Interview Skills Part 5

In Part 3, I covered what we look for when we present a small business problem in the interview; namely the ability to structure and solve the problem and the ability to tackle business realities that the candidate has hopefully learned at B School.

In this post, I would like to cover one approach for the industry based case study interview. These are usually the favourites of Consulting companies. The problem is usually a form of,

"One of our clients, a Top-3 player in X industry wishes to grow rapidly within the next Y years. What would you recommend we tell them to do?"

OR

"Company B's share price has been dropping for 3 quarters in a row. Company B has been a very successful player in Industry C for the last couple of decades. The new CEO is concerned and has hired our firm to address this issue. How would you go about this project?"

OR

"Company J, a large player in Industry K, is exploring an opportunity in Industry P. How would you help evaluate this opportunity?"


In all of these, there are two or three core questions the candidate needs to address.

1. Is the primary issue a revenue side issue or a cost side issue?
2. What are the top 2 or 3 cost drivers within the industry?
3. What are the top 2 or 3 success metrics that the industry uses to track progress at a top level?

In sunrise industries, another question would be

4. Has there been disruptive innovation in the industry that is going to radically chance Industry attractiveness for the current incumbents. As an example, look at the impact of smartphones and fast broadband on the Personal Computer industry. Or the impact of mobile telephony on the Plain Old Telephone Systems run by public sector enterprises. Sometimes the disruption can happen across industries, like the impact of cheap bandwidth and video-conferencing technology on reducing air travel and therefore on the airline industry.

For example, in the airline industry worldwide, the top two elements of cost are
Leasing fees for the aircraft and labour costs. Fuel costs used to be a big issue until recently and the rising cost of oil threw a number of airlines into the red during the early part of this decade.

The single most tracked metric by airlines is RPKms / ASKms i.e. Revenue Passenger Kilometers divided by Available Seat Kilometers. This metric provides a compound measure of Revenue per seat X Distance X Occupancy. Notice that if an airline is filling up its seats and flying passengers long distances at a high rate per kilometer, then the revenue side should be strong.

If the airline is making losses inspite of strong RPKms/ASKms metric, then the candidate would do well to look at the cost structure. If the usual operating costs, i.e. lease rentals, salaries, fuel, airport charges are in control, then the candidate might want to look at interest burden which was accumulated in bad times. The approach then might be to look at some way of restructuring the debt.

In the Telecom industry, the 2 most tracked metrics on the revenue side are ARPU (Average Revenue per User) and AON (Age on Network), a measure of loyalty. Telecom companies love customers who are high ARPU and high AON. Newer entrants have to concentrate on getting volumes through newer less affluent customers. Consider the subscriber base of an older established player such as Airtel and contrast this with the subscriber base of a new player such as Uninor. The established player is possibly more concerned with retaining their Professional and CEO clients while the new entrant might be focused on adding students and newly employed.

The top 3 revenue drivers and the top 3 cost drivers are crucial starting points in tackling an industry focused case. Once the primary revenue and cost drivers have been discussed, moving to any disruptions in the industry would be the next step.

The quickest way to start preparation for this type of interview would be to start with an internet search for the industry's metrics. Then in your mind reverse engineer the metrics to figure out what they reveal.