How to develop business judgement properly?

Hi,

Building Business Judgement is actually about building industry and functional knowledge.

Focus on the most common industries in the following priority (sorted by probability of getting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

There are several sources of info to develop business sense:

1) Cases - you simply solve 50-70 cases and get a broad knowledge of different industries, common pitfalls and questions. The key here - find good partners who already had case interviews with MBB companies

2) Company reports, equity reports, IB roadshow docs - usually have a good overview of company and industries. One of the best sources to prepare

3) HBS cases - quite useful, but not sure if lot's of them available publically. Probably worth buying

4) Books - one good book about airlines with numbers and industry analysis can give you all needed industry knowledge

5) News, Industry blogs

For each industry, you should understand:

• Revenue streams
• Cost structure
• Margins
• Key performance indicators
• Key revenue drivers
• Industry trends

I strongly recommend practice drawing structures for each industry - profitability, value chain, etc

Then I will switch to getting functional knowledge and key concepts in:

• Marketing (Brand and trade marketing tools, etc)
• Supply chain (Ops metrics like cycle time and throughput time, distribution and delivery specifics, etc)
• Finance (Basic Accounting and Valuation)

Good Luck

Hi Vasiliy,

it would be helpful to understand the exact feedback you received, as business judgment could mean different things: are you unable to find potential reasons for a decline in revenues in a specific industry? Or maybe how the business model works in a sector? Or maybe types of potential synergies?

Most of the time people expect that in order to have proper business judgment you should know everything about an industry – eg. that you cannot really solve a financial industry case if you don’t have deep knowledge of the sector. That’s not necessarily true. Although knowledge of the industry of the client helps, you can usually receive from the interviewer the necessary information you are lacking covering better two areas:

1. Your ability to ask the right questions at the beginning
2. You knowledge of the right frameworks to use (for right frameworks I don’t mean the standard ones in Case in point or Victor Cheng, which most of the time are too vague)

This is not to say that it is a completely waste of time to read books, blogs or reports on specific industries – such material may be indeed be useful; however that should be complemented with a more universal approach that helps you to identify issues even for unfamiliar sectors.

Thus in your case, this is what I would do:

1. Ask for detailed feedback on what “lack of business judgment” means – such terms could hide several different things
2. Understand what you could have asked at the beginning or added to your structure to unlock the missing element - posting a new comment on the PrepLounge blog could help to receive feedback on that particular area
3. If you identify a specific lack of knowledge in a certain sector that you are unable to unlock with questions at the beginning or a proper structure, move to read cases from MBA handbooks related to such a sector – the INSEAD one has for example a good list of cases for that. Then, add the missing element to your structure/initial questions toolkit.

Hope this helps,

Francesco

Hey there!

There are many ways to develop your business acumen, and I've answered a similar question before on Preplounge. Some suggestions:

1) Subscribe to Finimize: They will send you daily updates with recent business/finance news, and explain what is happening (and why) in Layman terms. It's an excellent way to both stay up to date with most recent events in a couple of minutes (e.g. on the commute to work) and also improve your business acumen. If you want to go further, read through articles on the FT/Economist (but this will take more time)

2) Read up on some basic business/microeconomics: Any decent first year of University or even advanced highschool economics should do - to get the basics and understand some key terms (e.g. economies of scale, breakeven point, etc.)

3) Watch/listen to cases online: This is a great way to come across typical business problems from case interviews, and how to approach them! If you run out of cases to listen/watch, you can also pick a case book online/preplounge cases and read through them!

Hope this helps!

Hi,

It's difficult to narrow the list since there exist many resources to choose from.

From my experience, reading articles from WSJ, Bloomberg, Reuters, Forbes, etc. have helped gain an understanding of some general business terms / jargon. At the same time, it helps to read different books that cover topics across various sectors - for your convenience, I've attached a list of recommended readings by Management Consulted below (I would also add Case In Point and Case Interview Secrets as recommended readings).

For any particulary industry coverage, IBISWorld and Hoover's are great resources to use.

Lastly, I think slideshare is a great resource where you can search for any business topics you'd be interested in learning about (slideshare.net).

https://managementconsulted.com/recommended-reading/

Hopefully this helps!

Best,

Carlos

When you read a news article, try reading the headline only and think of the drivers/reasons for why that might be happening. And then read the rest of the article

E.g. WSJ article 'Company A buys company B for 70B USD'.

Ask yourself: why would company A buy company B?

1. Economics: Synergies (cost/revenue)

2. Data/patents

3. Assets/labor.

4. New markets / existing relationships with buyers/sellers.

5. Etc..

You won't be able to replicate this with 100% of the articles, just get in the habit of applying this technique to most articles and see which reasons you may have missed out on. That's how you learn.

