2. Judgment: Analytics & Modeling

Diamond axis: Judgment. Are you solving the right problem, and does your answer say what the facts support?

This chapter covers the second half of Judgment: finding the truth. You’ve structured the problem in Structured Problem-Solving, and now you need to answer it with evidence, not opinion.

Analytics & Modeling

Build models in Excel, Python, or other quantitative tools; test hypotheses against data; estimate with confidence

2.1 Design Hypothesis-Testing Analyses (5) 🔺

Build analyses that will prove or disprove critical assumptions

Don’t just gather data. Design specific analyses that will prove or disprove your critical hypotheses.

Recruiting Application	Client Work Application
Design how you’ll test your fit for each firm: what specific evidence will you gather?	Design analyses that directly test your “what would have to be true” conditions

Analysis Design Principles:

Start with the output: What slide/exhibit will this create?
Work backward: What data do you need?
Consider alternatives: What would disconfirm your hypothesis?
Be efficient: What’s the minimum analysis to decide?

2.2 Build an Outside-In Fact Base (5)

Gather external data before relying on internal opinions

Gather facts from external sources before relying on internal opinions. Public information reveals a lot.

Recruiting Application	Client Work Application
Research firms, roles, and people before outreach so you know who you’re talking to	Build a fact base from filings, news, competitor data, industry reports

Outside-In Sources:

Source Type	Examples
Financial	10-Ks, earnings transcripts, investor presentations
News	Press releases, trade publications, analyst coverage
Competitive	Competitor filings, industry reports, market research
Expert	Interviews, surveys, published interviews
Digital	Web traffic, social sentiment, job postings

The Trust Equation for Networking:

When building relationships (a form of fact-gathering), remember:

\[Trust = \frac{Credibility + Reliability + Intimacy}{Self\text{-}Orientation}\]

Credibility: Do you know what you’re talking about?
Reliability: Do you do what you say?
Intimacy: Can they be vulnerable with you?
Self-Orientation: Are you in it for you or them?

Recruiting Activity: Research Firms and People Before Outreach

Supports: Networking Tracker

Build a comprehensive fact base on your target firms and the people you’ll network with.

Help me build an outside-in fact base for networking with [FIRM NAME]:

**Firm Research**
1. What are the firm's recent news and press releases?
2. What major projects or deals have they publicized?
3. What is their stated strategy and priorities?
4. Who are the partners/principals in my target practice area?

**People Research**
For [CONTACT NAME] I'm meeting with:
5. What is their career path and background?
6. What content have they posted or shared on LinkedIn?
7. What might we have in common?

**Role Research**
8. What does a typical day look like for an analyst/associate at this firm?
9. What projects do people at my level work on?
10. What skills and experiences do they develop?

**Intelligence for Conversation**
Based on this research:
- What 3 questions should I ask that show I've done my homework?
- What aspects of my background should I highlight?
- What can I offer or share that might be valuable to them?

Client Work Activity: Build Fact Base for P1

Supports: P1 Intelligence Brief

Systematically gather outside-in data on your target company from public sources.

Help me build a comprehensive fact base for [COMPANY NAME]:

**Financial Data**
1. Revenue, growth rate, and trends (3-5 years)
2. Profitability metrics: gross margin, operating margin, net margin
3. Cash flow and balance sheet health
4. Segment breakdown and performance by segment

**Strategic Information**
5. Management's stated strategy from earnings calls/investor day
6. Recent strategic moves: M&A, partnerships, restructuring
7. Key initiatives and investments

**Competitive Intelligence**
8. Main competitors and their market positions
9. How does performance compare to competitors?
10. What are competitors doing that this company isn't (and vice versa)?

**News and Trends**
11. Recent news: what's happened in the last 6-12 months?
12. Industry trends affecting the company
13. Analyst opinions and price targets

**Summary Fact Base**
Organize all findings into a structured document I can reference throughout my project.

2.3 State Assumptions Explicitly (5) ◯ ◯

Make your assumptions visible and find good proxies

You never have perfect data. Make your assumptions explicit so others can evaluate them.

