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The McKinsey Problem Solving Test (PST): How to ace it.

In this post we will delve deeper into McKinsey and it’s recruitment process. Today we will discuss the McKinsey Problem Solving Test or PST. We already explored the history of McKinsey and later this week we will dive into the specifics of their case interviewing methods. But today it’s all about the McKinsey Problem Solving Test: a multiple choice test that is really a pen-and-paper case interview in sixty minutes (70 minutes for non-native speakers as the test is in English only).

Originally developed to help streamline the application process and reduce the burden on actual consultants (read: billable hours) giving case interviews to hopeless candidates. Since there are thousands of McKinsey applicants worldwide in any given year, the PST has evolved as a thoroughly tested selection tool with high predictive capabilities. If a candidate passes the McKinsey Problem Solving Test, his or her chances to ace the case interview are also considerably higher. On the other hand, if you fail the PST you will have a hard time convincing McKinsey that you should be allowed to pass to the next round: the McKinsey Problem Solving Test features a true cut-off score: if you don’t make it, you’re out.

The McKinsey PST

So, what is the PST all about? It consists of about 25 questions based on five or six cases. Every case starts with a short description of the company, some data on revenues or number of employees. Maybe a chart on how profit has evolved through the years. At the end, there’s often a quote of the CEO or manager that has hired you with the question they want you to solve. Then there are about 5 questions about the case, either based on the info in the introduction or some new piece of data (a table, a chart) followed by a question. When I took the McKinsey Problem Solving Test for example, there was a case about a fish restaurant who served three kinds of fresh fish. The first question was about some piece of information hidden in the introduction. After the fourth question, a new problem was introduced, as the chef wanted to buy an automatic shrimp peeler and wondered whether it was worth the investment. The final two questions were on that new problem.

What do you need to do to pass the McKinsey Problem Solving Test? First of all, you need to read both quickly and carefully. Secondly, you need to polish up your math: the PST will always feature some quantitative questions. And finally: practice, practice, practice!

Reading

Skim the introduction and underline important data or observations. Read the question very carefully. For example, the first question in the fish restaurant case was (along the lines of):

“What is the objective of the restaurant owner?”

You then go back to the introduction, in which the owner is quoted (a piece of info you should have underlined), saying: “I want to reduce the amount of fresh fish per plate so I can reduce prices and attract more customers”. Now pick the best answer:

The owner’s goal is to reduce prices.
The owner’s goal is to reduce cost.
The owner’s goal is to increase profit.
The owner’s goal is to increase the amount of sales.

All of the above are right, or a logical result of the actions of the owner. The best answer however, is D: as the goal of the owner is to increase the amount of customers. Maybe the answer surprises you, but take this piece of advice: during your interviewing process and while taking the PST you’ll have to think as a consultant. Often the client requests a certain analysis or asks for a certain problem to be solved that is not really the problem. Many times you’ll have to rephrase the client’s question and drive down to the real problem they face. Consulting firms look for this skill in candidates, and it’s no surprise these questions also turn up in the PST. Another thing you could do is to read the questions first so you know what is important, before you read the ‘real’ info. Since you only have a limited amount of time, you don’t want to waste time while trying to figure out the exact meaning of a graph or table.

Math

While you are not allowed to bring a calculator, the McKinsey Problem Solving Test features some quantitative questions as well. It’s designed to give candidates with all backgrounds (non-business ones as well) an even chance, so don’t expect NPV calculations or the like. But the calculations are both tough and time-consuming: remember that you have only 60 or 70 minutes to finish the test. It does help to brush up your math, so check this post on case interview math. Being able to calculate out of your head quickly and accurately is beneficial both during your McKinsey Problem Solving Test and your real case interviews and is one of those things you can get really good at with daily practice. It’s like training a muscle: it needs patience and practice, so get started as soon as possible.

Practice!

Practice makes perfect, but there is very little material online that compares to the real McKinsey Problem Solving Test. You can use the previous McKinsey PST from their website, use PST-like tests from firms started by McKinsey alumni or practice by making the storyline questions in GRE-books.