Hi Kay,

there is one simple process that can help you to develop business acumen in a time-efficient way (that is – spending 20mins per day). This is based on understanding first which are the most challenging concepts for you, and then work specifically on such concepts, instead of reading general literature on a topic. To do this, I would recommend the following:

1. find some good consulting MBA handbooks. You can easily find several good ones online for free (eg Insead)
2. do/read a minimum of one case every day. Chances are you find more challenging one specific industry/topic. Try to skim through the handbooks looking for that particular sector (eg healthcare or M&A). Don’t focus on the structure (usually they are not particular good in these handbooks) but rather on the concepts present in the case. Track all the terminology/concepts that are challenging for you.
3. once identified concepts you don’t understand, look for more specific resources on that online. If for example you identify it is challenging for you to understand how the typical value chain for an industrial goods company is structured, you can easily find a good structure for it in a 10-minute online search. If you start from reading a book on industrial goods companies, you will of course cover that as well, but also tens of other topics that are not of interest, and spend 4-5 hours instead of 10 mins. This will allow thus to pinpoint the exact areas you have to improve in terms of brainstorming in the case.

Hope this helps,

Francesco

Hi,

Although officially most of the companies would say that you don't need any specific business knowledge, in reality, it is hard to solve a case purely based on common sense. So the lack of business knowledge becomes a very common problem among the people with various backgrounds

Business Acumen is actually about building proper industry and functional knowledge.

Focus on the most common industries in the following priority (sorted by probability of geting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

There are several sources of information that will help you develop the business sense:

1) Cases - you simply solve 50-70 cases and get a broad knowledge of different industries, common pitfalls and questions. The key here - find good partners who already had case interviews with MBB companies

2) Company reports, equity reports, IB roadshow docs - usually have a good overview of company and industries.

3) HBS cases - quite useful, but not sure if lot's of them available publically. Probably worth buying

4) Industry Books - one good book about airlines with numbers and industry analysis can give you all needed industry knowledge

5) News, Industry blogs

For each industry, you should understand:

• Revenue streams
• Cost structure
• Margins
• Key performance indicators
• Key revenue drivers
• Industry trends

I strongly recommend drawing the typical structures for each industry - profitability, value chain, etc

Then I will switch to getting functional knowledge:

• Marketing (Brand and trade marketing tools, etc)
• Supply chain (Ops metrics like cycle time and throughput time, distribution and delivery specifics, etc)
• Operations (Process optimization basics)
• Finance (Very basic Finance and Valuation)

Good Luck

Hi,

Builing Business Acumen is actually about building industry and functional knowledge.

Focus on the most common industries in the following priority (sorted by probability of geting a case): 1-retail and CPG; 2-airlines; 3-Telecom; 4-banking; 5-natural resources; 6-tech

There are several sources of info to develop business sense:

1) Cases - you simply solve 50-70 cases and get a broad knowledge of different industries, common pitfalls and questions. The key here - find good partners who already had case interviews with MBB companies

2) Company reports, equity reports, IB roadshow docs - usually have a good overview of company and industries.

3) HBS cases - quite useful, but not sure if lot's of them available publically. Probably worth buying

4) Books - one good book about airlines with numbers and industry analysis can give you all needed industry knowledge

5) News, Industry blogs

For each industry, you should understand:

• Revenue streams
• Cost structure
• Margins
• Key performance indicators
• Key revenue drivers
• Industry trends

I strongly recommend practice drawing structures for each industry - profitability, value chain, etc

Then I will switch to getting functional knowledge and key concepts in:

• Marketing (Brand and trade marketing tools, etc)
• Supply chain (Ops metrics like cycle time and throughput time, distribution and delivery specifics, etc)
• Finance (Basic Accounting and Valuation)

Good Luck

Hi Anonymous,

let me share an experience that I had during my first round at McKinsey; the practice I applied to was specifically on Oil&Gas (I did a master on Energy Economics), therefore I found natural to prepare on that and develop “business acumen” in the sector. I spent time reading a lot of material related to such a practice, including reports and blogs, and believed had a very good knowledge when I approached the day of the interview.

Then the day of the interview arrived, and instead of an Oil&Gas cases I got a completely different industry I was not familiar with. I managed though to spend enough time at the beginning to ask the right questions to clarify the industry. Once understood how that particular industry worked, I applied a proper framework, and managed to derive the right conclusion.

Thus, in my experience what is fundamental to crack a case is not much “business acumen”, but mainly two specific things:

1. Your ability to ask the right questions at the beginning
2. You knowledge of the right frameworks to use (for right frameworks I do NOT mean the standard ones in Case in point or Victor Cheng, which most of the time are too vague)

This is not to say that it is a completely waste of time to read books, blogs or reports on specific industries – such material may be indeed be useful; however it is probably not the best usage of your time to maximize the outcome of your next interviews.

What can you then do to improve? The definitive best thing you can do is what Vlad and Nuno have mentioned as #1 – Cases. So far that you manage to read in the right way 100+ cases you can be sure you will find a comparable scenario in your interview (for right way, I mean you don’t just read passively them, but try to think how to structure them before going through the solution). Then, if you ask the right questions as for step 1 above and apply the right framework as for step 2, you will be able to crack the case, even if you do not have specific knowledge of the industry.

