What is some example of opening hypothesis?

Hi! In such a situation I recommend to delay the hypothesis until you have something to ground your hypothesis on! Just stating a hypothesis for the sake of it serves no purpose!

Instead you can say “I would like to first identify the numerical driver of the problem, which can sit either on the revenue or on the cost side (or both). Based on this initial assessment, I would build a hypothesis on the underlying reasons for the detrimental development, then verify the hypothesis, and subsequently derive measures to address these reasons in order to reverse the trend.”

Cheers, Sidi

Hi,

There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. You always should make a full structure.  So in your case, you need the costs as well. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

• - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit" 

4) Present the main 2nd level Hypothesis: 

• "In the market, I would like to make sure that the market is big enough and growing;
• In the company I would like to find additional opportunities for growth;
• In competition I would like to check that the market is fragmented enough;
• Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!

Hi Anonymous,

To answer your first question, as mentioned by Vlad and Sidi, you should start first with a structure, then apply an hypothesis to that. If you have defined a MECE structure, your hypothesis could simply be taking one of the options and consider it as the reason for the problem or potential solution.

To answer your second question, the hypothesis requires first data to be verified and not additional structure. Once the hypothesis is verified, you can then move deeper in the analysis of only the particular area the hypothesis was referring to. At the same time, if you have correctly followed the process explained as answer of your first question, you would have already defined a structure when formulating the hypothesis.

Putting the two answers together, in your example about revenues and costs an ideal approach would be the following:

1. Present your structure (which in your example will include both revenues and costs as potential issues, eg – to understand where the problem is in this segment I would like to consider whether we have a revenue issue or a cost issue for it)
2. Formulate an hypothesis on which could be the problematic area (eg – my hypothesis is that we are facing a cost problem in this segment)
3. Ask for data to verify your hypothesis (eg – to verify such hypothesis, I would like to know how revenues and costs changed in the last year, do we have any information?)
4. If the hypothesis is confirmed by data, continue your analysis focusing on the part of the structure that the hypothesis referred to, otherwise move to the other one. At this stage, you can go on formulating a new hypothesis (eg – since we found confirmation that there is a cost problem, I would like to structure now my approach analysing fix and variable costs. My hypothesis is that we have a fix cost problem. To verify if this is correct, I would like to know how fix and variable costs changed. Do we have any information on that?)

Best,
Francesco

Hi,

There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

• - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit" 

4) Present the main 2nd level Hypothesis: 

• "In the market, I would like to make sure that the market is big enough and growing;
• In the company I would like to find additional opportunities for growth;
• In competition I would like to check that the market is fragmented enough;
• Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!

Hi Anonymous,

the first option would be better in this case, as the way you presented the second option would appear unstructured for an interviewer, almost like you are guessing the solution. Key thing related to this is that you should first present the structure and then make an hypothesis on the area to investigate, this will make easier for the interviewer to follow your reasoning. The thread below contains some more details on this and some examples of how to do it:

https://www.preplounge.com/en/consulting-forum/what-is-some-example-of-opening-hypothesis-1880

Best,

Francesco

Yes, absolutely yes. "My hypothesis is" should be part of your vocabulary. I have seen a Principal think long and hard in front of our Partner, before saying these 3 words at the beginning of a thought. Consultants say it, show us you can be one of us and speak like us.

Now, you dont necessarily have to start the initial framework by stating a hypothesis - but it should be implied. And be ready at al times to state your hypothesis if you haven't. Again - I was asked for mine on my first few projects.