Solving Complex problem with MECE Structures

 

By Omodiaogbe Samuel

February 12, 2024

Introduction

Learning how to break down and solve complex problems is a core skill needed in today’s business world. The more complex and multi-faceted the problems are, the more the problem-solving skills and techniques will be required. Problem-solving ability is essential to perform well in any profession where issues must be dealt with quickly, particularly in management consulting. Finding an optimal solution to a given challenge is at the of heart of how consultants create client impact, and that is considered as the most important skill for success in management consulting. Ultimately consultants are in the business of helping executives and organizations to make difficult decisions and implement change. However, to effectively solve a problem and provide the right solution as a consultant, you need the right structure. That is where the MECE principle comes handy.

The MECE Framework

MECE (pronounced “mee-see”) is an acronym for Mutually Exclusive, Collectively Exhaustive. This framework was invented by Barbara Minto of McKinsey & Co. in the late 1960s. It is a framework that allows you to tackle problem in a logical and thorough way as it ensures no obvious gaps in the logic and no glaring oversights. The MECE Principle helps you translate a set of complex ideas or information into groups that are simple, logical, and easy to understand. It breaks down complex issues into distinct, non-overlapping categories that cover all possibilities. The MECE principle suggests that to understand and fix any problem, you need to understand your options by sorting them into categories that are: Mutually Exclusive– items can only fit into one category at a time, and Collectively Exhaustive – no item should be left behind

Mutually Exclusive

This means all the listed options on the MECE framework have to be mutually exclusive with no scope of overlapping and there is no dependency of options on each other. So, all the options can be adjusted in a single category at a specific period. This is the first step to reduce complex issues with no overlaps and requires careful analysis of possible solutions for avoiding the situation of considering them twice. Essentially, when issues overlap and cannot be isolated, it is difficult to know why changes are occurring. It is also difficult to understand the issue. Isolating a question, issue or analysis (ensuring that “ME” part of MECE is taken care of) allows you to conduct a test whereby you can be sure of the reason responsible for the changes. To be Mutually Exclusive, each item should fit into one and only one category. This ensures that there is no ambiguity or overlap in how elements are classified. For example:

Collectively Exhaustive

The next query that arises while using the MECE framework is to see whether the list of options is collectively exhaustive. Collective Exhaustive (CE) means that the segments used to breakdown the overall population are comprehensive i.e. it includes all the relevant parts of the group being analyzed. It is aimed at ensuring a thorough list without skipping any alternative, Collectively Exhaustive includes all the categories of a group along with all possible options. All components adding up must be exactly equal to the original sum. For example:

The Five Ways to be MECE
  • Algebra structures
  • Process structures
  • Conceptual framework
  • Segmentation
  • Opposite word

                                     Algebraic structures

Algebraic structures are all about using the power of equations to accurately and clearly structure a problem. With this method, you can structure any numerical problem by breaking it down into an equation with real variables. Many organizations use numbers to measure their performance, and therefore, most organizations’ problems are based on trying to improve a particular metric, such as profits, revenues, costs, market share, customer evasion rates, production efficiency, and so on.

Examples of problems to be solved with algebraic structure:

Improving Profit: “Esan Foods, is a fast-food restaurant that has had declining profits over the last three years. What is the cause and how can the situation be turned around?”

Reducing Costs: “The Finance Director of Omonon Ride, an motorbike manufacturer in Nigeria has been asked to find 10% savings within the next two years. What approach do you suggest the director should take to find and realize such savings?”

Example of Profitability Equation

Let’s use a profitability equation to breakdown and algebraic problem. The profitability issue is sorted by defining various sub-categories related to the problem and all possible solutions.

It consists of breaking down profits into revenue and cost. Revenue is the quantity sold multiplied by the price of the product and cost is the sum of all the fixed and variable costs. Increasing profit will require moving these drivers in the right direction. The profitability framework is an efficient, precise approach to decipher the root of a profitability problem. Revenues and costs are the key factors to be aware of. But you don’t just stop at revenue and costs, you need to develop more layers on each. Eventually, at the end of the layers, you could add qualitative structures such as hypotheses or issue trees to further narrow down on the problem that really confronts the organization  

Specifically, from the above diagram, every step of the profitability framework is based on MECE thinking:

  • First, profits are broken down into revenues and costs.
  • Then, revenues are broken down into volume and price per unit
  • Costs are broken down into fixed costs and variable costs.
  • Variable costs can be further broken down into volume and cost per unit.

