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Strategy study w0 17

Kristina Safarova
Kristina Safarova

One of our most advanced training programs with >270 videos, is where we help a major Latin American Bank determine if they should enter the highly competitive US retail banking sector. We asked the partner leading this study, Michael, to document each day of the study as he thought through the issues, managed the client and led the engagement team on this complex assignment. The subsequent live-blog was one of the most popular programs we ever released. The posts were prepared at the end of each day of the study so you can see how the thinking on the study evolved. We have since re-edited the live blog. At 600 pages long, the re-edited live blog is probably the most detailed guide anywhere demonstrating how a partner thinks on a study. You will see that it is not a linear process. It is not a function of simply finding and plugging in a framework. Though there is a clear logic to the thought process. On StrategyJournal.com we are publishing the entire re-edited live-blog. On the Strategy Skills podcast channel, we will publish an accompanying free podcast series. Insiders, our most loyal clients, who want to see how we conducted the analyses, the actual engagement slides and follow the training to replicate this type of partner-level thinking can view all ~270 detailed videos at StrategyTraining.com and Premium members can view the videos on StrategyTV.com.

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StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. 17 Focus interviews are the heart of top-down analyses and must be done first FIs are critical to quickly test initial hypotheses and onboard the team in a safe environment Study Plan It is crucial to book in the dates for updates as soon as the study commences. Otherwise the clients diary may not be free. I have built a rough study plan and believe the following is feasible. We will confirm this once the team begins on the 16th June. They need to be comfortable with the timings I am proposing. For now, Guillermo will hold these in all the diaries: Week 2 Progress Update Week 3 Case Study Findings & Market Segment Analyses Week 4 Focus Interview Feedback + Modeling Report + Value Chain & Competitor Analyses + Identifying the business model options Week 6 Is market entry viable and what do we propose next? Week 8 Board Presentation: Our recommended option, analyses of the loan book and US pilot site recommendations Week 9/10 Final report with detailed analyses of the recommendation How did we come out with these analyses for each update so early? I did not suck the analyses out of thin air. I used the approach we use in every single corporate strategy study. Here is a rough breakdown of the steps, in the detailed videos from the technology merger corporate strategy study, that I used to do a high-level plan of this study: (1) Listed the objective function (2) Determine the drivers of the objective function (3) Prioritized the drivers (4) Broke down the prioritized drivers (5) Repeated this process until I had a decision tree about 4 / 5 levels down
StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. (6) Built hypotheses for the prioritized branches (7) Designed the analyses I would need to test the hypotheses (8) Clustered the analyses into common groups (9) From the clusters I them had a list of the areas I needed to conduct the analyses This is how I knew what work needed to be done. I will repeat this process with the team so they can learn how it should be done on a real study. Never ever do an analyses just because it is part of some checklist. That is not strategy. It is wasting time. An analysis must only be done to test a hypothesis, and the hypothesis must come from the decision tree and the decision tree must come from a clear objective function for the study. Everything naturally flows from the other. At this stage we have 29 focus interviews planned. The list could go up a little or even down a little as diaries change but it looks like a good start. It is unusual to have so much planning and coordination support from a client over a week before the study starts, but Guillermo and the CEO have pushed hard to create space for us to do this. The majority of the interviews are with banks that distribute LABs wholesale products through their retail branch network. The credit guarantee scheme will be carefully reviewed in these focus interviews since the banking client is rather proud of them and believe it is a win-win situation for the local banks. We have several development finance experts to interview including many from Yale, Africa, Harvard, Latin America etc., Of course, as the majority shareholder of the banking client, the government will be interviewed. Shadow Studies You will notice none of the distribution financial intermediaries are being interviewed. We have a very special plan for them. For the DFIs and recipients of the funding, entrepreneurs, we will be spending a day or two shadowing them silently, with their consent, to see what they do, why they do it and how it impacts the economics of the business. This is probably one of the best parts of the study.
StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. If the team needs help on the ground, I personally volunteer to shadow a food entrepreneur, and taste the excellent Hispanic cuisine. The team will fan out across New York, California, Nevada, New Mexico, Arizona and Florida to conduct the shadow studies and focus interviews. In total, we want to cover 9 Southern USA states. New York is being added as a control. Texas is not yet on the list due to scheduling problems but we hope to correct that soon. Imagine spending summer in California out in the heat shadowing entrepreneurs! There will be many shadows due to the blazing hot sunlight. Obviously the team needs to be dressed appropriate to the role. A Brooks Brothers chinos clad consultant in the middle of an informal LA food market in a seedy part of town is just asking to be mugged! In those situations, jeans and a shirt is the norm. We are visiting to 2 DFIs and will spend over a day at each. One is a DFI offering entrepreneurs funding of $700 and only targets customers within a cluster; such as focusing on clients who operate on the same street etc. They have many different types of clusters Another, is a massive operation offering funding to established small businesses of 2 years or more, with an average business loan size of $50,000 We will split the time at each DFI as follows: (1) Day 1: We will go out with a loan officer and see how she/he spends her day visiting clients, following up on delinquent loans and their general routine (2) Day 2: We will spend a day in the office seeing how the key processes work, map them and time them. The processes we will look at involve processing a funding request, updating a customer file, adjusting a loan request, handling delinquencies etc. Both DFIs are within driving distance of the US-Mexican border. These are my early thoughts, but if we assume the banking client wants to replicate the retail structure in the US since they think the DFI are so successful, then we need to test for this. Are the DFIs successful, and if they are, under what conditions are they successful and can LAB replicate these conditions? Key considerations The team should understand the: (1) Operational issues and requirements for successful micro-lending in the US and Mexico (2) Business model structures and products/services offered
StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. (3) Customer needs, customer support offer and how these vary by business/industry type and loan size (4) Systems, loan book, people and organizational structure requirements for different loan sizes and target markets in different states and for different sectors across different customer profiles (5) Economics of the value chain margins, costs, prices etc. (6) Lessons each DFI learned in starting up. How forthcoming will the DFIs be? LAB does not own them. They are clients of LAB the retailers to LABs wholesaler role. Will they share the information we need? I think they will. We can deduce enough from the information they will provide to model this operation correctly and since the banking client will have a mirror of the loan book managed by the DFI, we can always double-check the numbers. QUESTION(S) OF THE DAY: Have you tried using focusing interviews at the start of a study. How did the study change by adding this step? We answer this question, additional reader questions and discuss more issues raised in this article on the accompanying episode on the Strategy Skills podcast channel on iTunes, Google Android Podcasts, Libsyn, Spotify, Acast, Podbay, Podbean and Listen Notes. This is the worlds #1 ranked business strategy podcast channel. If you have a question, please post it as a comment on iTunes and we will respond in a podcast. If you would like sample episodes of our most advanced strategy programs all taught by ex-McKinsey, BCG et al. senior partners please visit the FIRMSconsulting.com homepage and provide your contact details at the top.