Recruiting Application	Client Work Application
When estimating in case interviews, state your assumptions clearly	Document all assumptions; find proxies when direct data isn’t available

Assumption Best Practices:

State assumptions at the start of any analysis
Distinguish facts from assumptions
Use ranges when uncertain
Identify which assumptions matter most (sensitivity)
Find proxies: “We don’t have X, but Y is a reasonable proxy because…”

2.4 Bound Answers with Quick Math (5)

Establish reasonable ranges before building complex models

Before building complex models, do quick math to establish reasonable ranges.

Recruiting Application	Client Work Application
Case interviews: market sizing, estimation problems	Bound the answer before diving deep: is this a $10M or $10B opportunity?

Market Sizing Framework:

Define what you’re sizing: Be specific
Choose an approach: Top-down or bottom-up
Identify key drivers: What factors determine the answer?
Make explicit assumptions: State them clearly
Do the math: Keep it simple, round numbers
Sanity check: Does the answer make sense?

Example: Smoothie Cups in Manhattan

Population of Manhattan: ~1.6M
% who drink smoothies: ~20% = ~320K smoothie drinkers
Cups per day: ~1 = ~320K cups/day
Add commuters/tourists: +50% = ~480K cups/day

Recruiting Activity: Market Sizing Under Pressure

Supports: Practice Interviews (Case)

Practice market sizing with explicit assumptions under interview-like time pressure.

Give me a market sizing case to practice:

**Setup**
1. Give me a market sizing question appropriate for consulting interviews
2. I have 3 minutes to structure my approach, then walk through my answer

**My Approach**
[I'll work through this, then paste my approach]

**Feedback on My Answer**
Once I share my approach:
1. Is my structure logical and MECE?
2. Are my assumptions reasonable and clearly stated?
3. Did I do the math correctly?
4. Is my final answer in the right order of magnitude?
5. What would have made my answer stronger?

**Practice Variant**
Give me a follow-up question that tests my assumptions or pushes on a different angle.

Client Work Activity: Size the Strategic Opportunity for P2

Supports: P2 Point of View

Quantify the opportunity or impact of your P2 recommendation. A compelling POV needs numbers.

Help me size the strategic opportunity for my P2 on [COMPANY NAME]:

**What I'm Sizing**
[Describe: e.g., "revenue potential from entering new segment," "cost savings from operational improvement," "market share gain from competitive repositioning"]

**Why This Matters for P2**
How does this sizing support my P2 recommendation?

**Sizing Approach**
1. **Top-Down Approach**
   - Total addressable market: [Size]
   - Serviceable market (realistic filters): [Size]
   - Company's realistic capture: [% and $]

2. **Bottom-Up Approach**
   - Key drivers: [customers × units × price]
   - Estimate each with explicit assumptions
   - Build to total opportunity

**My Assumptions**
For each key assumption:
- State the assumption
- Rationale (where does this come from?)
- Confidence level (high/medium/low)
- What data would validate it?

**Sensitivity Check**
- What are the 2-3 assumptions that most affect the answer?
- What's the range if key assumptions are off by 50%?

**P2 Integration**
- What's my point estimate?
- Is this opportunity "big enough" to warrant the company's attention?
- How does this strengthen my P2 recommendation?

2.5 Build Models and Run Sensitivities (5) ◯ ◯

Test how sensitive outcomes are to key assumptions

When more rigor is needed, build structured models and test how sensitive outcomes are to key assumptions.

Recruiting Application	Client Work Application
Case interviews: more complex estimation requiring a structured model	Build Excel models; test which variables drive the answer

Model Building Principles:

Separate inputs, calculations, outputs: Clear structure
Label everything: Units, sources, assumptions
Build in flexibility: Easy to change assumptions
Highlight key drivers: What moves the needle?
Run sensitivities: What if assumptions are wrong?

Putting It Together

The Analytics & Modeling actions flow:

Design Analysis → Build Fact Base → State Assumptions → Estimate/Bound → Model

You often iterate: a model exposes a gap that sends you back for more facts. When the analysis holds up, the work moves to Communication, which starts by synthesizing it into an answer.

Practice This Week

Market sizing: Estimate the annual revenue of smoothie shops within 1 mile of BYU campus
Outside-in research: Build a fact base on one of your target companies using only public sources
Sensitivity: For your market-sizing estimate, name the one assumption that moves the answer most, and by how much