Analytical Problem Solving
Gemini Skills Workshop
August 1998

Learning objectives
• Understand the key steps in the problem solving process.
• Learn tools and techniques that are available
for each step of the process.
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Analytical Problem Solving
“The significant problems we face cannot
be solved at the same level of thinking we were at
when we created them”
- Albert Einstein
“The difficult is what takes a little time; the impossible
is what takes a little longer”
- Fridtjof Nansen
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As consultants we need to have a structured approach
to problem-solving
• We work in groups.
• We work with complex problems.
• Other consultants or clients may have to continue our work (e.g. in
later phases of the project or when implementing the solution).
– Need to know “where we are” and what has been done
– Need to understand the process that leaded to the result/recommendation
• A structured approach helps the client follow “where we are”
• Our solution will be shared with people that did not take part in the
problem solving process.
• It is easy to miss a step.
• Current steps often seem less important than future steps.
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Key steps in the problem solving process
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
1. Determine what 1. Identify possible 1. Determine 1. Determine 1. Compare with 1. Prepare action 1. Measure
we know and causes criteria solution decision criteria plans expected
what we don’t approach benefits
2. Design tests 2. Determine 2. Decide on 2. Prepare follow-
2. Gather decision 2. Develop solution(s) up plan and 2. Collect
information 3. Perform tests process solutions measures feedback
3. Validate
3. Identify 4. Determine 3. Implement 3. Incorporate
constraints causes or re- feedback into
test ongoing work
4. Determine if
you should 5. Determine to
proceed proceed
There are many variations of this process, but these are the basic steps
you should follow.
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STEP 1: CLARIFY PROBLEM
Clarify the problem
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Determine what we • What we know/What we don’t
know and what we don’t
• 5 W`s and 1 H
2.Gather information (What, Where, When, Who,
Why and How)
3.Identify constraints
• 5 Whys
4.Determine if you should
proceed • SWOT (strengths,
weaknesses, opportunities,
threats)
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STEP 1: CLARIFY PROBLEM
Clarifying the problem is the most important step in
this process
• A problem can be defined as a gap between where we are and where
we want to be. This gap should be measurable.
• Be aware that “perception is reality”. Although some client problems
we encounter are very logical and factual, such as machine
breakdowns, most client issues are based on people’s perceptions of
problems, such as poor customer service.
• Because of this, most problems will no require an optimal solution,
but will have many adequate solutions.
• Ensure that the problem statement accurately depicts the client
situation. It will determine your entire course of action.
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STEP 1: CLARIFY PROBLEM - EXAMPLE
These are the steps involved in clarifying the problem
1. Determine what we know and what we don’t. Using a table with What, Who,
When, Where, How, and Why can help define what information needs to be
gathered.
Example: Urgent customer requests are not being addressed.
What We Know What We Don’t Know
What Customers are complaining about Are requests being lost, forgotten,
or not lack of responsiveness answered initially?
Who Only customers with urgent E-mail, voicemail,or telephone
requests or rush orders communications?
Where Headquarters Customer place of origin
When Problem only in last two months
Why No documentation of requests or System error? Not recorded by
service orders agent? Message not received?
How
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STEP 1: CLARIFY PROBLEM
Steps to clarify problem (continued)
2. Gather the information you need in order to define the problem statement.
You may begin to identify possible causes, but that should really be done at a
later step.
3. Identify constraints - Who is the client for this problem and what is important to
that client? Consider time frame (short-term vs long-term), costs, resources
required, level of effort vs value-added, etc.
4. Define the problem statement. Validate the problem with the client. Do we
agree that this is really the problem at hand?
5. Determine how to proceed. Seriously consider if the time and effort involved
creates enough benefit or if this problem will disappear as the result of other
activities.
Most importantly, this step frames the investigation before we begin
tackling the causes.
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STEP 2: INVESTIGATE CAUSES - EXAMPLE
One very easy way to understand and define a problem
is to ask “Why?” 5 times (5 Whys)
Real Client Example:
• Why are we shipping orders late?
Because we can’t meet our production schedule.
• Why can’t we meet our production schedule?
Because we are constantly changing it.
• Why do we change it?
To accommodate late orders from our customers.
• Why do we have late orders?
Because many of our customers don’t know what their orders are by
the order cut-off date.
• Why do we have a cut-off date?
So we can create a production schedule and meet our shipping dates.
Client problems may require several iterations of the 5 Whys.
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Strengths, Weaknesses, Opportunities, and Threats
(S.W.O.T.) can clarify complex issues and define
direction
– S.W.O.T. analysis is a general tool that can be used across key areas:
• Product mix
• Profit/pricing
• Promotions
• Space management
• Supply chain
– Definitions:
Strengths Weaknesses
Exploited strategic capabilities and/or market Exploited strategic capabilities and/or market
positioning providing a competitive advantage in the positioning possessed by competitors creating a
market place. competitive disadvantage in the market place.
