Why “Five Why”?
Every heard of the “Five Why” approach to problem solving? It’s a method of analysis that seeks to get to the bottom of any problem by asking a series of “Why” questions. Take this recent example by Peter Cohan who used the technique recently to analyze the Silicon Valley Bank failure. Note: My interest is less in the bank collapse and more in why the “Five Why” method can be so powerful in issue resolution.
Photo: Tony Webster
“Why did the FDIC take over SVB? SVB could not find a private institution willing to acquire the bank in time.
Why was SVB unable to find a buyer? As CNBC wrote, "a rapid outflow of deposits -- totaling $42 billion on March 9 alone, about a quarter of the bank's total deposits, according to the Wall Street Journal -- was complicating the sale process."
What prompted the rapid outflow of deposits from SVB? SVB surprised investors on March 8 with an announcement that it took a $1.8 billion loss on its $21 billion portfolio of treasury securities and borrowed $15 billion. Since 94 percent of SVB's deposits exceeded $250,000, the FDIC did not insure them -- thereby boosting incentives for depositors to flee, noted AP.
What prompted SVB to raise capital at such a high cost? In February 2023, Moody's told SVB that it was preparing a downgrade of its credit rating.
Why was Moody's poised to downgrade SVB's rating? SVB's deposits and the value of its bond portfolio had fallen sharply.
Why had SVB's deposits and the value of its bond portfolio dropped? As the Fed raised interest rates, technology stocks lost value, the IPO market dried up, venture capital firms stopped providing startups with more capital to fund their losses, startups began withdrawing their deposits to fund operations, and the higher interest rates cut into the value of SVB's lower yielding securities.”
citation: Inc. Article
This technique is conceptually super simple and practically impossible to apply on a regular basis. It takes focus and careful discernment. To help, try taking a small problem at first, ask “Why,” and then write each question and answer down. Find the rhythm. Once you think you have the hang of it, try a more difficult problem. The more often we apply the “Five Why” method the more intuitive it will become.
What’s great about the technique is that anyone can use the "Five Why" approach from individual contributors to senior leaders. The individual contributor can employ it to discern the best answer to an issue they are working on before taking the issue to a supervisor. If the individual contributor is asking the “Five Why’s” they are more prepared to help the supervisor make a better decision and support their recommendation.
A supervisor/senior leader in turn may ask the “Five Why’s” as individuals bring solutions to them. This will help them to get at the root cause of the problem and ultimately make a better overall decision. Furthermore, if the senior leader is asking “Five Why’s” of their report the direct report is also learning. It can be a wonderful form of leadership and mentoring. Stay tuned until next week when we dig into another problem solving model!
“Use the “Five Why” method this week to address a pressing problem. See if you come to better conclusions. ”