All of them are either not very much like the ‘real’ PST or give you very little insight into the tactics you can employ to maximize your score on the PST. Every bit of practice helps, which is why you can download these practice materials for free below. But if you want to learn how to ace the Problem Solving Test with confidence, with a full practice PST to put your skills to the test, I suggest taking a look at “The Key to the PST”, which includes inside info on how to prepare and a full Practice PST with a detailed answer guide to learn from your mistakes.

I wrote the book because a friend of mine who had to take the PST really liked the section on PST-preparation in my other book, “Cracking the Case“. He asked me to write a full sample test and I walked him through the test and his answers. After he successfully took his PST, he urged me to put the sample test I wrote online so others could practice with it as well. I decided to add the full PST-preparation section from “Cracking the Case” to the sample test, as well as a detailed answer guide (I can’t walk you through your answers personally, unfortunately). Since putting it online in June 2012, hundreds have downloaded “The Key to the PST” to help prepare for their test.

Not sure why you would need to practice? One of the readers of my book experienced first hand why practice helps:

I recently used your book to prepare for the cases. It was really helpful. I have just gotten news that I passed the test and the wonderful thing is I managed to finish with some 10 minutes to spare and revise the bits I was unsure of. Your guide really helped. Thanks again.

You can get it now for just $17, just click to buy it now or click here for more info. Don’t want to spend any money yet? You can also use the material I gathered below: it’s free. Everything I’ve gathered over the years is free to download and to use as you like:

– McKinsey Problem Solving Test 2011 Practice

– McKinsey Problem Solving Test 2011 Coaching Guide

– McKinsey Problem Solving Test Practice: 2001 Problem Solving Test

– McKinsey Problem Solving Test Practice: Monitor Test

– McKinsey Problem Solving Test Practice: 2020 Test

But if you want inside information on how to ace the PST, including a complete practice PST with detailed answer guide, I advise you to take a look at my book on the subject. “The Key to the PST” is available now for just $17! Click for more info.

Good luck with your PST!

– Stephan

Update: A reader pointed me to some other great resources:

Another good way to practice is using GRE training materials, especially the story-line questions. Below are links to three GRE books:

Kaplan GRE Exam Math Workbook (Kaplan GRE Math Workbook)

GRE Math Prep Course (Nova’s GRE Prep Course)

CliffsNotes Math Review for Standardized Tests (CliffsTestPrep)

And also some free practice online:

Sample GRE questions from ets.com

Sparknotes on Data Interpretation

Five (easy) Data Interpretation tests on IndiaBix

Good luck!

– Stephan

Rating: 8.6/10 (31 votes cast)

The McKinsey Case Interview

by Stephan Spijkers 5 Comments

The final post in our McKinsey Week series: the McKinsey Case Interview. In this special week, we’ve focused on the most well-known strategic consultant we all love (and hate): McKinsey & Company. We’ve explored the long history of McKinsey, both the company’s roots and more recent developments. This weekend, we featured a post on the McKinsey PST: the first ‘hurdle’ every aspiring McKinsey consultant or intern will face.

Today we will focus on the steps that come after the resume selection and the Problem Solving Test. For if you were lucky, smart or prepared enough to make it to the interviews, you’d better get ready for the case interview. The case interview is the selection method of choice in the strategic consulting industry and has recently found its way to the other (more general) management consulting firms as well.

In this article you can find information on the specific way McKinsey handles the case interview, but the basics are similar across firms. You will face a (senior) consultant or engagement leader in the first rounds and a principals and partners in the final rounds in a one-on-one conversation. They might start with some general questions on your background and resume, but quickly move on to the case. The business cases you’ll be asked to solve will be as varied as consulting life itself, as they are often taken from the personal experience of the interviewer. Click if you would like to learn how to confidently solve a case interview.

McKinsey case interviews require the same approach as any case interview, but they differ on some specific parts. The first difference is not even in the way the case is handled, but during what is often called the ‘experience interview’ or ‘airport test’ part of the interview: the first minutes in which the interviewer will ask questions about your background. McKinsey is a leading company looking for future leaders. A question you’re sure to be asked, especially during the first rounds, is:

Tell me about a time you exhibited real leadership”

Be prepared for these kind of questions! It’s something I also elaborate on in my book: consulting firms such as McKinsey are not just looking for the smartest people, they want the smartest guys and gals with people skills. You can expect this question during interviews at any other firm as well, but McKinsey focuses more on leadership than other firms, so be prepared.