Opportunities Threats
Unexploited strategic capabilities and/or market Unexploited strategic capabilities and/or market
positioning which could provide a competitive positioning which could provide a competitor a
advantage in the market place. competitive advantage in the market place.
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STEP 2: INVESTIGATE CAUSES
Investigate causes ( or perform analysis)
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1. Identify possible • Hypothesis
causes • Surveys and interviews
2. Design test • Fishbone (cause and effect)
3. Perform test • Pareto
4.Determine causes or • Root cause analysis tools
retest • DuPont tree
5. Determine to proceed • Financial, statistical, database
analyses
We use two general methods to approach problems - using analogies to
previous experience and breaking the problem down into smaller pieces.
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STEP 2: INVESTIGATE CAUSES
Step 2 is to investigate causes of the problem
1. Identify possible causes. We need to do this in order to carve out a
manageable piece of work by narrowing the scope of the problem to the most
probably causes.
There are many tools we can use to investigate causes. The two basic ways to
analyse problems for causes are:
– Use analogies. We naturally relate the current problem to our previous experiences. As experts,
we should be able to develop plausible hypotheses to explain the problem.
– Break the problem into smaller subsets of problems (chunking). In conjunction with our
hypotheses we can also dissect the problem into its variable components and determine which of
these components is most likely to be causing the problem.
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STEP 2: INVESTIGATE CAUSES
Now we are ready to test our possible causes
2. Design tests or analytics. Tests can include surveys, interviews,
process flows, pareto analyses, control charts, etc. it is unlikely that
you will have to create an entirely new analytic because so many
already exist, in Gemini and externally. Well-designed tests should
directly prove or disprove hypotheses and should consider one
problem variable at a time.
3. Perform tests. Ensure that the test will not be a burden for the client
and that they want to do it. Otherwise, the results may not be
accurate.
4. Determine causes based on test results. (Or re-test, if necessary)
5. Determine how to proceed. Is the cause within our sphere of
influence? How does it compare with our constraints?
It seems logical that the next stop would be to develop solutions. but to
make our time more effective, we should plan ahead to determine what a
“good” solution looks like.
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STEP 2: INVESTIGATE CAUSES - EXAMPLE
The Fishbone or Cause and Effect Diagram is simple
tool for investigating causes
CAUSES FOR A CAR NOT TO START:
Man Machine
Dead battery
No gas • Left lights on
Lost keys Bad choke • Bad Switch
• Electrical
Wrong fuel Worn out
Lemon
No oil
Vapor Lock
Car will
not start
Out of tune Don't know Too cold
how to start
• Rental
Parts Stolen
No antifreeze Repo'd
Gets wet in the rain
Material Methods Milieu (Environment)
“5“ M fishbone - Man, Machine, Materials, Methods and Milieu (Environment) - 15 -
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STEP 2: INVESTIGATE CAUSES - EXAMPLE
Supply Chain fishbone is an ‘mental model’ for looking
at a business
Purchasing & Vendor
Production Control,
Mtg.
Supplier Inventory
Partnership selection
Performance Capacity Reliability
EDI measures
Safety stock Maintenance
Sourcing terms Vendor alliances Information Mgt.
Lead time Reliability
Certification
Supplier base Auditing Common databases Networking
Change over Cycle time
reduction
Contractor Lead time
New product Accessibility Transparenting
BOM Quality
management development Real time Bar coding
Forecasting Complexity
Quality material MRO Aligned with operations User training
Monitoring turns Labour training
TQM JIT Timing of processing Cycle time
Scheduling Stock accuracy
All-in-one cost Forming consortiums Data accuracy Trust in the system
Real time Data accuracy
Transportation Procurement Measurements Reliability
Standardised coding Labour climate
Cycle time Raw material packaging Data capture Management reports
Consumption rate Supply Chain
Order size Order Modes & lead times Driver training Cycle time Corporate scorecard
Effectiveness
Frequency EDI Transportation Return logistics CSF’s Planning & objective
MTBF/MTTF
Bar coding Cost order Vehicle maintenance Warehousing OEE setting
Segmentation Pricing Network/routing Driver tracking KPI’s Break-even time
Verification Know your customer DRP optimisation Modes of freight &
Labour climate SOP’s Sales & op. planning
Lead time on orders Perfect orders Cost of fuel packing ABM Customer loyalty
Order processing Transportation costs Regulations LTL vs. FTL Cost of quality End-to-end measures
Payment terms ECR Intermodel networks Compensatio
Outsourcing Quality & availability of
n rewards measures
Distribution/logistics Promotions Scheduling Electronic tracking
Budget variances Tracking & reporting
Order error rate Accounts receivables Goods in transit Insurance
Continuous Total consumption
Discounts Inventories Sourcing Inventory management
improvement systems
Vendor mgt. Credit control HVOV’s Cross-docking Connectivity to other
Customer Order status record Service point Damaged goods core processes
Distribution Performance
Order Fulfilment Logistics Measures
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STEP 2: INVESTIGATE CAUSES - EXAMPLE
A “DuPont” tree is a structured way to look at causes
Price
Revenue
Volume
Sales
Earnings
Materials
Production Costs
Overheads
EVA
Marketing
Risk-free rate
Capital employed
Beta Cost of equity
Cost of capital
Risk premium Total equity
Ave cost of capital
Cost of debt
Total debt
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We rely heavily on surveys and interviews to
gain information quickly - Example Culture
Survey
Please complete the following questions by circling the appropriate number on a scale from 1 to 6, where 1=strongly disagree and 6=strongly agree.
