Clean splits: being MECE
Breaking a problem into parts that do not overlap and together cover everything.
Key takeaways
- A clean split has parts that do not overlap and that together cover everything.
- A split that is not MECE: Suppose you split a company's customers into "young people" and "students." That is not mutually exclusive, because a young student is in both, so you will count them twice.
- Profit is the money left after all costs.
Here is a problem. A company sells the same number of products as last year, but its profit has dropped. What is going on? Before you guess, watch how a strong candidate splits it.
Profit is the money left after all costs. If the number sold has not changed, then each sale brings in less money, or the business costs more to run, or both. Costs can rise per unit (materials, shipping) or in total (rent, salaries). A good candidate does not guess. They split the problem into the revenue side and the cost side, check which side moved, and only then look for the reason.
Key idea
A clean split has parts that do not overlap and that together cover everything. Consultants call this MECE: mutually exclusive and collectively exhaustive. It is the habit that sits underneath every good structure.
The two words do all the work. Mutually exclusive means the buckets do not overlap: each thing belongs in one bucket only. Collectively exhaustive means the buckets together cover everything, with nothing left out. The revenue side and the cost side are MECE for profit. Every change in profit comes from one side or the other, and together they cover all of profit. Both sides can move at the same time. That is fine, because each change still belongs to one side only.
Suppose you split a company's customers into "young people" and "students." That is not mutually exclusive, because a young student is in both, so you will count them twice. It is also not collectively exhaustive, because a 40-year-old office worker is in neither, so you will miss them. A split like this causes errors in the rest of your analysis.
Four reliable ways to make a clean split: by a formula (profit is revenue minus cost; revenue is price times quantity), by the steps of a process (the stages a product goes through from made to sold), by clear groups (new customers and returning customers), or by a yes and no question (customers who left and customers who stayed).
Which split of "why did profit fall" is MECE?
Units sold are flat but profit fell. Which of these could explain it?
Sources for this lesson (1)
- Recognized public explanations of case-interview concepts and frameworks
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