When to formulate an hypothesis?

Hi Hubert!

My general recommendation is: delay the explicit statement of a hypothesis until you have something to ground your hypothesis on! Just stating a hypothesis for the sake of it serves absolutely no purpose! Moreover, formulating a starting hypothesis for the entire case almost never make sense in the structuring phase! Hypotheses are rather a tool to conduct second level analyses throughout the case in an efficient way.

A robust approach towards solving entire cases should be rooted in the actual question that you need to address. From there, you should define the criterion to answer this question, and build a corresponding value driver tree with branches and sub branches. All the "areas of inspection" (customer, product, company operations/capabilities, market structure, etc.) should be mapped to the different sub branches of your value driver tree. You then work through these branches by means of hypotheses which you can either confirm or not in your analyses.

This is true for practically any kind of for-profit case scenario you face (M&A, market entry, capacity expansion, product launch, etc.), and also non-profit scenarios! The crucial point is that, thereby, you create a rigorous thinking frame which organizes all relevant elements into a structure by which you can link the analysis of every element back to the core question you need to answer by means of logic.

Cheers, Sidi

Actually it's quite straightforward. 

You should make a hypothesis when you have enough data to support one. 

Think about it like a table. 

You can only call it a table, and it can only stand, once it has feet under it. The feet are the supporting evidence. More feet = more stability.

Best,

Cristian

Hi,

First, the hypothesis are not officially required for a McKinsey interview. That's smth Victor Cheng proposed to market his books. However, now there is a whole generation of interviewers who were prepared on his books and they might be looking for the hypothesis:)

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!

Slightly disagree with Sidi - probably more semantics: a hypothesis is a way for you to focus your thoughts and know what you need to prove - just like creating slides is also a way for consultants to crystallize their thinking, even if noone will see them. We do not expect you to state a hypothesis early on,  but it can help you to think "my hypothesis is that the client's objective is possible", even if you don't say it out loud.

Beyond this, remember a hypothesis is just that. If you disprove it, no worries -> simply formulate a new one and keep going. We make wrong hypithesis all the time. What matters is you remain structured and keep driving to an answer