Case Interviews
How do I actually test a hypothesis in a case interview?
I understand the idea of having a hypothesis, but I'm less clear on how to test one. If I think a profitability problem might be caused by falling demand, do I work through revenue and cost until the evidence points there, or should I state and test that idea directly?
Ian’s Answer
I think you need a specific example here not general rules. So, here goes.
First, unless you've been given some clear evidence, don't say "I hypothesize this is due to a R drop". What if the interviewer goes "why?"
Now, if our prompt is about a retailer in a middle America mall, ok, that hypothesis could be right (i.e. online threat, economic stagnating region, etc.). But, lacking that, your hypothesis should actually be more about "what do I need to find an answer".
So, you could say something like "to figure out what's happening here, I need to identify 1) If this is an "us" or the general world problem". If it's an "us" problem, what are we doing wrong? If it's a world problem, what is it specifically, and what can we do to fix it?
2) If it's an "us" problem, is this due to falling revenue, increased costs, or both? To figure this out I need to look at our company's financials from the past few years to spot trends.
3) If it's a world problem, we can see this by looking at market and competitor data.
Do you see where I'm going with this? You hypothesis is less on staking your claim on a random statement and more on stating what you need to know to figure it out. By the time you've found the data to say "I hypothesize that the profitability drop is due to revenue and client preference change" you're already at the end of the case giving your recommendation!