Another difference is that the McKinsey case interview is more often interviewer-led than other firms. What does this mean? An interviewer-led case interview will be structured by the interviewer, who will ask you to solve a specific part of the case (on a qualitative or quantitative way) and after you present a solution, he or she will walk you to the next specific issue. For example:

What would influence the demand of replacement car tires in the USA?”

[you think of the four to six most important factors and answer the question]

Very well, given those factors, what would be the yearly market for replacement car tires in the state of New York?

[you structure the question using the factors you mentioned and calculate the market size]

Ok, so the CEO of a national car maintenance chain has asked you to investigate whether it’ll be a good idea to acquire a local car tire manufacturer, what would be the advantages and disadvantages, you think?”

And so on, and so on. The interviewee-led case interview will put your problem structuring skills more to the test, as you’ll have to structure the whole case on your own, making sure your structure is completely MECE. You will be the one forming hypotheses and then gathering data to prove or disprove them, with help of assumptions or information from the interviewer. These structures should follow the Minto Pyramid Principle, if possible. We will delve deeper into how to solve case interview questions in my book.

Don’t forget that regional differences also influence the kind of questions you will get, since cases are often based on real consultant work. So you can expect more financial cases when applying to the New York office, more oil/energy when applying to the Houston office and more tech/IT oriented questions when applying to the Chennai (India) office of McKinsey.

Standing out above the rest of the candidates is all about preparation. All applicants are smart. All applicants come from top schools. All applicants have good grades. But not all candidates are as prepared as you can be. So know everything there is to know, read up on news in the sectors you can expect questions from. And above all: practice cases with a friend, read all the info available on the web and this website, read my book.

If you have comments, questions or stories to share: comment below and I’ll share my thoughts or improve this article. Trouble practicing for the McKinsey PST? Also applying to other firms? Check out our Company Profiles page! If not, good luck with your McKinsey Case Interviews!

Rating: 8.9/10 (16 votes cast)

The Consulting Cover Letter

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Before you even get to the case interviews to which this blog is dedicated, you’ll have to apply to the firm you’d like to work for. When applying for a consulting firm such as McKinsey or BCG, you’ll probably be asked to send them three things:

A cover letter
Your resume
Your grades from high school and university

Aside from falsification, there is little you can do about nr.3 on this list, so we will focus on the cover letter and resume. Since so much can (and does) go wrong with these basic elements of your application I’ll cover both on this blog, starting with the cover letter.

The first step

Let’s first debunk a myth here: sending your application to the firm’s recruitment manager is not the first step in the interviewing process. At least, it should not be, even though it is the case for 90% of applicants. Your application process should start with networking: visiting recruitment events, having coffee with consultants and searching through the alumni network of your university for (ex-)consultants. All with the goal of having your application recommended by one of these people. Even if they aren’t able to recommend you, you can still refer to these meetings in your cover letter, easily differentiating you from 90% of the applicants who did not take this opportunity.

The 30-second rule

Referring to a previous event or a (former) employee shows you did your research and directly sets you apart from the rest of the applicants, who send typical letters in which they link personal characteristic X to firm benefit Y. Since these companies get hundreds and sometimes thousands of applications each month, not every cover letter is read: they are scanned. So don’t expect them to read a four-page document in which you elaborate on why you are the perfect consultant. You just proved them otherwise. The limited timeframe is why (positive!) differentiation is so important: you only get 30 seconds to prove you need to be invited for the interview.

Step into their shoes

So, every application gets about 30 seconds worth of attention. Those 30 seconds will determine whether your application ends up on the ‘reject’ or the ‘invite’ pile. You’ll want to make that decision as easy as possible for the person scanning your cover letter. Think about the poor guy sifting through those endless piles of boring letters, trying to decide whether every candidate is a consultant or not in a minute or less (or do you want to spend the evening reading these letters as well?). How would you feel? What would the perfect cover letter look like?