The profitability framework, in particular, is helpful because it demonstrates how multiple data sets within your MECE analysis can be applied to a problem.

Things to note with algebraic structure:

  • Some people will stop at layer 1. If you don’t go beyond the first layer, although its’s MECE but it’s too shallow.  You need to have more layers, and eventually use the last layer to develop your hypotheses.
  • When using this type of structure, the more number-oriented candidates tend to just focus on the numbers and ignore reality. Don’t fall into this trap. The goal is to use the numbers to generate insights
  • Algebraic structures are limited to numerical problems.
  • Algebraic structure is not good to structure a long-term strategic problem

                                   Process Structures

A lot of the problems management consultants solve are related to processes.  For example, we use process structures in manufacturing, logistics, maintenance, sales, hiring, etc. The fact about a process structure is that it has a beginning, some steps in the middle and then an end. Therefore, breaking down any problem that has an underlying process into its steps is a sure way to be MECE.  Looking at Cement producing company for example. Imagine you need to find reasons why the production cost of your cement has increased. You can break this problem down to each production step, check if the cost has gone up in that step and if so, examine why.

Some good examples where process structure is used are:

  • The marketing funnel framework
  • Sales funnel
  • Manufacturing process
  • Value chain framework

Example of a process structure in Telecom customer service:

 

Here’s how a typical customer might interact with a mobile provider

From the above process of telecom customer service, because each stage of the structure is different from others, there is no overlap, and that means its Mutually Exclusive

 

Essentially, what you want to achieve as a consultant with the process structure is to be able to prioritize where to focus your analysis on at the end of the day. Obviously, there are many branches on the reasons why customer satisfaction dropped. On each of the reasons, there are hypotheses that could explain the reasons. However, we cannot analyze all. As a result, we need to prioritize our focus, by identifying the hypotheses that would give us the most impactful outcomes. The best approach to achieve that is to include qualitative issues after each MECE element of your structure as that shows insight along with the logical thinking. Also, you might create a process structure and later discover that the problem is outside the process you have created. Then you need to create a new structure until you get to the root cause of the problem.

Bear in mind that although process structures are good for simple, linear problem, but it’s not helpful for solving a strategic problem. Some problems aren’t numerical problems nor processes. Even if you practice mind-stretching, you can’t really find an underlying process to it. In such a situation, the conceptual framework comes handy

 

                           Conceptual Frameworks

Conceptual frameworks are a valuable tool for strategic thinking and problem-solving. It allows you to categorize qualitative drivers of the problem. Also, it provides a structure for breaking down a system and identifying root cause of a problem. When you’re dealing with a strategy problem, conceptual frameworks are the only quantitative tool to help you think in the long-term. Some examples of conceptual framework are SWOT analysis, Porter’s Five forces, PESTEL analysis, 3Cs, 4Ps, BCG Growth Share Matrix, GE McKinsey Matrix, VRIO Analysis, Stakeholder analysis, etc.

Key insights Conceptual Structures:

  • Conceptual frameworks are the hardest type of structure to master but they’re the most important one especially when dealing with strategic problem
  • Conceptual frameworks provide a way to analyze long-term effects and strategic considerations that cannot be quantified with numbers.
  • Using a conceptual framework can be a valuable tool in solving specific business problem. For example, determining what actions Innocent Vehicle Manufacturing (IVM) should take to increase sales
  • A conceptual structure can be a great tool especially when you’re dealing with problems that are not numerical or when you want to understand the whole context of a situation.
  • The quality of your hypotheses is crucial in using conceptual frameworks effectively, as it determines whether you have raised all the relevant issues and hypotheses or not.
  • The ability to adapt or create a framework from scratch is more important than simply picking one

