Business problem solving 101

Maxim #23
Always MECE

maxim_23Business problem solving requires clear structured thinking. This is the basis of this Maxim. Being clear and logical requires the consistent application of MECE. MECE stands for mutually exclusive, collectively exhaustive. We aren’t entirely sure where the term originated but generally we credit McKinsey & Company, a large strategy consultancy.

Few people naturally think or write within this framework. For most it is a skill you must learn. MECE starts with the top level answer and then deconstructs the solution into its constituent parts. This is the way your thinking should work when you are trying to solve a problem. For example, let’s say the problem is that you have to help a company improve its profit. If you think of this at its highest level, you can improve operating profits by increasing revenue or reducing cost. Cost and revenue are distinct and separate components. As such they are considered mutually exclusive. Now when we consider the problem of profitability, do all other issues that affect profitability come under either revenue or cost? They do, therefore the list is also collectively exhaustive. From this starting point we could now break down revenue and cost into its subcomponents.

So, say we said that the key drivers that affect costs are material, labor, overhead, and paid hours. While they are all technically drivers of cost, material, labor and overhead are all mutually exclusive but paid hours is a subset of labor. This is a common error, as many people overlap different levels of thinking. The list is no longer mutually exclusive. What this does to the listener or the reader (or the problem solver) is confuse them.

Whenever you present or write anything, you do so to persuade someone that your hypothesis (whatever it might be) is correct. As such you make your solution statement upfront, support it with evidence, and then re-confirm the logic of your argument. It is the evidence you present in the middle that must be clear and logical. Every time you argue any point you in effect present people with a list of reasons why you are right. This list must be MECE, for the argument to be coherent and conclusive.

Every presentation, letter, memo or even e-mail should try to be MECE. Being clear and logical requires starting with the top level of your solution, making a list of the drivers that cause that solution, and then being sure that you don’t confuse the drivers with their subsets.