When considering solving any business problem, such as "What are this company's options for growth?", "How can we cut costs?" or "How can we increase units sold?", the MECE principle suggests that all the possible causes or options to be considered in solving these problems be grouped and categorized in a particular way. Specifically, all the information should be grouped into categories where there is no overlap between categories (mutually exclusive) and all the categories added together covers all possible options (collectively exhaustive).
Here's an example of a grouping structure that is not MECE.
Grouping customers by their hobbies. (It's not MECE because a single individual customer may appear under more than one hobby category).
An alternative that is MECE is to group customers by age group. This is MECE because no one individual can appear in more than one category (hence it is mutually exclusive) and the age groupings taken as a whole cover the entire population (so they are collective exhaustive).
The reason MECE is popular in consulting is it allows consultants to communicate complex information to clients in a way that eliminates confusion and ensures thoroughness.
The MECE principle can be applied to groups of related items (like customers of different age brackets). MECE can also be applied to explain a particular mechanism.
For example, [ Profits = Revenues - Costs ] is a MECE framework. It very simply communicates that to increase profits one of two things must happen. Revenues must increase or costs must decrease. The components of revenues (typically, unit pricing and units sold) do NOT appear in the cost category (and vice versa). This passes the "mutually exclusive" (the ME part of MECE) portion of the test. In addition, if you combine all the factors (both revenues and costs), the combination of all categories full explains the cause of a change in profits. No other factor is missing. Thus this categorization structured is considered "collectively exhaustive" (the CE part of MECE).
You can break down Revenues into its own MECE components with the formula [ Revenues = Price x Units Sold ]. This too is simple enough for most people to understand. By using this approach to break down a financial metric into intuitively easy to grasp components that are also MECE makes it easy to see what operating "levers" you can use to influence the financial metrics you're trying to improve.
The MECE principal can also be applied to conceptual data, not just numerical data.
For example, if a client were to ask, should I enter the XYZ market?
You might say there are two possible factors to consider in analyzing this decision:
1) Financial factors
2) Non-Financial factors
Every possible reason for or against this decision can be grouped into either "financial factors" or "non-financial factors". Largely speaking items that are financial in nature can not appear in the non-financial category (and vice versa). Thus the categorization structure is mutually exclusive. In addition, if you combine ALL the financial AND non-financial factors together, there can be no other reason why entering XYZ market is a good or bad idea. Because all the categories in aggregate cover ALL the possible factors to be considered, it's considered a collectively exhaustive structure. Because this structure is both mutually exclusive, and collectively exhaustive, it's considered MECE.
When you learn to think in a MECE way, you can apply to every decision in your personal life.
For example, how would you structure the following personal decisions in a MECE way?
- Should you get married now?
- Should you go to Hawaii on your vacation?
- Should you attend Harvard or Stanford business schools?
While I never actually read the book, it was used by everyone every single day that I ended up picking up the principle through my colleagues and later read summary materials used during internal firm trainings.