Issue trees are a useful approach to breaking down a problem statement into component parts that can more easily be acted upon. In consulting teams, it’s often done in the first couple of weeks of a project. It enables the team to structure the project in a way that people can be assigned to specific “workstreams” and that the team can align their hypotheses to make predictions about which elements might have the biggest impact.
I like the definition that McKinsey Mind uses for issue trees:
The issue tree, a species of logic tree in which each branch of the tree is an issue or question, bridges the gap between structure and hypothesis. Every issue generated by a framework will likely be reducible to sub issues, and these in turn may break down further. An issue tree is simply the laying out of issues and subissues into a MECE visual progression. By answering the questions in the issue tree, you can very quickly determine the validity of your hypothesis.
It’s a good definition but it’s also chock-full of jargon and we’re not a fan of jargon (or at least egregious uses of it) here are StrategyU The simplest way of thinking about an issue tree is as a way of breaking down a complex problem into many possible explanations of what is going wrong.
What Do They Look Like And How Do You Use Them?
Issue trees are often created visually in PowerPoint but can also be in the form of financial models. The type of issue tree we are concerned about are the ones that help us structure our central problem or mission. For example, most companies are focused on increasing profitability. We might frame this “problem” in the form of a question, “Company profitability is declining, what are the ways to improve it?”
We can then start to brainstorm different ways that profitability might be increased. At the higher levels, you want to be as broad as possible such that you can break the tree down further and get more specific the deeper you go. You’ll also want to try to use MECE. Our initial issue tree might look like this:
From there we can go deeper. What are the different ways we can increase revenue. It’s best to just start listing ideas and then start thinking about how to synthesize them, organize them, and yes, make sure they are MECE!
You might develop the next leg of your tree:
This tree is not perfect and the answers at the lowest level are not collectively exhaustive for all the possibilities for increasing revenue and decreasing costs. However, for a specific company, these may be the relevant issues, meaning that they are the ones that you are able to invest money on, tweak and that might have a positive impact.
The next step is to develop analyses or experiments that you can perform to validate or quantify how much impact can be generated by focusing in each of these areas
How Issue Trees Are Linked With Problem Solving
At StrategyU we are fans of the SCQA process to define problems and develop hypotheses. This approach enables us to have a rigorous problem-solving approach to business problems instead of starting with the solution in mind from the beginning. This approach works best when you are open-minded and flexible. The first test of the issue tree is when you are doing the initial research and analysis after you structure the problem. This is step two of the consulting process:
At this point, you will likely get some quick feedback on your initial problem statement such as:
- Have we defined the problem appropriately or are there deeper issues?
- Have we identified the relevant issues and areas in which we can make a difference?
- What kind of initial tests have we done are are we designing to confirm if the issues and questions are right?
This is a frustrating, iterative process and within a consulting team, you are often revisiting the issue tree and problem statement over and over again throughout a project.
How To Use This In Your Company
You should have a good understanding of the “levers” that help your company continue to grow, increase its profitability, and improve over time. Spend long enough in any company and you start to realize that there are a narrow set of metrics everyone makes decisions around. Except unless you’ve mapped this out explicitly, there will likely be many different definitions and interpretations of what you are optimizing for.
Using a template like follows and coming up with the high-level issues and areas within the business you are focusing on can be clarifying. You can also add specific types of analyses and information that you use to help you solve or improve in these areas:
This can also be rolled out across your org chart. Let’s imagine a company realizes that it doesn’t have much room to lower costs anymore and it wants to focus exclusively on increasing revenue. They can do this in two ways (assuming they aren’t adding new products). They can increase the price per order or they can increase volume. They may when want to break this down into different sub-issues.
In reality, you’d want to collect a lot of data and verify that the way you are breaking things down is correct. The numbers often surprise companies. They realize that an area of focus (increasing # of customers, for example) is not as big of an impact on the bottom line as other areas.
The only way to figure this out is to map out all of the possibilities of your issues and then validate them with real data.
This is the same thing that consulting teams do when they work for companies.
In my course, Think Like A Strategy Consultant, you have to complete an issue tree for a case example featuring Facebook’s transition from desktop to mobile and I’ll walk you through the process step-by-step which also providing you feedback if you want. Learn more here.