The perfect cover letter is one in which the decision is made easy, where you can be sure that rejecting candidate X with the 7 page cover letter saves both the firm and the candidate precious time and where candidate Y has to be invited to the interview because we risk losing his or her talent to a competitor. So you need to do two things in your cover letter:

Stand out
Communicate effectively

There are multiple ways of standing out from the crowd and differentiate from the bulk of applicants (in both negative and positive ways). In my book I discuss five proven methods in great detail and help you secure that interview invitation. In our next post, we’ll focus on that other important document that you send with each application: your resume.

Good luck!

Rating: 8.2/10 (15 votes cast)

BCG Case Interview

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In our last post, we looked at the history of BCG. And following CaseInterviewHQ tradition, we will now continue with the specifics of the Boston Consulting Group (Case) Interview process, as we did with the McKinsey Case Interview. The basic structure of the case interview is the same, so I really recommend reading the McKinsey post (again).

About 75% of the interviewing process overlaps between firms, and within firms there is about 90% overlap. That means there are differences between firms but there are also subtle differences between offices. The latter is caused by specialization: New York offices focus more on finance, Detroit offices focus more on manufacturing. So what makes the Boston Consulting Group different from the rest?

The Interview Process

Normally, the process would be six case interviews with consultants in ascending seniority. So while you might meet a senior consultant in your first rounds, your final rounds will almost always be with partners. There could also be five case interviews, with the first interview being a telephone interview with recruitment, or an ‘experience interview’ (focused on your resume and motivation) at the office, also with recruitment. We’ll come back to the case interview later, first a closer look at some recent developments in the BCG recruitment process: the computer test and the written case interview.

Computer Test

A pretty recent development, currently only employed in Western Europe, is the computer test. While I have no personal experience with it, I have been told that it is comparable to the McKinsey PST, but focuses more on the quantitative part. To me, it looks like an intelligence test adapted specifically to the consulting practice. It’s a first round selection tool and probably features a cut-off score: if you beat it, you can expect an invitation to the case interviews, otherwise it’s over.

The Written Case

At BCG, you can expect two kinds of case interviews. Aside from the normal ‘conversational style’ interview where you ask questions to the interviewer and solve a case together, some BCG offices feature a written case. In a written case interview, you’re asked to solve a specific question for a hypothetical client and you’ll be handed a pack of paper with analyses. You’re then given one hour to analyse the data and present your findings after one hour. Since there is too much data to read and investigate everything (just as in real consultant life), you need to structure your analysis and focus on what’s important. Start with a hypothesis (“Company X can improve profit by reducing costs”) and set out to (dis)prove this hypothesis using the data you’ve been given: basically the same method as used during real case interviews.

There are good and bad ways to structure your analysis and we discussed the consultant’s method of choice a few weeks ago: the Minto Pyramid Principle. Using the above example (“Company X can improve profit by reducing costs”), you will want to split the analysis in MECE categories. In this case, Revenue and Cost would be interesting area’s of investigation and MECE (Mutually Exclusive and Collectively Exhaustive): there are no other factors influencing profit. Since your hypothesis is that reducing cost will improve profits, you then break down costs into MECE-categories, for example Fixed and Variable, but you could also segment cost per product line or country. If there are indeed huge potential cost savings, you have proven your hypothesis and can start working on recommendations. If not, you change your hypothesis and start looking at the other branch of your analysis: Profit. You then continue to dig down until you’ve found the problem and it’s solution. But always let a hypothesis guide your analysis, an important thing to keep in mind even during normal case interviews. A great way to practice written cases is the Interactive Case on the BCG website.

Where BCG differs

Apart from the regional differences and the ‘new’ case interview methods discussed above, the Boston Consulting Company is a pretty selective bunch. They’ll be looking for candidates that ace their case interviews (so don’t screw up your math) and are passionate and enthusiastic about consulting at the same time. Try not to underestimate that ‘soft’ part of the interview, as it really does influence your chances a great deal.

BCG is also more qualitative in their cases then competitors, McKinsey in particular (another reason to polish up your math). BCG case interviews are also far more often ‘interviewee-led’, so don’t expect much from the consultant on the other end of the table, again different from the McKinsey case interview which is more often led by the interviewer.

