PRICE Framework: Hypothesis Generation

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PRICE Framework
Hypothesis Generation
August 31, 2013
Forming a coherent hypothesis is an instrumental tool when analyzing and
addressing any business problem. It is a popular technique used by management
consulting firms. The PRICE framework helps us develop a proper hypothesis. This
document explains the methodology and provides template slides to be used in your
own presentations.
ORIGINAL PROJECT DETAILS
http://pptlab.com/ppt/Management-Consulting-Basics-PRICE-Hypothesis-Generation-40

PPT Lab (www.PPTLab.com) – Crowdsourced Business Presentation Design Service 2
PPT Lab (www.pptlab.com) is the only crowdsourced
presentation design service. Get consulting-quality
presentations at a fraction of the cost!
Each month, we will create well over 50 slides of for our members.
As a member, you will drive what business slides we create by
submitting your own presentation projects to our team. All
presentations will be created by a team of management
consultants and follow the Consulting Presentation Framework.
www.PPTLab.com
support@pptlab.com

The PRICE framework is a tool used for formulating and testing a
hypothesis
Introduction
Forming a coherent hypothesis is an instrumental tool when analyzing and addressing any business
problem. It is a common approach used by management consultants. When evaluating any new,
abstract business problem, it is wise to begin by forming an hypothesis related to the problem.
A popular consulting framework for forming a hypothesis is PRICE. PRICE is used by strategy
consulting firms like McKinsey, Bain, and BCG. It can be used to test a hypothesis, determine if the
hypothesis is valid, and answer questions, like, Does the hypothesis make sense? Should it be
discarded? Should it be reworded?
This purpose of this document is to explain how to use the PRICE framework.
Problems to
be solved
Restrictions on
scope and hurdles
Individual decision
makers
Criteria for
success
Environment
context
P R I C E

First, let’s formally define the term “hypothesis”
Hypothesis Definition
Note, that, by definition, a hypothesis must have 2 components—oftentimes, people
provide a hypothesis that only contains the “observable phenomenon” portion.
A hypothesis is a proposed explanation
for an observable phenomenon
The above pictured is the Andreas Cellarius hypothesis, demonstrating
the planetary motions in eccentric and epicyclical orbits
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The PRICE framework dissects the hypothesis into 5 components, as
defined below
PRICE Framework
P
Problems
E
Environment
R
Restrictions
C
Criteria
I
Individual
Hypothesis
PROBLEMS to be solved
• The first step is to identify the problem(s) to be solved
• Push hard to find 1-3 very high level questions that will efficiently
guide the rest of the work
• Example: How can we capture channel advantages relative to
competitors A and B?
RESTRICTIONS on scope and hurdles
• Try to keep these restrictions at a high-
level, related to the original problem
statement
• Example: Attributable product ROCE
must exceed 20%
INDIVIDUAL decision maker(s)
• Identify the decision makers
• Note that different decision makers
require different levels of detail (e.g.
Board-level vs. C-level vs. Director vs.
Manager all need different levels of info
to perform their jobs)
CRITERIA for success
• In defining criteria, be as
specific as possible
• Criteria can be changed down
the road
ENVIRONMENT context
• Give a brief summary of the
client/industry situation to
put the problem
in context

By setting up the context, we can formulate the proper hypothesis that
addresses the right questions and discussions
PRICE Framework
P
Problems
E
Environment
R
Restrictions
C
Criteria
I
Individual
Hypothesis
By setting up the context for our
hypothesis, we can use the PRICE
methodology to:
• Frame the problem
• Bring out the right questions
• Draw out the right
discussions

… that can be answered, if we frame our hypothesis in the format “Due
to… We can… Resulting…”
Hypothesis Structure – Example (2 of 2)
What is creating the
phenomenon?
What is the observable
phenomenon?
What is the outcome of the
phenomenon?
DUE TO
securing exclusive
distribution rights with
Channel Partners A and B
WE CAN
reach a wider audience and
dominate the top 5
distributors
RESULTING IN
A ROCE of 30% for the
Emerging Markets.
… …
The hypothesis must state the desired outcome of the phenomenon
(e.g. ROCE of 30% in Emerging Markets).

Insert headline
PRICE Framework TEMPLATE
P
Problems
E
Environment
R
Restrictions
C
Criteria
I
Individual
Hypothesis
PROBLEMS to be solved
• Filler text, filler text, filler text
• Filler text
RESTRICTIONS on scope and
hurdles
• Filler text
INDIVIDUAL decision maker(s)
• Filler text
CRITERIA for success
• Filler text
ENVIRONMENT context
• Filler text

Insert headline
Problems to
be solved
Restrictions on
scope and hurdles
Individual decision
makers
Criteria for
success
Environment
context
P R I C E
• Filler text, filler text, filler
text
text
text
text
text
text
text
text
text
text
Insert bumper.

Insert headline
Hypothesis
Definition
PROBLEMS
RESTRICTIONS
INDIVIDUALSCRITERIA
ENVIRONMENT
Insert bumper.

Insert headline
Insert bumper.
What is creating the
phenomenon?
What is the observable
phenomenon?
What is the outcome of the
phenomenon?
DUE TO
filler text filler text filler text
filler text
WE CAN
filler text
RESULTING IN
filler text.
… …

PPT Lab (www.pptlab.com) is the only crowdsourced
presentation design service. Get consulting-quality
presentations at a fraction of the cost!
Each month, we will create well over 50 slides of for our members.
As a member, you will drive what business slides we create by
submitting your own presentation projects to our team. All
presentations will be created by a team of management
consultants and follow the Consulting Presentation Framework.
www.PPTLab.com
support@pptlab.com

PRICE Framework: Hypothesis Generation

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PRICE Framework: Hypothesis Generation