As for your specific case, I agree with Nuno – a feedback mentioning “lack of business acumen” is not very explicative anyway. It is likely there are some specific areas you can improve doing cases – clarifying questions, structuring, graph interpretation – and the interviewer summarized it as lack of business acumen. As it is difficult for you to identify alone which was the issue, the best thing would be to find a proper partner for interviews, able to pinpoint the potential improvements that you have to concentrate on. This will help to derive what they actually meant with “lack of business acumen” and take the specific steps to avoid repeating such mistake. It is very likely that once fixed it, you will not need to read additional books/reports, but only read more cases in order to succeed in your next interview.

Best,

Francesco

Sorry to hear that, but don't take it personally - Everytime someone says "no", it brings you one step closer to a "yes" :)

Regarding your question, first, you have to think about the case and determine what exactly has caused them to state your business acumen wasn't enough - I think 1 of 2 things may have happened:

1) They asked a specific brainstorming question and you failed to give enough input (i.e. what ways can you see of decreasing variable cost for this particular problem?)

2) You showed lack of overall business sense when moving the case forward (i.e. perhaps you focused on small stuff and forgot about the big picture)

Obviously, it is very hard to pinpoint without any detail from the case. So I would like to focus on 2 pieces of advice moving forward:

1) Some people will recommend you reading business journals and similar - I think that is great dont get me wrong - but to develop a better business acumen you should keep practicing cases in different industries facing different problems; studying also the major drivers of the main industries would help; but overall, as everything, it takes time and the harder you work the better you will become.

2) Sometimes HR will give you BS points why you didnt move to the next round (not saying that in this particular case it was) just because they had to - So I woulnt dwell on this particular point.

my 2cents for what is worth

Hi Kay,

I think that the most effective way to improve business judgement is to be curious. When I say "be curious" I do not mean just reading newspapers and listen to the latest FT podcast, but really try to understand what is behind macroeconomic trends. Just to give you an example: don't just read that interesting article about blockchain implementation in banking, but also ask yourself "how does blockchain work? why does it work? are the alternatives? will it have really a future?" and search for answers to these question. You may want to start this process with a topic that is interesting to you, so that at the beginning will be easier to do that. In this way you will build a knowledge and a forma mentis that will help you to rapidly put the "puzzle pieces" together and create your own point of view. Of course, even if you have not formal studies on this topic, reading some books about the main principle of macro and microeconomic is fundamental (i.e. you can't have real business acumen if you have not idea of what price elasticity is).

Best

Lorenzo

You have great answers here but similar responses I have read off different case interview sites didn't really make help to develop business judgement or show me how to mine my existing experience (my opinion) until I listened to this podcast "https://www.firmsconsulting.com/podcasts/what-is-business-judgement/". I am going to summarize what I learnt from it for you:  

Business judgement/intuition effectively means your ability to make reasonable guesses/ inferences in business situations.It is the way you interpret things based on your collective past experience. What does that imply?

First, you have business judgement, you just lack the ability to mine your own experience. As soon as I learnt this, I took a pause from travelling, reading tonnes of Mckinsey quarterly and asked myself, how can I mine what I already know and bring into a case? It was then I realised that I knew a lot! 

I was doing a case where I had to estimate the revenue Disney world generated in its theme park in Paris. I have never been to Disney World or any large theme park for that matter but as soon as I figured I could mine my experience with going to a stadium (I am a big premier league fan) and an Amusement park (I went to as a child), it all came together and I just drew inferences that impressed my coach.

Firmsconsulting.com has tonnes of practical articles on how to improve your business judgement that I encourage you to read and listen to. It will change the way you approach this. 

I wish you the best. 

Hi Vasiliy,

It seems that your approach to-date has been mostly self-taught. This also includes the advice below (i.e. read more).

I honestly find that a lot of people with this issue fundamentally need a mindset shift. This isn't about # of hours spend reading/studying. This is about talking through your thinking, and reframing it. This can be fixed (for some) in as little as 30 minutes. However, you need to talk to someone for this type of learning to take root.

Sort of like frameworks, it can help to memorize them, but ultimately it's best to learn how to think about them.

Happy to offer you a session on shifting your mindset.

The following are the best ways to increase business acumen...

1. Reading more and more case studies.

2. Taking part in more management competitions.

3. Enhance the skills by playing more business stimulation games.

4. Keeping up to date with advancements in technology and news.

• Just do as many cases as you can across various industries....and across various business issues eg operations, profit, comp responses. 
• Read the news, watch the news, read annual reports. Listen to CEOS speak on youtube. 

I think rather than picking up on acumen, it's more important to understand the value chain and operations of organisations. When you walk around in daily life, think about the places you visit, what is their purpose, what can be improved, whos working in this store, what behind the scenes operations are occurring? For example, when you visit the supermarket, walk around and observe the staff, the customers, try to think about what matters to the company and customers. Come up with some ideas of how you may improve this supermarket, is their a bottle kneck at cashiers, are the isles crowded? Then go home, read a supermarket case, read a supermarket annual report etc, compare your knowledge...make it a game if you can!

Also, im guessing you have friends who work in business...pick their brains...i would meet a person at a party who worked in a random industry, id ask him what exactly he did, what was the industry looking like atm, what are the challenges, blah blah blah. 

BE CURIOUS...BE OBSERVANT...BE OBSESSIVE.