A good analyses structure assumes the clients’ preferred option is not valid

Merely doing what a client wants does not make you a great consultant

Strategy Study W0 10

Jobs vs. Profits

What if…

…The sector with businesses that generate the highest returns for the bank…

…Is the smallest or shows a low growth rate…

…And also does not create many jobs?

This is something we need to reconcile in the study.

Are we pursuing the most profitable sectors or those that create jobs?

Should the bank worry about job creation at all?

Of course, their mandate will guide us on this but we are yet to see that.

I suspect they will not worry much about this in the US, but it will matter in Latin America.

However, given the striking poverty rates in the US, maybe someone should worry about these things.

Although we have a high-level approach to the study, which we used to secure the work via the written proposal, in the next few days, we will meet Guillermo to learn which areas the bank wants to prioritize.

We will thereafter adjust the study based on that discussion.

Most of this morning will require myself taking a shot at structuring the focus of the study. Despite what LAB thinks, I do not believe setting up a massive retail structure is feasible.

Why not build an App?

We now need to prove that it is unfeasible. So, most of the early study will focus on the economics of the retail structure to provide entrepreneurial funding.

Whether we prove the structure viable, or not, the direction of the study changes dramatically:

(1) If the retail structure is viable, we need to thereafter focus on implementation?

(2) If the retail structure is not viable within the US market, we need to think if there is another way to enter the US market?

(3) If the US market is not at all viable irrespective of the entry mechanism – we believe this is unlikely – is there another way for LAB to meet its mandate?

How will we calculate the demand for funding among the unbanked in the US?

As I think through the approach the team will need to take to work out the economics of the retail structure, we need to estimate demand for loans and so far, there has not been a good method presented anywhere.

I suspect we will need to find a way to break out demand by sector and sector size. I would assume the economics of the retail micro business is very different from the economics of a medium or small size retail operation.

We see a lot of literature and studies using assumptions, benchmarks and guides from studies done in Mexico, Brazil, Bangladesh and so on.

It is not appropriate to apply this data to any current study since the older study was probably asking a different question. Kevin P. Coyne is very good at breaking down issues and areas of a study by distinguishing between the different economic forces. We can all learn a lot from that style of thinking.

In this study we will need to do the same. A retail network in Arizona will have different economics from a retail network in New York since the economic forces impacting them are different.

Moreover, even if we import the best practices from other parts of the world, we need to adjust and model them, as the forces impacting them are very different.

I have not completely gotten around understanding and thinking this through, but it will be very important to understand.

QUESTION(S) OF THE DAY: Do you understand the dangers of using analysis structures used for other studies?

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, Spotify, Acast and Google Android Podcasts. This is the world’s #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.

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