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Strategy study w0 17

  • 1. StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. 17 Focus interviews are the heart of top-down analyses and must be done first FIs are critical to quickly test initial hypotheses and onboard the team in a safe environment Study Plan It is crucial to book in the dates for updates as soon as the study commences. Otherwise the clients diary may not be free. I have built a rough study plan and believe the following is feasible. We will confirm this once the team begins on the 16th June. They need to be comfortable with the timings I am proposing. For now, Guillermo will hold these in all the diaries: Week 2 Progress Update Week 3 Case Study Findings & Market Segment Analyses Week 4 Focus Interview Feedback + Modeling Report + Value Chain & Competitor Analyses + Identifying the business model options Week 6 Is market entry viable and what do we propose next? Week 8 Board Presentation: Our recommended option, analyses of the loan book and US pilot site recommendations Week 9/10 Final report with detailed analyses of the recommendation How did we come out with these analyses for each update so early? I did not suck the analyses out of thin air. I used the approach we use in every single corporate strategy study. Here is a rough breakdown of the steps, in the detailed videos from the technology merger corporate strategy study, that I used to do a high-level plan of this study: (1) Listed the objective function (2) Determine the drivers of the objective function (3) Prioritized the drivers (4) Broke down the prioritized drivers (5) Repeated this process until I had a decision tree about 4 / 5 levels down
  • 2. StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. (6) Built hypotheses for the prioritized branches (7) Designed the analyses I would need to test the hypotheses (8) Clustered the analyses into common groups (9) From the clusters I them had a list of the areas I needed to conduct the analyses This is how I knew what work needed to be done. I will repeat this process with the team so they can learn how it should be done on a real study. Never ever do an analyses just because it is part of some checklist. That is not strategy. It is wasting time. An analysis must only be done to test a hypothesis, and the hypothesis must come from the decision tree and the decision tree must come from a clear objective function for the study. Everything naturally flows from the other. At this stage we have 29 focus interviews planned. The list could go up a little or even down a little as diaries change but it looks like a good start. It is unusual to have so much planning and coordination support from a client over a week before the study starts, but Guillermo and the CEO have pushed hard to create space for us to do this. The majority of the interviews are with banks that distribute LABs wholesale products through their retail branch network. The credit guarantee scheme will be carefully reviewed in these focus interviews since the banking client is rather proud of them and believe it is a win-win situation for the local banks. We have several development finance experts to interview including many from Yale, Africa, Harvard, Latin America etc., Of course, as the majority shareholder of the banking client, the government will be interviewed. Shadow Studies You will notice none of the distribution financial intermediaries are being interviewed. We have a very special plan for them. For the DFIs and recipients of the funding, entrepreneurs, we will be spending a day or two shadowing them silently, with their consent, to see what they do, why they do it and how it impacts the economics of the business. This is probably one of the best parts of the study.
  • 3. StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. If the team needs help on the ground, I personally volunteer to shadow a food entrepreneur, and taste the excellent Hispanic cuisine. The team will fan out across New York, California, Nevada, New Mexico, Arizona and Florida to conduct the shadow studies and focus interviews. In total, we want to cover 9 Southern USA states. New York is being added as a control. Texas is not yet on the list due to scheduling problems but we hope to correct that soon. Imagine spending summer in California out in the heat shadowing entrepreneurs! There will be many shadows due to the blazing hot sunlight. Obviously the team needs to be dressed appropriate to the role. A Brooks Brothers chinos clad consultant in the middle of an informal LA food market in a seedy part of town is just asking to be mugged! In those situations, jeans and a shirt is the norm. We are visiting to 2 DFIs and will spend over a day at each. One is a DFI offering entrepreneurs funding of $700 and only targets customers within a cluster; such as focusing on clients who operate on the same street etc. They have many different types of clusters Another, is a massive operation offering funding to established small businesses of 2 years or more, with an average business loan size of $50,000 We will split the time at each DFI as follows: (1) Day 1: We will go out with a loan officer and see how she/he spends her day visiting clients, following up on delinquent loans and their general routine (2) Day 2: We will spend a day in the office seeing how the key processes work, map them and time them. The processes we will look at involve processing a funding request, updating a customer file, adjusting a loan request, handling delinquencies etc. Both DFIs are within driving distance of the US-Mexican border. These are my early thoughts, but if we assume the banking client wants to replicate the retail structure in the US since they think the DFI are so successful, then we need to test for this. Are the DFIs successful, and if they are, under what conditions are they successful and can LAB replicate these conditions? Key considerations The team should understand the: (1) Operational issues and requirements for successful micro-lending in the US and Mexico (2) Business model structures and products/services offered
  • 4. StrategyTraining.com l StrategyJournal.com l StrategyTV.com l FIRMSconsulting.com We teach business strategy in compelling and creative ways. Our clients solve mankinds toughest problems. (3) Customer needs, customer support offer and how these vary by business/industry type and loan size (4) Systems, loan book, people and organizational structure requirements for different loan sizes and target markets in different states and for different sectors across different customer profiles (5) Economics of the value chain margins, costs, prices etc. (6) Lessons each DFI learned in starting up. How forthcoming will the DFIs be? LAB does not own them. They are clients of LAB the retailers to LABs wholesaler role. Will they share the information we need? I think they will. We can deduce enough from the information they will provide to model this operation correctly and since the banking client will have a mirror of the loan book managed by the DFI, we can always double-check the numbers. QUESTION(S) OF THE DAY: Have you tried using focusing interviews at the start of a study. How did the study change by adding this step? We answer this question, additional reader questions and discuss more issues raised in this article on the accompanying episode on the Strategy Skills podcast channel on iTunes, Google Android Podcasts, Libsyn, Spotify, Acast, Podbay, Podbean and Listen Notes. This is the worlds #1 ranked business strategy podcast channel. If you have a question, please post it as a comment on iTunes and we will respond in a podcast. If you would like sample episodes of our most advanced strategy programs all taught by ex-McKinsey, BCG et al. senior partners please visit the FIRMSconsulting.com homepage and provide your contact details at the top.