so-called Day 1 Answer. You then test the hypothesis by finding data to confirm or reject it.
You iterate and adjust the hypothesis as you learn more about the topic.
For example, imagine you work for a mobile payment provider and are considering entering the Philippine market.
The leading hypothesis is the following: We should enter the Philippine market because of 4 reasons:
- The market is growing.
- There is a demand for mobile payments.
- We have an attractive offer to satisfy the demand.
- There is little competition.
Test your hypotheses
To confirm or reject these hypotheses, you need to do research. I explained how to plan and conduct research here.
TL;DR: for each hypothesis, you find out three things:
- What analysis is needed?
- Where to find the information?
- How much time do you need to conduct the analysis?
When you conduct the analyses, you have to keep in mind two things:
- Picking the right data: Is the source reliable? Do the numbers make sense? What period is relevant? Who should you interview, and how?
- Beware of cognitive biases such as confirmation bias, where we may neglect data that contradicts our beliefs.
Let’s say, in our example, you find out the following:
- The market is growing: Confirmed.
- There is a demand for mobile payment: Confirmed.
- We can provide an attractive offer: Confirmed.
- There is little competition: Rejected because there are many competitors.
What to do now?
You eliminate hypothesis four because it’s false, and you reassess: Is my leading hypothesis still valid?
In this case, considering the other three hypotheses are true, you still feel confident about the initial hypothesis of market entry. Hence, you decide to keep it as it is.
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How to Communicate Your Findings for Maximum Impact
You saw how a business objective top-down dissects into a leading hypothesis (we should enter the Philippine Market) and smaller hypotheses.
After the analyses, you need to convince others. So, you synthesize your findings into a recommendation following the logical structure of the hypotheses.
Based on your analyses to derive your recommendation, you build the communication like a house from the bottom up.
This is also what we call the Pyramid Principle of communication.
It is built on facts, findings, conclusions, and a key recommendation.
How to present your recommendation for maximum impact
You convey your message in the same top-down structure you originally used to set up the project:
- Start with a concise key message.
- Support it with logical arguments.
- Use data to back up the arguments.
- Summarize the main points again.
For example (all numbers are fictitious):
Core message: We should offer a mobile payment service in the Philippines.
Supporting arguments: There are three reasons why we recommend this…
- …The Philippine market is growing.
- …There is a demand for mobile payment.
- …We can provide an attractive offer.
Data to back up the arguments: Here is what we found…
Firstly, the market grows by around 6% yearly.
Secondly, Filipinos are very affine to mobile payment.
And thirdly, we can create an attractive offer with a unique selling proposition as found by a Blue Ocean analysis:
We created the Blue Ocean analysis by defining key features with high demand. Then, we mapped the existing offers by our competitors against those features to see if there were any gaps.
We found gaps for the following two features:
- Feature 4: AI-driven organization of personal finances.
- Feature 5: Crypto payments.
Summary: We should enter the Philippine Market. We can create a unique offer in a growing market by focusing on the new features of organizing personal finances and crypto payments.
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Key Takeaways
Companies in the US will spend $60 billion on consulting services in 2024. This number will continue to grow in the coming years.
Hypothesis-based problem-solving is the most popular approach among top consulting companies.
It’s a way of thinking and structuring your work. You can use it in any context and industry by following these 4 steps:
- Define the problem, for example, using the TOSCA framework
- Define what the solution should look like
- Define hypotheses for all knowledge gaps between the problem and the solution
- Break the hypotheses down into smaller ones and analyze them one by one
- Synthesize your findings and reject or confirm the hypothesis
- In case of rejection, iterate: Adjust the hypothesis and analyze again
- Conclude your findings and communicate your recommendation top-down with the Pyramid Principle
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Get a free copy of the Problem-Solving Playbook: Lead & Succeed!
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This post was previously published on medium.com.
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