Example of a Conceptual Framework: Innocent Vehicle Manufacturing (IVM)

From the above structure, we used the 3Cs and P to break down Innocent Vehicle Manufacturing (IVM) plan to launching a premium brand to compete with the likes of Bolt or Uber in major cities in Nigeria.  Here, the model enables us to ensure that each of the buckets is different from the others, and that there are no overlaps. Also, by developing hypotheses from each of the buckets, we tried to identified as many of them as possible to ensure they are collectively exhaustive. On the first layer, we used the model to ask key questions on each. Moving to the second layer, we developed hypotheses from the question asked. The next state is to try to determine the relationships and connectivity of the factors highlighted on the hypotheses developed. That is where the conceptualization comes into infect. We need to develop insights from the factors identified and make informed decisions based on that for IVM that wants to launch a premium brand. Being Collectively Exhaustive in conceptual framework mean getting all the relevant factors right. Essentially, getting the hypotheses right is much more difficult than highlighting the buckets, and therefore, much effort should be put into the hypotheses.

 

                                             Segmentation

Segmenting a problem is a way of applying a logical structure to the problem and dividing it into smaller and more specific sub-parts. Applying the MECE principle, a framework for segmenting problem statement can be done by following a few steps. Begin by defining the problem statement and objective, then identify the main drivers or factors that influence the problem. Each driver or factor should be broken down into smaller and more specific sub- to ensure that they are mutually exclusive and collectively exhaustive. This process should be repeated until you reach a sufficient level of detail and granularity. Bear in mind, segmenting a problem is not a one-size-fits-all process, and therefore, it requires creativity, critical thinking, and judgment. To effectively do it, you use a top-down approach that starts with the big picture and then drills down into the details. Also, you should use a hypothesis-driven approach to formulate and test assumptions and hypotheses. Data should be used to support segmentation and analysis in a client-centric way that aligns with the client’s goals, needs, and expectations.

Segmenting is essentially cutting a slice of the problem. For instance, you could segment a company’s customers by age group (0-20, 21-40, 41-60, 61+), by gender (male, female), by country, etc.

Example of Market segmentation

The problem with using segmentation is that while it’s MECE, but your structure will only generate insight if you have chosen the right segmentation criterion. Also, there are many ways to segment almost any problem and if you don’t pick the right one, you will waste your time, and not arrive at the solution you desired. Essentially, it is best to use segmentations as a complement to algebraic, process, or conceptual structures. That is because segmentation does not generate the sufficient insights desired. Therefore, segmentations are excellent complements, even though they rarely generate enough insight to solve a problem on their own. Adding a couple of segmentations here or there in your core structure is an excellent way to deepen your problem-solving approach.

 

                                        Opposite Words

Opposite words are quick and easy to create, and they are always MECE. Although, it doesn’t generate enough insights. By using opposite word pairs, you guarantee MECEness in solving any problem. For example, supply and demand. financial and non-financial, external and internal factors, short-term and long-term, benefits and costs, upside and downside, direct and indirect, qualitative and quantitative, in and out, positive and negative, etc.

 

How to use opposite words

  • To separate inherently different problems
  • To quickly organize your thoughts
  • To separate different problems
  • It can enable you to create extra layer(s)

Example of opposite words

This organization is MECE. Being mutually exclusive means that none of the different parts overlap with each other. In this example, eating out and eating in are mutually exclusive. You cannot do both simultaneously, so you can only do one or the other. Also, eating out and eating in are collectively exclusive. You will end up choosing one or the other because there are no other options or possibilities. However, with that type of structure, although MECE, it looks so shallow, and not enough insights generated

 

                                          Core Structures

 

The three core techniques that you must learn are the Algebraic structures, Process structures and Conceptual frameworks. Segmentations and Opposite words aren’t core techniques because they don’t stand-up on their own. You can solve a consulting problem by using any one of the three core techniques. But there’s no single problem you can successfully solve by using the segmentation or opposite words, even if you combine them. Segmentation and opposite words cannot give you enough insight to solve whole problems because they cannot take you to the root cause of a problem. Insight is all about getting closer to the real, underlying nature of a problem, and that is what you can’t derive from those two techniques

From the above, you can see the importance of the three core structures (algebraic, conceptual, and process). Therefore, to craft your MECE structures, you need to master the three core techniques and have two additional ones as back-ups. Essentially, you can choose to build a structure using one of the above techniques, or to put many together in an issue tree format and end up with a tailored structure to your problem.

