Effective Problem-Solving with MECE Principle

PROBLEM-SOLVING WITH MCKINSEY S MECE PRINCIPLE Presented by You Exec

MECE METHOD M MUTUALLY E C COLLECTIVELY E EXCLUSIVE EXHAUSTIVE No one individual can appear in more than one category All categories combined includes all individuals (ex: no individuals are excluded)

MECE DEFINITION MUTUALLY EXCLUSIVE COLLECTIVELY EXHAUSTIVE Not Exhaustive Idea 1 Idea 2 Not Exclusive Idea 1 Idea 2 Exhaustive Idea 1 Idea 2 Exclusive Idea 1 Idea 2 Idea 3

Mutually Exclusive Not Mutually Exclusive MUTUALLY EXCLUSIVE Identifying blocks of data related to each other that do not overlap Collectively Exhaustive Not Collectively Exhaustive COLLECTIVELY EXHAUSTIVE Group 1 *not studied Group 1 Group 2 Group 2 All blocks of data when summed together address the entirety of the problem at hand Group 4 Group 3 Group 4 Group 3

MECE VS. NON-MECE An example for a MECE breakdown is dividing the population into subsets of age: 0 50 100 A group of people below 50 years and another group of 50 years and Group 1 Group 2 Age above is MECE. No person can be in both groups mutually exclusive but every person is in either one of them collectively exhaustive. 0 50 100 A group of people below 50 years and another group of people from 40 to 70 years is not MECE, as people from 40 to 50 years belong to Age Group 1 Group 2 both groups they are not mutually exclusive and people above 70 are in neither one of the groups they are not collectively exhaustive. Not Exclusive Not Exhaustive

EXAMPLE: NORTH AMERICAN CELL PHONE MARKET MECE BREAK DOWN NON-MECE BREAK DOWN Female, male or non-binary GENDER Female Consumer, business or government TYPE Business Age 35+ 0-18, 19-34, 35+ AGE

COLLECTIVELY EXHAUSTIVE DEFINITION B C C A A D COLLECTIVELY EXHAUSTIVE NOT COLLECTIVELY EXHAUSTIVE

PROBLEM Breakdown with MECE SUBPROBLEM Can you take a physical action to solve this subproblem? GO SOLVE IT! NO YES

TWO-PART MECE FRAMEWORK EXAMPLE Internal External ECONOMIC BARRIERS Short-term Long-term Raw Materials Equipment Labor Other Capital Economic Non-economic Quantitative Qualitative VS Direct Indirect NON-ECONOMIC BARRIERS Supply-side Demand-side Knowledge & Expertise Brand Name Distribution channels Upside Downside Benefits Costs

MECE EXAMPLE: You may have a customer list segmented according to these age brackets: CUSTOMER AGE BRACKETS With these categories you have covered all possible ages of customers 0-15 16-30 76+ AGE No one can appear in more than one category 61-75 31-45 46-60 15 years are represented in each category. This makes them easily comparable

MECE EXAMPLE: CUSTOMER AGE BRACKETS MUTUALLY EXCLUSIVE COLLECTIVELY EXHAUSTIVE No one individual can appear in more than one category The age grouping taken as a whole cover the entire population 0-15 16-30 31-45 46-60 61-75 76+

MECE EXAMPLE: PROFITABILITY FRAMEWORK Price/Unit Revenue Units Sold PROFIT Cost/Unit Cost/Unit Cost Units Sold Units Sold

STEPS OF PROFITABILITY FRAMEWORK Valuable costs can be further broken down into volume and cost per unit Then, revenues are broken down into volume and price per unit (PPU) STEP 1 STEP 3 First, profits are broken down into revenues and costs. Costs are broken down into fixed costs and valuable costs STEP 2 STEP 4

Sub Condition 1-A CONDITION 1 Sub Condition 1-B Sub Condition 1-C Sub Condition 2-A HYPOTHESIS IS TRUE IF CONDITION 2 Sub Condition 2-B Sub Condition 2-C Sub Condition 3-A CONDITION 3 Sub Condition 3-B Sub Condition 3-C

HOW SHOULD WE MAKE THE COMPANY MORE PROFITABLE? THE STRUCTURE IS MECE By increasing our By decreasing our If a node is in one branch of the map, it isn t in another and the REVENUES COSTS map is collectively exhaustive. By increasing our revenues By Increasing our revenues By decreasing our By decreasing our from returning clients from new clients fixed costs variable costs THE ANSWERS ARE ICE: One being true doesn t preclude other to be also true. Rather, they are independent (I) + collectively exhaustive (CE)