Analytical Tools Glossary

Analytical thinking involves breaking down complex problems into smaller, more manageable parts, examining each part carefully, and organizing the parts in a logical way to arrive at a solution.

It requires a systematic approach to solve problems, make decisions, and analyze situations. In this section, we will explore various tools that can help enhance your analytical thinking and enable you to solve problems more effectively.

Root Cause Analysis

Imagine your company is facing a significant drop in customer satisfaction. You have been tasked with identifying the root cause of this issue to implement a solution that addresses the problem at its core.

Root Cause Analysis is a method of problem-solving used for identifying the root causes of faults or problems. It involves systematically breaking down a problem into smaller parts, and examining each part to identify the underlying issues that led to the main problem.

The goal is to identify the fundamental cause of a problem, rather than just addressing its symptoms. Once the root causes are identified, they can be addressed to prevent the problem from recurring.

Inventor: The concept of Root Cause Analysis can be traced back to Kaoru Ishikawa, who developed the Fishbone Diagram (Ishikawa Diagram) in the 1960s.

SWOT Analysis

Imagine you are considering opening a new branch of your business in a different city. You need to carefully evaluate the internal and external factors that could affect the success of this expansion.

SWOT Analysis is a strategic planning tool used to identify the Strengths, Weaknesses, Opportunities, and Threats related to a project or business venture. It involves creating a matrix with four quadrants, each representing one of the SWOT elements. 

The goal is to identify the internal strengths and weaknesses of an organization, as well as the external opportunities and threats it faces. 

This analysis helps in making informed decisions and creating a strategic plan that leverages the organization’s strengths and opportunities while addressing its weaknesses and threats.

Inventor: The SWOT Analysis was developed by Albert Humphrey in the 1960s.

PESTLE Analysis

Imagine you are the head of a company planning to expand internationally. Before making any decisions, you need to understand the macro-environmental factors that could affect your business in the new region.

PESTLE Analysis is a tool used to analyze the external macro-environmental factors that affect an organization. It stands for Political, Economic, Social, Technological, Legal, and Environmental factors. 

The analysis involves examining each of these factors to identify the opportunities and threats they present to an organization. This helps in making informed decisions and creating a strategic plan that takes into account the broader environment in which the organization operates.

Gap Analysis

Imagine your company has set a goal to increase sales by 20% over the next year. However, at the end of the year, you find that sales have only increased by 10%. 

You need to identify the gap between the actual performance and the target, and understand the reasons behind this gap.

Gap Analysis is a tool used to identify the difference between the current state and a desired future state. It involves defining the desired outcome, analyzing the current situation, and identifying the gaps that need to be addressed to move from the current state to the desired state. 

This analysis helps in creating a plan of action to address the gaps and achieve the desired outcomes.

Fishbone Diagram (Ishikawa)

Imagine you are a manager at a manufacturing company, and you have noticed an increase in the number of defective products being produced. 

You need to identify the possible causes of this problem to implement corrective actions.

The Fishbone Diagram, also known as the Ishikawa Diagram or Cause and Effect Diagram, is a visual tool used to identify and organize the possible causes of a problem. 

It involves creating a diagram that resembles a fishbone, with the problem or effect written on the right side, and the causes grouped into categories and listed on the branches. 

This helps in organizing the causes of a problem and identifying the underlying issues that need to be addressed.

Inventor: Kaoru Ishikawa, a Japanese quality control statistician, developed the Fishbone Diagram in the 1960s.

5 Whys

A questioning technique used to drill down into the details of a problem and uncover its root cause. It can be used in conjunction with the Fishbone Diagram to further explore the causes of a problem.

Pareto Analysis (80/20 Rule)

Imagine you are a customer service manager, and you have received numerous complaints from customers. You need to prioritize the issues to address the most significant problems first.

Pareto Analysis, also known as the 80/20 Rule, is a decision-making tool used to prioritize issues or tasks based on their impact. It involves identifying the most important issues or tasks that contribute to the majority of the problems or benefits.

The analysis is based on the Pareto Principle, which states that 80% of the effects come from 20% of the causes. This helps in focusing efforts on the most critical issues or tasks that will have the greatest impact.

Inventor: The Pareto Analysis is based on the Pareto Principle, which was developed by the Italian economist Vilfredo Pareto in the late 19th century.

Related Tools:

Priority Matrix: A tool used to prioritize tasks based on their urgency and importance. It can be used in conjunction with the Pareto Analysis to create a prioritized list of tasks or issues.

Action Plan: A tool used to outline the steps needed to address the issues identified in the Pareto Analysis.

Failure Mode and Effects Analysis (FMEA)

Imagine you are an engineer working on the design of a new product. You need to identify the potential failure modes and their effects on the product’s performance to implement preventive measures.

Failure Mode and Effects Analysis (FMEA) is a systematic tool used to identify and evaluate the potential failure modes and their effects on a system, process, or product.

It involves listing the potential failure modes, their causes, and effects, and then rating them based on their severity, occurrence, and detection. This helps in identifying the most critical failure modes and implementing preventive measures to reduce the risk of failure.

Related Tools:

Risk Matrix: A tool used to assess the risk level of different failure modes based on their severity and occurrence. It can be used in conjunction with the FMEA to prioritize the risks.

Action Plan: A tool used to outline the steps needed to address the failure modes identified in the FMEA.

Business Process Modeling

Imagine you are a business analyst tasked with improving the efficiency of your organization’s processes. You need to understand the current processes in detail to identify areas for improvement.

Business Process Modeling is a method used to create a visual representation of an organization’s business processes. It involves creating flowcharts or diagrams that map out the steps, activities, and decision points in a process.

This helps in understanding the current processes, identifying bottlenecks or inefficiencies, and designing improved processes.

Related Tools:

Process Flowchart: A visual tool used to map out the steps and activities in a process. It can be created as part of the Business Process Modeling.

Value Stream Mapping: A tool used to create a visual representation of the flow of materials and information through a process. It can be used in conjunction with the Business Process Modeling to identify areas where value is added or wasted.

Scenario Analysis

Imagine you are a strategic planner at a large corporation, and you are tasked with developing a long-term strategy for the organization. You need to consider different possible future scenarios and their implications for the organization.

Scenario Analysis is a strategic planning tool used to explore different possible future scenarios and their implications for an organization.

It involves identifying key uncertainties, developing different possible scenarios based on these uncertainties, and analyzing the potential impacts of each scenario on the organization. This helps in developing a flexible strategy that can adapt to different possible futures.

Related Tools:

SWOT Analysis: A tool used to identify the internal Strengths and Weaknesses and external Opportunities and Threats related to an organization.

It can be used in conjunction with the Scenario Analysis to assess the internal and external factors that may influence the scenarios.

PESTLE Analysis: A tool used to analyze the external macro-environmental factors that affect an organization. It can be used in conjunction with the Scenario Analysis to provide a more comprehensive view of the external environment.

Benchmarking

Imagine you are the manager of a department and you want to improve the performance of your team. You need to understand how your team’s performance compares to other teams within the organization or to industry standards.

Benchmarking is a process of comparing an organization’s processes, performance, and practices to those of other organizations or industry standards.

It involves identifying key performance indicators (KPIs), collecting data on these KPIs for your organization and others, and then comparing the results. This helps in identifying areas where your organization is performing well and areas where there is room for improvement.

Related Tools:

Key Performance Indicators (KPIs): Specific and measurable metrics used to track the performance of an organization or a process. They are essential for the benchmarking process.

Balanced Scorecard: A tool used to monitor and manage an organization’s performance across multiple dimensions. It can be used in conjunction with benchmarking to track and improve performance.