                           Tips for being MECE

  • Logical thinking: Organize your thinking in a logical order. For example, if you are analyzing an issue and segmenting it by timeframe, arrange your thoughts in order of short-term, medium-term, and long-term. But it does not make sense to order your thinking by long-term, short-term, and medium-term. This ordering is confusing and hard to follow.
  • Have three to five elements: Your thinking needs to be both comprehensive, and easy to follow. Also, your framework should have at least three elements to be able to cover enough breadth of the key issue. In addition, the framework should have no more than five elements. Anything more than that will make your framework too difficult to follow.
  • The branches should be parallel: The elements in the framework should all be on the same logical level. For example, if you decide to segment your thinking by states in Nigeria your elements could be: Lagos, Edo, Delta, Kano, Enugu, Benue or Adamawa. Such segmentation is logical because each segment is a state in Nigeria. But it would not make sense to segment by Lagos Cape town, Kano, Accra, Edo or Benue. Such segmentation does not follow logical consistency because it mixes states from different African countries.

 

                              Key Benefits of MECE?

 

  • Problem solving: It provides a structured approach to problem-solving, which can lead to more effective solutions
  • Clear thinking: MECE encourages clear and structured thinking, as it helps you break down complex problems into distinct components
  • Comprehensive analysis: MECE makes you to ensure that you’re considering all relevant factors without gaps. This leads to a more comprehensive understanding of the situation
  • Better decision-making: MECE helps in making informed and well-rounded decisions by considering all possible options
  • Efficiency: It reduces the risk of duplicating efforts or analyzing the same information multiple times. This can save time and resources
  • Communication: When you present information in a MECE manner, it’s easier for others to understand and follow your logic.
  • Goal alignment: MECE helps align goals and strategies with the available resources, making it easier to allocate resources effectively
  • Risk management: By ensuring that all possible options are considered, you’re less likely to overlook potential risks or opportunities
  • Innovation and creativity: MECE can stimulate innovative thinking by forcing you to consider all potential options, even those that might not be immediately obvious
  • Project management: It aids in planning and managing projects by breaking them down into distinct, manageable tasks or components

                                              Conclusion

MECE is a framework that help you break down a problem into various key components related to it. It’s a methodological structure that can make you a better decision-maker and problem-solver. The framework helps you see the situation more clearly and reach conclusions decisively. MECE is most effective when you’re working on complex problems with many moving parts, a tight timeline, and requiring a lot of fact-finding or information analysis. MECE enables you to organize your thoughts and information so that you can quickly identify and solve complex problem by arriving at meaningful insights, and tackle the problem with confidence.  However, keep in mind that your frameworks don’t always need to be 100% MECE for you to solve a problem. The goal is not the structure, but providing solutions to problems. Therefore, in addition to learning MECE structures, you may also need to learn how to apply creativity in order to effectively solve complex problems.  

 

Omodiaogbe Samuel, MSc. CMC, ChMC, FIMC

Omodiaogbe is a Strategic Management Consultant, and he the Principal Consultant/CEO at Vast Thinking Consults Ltd where he help organizations and business leaders to create superior value. Omodiaogbe holds BSc. and MSc. in Economics. Also, he is a Certified Management Consultant (CMC), a Chartered Management Consultant (ChMC), and a Fellow, Institute of Management Consultants, Nigeria. He is an Instructor on Coursera, where he teaches 25 courses in Strategic Management. Omodiaogbe is one of the world’s leading learners on Coursera and Edx with over 500 Certificates from top-ranked Universities, Business Schools, and Organizations.

Contact him:
Email; somodiaogbe@vastthinking.com.ng
Visit: www.vastthinking.com.ng

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