Structuring

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					Project Skills Workshops
Structuring the Logic
Instructors: Douglas Dow – Integrative Projects Selwyn D’Souza – Managing New Ventures

20 October 2005

Agenda
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Structuring the Logic
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60 mins

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What is it & the benefits MECE disaggregations Deductive logic Inductive logic Practical hints on building a pyramid

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An example – the MBS Mt Eliza merger In-class Exercise No. 1 - Whitecane

10 30

Assignment - PaperCo

5

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Structuring the logic
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We are going to force you to spend a lot more time on this than ‘normal’ Management problems are frequently very complex
» Examples » Our duty of care …

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There is a tremendous benefit in attacking such problems in a what is referred to as a ‘deliberative’ approach
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The nature of complex problems
(and approaches to solving them)
Infrequent
(analytical)

Deliberative
Argument mapping, Pyramidal logic

Technical
linear programming, game trees, DCF, etc

Qualitative
(multiple metrics & objectives)

Quantitative
(single common metric & objective)

Intuitive
Pattern matching, Bill the Mechanic (Pirsig) Doing cases, more cases, and even more cases !

Savant
Chess master Idiot savant

Frequent
(intuitive)
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There are a variety of names for the ‘deliberative’ approach
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Argument mapping
» from the field of philosophy – see van Gelder article

Scientific method (1st stage of …)
» from the pure sciences – see Pirsig article

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Pyramidal logic or McKinsey method
» from management consulting – see Ohmae article and books by Minto and Rasiel

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It is also often referred to as …
» » » Structuring the logic Framing the problem Issue trees
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In theory, logical structuring is quite simple
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It is about breaking a complex problem into smaller and more manageable ‘chunks’, and Being very clear and explicit about the relationships amongst the components of the argument

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Usually illustrated in the form of a tree or pyramid (thus, the term pyramidal logic)
Unfortunately it is harder to do ‘well’ than it sounds

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The benefits of logically structuring issues
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Helps uncover implicit assumptions Lowers the risk of ‘missing’ key issues Easier to test & confirm the elements Saves time Results in a more convincing ‘case’

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Uncovering assumptions and missing issues? Consider this shopping list:
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Milk Potatoes Grapes Eggs

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Oranges Butter Apples Sour cream

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Carrots

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Can you remember them all ?

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I guarantee, more people will remember them if they are present this way
Milk Eggs

Dairy Products

Butter Sour cream

The Grocery List

Vegetables

Potatoes

Carrots

Grapes

Fruit

Oranges

Apples
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Two things are going on here
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The Magical Number Seven, Plus or Minus Two
(George Miller, The Psychology of Communication, 1967)

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An imposition of logical relationships

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Easier to test and saves time? Consider a simple example from Pirsig …
Motorcycle

Components

Functions

Power Assembly

Running Assembly

Source: Pirsig, Zen and the Art of Motorcycle Maintenance, 1974, p103 20 October 2005 Melbourne Business School: Project Skills Workshops 12

Or, a more management oriented example:
Through better technology? Higher price realisation? Why is Phoenix the most profitable player in solar hot water? Lower unit costs? Through a stronger brand?

In manufacturing?

In distribution?

Source: BCG 1998, Training manual

In marketing?
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There are three key building blocks to a logic tree
1.
2. 3.

MECE disaggregations
Deductive Logic Inductive Logic

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MECE disaggregations
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… are about breaking an idea, concept, or phenomena into smaller more manageable pieces MECE stands for:
» Mutually Exclusive (no double counting) » Collectively Exhaustive (got them all)
• • Bounded Unbounded

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Deductive logical arguments
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Two or more hypotheses* are linked together in a ‘chain’ of logic …
» … to create a new hypothesis, or » … predict an event

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A key feature of this form of logic is that, if all the elements are supported, then the resulting hypothesis is ‘proven’

* Various people substitute different terms such as ‘general truths’ (Persig), ideas, and assertions.
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A simple example of deductive logic
A<C
(then)

(if)

(and)

A<B

B<C

The ‘if’, ‘and’ and ‘thus’s are typically left off.
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A more managerial example of deductive logic
Advertising levels are a critical driver of sales volume in FMCGs *

