Audio 7

Very big error in the beginning of the case which made it impossible for him to solve the case.

80/20 rule: 20% of the things u can influence will impact 80% of ur results. (working smarter and not
harder in a problem solving type of qn)

Candidate analyzed a part which is not imp and did not focus on what is important. Missed the
objective of the case. Need to clarify what the interviewer is asking for. Don’t guess what the
interviewer wants. Always clarify and verify.

Client is a storage company that has a lot of warehouses that will store a wide variety of things. 3 major
parts of this business is: a moving company so sometimes can store ppls homes and belongings if they
are in the middle of a move. And store records or paper works. A data storage which stores tapes and
backup tapes for companies with a lot of computer stuff… and this business, the owner is unhappy bcuz
losing money and sales declined. How to help them

Int: (repeats and summarizes the case).

Int: is he losing money bcuz of the sales or is he losing profit?

Vc: both. Sales and profits are down

NOTE: most mistakes are made in the first three minutes of the case. Candidate did not verify what the
objective is. The objective in the case is to improve profitability. ASK WHAT OBJ IS. Bcuz improving sales
and improving prof are related but not necc the same thing. Mistakes made later were bcuz of unclear
understanding of obj.

Int: so profits is made of revs and costs. Revs is divided into volume and selling price. And divided price
into vc and fc.

Int: so u said profits are down, do we have any info by how much…

Vc: the business had a million in income last year and this year it has a loss of 4 mil.

Int: so we went down basically 5 mil

Vc: correct

Int: id like to tackle the rev side at first. Has this been gng down for the past years. And if so what is the
trend

Vc: it was fairly flat the last yrs and taken the decline the past year only

Int: and is it also by the same amount in terms of 4-5 mil

Vc: (unclear answer)

Int: id like to form a hyp that this rev decline is due to reduction In volume. Do we have any info on that

Vc: yes number of orders and clients have declines by 10 to 20 percent.

Int: can u breakdown the revenue stream for me for each 3 parts of the company
Vc: sure the residential moving company revenues were 30 mil in sale, the record storages 15 mil, and
data storage 10 mil

Int: and prevs years ?

Vc: Residential 50 mil, record 15mil, data 8 mil

Int: so we have decreased mainly in the residential area… have we changed any pricing in our system

Vc: no same.

Int: so the main problem here is that we have gone done in the residential area and im getting comf
with the rev side. But just to make sure and cover all bases Id like to analyze costs. Id like to segment
costs into fixed and variable… do u prefer that way or would u prefer me to break them down by the
value chain comp within each rev stream

NOTE: advice. How to know what to segment. The right way to say it: id like to look at costs and break it
down into its components, do we have any more detailed data on costs and on what is included in the
overall costs. And the reason u wna do that is there are many many ways u can segment costs… ask for
this detailed qn and not a general qn. BEFORE U SAY u wna break costs to vc and fc, ask them the qn
(the right way) up and see if they want u to segment it in any other way.

Vc: fc have been 27 mil per yr inclusive of equipment, real estate (v big component of fc), and remaining
of costs were labor which were abt 32 mil per yr.

Int: before we go to vc, just wna make sure of some stuff. Do we know how much of the 27 mil is real
estate.

Vc: 70% of it. And the remainder would be trucks in the residential site

Int: is there a reason on why we are depending on real estate.

Vc: yeah they have X hundred thousand square ft of facilities base. Own A lot of land that require service
morgages and payments

Int: have costs changed from the prevs years

Vc: yeah vc went down from 47mil to 32mil and fc stayed same

Int: can u break down vc for me as well

Vc: lets assume vc is all labor.

Int: we assume labor is variable not fixed.

Vc; yes labor in terms of actual human delivery.

Int: (explains what he has on paper). We have 1 major problem: lost much volume on the residential
side.

NOTE: BIG MISTAKE DONE NOW. (try to find it).

INT: split the page into external and internal factors. External: costumers and competition. Internal:
product and company(client). I wna understand if we are the only ones facing the drop in the industry of
residential side.

Vc: industry problem everyone almost decreased by same amount.

Int: so someth not in our own hands. So im gna go to costumers now.

NOTE: (CUTS THE VOICENOTE bcuz candidate goes through 25mins of useless business situation)
objective of this case was to increase profits. And this business consists of 3 divisions. And the first
analysis that shoulve been done was to figure out what the profits are in these three divisions and how
they have changed. We have to know which is the most and least profitable now. Candidate tried to go
after most revenue and increase its sales. He tries to drive more revenue… try and see: what is the
overall probability of the company (shared earlier), and then what is the profit level of res, paper
storage, date storage? How much income did each business drive?... we don’t know cuz candidate didn’t
ask for. Multiple division for each businesses and we don’t have time to analyze each one so u have to
use the 80/20 rule or wtv and candidate picked the wrong area to focus on. Mistake made in first 5
mins.

(skips to feedback section)

Vc: so suggestions: went down the wrong approach. U were trying to turn around the profitability of the
worst part, the part that was losing money. U ignored the parts of the business that were already
making a lot of money. from a balance stand point, its reasonable to try and turn the residential
business around it’s a reasonable initial hyp but u didn’t spend any time on the parts of the business
that are profitable. So for for ex, which business is the most profitable of the 3?

NOTE: this is the mistake of the case. Not figuring out which of the 3 businesses u wna spend time
analyzing to turn around the prof. the reason the cand made the mistake is bcuz he was using the
framework as is. Do not go through the framework mechanically. Here there is a twist. 3 businesses and
not 1. Cant just use the framework as is.