Answer the statements according to the ‘way it is’ in your organisation at the moment on the left column. Then move to the right-hand column and
respond according to ‘the way it should be’ in your opinion. There are no right or wrong answers. Please answer all questions from your own
perspective.
Strongly disagree Disagree Agree Strongly Agree
1 2 3 4 5 6
Please circle Please circle
The way it is The way it should be
1. People here act when they see things that need to be
1 2 3 4 5 6 done 1 2 3 4 5 6
2. People in this organisation try to resolve their
1 2 3 4 5 6 differences constructively 1 2 3 4 5 6
3. People here readily accept responsibility for their
actions and decisions
1 2 3 4 5 6 4. Cost is one of the most important factors taken into 1 2 3 4 5 6
account before decisions are made here
5. Inconsistencies exist between what is said and done.
1 2 3 4 5 6 Managers don’t ‘walk the talk’ 1 2 3 4 5 6
6. People here constantly explore new and better ways
of doing things
1 2 3 4 5 6 7. People here listen to customers and respond to their 1 2 3 4 5 6
needs
1 2 3 4 5 6 8. There is a concerted effort to perform better than the 1 2 3 4 5 6
competition
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We use focus interviews on every Analysis and Design
project
Focus Interview Guide
General Information
1) Years with Company:: _______________________________
Years in current position: _______________________________
Number of reports: _______________________________
2) a) What is your understanding of your company’s top three business objectives?
b) What is your company’s vision?
3) a) What are your group’s top three business objectives?
b) How are they (or will they be) measured? Your Group
Overall
efer back to the scope graphic on page 1 if the concept of GTS is not clear.)
4) What do you consider to be your group’s three greatest strengths?
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Pareto’s Law states that 20% of the sources cause 80%
of the problem
$35M
Customer Service Complaints Pareto Analysis
30
Number of Occurrences/month
25
20
15
10
5
2 2
1 1 1
0
No one Routed to Don’t Unhelpful Don’t Hard to Gum Discourteous
Answers wrong know the return understa chewing
Phone person answer calls nd
Customer Complaints about our Customer Service
We can use this principle to determine where to focus our improvement
efforts
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STEP 3: DETERMINE DECISION CRITERIA
Determine Decision Criteria
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Determine criteria • Decision modelling
2.Determine decision • RACI charting
process
• Criteria weighing
• Quadrant analysis
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STEP 3: DETERMINE DECISION CRITERIA
The third step is to determine our decision criteria
• Determine the decision criteria. Refer back to the constraints.
Consider:
– Needs vs. wants
– Long-term vs. short-term
– Interim steps
– Risks
– Costs
– Timing
– Desired benefits
– Ranking or prioritizing the decision criteria (most important to least important)
• Determine decision process. Who needs to be involved in the
decision? Who has final say? What method will we use - voting,
client chooses, numerical rankings, a dart board?
Doing this now avoids looking foolish later.
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Quadrant Analysis provides a framework for making
decisions
– Quadrant analysis is a general tool that can be used across different levels of analysis:
• Corporate portfolios
• Customers
• Products
– You can compare any two axes relevant to your problem:
• Quality vs. cost
• Market share vs. market potential
• Volume vs. margin
Market
Share
Sleepers Winners Market
Growth
Questionables Opportunity Gaps
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And then helps determine possible actions based on
your findings - Example Quadrant Decision Matrix
Possible
Quadrant Category Roles Possible Actions
Opportunity gaps Profit contributor • Review planograms - are category and fastest movers underspaced?
(Higher growth/low share) Variety image • Review pricing mix - is pricing of key items too high versus market?
• Review promotions - are category and key items under-promoted versus market?
• Review product mix - is mix wrong for target customer segments? Any new, faster-
moving items not being carried?
