20 Oct Crack the problem: Step 1- What’s the problem?
The most crucial part of your problem statement is working out what the actual goal is – and why exactly. You must uncover that far-out intent, and then shed light on its connection to the issues presented. Otherwise resolving the issues will not get you to the target!
We cannot solve problem unless we know what is the intended outcome. But articulating that outcome and relating it to the issues as presented to us is not trivial. In any environment, there are many issues swirling around, and people tend to run through many of them making it all very confusing. To sort it all out, you first need to get agreement on where the goalpost should be placed. And take each of the issues apart, and figure out which ones are getting in the way of your objective.
You cannot steer your ship to an unknown destination! You must figure out your target.
- “Should we build a Distribution Center in China?”
- “Should I buy a house?”
- “Should we build up the company organically, or seek acquisitions?”
- “Should we raise capital now?”
If you have ever found yourself in a position to have to answer questions like these, you know what I am talking about: You cannot answer them! You can’t say yes or no, or maybe, and you are not sure why. Something is missing, but you can’t quite put your finger on it.
What is it that makes these questions un-answerable? They don’t tell you what you are trying to accomplish.
You need specificity of your objective.
Are you looking to build a DC in China to:
- Accommodate growing demand in the Chinese market?
- To reduce your supply-chain costs and make you more competitive in that market?
- To improve the lead time that your customers are complaining about?
- To replace the one in Singapore?
- To allow you to enter the Korean or Vietnamese or other Asian markets from the China location?
Are you considering buying a house to:
- Raise a family in for the next 20 years?
- Invest some money you have saved up, and get a good return from them?
- Use as a rental and get extra cash flow?
- Fix and flip?
- Have your aging parents live in so they can be close to you?
You get my point. The immediate answer to the original questions can only be ‘it depends’! But if you need a better – real – answer, we need to do better than that: We need to get absolute clarity on our objectives.
(If you are wondering about how to manage this if you are just an an exploratory / discovery mission, see here. Short answer: You still need an initial target. May change later).
But how? You could lay out a number of possibilities, as I did above, but that is difficult sometimes, and you may miss the real point. Here’s a better approach to get clarity on your Question.
How to figure it out step-by-step
1. Start by describing your current situation
If you have found yourself with enough cash for a good down payment, and you have been looking to buy a house for some time, then your situation is more related to the proper use of this money, and maybe the proper timing for buying a house. If, on the other hand, you want to buy a house to raise a your family in this area , but are unsure of your current job, then your situation is more around the option of buying a house for a short period of time vs. renting one and waiting – or maybe, it is about changing jobs to make sure you stay in the area!
Similarly, if you know you have a lead-time problem because you have to ship to China from the U.S. – or another DC somewhere- then your objective would be more around fixing the lead time problem. If, on the other hand, pricing is not a problem currently, but Asian demand is, then your goal would have to do with the best way to satisfy that demand.
So, understand what is currently going on that may be giving rise to your Question
2. Why is that a problem? (which part of it would you like to fix?)
This part can be tricky, because you think you already described the problem in the previous step. Didn’t I already mention that I am unsure about my job stability? Didn’t I say that I have a cost problem in China because of my extra shipping expenses?
Sure. But ask yourself this: So-What? What will happen if you don’t buy a house now given your job uncertainty? What risks are you trying to manage? Maybe interest rates and prices will go up. But what if you have to move soon? What will happen if you don’t build a DC in China? Do you have other options to solve your cost problem? What is likely to happen if you don’t build it?
In this step, try to understand the flip-side of your original Question: What if I don’t do that? What will happen then? Or, what other options would I consider?
This preparation should allow you to move to the next step with better clarity on what is bothering you and what the implications are.
3. Understand the unknowns
Based on the previous analysis, you should now have a clearer picture of what it is you need to understand to make a decision.
For example, if having your family living in a house is your main objective, but you don’t know if you will incur a heavy loss if you have to move soon, then you need to understand the financial projections for various scenarios.
Or, if reducing your product costs to customers in China is your objective, then you need to know if building a DC in China is the best way to do this, or if you have other options.
4. Formulate your Question again – with specific objectives.
Now, we are ready to have a Question that includes a clear objective, and is focused on what is really unknown:
Is it financially preferred to take advantage of low 3-4% rates and prices now to buy a house for my family if I may have to move within 2-4 years, or should I rent a house at a $X-Y cost instead?
Is it possible to reduce our product costs for the China market to $x/unit, by building a DC in China or is it preferable to consider a different location? (which?)
Compare these to the original questions, and you can see how you have improved on the ‘answerability’ of your Question. Now you know exactly what kind of information you need to collect to be able to solve the problem!
Sounds simple, right? It is easy to get confused by a question that is too general and won’t tell you what you are trying to achieve. If you follow debates in the news or online, you know the problem:
“Should we reform the health care system?”
“Should we intervene in country X?”
I don’t know! What exactly are we trying to accomplish?