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How the hypothesis testing process helps frame the study

This is probably one of the most beautiful slides we have because of how it captures the entire process. You may have heard the phrase, “Hypothesis help frame the study.” In other words, hypothesis testing process sets the pace for the study.

For many people, they don’t really know what that means.

In fact, I will have to say that 80% of people who use the word hypothesis and use hypotheses in their work don’t use it correctly and don’t even understand how it fits into the overall study structure, how hypotheses guide the process.

I’m even referring to management consultants working for major firms who are not that familiar with the process. Or even those who are familiar with the process but are not good at it. Not everyone at BCG, McKinsey, Deloitte, PwC, et al. is skilled at this process. A lot of people are going to be managed out and don’t fully understand the process.

hypothesis testing process consulting

How the hypothesis testing process sets the pace for the study

We’ve been hammering home an approach to doing consulting studies, including strategy studies, in various programs on StrategyTraining.com, and this is another way of explaining the approach. It’s important to understand this process.

So this is the way it works.

You first need to decide what you think is going on.

Remember how we teach you to do this?

You figure out the objective function, build decision trees, prioritize some branches that you think are most important, and then you build the hypotheses.

From the hypotheses, we then need to do two things:

  • We need to determine the tests we will run for each hypothesis.
  • And then, we need to construct the time plan to conduct the test.

For each test we’re going to complete, we are going to create a graph.

From each graph, we know what the key message is that we’re going to deliver from that graph.

If we take all of those key messages that we expect to find, we can rearrange them to create a storyboard. This is what the case partner wants to see.

The case partner looks at the storyboard to see whether the story the consultants have is worth telling in the first place. And if it’s worth telling, is it told in the best way?

Once the case partner approves the storyboard, consultants go and collect all the data to test the hypotheses, to complete the hypothesis testing process.

Once the analyses are done, the storyboard is updated based on the findings.

Testing your storyboard

When you look at your story, always ask the most important question:

Would client pay to find this out?

It is important not to come up with a ridiculous question that the client would NOT pay you to find an answer for.

Consulting firms charge millions of dollars. And clients want to know that they are paying for something useful and important. So make sure that the story you’re telling is worth paying for. Ask yourself, if you were in client’s shoes, would you pay for this?

Opportunity carts

Once you’ve told that story, from the story, you can then extract each of the opportunities you have told the client they need to implement and build an opportunity chart for each opportunity.

An opportunity chart is basically a business case of what is the benefit of doing this, what will be the cost to implement it, and what will be the payback period.

You need to identify how much is a possible intervention worth?

And then, from there, you talk about the steps they need to implement it, which is program design for implementation.

Everything starts with the hypothesis testing process

So you can see that everything starts with hypothesis testing process. I think it’s a very beautiful process because it works so well.

We do the same in every single strategy study. Sometimes partners have thought out all of this, sometimes the team plays a big role in this process, but this process has to happen.

Even if you are very experienced in strategy, don’t feel embarrassed to take clients through this process.

Because that’s the way you get good thinking.

And then, from there, you can help them think through the analysis they would need.

In fact, sometimes we have clients now for whom we do not do consulting work as we just don’t have capacity and it is not our primary focus, but they want to know if a project they have with a firm like BCG or Deloitte is going well. They’re not sure. And we would then do this parallel process to see what we would have ended up doing to see if it appears as if the consulting firm is doing the right thing.

We’re not saying consulting firms are doing anything wrong, but sometimes the client doesn’t understand the process and needs someone to talk them through it. And even though most of our clients were trained by us to understand this process in details, some clients still sometimes need our opinion to make sure they are getting good consulting work. Which is understandable since projects can cost over 10 million dollars.

It’s a beautiful process. This is the strategy process on one slide, basically. If you master this process, you can add significantly higher value for your clients as a consultant. And if you master this process as an executive outside of consulting, you will be much stronger thinker versus your colleagues who do not have a hold of this approach.

Next steps

We teach this process in detail in “Follow a Full McKinsey et al. Engagement” step-by-step 200+ episodes study. In fact, above write up is an excerpt from the “How do hypotheses help frame the study?” lesson from the “Follow a Full McKinsey et al. Engagement” step-by-step study (just this one study is 200+ lessons). For the next two days, you can watch the full video (normally exclusively available to Insiders and Legacy members) as it is temporarily unlocked for the FC community: https://www.strategytraining.com/programs/219

If you’re already an Insider or Legacy member, the full study is inside your member’s area. The direct link is here (200+ videos): https://www.strategytraining.com/categories/follow-a-full-mckinsey-et-al-engagement

If you don’t have access, discover how to solve the most difficult problems regardless which organization you are a part of by joining Insider or Legacy.

You’ll get instant access to powerful training by former McKinsey, BCG, et al. consulting partners. This training created hundreds of millions of dollars of value for our clients. You can also join a second-to-none community (Legacy), plus gain full access to step-by-step studies (including the one above) and advanced problem-solving and strategy programs to help you gain an edge in your career or business. Such programs include How to Solve Big ProblemsHow to Become a McKinsey Partner and Competitive Strategy with Kevin P. Coyne, former McKinsey worldwide co-head of strategy practice. For any questions email [email protected].

If you join as Insider (annual membership – scroll to membership options) by this Sunday end of day, use code to lock-in $200 discount for an annual membership:

ASCEND200

If you join as Legacy (Insider+Legacy resources+Legacy group coaching calls – scroll to membership options), email us by July 15th 9 pm PST, and we will arrange for you 2 weeks access to the Strategy Reading Room (new and even more powerful version of SLIDES membership that is coming up soon). Strategy Reading Room offers access to our written strategy materials library such as published and unpublished books, book drafts, full step-by-step studies you see on StrategyTraining.com, million-dollar winning proposals, templates, study maps, studies not released on StrategyTraining.com, and more.

Don’t miss this opportunity to deepen your understanding of how to be a successful partner in a consulting firm or a top thinker within your organization.

Take care,

Kris Safarova

P.S. Want to learn about powerful materials, resources, and programs that can give you a competitive edge? You can find some options to consider here.

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