• Tie-in promotions with higher margin consumption items
Winners Traffic draw • Continue current programs
(High share/higher growth) Cash generator • Increase promotional support
Price image • Review space management to ensure minimal out-of-stock potential
• Add good performing items not carried but available in market
• Be first with new items
• Review pricing and gross margins to see if selected price reductions can enhance
image and increase growth and share
Sleepers Profit contributor • Review product mix versus
(Good share/lower growth) Transaction builder
Questionables Profit contributor • Review product mix versus market (variety index)
(Low share/lower growth) Variety image • Delete poorest performance items (brands, flavors, sizes)
• Raise prices if appropriate
• Promote category to meet market
• Minimize space allocated
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Key steps in the problem solving process
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Determine solution • Various Gemini
approach methodologies
2.Determine solutions
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STEP 4: IDENTIFY SOLUTIONS
Finally, we can develop solutions
1. Determine solution approach. This can be almost anything, like:
– Brainstorming
– Benchmarking
– Best practices
– Modelling techniques, e.g., decision modelling, business modelling, process modelling
– Vision engineering
– Organisation design
– Any number of Gemini methodologies
2. Develop solutions. It is good practice to develop alternative
scenarios, if applicable.
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Benchmarking can provide a gauge of “what good looks
like” - Purchasing KPI Benchmarks
Average Benchmark
Key Performance Indicator Benchmark Range
• Purchasing function expense as a 0.3 % 0.06% -> 3.0%
percentage of sales
• Purchasing function expense as a 1.2 % 0.7% -> 7.0%
percentage of purchase value
• Purchasing headcount as a percentage of 1.1% 0.3% -> 4.5%
total company headcount
• Active suppliers per purchasing employee 50 6 -> 182 1
• Percentage of all active suppliers that
account for 90% of total purchase value 20% 5% -> 75% 2
• Average actual time to develop/negotiate a
contract 9 wks 2 -> 26 wks
• Percent of deliverables received on-time
within the most recent 12 month period 88% 63% -> 98%
1: Median = 39
2: Median = 91
Source: Center for Advanced Purchasing Status
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We can also benchmark best practices - Purchasing
Best Practices
Company Best Practice/Strength
• Outboard Marine • Partnering: establishes 3-5 year contracts with suppliers
Corporation
• Ford Motor Company • Partnering: 70% of North American Automotive Operations’ contracts are
long term (3-5 years)
• New product development: with preferred suppliers, Ford uses “black box”
design responsibility. Ford specifies a parts function and lets suppliers
figure out the best way to manufacture it
• Motorola
• Partnering: suppliers participate in developing design guidelines for new
products
• Supplier management: communications sector trimmed its supplier base
from 4,200 in 1985 to 1,155 in 1989
• Technology: supports a common global database for critical material
purchases
• Supplier management: has created “Motorola University”, an education and
training center in Schaumburg, Illinois where suppliers and its own
employees brush up on basic quality concepts as well as learn the more
advanced techniques in quality control
Source: Purchasing
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STEP 5: EVALUATE SOLUTIONS
Key steps in the problem solving process
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Compare with decision • Impact/Effort matrix
criteria
2.Decide on solution(s)
3. Validate
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STEP 5: EVALUATE SOLUTIONS
Evaluating solutions becomes easy because we have
already laid the groundwork
1. Follow the decision process and compare with decision criteria
2. Decide on solution(s)
3. Validate solutions with initial constraints and your sphere of
influence
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An Impact/Effort Matrix is a useful tool for prioritizing
work and identifying “early wins”
High
Action
Level of impact (results)
4
Action
3
Action Action
1 5
Action
6
Action
2
Low High
Level of effort required
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Key steps in the problem solving process
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Prepare actionj plans • Workplans
2.Prepare followup plan • RACI charting
and measures)
3. Implement
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STEP 6: IMPLEMENT SOLUTIONS
Step 6 is to implement the solution(s)
1. Prepare action/implementation plans. Include responsibilities and
time frames
2. Prepare follow-up plan and measures
3. Do it!
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Key steps in the problem solving process
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
Steps Tools (examples)
1.Measure expected • Key performance
benefits indicators
2.Collect feedback • Balanced Scorecard
3. Incorporate feedback • Benefits dashboard
into ongoing work
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STEP 7: MEASURE AND FOLLOW UP
Don’t forget to measure and follow-up!
1. Measure improvements and compare with expected benefits
2. Collect feedback
3. Incorporate feedback into on-going work
You will learn more about performance measurement in later sessions
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In everything we do, Plan (think) - Do - Review
Determine Follow-up
Clarify Investigate Decision Identify Evaluate Implement
Problem Causes Solutions Solutions Solution and
Criteria Measure
THINK DO THINK DO THINK DO REVIEW
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