Other than that, I can only say that practice does help, giving you the self-confidence necessary to appear relaxed and pleasant. More info on the consulting interview process (from cover letter to case interview), can be found in my book and on the Company Profiles page. Good Luck!

Rating: 8.6/10 (19 votes cast)

BCG: From 1 Phone Line to 4,400 Consultants in 50 Years

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This time, we’ll look at the biggest competitor for McKinsey: The Boston Consulting Group (BCG). Next week, we’ll take an in-depth look at the recruiting and BCG case interviewing process, which differs from region to region. For example, some use an analytical test as the McKinsey PST, other offices focus only on case interviews and some add a one-hour ‘experience interview’ in the first rounds to make sure you fit with office culture.

But today as a general introduction and guidance for the one or two resume questions you get at the beginning of each case: the history of the Boston Consulting Group.

A New Perspective

Founded in 1963 by Bruce Henderson (ex-Arthur D. Little) as part of the Boston Safe Deposit and Trust Company, with Henderson as sole consultant, the management consulting firm that would later be known as the Boston Consulting Group directly started challenging business literature status quo. These regular essays called ‘Perspectives’ would form the platform from which BCG would launch its famous business concepts.

The Experience Curve

The first of these concepts developed by Henderson was inspired by work in the semiconductor industry in an attempt to understand the quick price drops. Experience producing a product allows a firm to lower production costs as cumulative volume (‘experience’) increases. It affirmed the importance of increasing market share and production scale, as it allows you to reap cost benefits.

Dogs, Question Marks, Stars and Cash Cows

Only two years later another famous concept would find its way into the ‘Perspectives’: the Growth-Share Matrix, or just the BCG-matrix. Allowing firms to categorize their product portfolio into categories and rationalize their cash flows: invest money from cash cows into stars and question marks, divest dogs. It resurfaced during the 80’s when it was used to categorize firms in investment portfolios to identify opportunities and divest divisions or companies with negative cash flows.

From Bill Bain Until Now

In 1973, Bill Bain leaves BCG to start up his own Boston consulting firm: Bain & Company. Meanwhile, BCG continues to grow and expand internationally. The Boston Consulting Group maintains its reputation as a research-driven and status-quo challenging company, being the first to identify the network-structure and the resource based view of the firm. Now 4,400 consultants strong, it’s the second largest firm (McKinsey still has about twice as much consultants at 9,000) in the strategic consulting industry and still growing.

During the interview

When interviewing with BCG, know that they have always been innovators and still love to challenge the status quo in economic theory and business practice. If you can show that you’ve been innovative in your PhD-research or other area’s of your life, do so! Also, know their five pillars and try to match your ambitions with one or more of these: show that you’re prepared and passionate about working for BCG. Acing the cases and knowing your math is only part of the interview, the soft part is equally important!

Want to know how to communicate passion and enthusiasm without looking like a clown? Buy my book! Also applying at other firms? Check out the Company Profiles. And as always, good luck with your interviews!

Rating: 8.8/10 (8 votes cast)

Case Interview Basics

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At the very beginning of CaseInterviewHQ.com, we already introduced basic guides on case interview math and the McKinsey PST. After looking at the specifics of the McKinsey and BCG case interview, we now ‘take a step back’ and return to the basics of case interviews in a specific page.

Click to learn more on the basics of case interviews.

Rating: 9.0/10 (4 votes cast)

Writing the Perfect Consulting Resume

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A lot of people want to work at a (strategic) consulting firm, which means companies like McKinsey, BCG and Bain receive hundreds of applications a month. All these applications are read, or should I say scanned: they receive only a tiny fraction of attention each. Together with your resume, you’ll send your cover letter, which we already discussed a few weeks back.

The Consulting Resume

To craft the best consulting resume, we will revisit our post on the cover letter, as the basic dynamics are the same: you need to stand out compared to the rest of the 300+ candidates. If I see something I like on your resume, you might be invited to the interview. Resume selection is also an elimination process: if I see something I don’t like on your resume, you will probably end up on the ‘reject’ pile. Knowing how consulting firms use your resume is step one in getting invited to the next round.

