“MECE” in Practice: How We Used the Issue Tree Framework to Approach the Industry Landscape in the Early Stages

Reflecting on the halfway point of our SIRI project journey, I believe a key technique for the work we’ve done so far was the Mutually Exclusive and Collectively Exhaustive (MECE) framework. This means testing the hypotheses from the top to the bottom of issue trees. As a McKinsey consultant said, “The great value of the technique is that it forces you to pull out of your head information that you weren’t aware was there and then helps you to develop and shape it until the thinking is crystal clear.” This was especially important in the early stages of our analysis, where we needed to tackle an overwhelming number of potential variables, e.g., different types of PE ownership models and policies, in a systematic way.

Our client is a U.S.-based NGO with a union of professionals that champions high-quality public education, healthcare, and public service. The preliminary tasks and scope our client provides are evaluating whether growing levels of private equity ownership in healthcare are leading to increases in consumer prices and exploring state policy options to address and prevent this. Therefore, our project was divided into two main components: private equity (PE) and policy. As a team member with a finance background, I am in the PE team. My teammates focused on the policy side of the analysis. The policy team took a systematic approach to policy mapping, dividing the work into three core areas: proposed bills, existing legislation, and stakeholder engagement. Their goal was to thoroughly map out all proposed policies and existing legislation in key states, identifying which political actors were most interested in this space and which areas had gaps in the literature. This structured mapping was essential for understanding the regulatory environment and anticipating the potential for policy change.

On the PE side, a teammate and I created an issue tree for PE ownership models with three primary branches: full control, partial control, and financial restructuring. Each of these branches had two further layers of analysis. This helped us to break down the landscape in a way that allowed our client to understand where their interests in the PE space aligned. For instance, our client’s primary interest lay in two areas: a roll-up strategy and hospital consolidation. The first of these interests fits under the branch of “Full Control—Complete Ownership—M&A (Mergers and Acquisitions).” Hospital consolidation and acquiring control through M&A were key areas the client wanted to focus on. Their second interest aligned with “Partial Control—Joint Venture.” They cited a specific case for us to study.

Under the MECE framework, I gathered key data points and presented them clearly to our client during our weekly meetings. For instance, for the topic of hospital consolidation, I cited proofs of its influence on rising prices. 90% of hospital markets are highly concentrated. Anti-competitive mergers and lack of regulation led to price increases of 5% or more. Cross-market mergers have estimated price increases ranging from 6% to 17%. Mergers in rural regions with lower incomes and higher poverty rates generated larger average price increases, most often in outpatient services. These all served as strong evidence for our initial hypothesis, and the MECE framework made the work clearly located.

Apart from the “MECE” thinking, I was also provoked by my teammates to think more deeply about the nature of consulting—how to best serve the client. The first realization, as I touched upon above, was the importance of helping the client navigate through their interests. This is important, especially when they themselves may not have a clear understanding of the larger industry landscape. Another thing was the importance of thinking from the client’s perspective. One of our teammates proposed drafting a policy memo based on the client’s objective of influencing specific states’ legislation. Alternatively, I want to call it “thinking one step further.” However, it’s also important to ensure that the extra proposals align with the client’s overall strategy and organizational goals. For instance, some of our more aggressive ideas, like reaching out to congress members on behalf of the clients, were declined due to public relations concerns. Hence, it is important to balance our desire to serve the client’s objectives with the need to avoid unnecessary risks.

For the interim presentation, one of the most challenging aspects of the project was presenting our findings in a digestible way. As a research-driven project, we wanted to both showcase the depth of our work and avoid wordy slides. We eventually chose to present an overall landscape summary in a brief manner. The second half of the slides was served with screenshots or research and an actionable headline. That we could explain verbally during our presentation. The key here was to strike a balance between depth and clarity.

Looking ahead, Prof. Minard suggested that we move forward by investigating specific PE deals to answer two key questions: How do regulations affect consumer prices? In what ways do regulations, and in what nuances, restrict or facilitate PE deals? Additionally, she encouraged us to explore different PE deal structures and how they might interact with the regulatory landscape. Therefore, our two groups will collaborate to investigate these dynamics in greater depth.