[The Definitive Guide to Reskilling in the Digital Age] Logical Thinking Part 3: Is Mie Prefecture in the Kinki Region or the Tokai Region?
*If you haven't seen Logical Thinking Part 1, click here
In business terms, the most easily understood way to describe a relationship of opposition is MECE (Mutually Exclusive, Collectively Exhaustive). This means "without omission, without overlap." This is extremely important for considering the framework of a discussion.
As an anti-pattern, I would like to first provide an example of "with omissions."
Strategy Manager at Pharmacy A: "To overwhelmingly expand our company's market share, we will launch a campaign to eliminate competitors. List all the competitors."
Strategy Staff: "Companies B, C, and D. The others are small and medium-sized enterprises and cannot be considered competitors."
Strategy Manager: "OK, I understand. Then, we will create a strategy to thoroughly take market share from these three companies, called the BCD Share Recovery Operation. Let's do our best. Hip, hip, hooray!"
As for the result, while they did take share from companies B, C, and D, they ended up losing significant share to others. Who are these others? Amazon. This is a case where, when considering competitors, they only thought within the framework of existing rivals and omitted the potential framework. The damage caused by the initial omission is enormous.
As the next anti-pattern, I will provide an example of "with overlaps."
Sales Manager overseeing the Kinki region: "This term, thanks to the performance in Mie Prefecture, we achieved a 50% increase compared to the previous year."
Sales Manager overseeing the Tokai region: "We also achieved a 45% increase compared to the previous year this term, thanks to the performance in Mie Prefecture."
General Sales Manager: "Wait, you two, which region is Mie Prefecture in?"
Sales Manager overseeing the Kinki region: "It's Kinki, of course. It says so in the atlas."
Sales Manager overseeing the Tokai region: "What are you talking about? It's definitely Tokai. You can see that if you look at the Japan Meteorological Agency's weather forecast."
General Sales Manager: "..."
To avoid falling into these anti-patterns, it is important to categorize things "without omission, without overlap."
So, how can you categorize things "without omission, without overlap"? There are three main ways of thinking.
1. Use frameworks -> PEST, 5 Forces, 4C, SWOT, 4P, etc.
2. Use classifications -> Fixed/Variable, Quality/Quantity, Past/Present/Future, Industrial Classification, etc.
3. Use mathematical formulas -> Sales = Number of Customers x Average Spend per Customer, etc.
From the perspective of problem-solving using data, the use of mathematical formulas in point 3 is particularly important.
Below is an example of decomposing ROE for a retail business. Place the comprehensive indicator that is important to the company at the top left, and decompose it using formulas. The further to the right you go, the closer you get to the front lines, becoming specific indicators that represent the company's business.
After decomposing the indicators "without omission, without overlap" in this way, map out the measures for what should be done to improve each indicator. This allows you to create an overall picture of measures that are "without omission, without overlap."
Furthermore, a benefit of expanding with formulas is the use of sensitivity analysis. You can simulate how much impact there will be on the final key indicator, ROE, when you move each terminal indicator by one point. Based on those results, you will be able to quantitatively prioritize each measure.
This concludes the explanation of logical thinking. In your daily business, I would like you to always be conscious of (a) Equal relationships, (b) Causal relationships, and (c) Opposing relationships. By being conscious of them, your logical thinking skills will definitely improve.