Debunking the formatting myth

When talking about resume’s, you cannot avoid talking about formatting. Everyone worries about how to format their resume, which typeface they should use, whether they should include a picture, etc. The problem is: a beautiful layout is not going to hide your lack of experience. Even worse: distractions and odd layouts can make the reader/scanner miss some important points on your resume. That’s why I focus on effective formatting in my book: formatting is important, but only up to a certain point.

Standing out

In the end your resume comes down to communicating your experience, achievements and skills. Effective formatting is a step in the right direction, but ultimately it’s the content that counts. Your resume is a pretty ‘dry’ summary of what you’ve achieved up until now and you should use your cover letter to flesh out some of your achievements and experiences. Still, you should craft the content with care: it should be easy for the reader to identify your key achievements and get a feel for who you are. In ‘Cracking the Case’ I elaborate on what makes you stand out, and supply you with a basic structure of resumes.

Rating: 8.7/10 (7 votes cast)

Everyone’s Trusted Advisor: The History of McKinsey & Co.

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How did the company which insiders affectionately call ‘The Firm’ and outsiders know as ‘McKnife ‘ come to be? This week we will explore McKinsey’s history and firm-specific application process (which include case interviews and the “PST“). Today, we start with its history.

McKinsey & Company was founded in Chicago in 1926 by James McKinsey as “James O. McKinsey and Company”. Previously, McKinsey served as an accounting professor. The firm had both an accounting practice and a management engineering practice. One of the first firms to provide executive management with strategic advice, which it called management engineering, it focused not only on inefficiencies and badly run companies but also helped healthy companies position themselves wisely.

In 1937 James O. McKinsey died unexpectedly of pneumonia, leaving the remaining partners in disagreement over how to run the firm. The management engineering practice was split into two affiliated firms: McKinsey & Company and McKinsey, Kearney & Company. McKinsey, Kearney & Company continued the Chicago office under guidance from Andrew Thomas Kearney, while Martin Bower continued McKinsey & Company from New York.

Under the guidance of Martin Bower, the first pillars of modern management consulting and ‘The Firm’ as we know it today became clear. Bower, now regarded as the ‘father’ of modern consulting, served as McKinsey’s managing director for 17 years, from 1950 until 1967, and continued to advise the firm long afterwards. In 1952, he bought the rights to the name McKinsey & Company and Kearney continued his firm as ATKearney & Associates, as it is known today.

McKinsey still sets the industry standard, even though it now faces competition from both The Boston Consulting Group and Bain & Company (the three of them collectively referred to as MBB). As the consulting giant, it has faced controversy as of late: it was held partly responsible for the collapse of Enron and two of its alumni now face charges on insider trading.

McKinsey is the largest strategic management consultant today, with 100+ offices in more than 45 countries and a staff of over 9000 consultants. Constantly looking for the best performers, it’s a top employer of MBA’s and grad students, but few survive the selection process. Want to be really well prepared for the case interview? Keep in touch for the articles on McKinsey’s PST and case interview methods due later this week.

Rating: 8.9/10 (9 votes cast)

The Minto Pyramid Principle Explained

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Earlier we discussed the MECE-principle, which states that every grouping (of arguments, information, data, etc.) should be mutually exclusive and collectively exhaustive. I’ll assume that you’ve read it, so if you didn’t: read up before continuing with this post on the Minto Pyramid Principle.

Barbara Minto was the first female consultant at McKinsey and was tasked with improving communications in the USA and later in the newly opened international offices in Europe. She discovered that all consultants suffered from the same problem: communicating effectively. It triggered her to develop the Minto Pyramid Principle.

Minto’s Pyramid Princple is one way to structure information in an effective manner. Instead of reasoning bottom-up, you should reason top-down, in a pyramidical fashion. By following the pyramid principle, you structure the information up-front before presenting it, which gives the listener a framework to interpret your info and prevents him from forming his own (wrong) framework. Take for example the following text, which does not follow the Minto Pyramid Principle:

Linda does not speak French, though she speaks some German next to her native English because of some charity work in Berlin. She loves snow and hiking in the nature, and is fed up with the busy city-life in New York. She wants to move to Canada to make a fresh start. Therefore she should move to Toronto instead of Quebec.”

