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3. MECE Part 1
When structuring your presentation, the issues you address should be MECE (mutually exclusive, collectively exhaustive). In this lesson, I'll explain this important concept with some concrete examples
MECE part 1
- MECE stands for mutually exclusive, collectively exhaustive
- This concept underpins the problem solving approach by management consulting
- MECE essentially means that each issue in a set should not overlap and that the set of issues is complete
MECE is harder than you think
- It often appears easy to create a MECE structure
- However, issues have a way of finding an overlap
- Out-of-the-box frameworks are typically not MECE
- Developing effective MECE structures can make you a great problem-solver
When structuring the set of issues at the heart of the problem you’re trying to answer, you should aim to create a set that are mutually exclusive and collectively exhaustive, or MECE for short.
This means that the set of issues should not have any overlap and that the set should not emit any major issue.
This may sound relatively straightforward, but creating a MECE issue tree can be very difficult, particularly when answering complex problems.
Let’s illustrate this challenge with a very simple example.
OfficeCo sells office furniture and appliances to local businesses.
Our hypothesis is that OfficeCo can grow profits 20% in the next three years.
Let’s now break down this statement into a MECE structure.
To create the initial layer of issues, let’s start with defining how profits are created.
It’s revenues minus costs.
This in itself is a very high level MECE structure, but not a very insightful one.
So let’s go a bit deeper.
If I want to increase revenues, what are my options? Well I could change the price, change the product, change the marketing message, or change the sales channel.
At a glance, this structure still appears to be MECE, but if you look more closely, you’ll see some problems.
If I lower the price for example, I may have to change the product to ensure that I maintain an adequate margin.
If I change the marketing channel, perhaps that will cost me more money in variable costs.
So as you can see, creating an MECE issue tree can be quite difficult, as it should be.
Business problems can rarely be solved with simple frameworks like revenues minus costs.
Instead, solutions will often be heavily reliant on your domain knowledge to create the correct MECE framework for the problem in question.
To give you an example of a tree that I consider almost entirely MECE, consider a company attempting to require its competitor.
What are the issues that should be discussed? Well first of all, we want to consider the sale price of the target.
Next, we want to consider the intrinsic value of the target that we’ve put on the company.
After this, we want to consider the synergies, or the additional value created by combining the target with our company. And then last of all, we want to consider the ease of implementation.
For example, any regulatory hurdles or cultural problems that may exist.
Even though this structure is still at a high level, an analyst using this structure could create a compelling case as to why this acquisition should or should not proceed by exploring four, neatly defined, non-overlapping issues.