Media expenditure is the primary determinant of brand recognition for FMCGs

Brand recognition is a major factor in the customer’s purchasing decision for FMCGs

* FMCGs – Fast Moving Consumer Goods (e.g. cereals, snack foods, detergents)
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Inductive logical arguments
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Two or more observations are grouped together to imply that a hypothesis is likely to be true The key features of this form of logic are:
» Each observation is consistent with, but not absolute proof of, the over-riding hypothesis » Refuting one observation may weaken the overall argument, but does not falsify it

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A managerial example of inductive logic
Advertising levels are a critical driver of sales volume in FMCGs *

The 3 best selling FMCG brands in Aust also have the highest advertising expenditures

The 3 poorest selling FMCG brands in Aust have the lowest advertising expenditures

The same hold true in the USA

… and in Japan and Europe

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Some Practical Hints
… for when you are structuring your logic

Be clear about the ‘theme’ and ‘order’ at each level
1.

Each tier or branch within a pyramid has a unique conceptual theme
» E.g. I can breakdown BHP Billiton’s profits by country, type of mineral, or stage in the value chain

2.

The ordering of items within a ‘branch’ should follow a logical pattern
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Don’t reinvent the wheel
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There are sequences of logic that reappear in numerous problems You need to manage a balancing act:
‘Not reinventing the wheel’
while at the same time

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‘Not forcing every problem into the same solution’
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Generic frameworks should be the starting point, not the final solution
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Approaches to building a pyramid
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The Top-Down Approach

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The Bottom-Up Approach
Then merge the two

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The Top-Down Approach
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Begin with the initial problem (or, a hypothetical solution to that problem) How would you convince a sceptical audience? Work down the pyramid imagining how you would prove each point
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Beware when you start at the top: ‘The problem is not always the problem’
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The problem, as initially stated, …
» … is often only a symptom, and » … frequently is biased to a particular solution

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Spend time upfront ‘questioning the question’

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The Bottom-Up Approach
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Write down all the facts and arguments that you (& others) feel are important (the de Bono ‘Red Hat’ – gut feel) Begin to identify how they relate to one another Start to fill in the gaps

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A big cautionary note
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There is never just one unique and perfect pyramid for any problem

BUT …
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Some pyramids are flawed
Others may not be as ‘efficient’

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Tools to help you
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LOW Technology approaches:
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Use large pieces of paper (A3) or white boards
• • Pyramids can get large & complex very quickly Spreading them across multiple page makes it hard to see the overall picture
Business cards / index cards, or Boxes/cells in a Powerpoint presentation or an Excel spreadsheet That makes it easier to rearrange ‘chunks’ of the logic

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For the ‘bottom-up approach’ I put each fact or idea on …
• • •

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HIGH technology approaches:
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There are a variety of software packages (of varying quality)
» FreeMind is free – http://freemind.sourceforge.net/#h3_0

»
»

Reason!able is cheap: $33 - http://www.goreason.com/
MindMap is more expensive again: $99 http://www.conceptdraw.com/en/products/mindmap/main.php
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Now I want to walk you through a more complicated example …
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The merger between:
» the Melbourne Business School, and » the Mt Eliza Business School

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From the perspective of the MBS

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Now let’s try the Whitecane exercise
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Gather into your syndicates Take 20 minutes to develop a pyramid based on the facts provided

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Limit yourselves mainly to the assertions supplied
» » » You will probably want to add intermediate ‘thoughts’, and Possibly break up some of the paragraphs, but Those are the ‘facts’ you have to deal with (i.e. don’t add any more)

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When you return, be prepared to present your pyramid
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A second exercise (your assignment): PaperCo
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Do this one individually as an assignment Develop a pyramid based on the facts provided The same instructions apply
» » » You will probably want to add intermediate ‘thoughts’, and Possibly break up some of the paragraphs, but Those are all the ‘facts’ you have to deal with (i.e. don’t add any more)

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Submit your pyramid to the instructor by 5:00 PM, Monday, 31 October
» It may be in the form of a Powerpoint document, and Excel spreadsheet, or one of the commercial mapping packages – but the relationships must be clearly indicated

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