This example provides the listener (or in this case, the reader) with a lot of data, followed by the interpretation in a conclusion. This presentation of information does not follow the Minto Pyramid Principle: it is not top down. If you would present your data followed by your conclusion like this, the listener might come to a different conclusion than you. He might for example think that Linda should move to a city on the west coast of Canada. To prevent this from happening, you should follow Minto’s Pyramid Principle:

Linda should move from New York to a Toronto suburb:

Toronto is in Canada

A Toronto suburb is closer to natural beauty than New York

In Toronto, people speak English (instead of French as in other parts of Canada, such as Quebec)

The Minto Pyramid Principle can also be used in business situations, for example during case interviews. The following text does not follow the Minto Pyramid Principle:

When we look at the company sales data, we see that there has been a decline over the years. We also face increased competition, even though we introduced new features two years ago and relaunched the product. These new features required a new factory to be built, which also increased costs. We have to increase market share to attain an economy of scale”

Now, with the Minto Pyramid Principle applied:

To regain profitability we have to improve market share by cutting prices:

Lower prices will increase sales

Lower prices vis-a-vis competitors will increase our market share

Increased volume helps us create economies of scale

The “key line”, the top of the pyramid has to be actionable and must be supported by the arguments following it. These could be key lines themselves and be broken down into sub-arguments (who all should be MECE). Since the Minto Pyramid Principle is used by all consultants, using it during your own case interview is a big plus. The Minto Pyramid Principle is difficult to grasp though. For a more thorough treatment of the Minto Pyramid Principle and how to effectively apply it during your case interviews I recommend buying my book or taking a look at the book by Minto: The Pyramid Principle: logic in writing and thinking.

Also, feel free to comment if you have questions!

Rating: 8.5/10 (20 votes cast)

MECE categories: Pyramid Principle

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Before I’ll explain the Minto Principle later this week, I’ll explore the term MECE (pronunciation: me see) with you, as it’s an important term in the Minto Principle, case interviews and consulting in general. MECE stands for ‘Mutually Exclusive, Collectively Exhaustive’ and is the consulting way of representing complex information in an easy way. Let’s look at both components separately.

Mutually Exclusive

If you are categorizing data, the MECE-principle dictates that the categories should be mutually exclusive. This means that it should not be possible for a member of group A to be a member of group B. To make it less abstract, an example of categorization that is not mutually exclusive:

Grouping of people according to their color of clothes worn, as people can wear clothing with different colors, and others can wear these colors as well.
Grouping of people according to their hobbies, since people can have multiple hobbies and two people can do the same hobby.
Grouping companies according to their products, as they can sell multiple products at the same time.

You get the picture, I guess. So mutually exclusive categories are, for example: age, sex, nationality (often, at least). We got the ME- part, what about the other two letters?

Collectively Exhaustive

Besides being mutually exclusive, the categories you pick should also be collectively exhaustive: all options/all information should be included in the categories you pick. This way you can be sure that there’s nothing you missed in your analysis. For example, the decision of a firm to acquire a competitor can be based on both financial and non-financial factors. These factors should then be broken down into new factors who are also (ME)CE. Another example is the profitability framework (example from my book below): it’s collectively exhaustive, as profit can be broken down into revenues and costs. No other factors influence profit.

In addition, the profitability framework is also mutually exclusive, as revenues can never be costs and vice versa. These factors can also be broken down into new MECE-factors. Revenues can be broken down into numbers of sales and the price: the revenue per sale.

Practice

During your case interviews, you should strive to be as MECE as possible when structuring your case. Don’t get bogged down while striving for perfection though, as you’ll only have limited time. But how to make sure you get it right the first time? As with most things: practice makes perfect. Apply the pyramid principle and MECE-thinking in real life: when choosing a vacation destination, while choosing between dinner options or when picking a new car.

More info on case interviews and the pyramid principle in a new post later this week. Also check out my book and the official Pyramid Principle book by Minto.

Rating: 8.7/10 (12 votes cast)