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If I asked you which is the most successful store in UK or the most successful walmart
store in US, what would your asnwer be? If you come back and tell me that the one
with the highest revenue per square foot is the most successful Tesco store (or walmart
store), I will disagree. If you come back and tell me that the one
with the highest profitability is the most successful Tesco store, I will still disagree.
If you come back and tell me that the one with the minimum stockouts, the best inventory
management systemis the most successful tesco store, there is still a chance that I will
disagree. Why do I keep disagreeing?
The reality is that it is an ambiguous problem. You can define success of a Tesco store in
multiple ways. In fact, every single person watching this
video right now can come up with his or her own definition of success.
So how do you get away with problems such as these, problems that are ambiguous?
We use a framework that we call the Situation - Complication- Question framework.
This framework is particualrly important when you are working in a team because all the
team members need to agree on a common definition of the problem before they even start solving
it. Let's actually understand what the Situation
- Complication- Question framework is. It is simple.
There are three different buckets: 1) the S which is the situation, understanding
what the context of the problem is 2) understanding the complications - what
are the headwinds that you will face when you actually do the analysis
3) and finally the questions: what are the main questions that you need to asnwer to
finally come to a conclusion and make a set of recommendations
Let's use the Tesco problem to build the SCQ framework.
For starter, let's assume that you work for Tesco and that your new COO boss has asked
you to solve this problem. But is that the real context?
On further diligence, you realise that your COO wants to replicate the success of one
Tesco store across all the other Tesco stores, and that's the real context.
Then what are the complications? The first compplication is that Tesco stores
have multiple formats. There are stores in high-end locations and
low-end locations. There are stores of every different size,
and the stores stick different products. What is the second complication?
The second complication is that you can define success in multiple ways.
You can have a range of operational metrics to define success.
What are the questions you need to asnwer? The first question is to find out what these
operational metrics are. These operational metrics could be from a
profit and loss statement such as revenues and costs.
They could come from a balance sheet such as the inventory spent.
Or they could be from the cashflow statement. What is the second question you need to asnwer?
The second question you need to asnwer is what is the definition of success?
How do you combine the operational metrics that you have already defined in the first
question into a composite metric? The third question is to compare all the Tesco
stores against the composite metric that you have defined in the second question.
That's it. It's simple. Situation, Complication, Question.
It is not a science. We do this in our head in some form or the other anyway.
But it is important that you lay this down on a piece of paper and agree with your manager,
your fellow team members and your client.