A hypothesis-driven approach is the secret to solving any complex business problem — even the most convoluted and confusing ones.
If you run a business, you’re going to face complicated scenarios. Simple as that.
I know the big problems can feel overwhelming and unmanageable in the moment. You’re already juggling five thousand responsibilities. Adding ‘understand why our profits have flatlined the past three months’ might feel like one ball too many to handle.
Luckily, there’s a proven way to approach your problems — a way that allows you to use data-driven insights to more effectively overcome any business dilemma.
Hypothesis-driven problem solving: A proven approach to complex problems
Are you familiar with McKinsey? The management consulting company helps some of the world’s most influential businesses solve complex problems using a hypothesis-driven approach.
Now, organisations pay McKinsey consultants top dollar because their problem-solving process works. No matter the size of your business, I believe that’s worth paying attention to…
In this article, we’ll explore what it means to be hypothesis-driven in your business. Then, I’ll outline a five-step process to problem-solving to help you overcome even your trickiest business challenges.
What is a hypothesis-driven approach to problem solving?
Think back to grade school science class. Do you remember formulating a hypothesis before conducting an experiment?
A hypothesis-driven approach to problem solving isn’t all that different.
When faced with a complex business problem, we want to make an initial hypothesis. In other words, what is causing the problem?
We then conduct experiments to test the hypothesis. Using the data gained, we create a step-by-step solution. Finally, we reiterate until we solve the problem.
Sounds straightforward, right? In a way, it is — so long as you follow the right steps to formulate and test your hypothesis. Here’s what that looks like:
Solve any complex business problem with this 5-step hypothesis-driven approach
1. Gather your initial facts
Before you craft your initial hypothesis, take a few moments to gather your facts. We’re not unearthing every piece of data possible — that would be time-consuming and counter-productive.
However, we do want to ensure we understand the full scope of the problem and the most critical factors affecting the situation.
Consider (1) What is the exact problem I want to solve and (2) what does the data I have already say about the problem?
2. Break down your complex problem
“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.” - Richard Branson.
Big problems are daunting. Smaller micro-problems are less intimidating and easier to handle. So, simplify your complex problems.
McKinsey consultants use two frameworks to break larger problems into smaller, more manageable pieces:
An issue tree is a visual breakdown of a question or problem into its essential elements. It maps out your problem clearly and concisely while accounting for all possible issues.
This is an excellent article that explains in great detail how to structure issue trees for your hypothesis-driven approaches.
The MECE Principle
MECE means Mutually Exclusive, Collectively Exhaustive. The basic idea is that your issue tree has no gaps (it is collectively exhaustive) and no overlaps (it is mutually exclusive; each part is different from the rest.)
Once you’ve created your issue tree following the MECE principle, you’ll better understand the full scope of your problem. You’ll also discover new, creative ideas you have yet to consider.
3. Define your initial hypothesis
Now that you fully understand the facts and issues surrounding your problem, make a clear and testable hypothesis.
Zoom out from your issue tree so that you once again see the full scope of the problem; use this bird’s eye view to craft your hypothesis-driven approach.
This initial hypothesis is your guide — it will keep you laser-focused and pointed in the right direction so that you solve your problem without any unnecessary detours.
That’s not to say your initial hypothesis will always be correct. It won’t. We still need to conduct a fact-based analysis to determine its validity.
However, the beauty of an initial hypothesis is that it reinforces a solution-oriented mindset while preventing you from venturing down a veritable rabbit hole of extraneous facts and information.
4. Apply a test and learn approach
With our hypothesis in hand, it’s time to validate our ideas with ‘test and learn marketing’.
In other words, we want to test our hypothesis to obtain data-driven insights that will prove (or disprove) our initial hypothesis so we can make the necessary improvements.
One of the primary benefits of a test and learn approach to problem solving is that we don’t rely on guesswork and hope for the best. Instead, we use the data to evaluate our hypothesis so that we quickly zero in on what works (and incrementally increase our efforts from there.)
Note: You’ll want to define your KPIs so that your team stays focused on the metrics that matter. Have specific, measurable goals and targets in place.
5. Return to your initial hypothesis
You’ve tested your hypothesis. Now, what do the experiment results tell you?
Here’s what I want you to remember:
Growth marketers who embrace a hypothesis-driven approach to problem solving are not intimidated by failure.
Stay unattached to the results of your experiment. It’s not about proving the hypothesis correct but about quickly failing (so that we can succeed even more rapidly.) A famous quote by Thomas Edison comes to mind:
“I have not failed. I’ve just found 10,000 ways that won’t work.”
Thanks to new technology, it’s never been easier to use data to solve problems. The key is to instil a test and learn culture within your business so your employees stay agile while using hypotheses to approach problem solving.
So, encourage curiosity, apply results, and make decisions based on the story the data tells.
You’ll implement more of what works and quickly ditch what doesn’t so you can grow your bottom line more rapidly.