To be honest with you, I am still a bit puzzled. But it totally makes sense. Over the past 9 weeks, I ran into three different people that I had met through my work at IBM. They all had three things in common:
They used to be a Business Analytics advocate and driver at a customer
They left that job to pursue another opportunity with a new company
They hate their new jobs and are looking for a new role
Do you like pies? I do! But not for analyzing data. Pie charts are just too busy and too hard to read in most situations. Yet they are the frequent tool of choice for visualizing the composition of a certain variable. Take a look at this example: I want to find out how total revenue is split between different product categories. The easy choice would be to create the following chart:
Personally, I don’t like this! You constantly jump around the different pieces and it is really tough to obtain the overview that we are looking for. Pie charts work for few variables that account for larger pie slices. Another and better option is to use a bar chart. To make it easy for the viewer, I ranked the values in IBM Cognos 10:
Isn’t this much better? You can quickly identify the best performing products. It is easy to read the individual contribution of each product. But I am not able to see my total revenue amount. Good news – there are different ways to perform this type of part-to-whole analysis
Waterfall charts (sometimes called Progressive Charts) allow us to visualize the composition of the a value along different segments. In plain English: Total revenue can be visualized as a build up of the different individual values of the products. Take a look at the example below. The values are once again ranked:
Notice how quickly you can see the segment revenue along with the total revenue of roughly 540 million. I personally like the clean and uncluttered look. Reading the individual values is a bit harder than in the traditional bar chart. But IBM Cognos 10 allows me to hover over each segment to obtain the actual value. It’s personal taste which chart is more effective. Here you can see both versions side-by-side.
Waterfall charts are great for any kind of part-to-whole analysis: revenue/ margin across products, customers, channels. Composition of Profit across the P&L, etc.. There are a few interesting examples on Wikipedia.
THE PARETO CHART
There is yet another great option for displaying this type of data: Pareto Charts. They are are named after the Vilfredo Pareto who proposed the 80/20 principle. This chart simply enriches the bar chart we saw earlier with a cumulative percentage line. Take a look:
This graph allows us to quickly answer questions such as: Which products create 80% of my total revenue? (roughly everything up to Alpha Bronze). In other words: the pareto chart allows me to identify the most important items. IBM Cognos 10 allows different customization options which I would highly recommend looking at. Hiding one of the axis is not a bad idea, for example. The use of colors could be helpful here to identify the main product categories:
Waterfall Chart vs Pareto Graph?
Seems like a lot of options, right? Which one is the best? Can’t say. It really depends on the situation. I like all of them. There are slight differences and it depends on the user. Waterfall charts are probably better suited for executive dashboards. Pareto charts are more likely useful for analytical purposes. And the classic bar chart is always is a winner. Try to add these charts to your tool-box! And drop those pies.
A few days ago, I took friends to the famous Neuschwanstein Castle. It’s close to my house – right around 100km and I have been there many times. But no matter how often I go there, I am always amazed by the stunning beauty of this monument. It is situated amidst rugged and snow-covered mountains. Awesome waterfalls, lush forrests and pristine lakes surround it. This is the stuff you read about in fairytales. The person who had this castle built truly had a stunning vision.
THE CASTLE BUSINESS
Fabled Bavarian King Ludwig II is known as the fairy-tale king. Born in 1845, he had a thing for beauty and architecture. And he had a big vision for himself and Bavaria. Under his reign, several amazing castles were built across Bavaria. Each one of these castles is highly unique and breath-taking: there are hidden grottos, magic dining-room tables, mirrored dance halls. And this is why millions of tourists from all over the world flock to these castles. They spend their precious money on tours, horse-carriage rides, souvenirs, food, drinks and hotels. It is safe to say that the economic contribution of these sights is enormous. Bavaria is benefiting from these castles in a big way. Vision accomplished!
This interesting story sparked a discussion amongst our group: What if the king had not followed his vision and played it safe? Would Bavaria be as popular and famous amongst tourists as it is today? What would have happened to these remote regions? Difficult to say, but we all agreed that things would be quite different. The king did run into serious resistance when he built his dream castles: while the general public supported him (the castle building created many jobs in the poor and remote regions), his ministers did not appreciate his personal spending habits and vision. The tried to block, hinder and deceive. But the king did not get bogged down in short-term thinking. He did not try to please his ministers. No, he poured his entire energy and fortunes into accomplishing his goals. The one thing we can safely say is that the King’s decisions ultimately led to the long-term well-being of Bavarian tourism.
TOO MUCH SHORT-TERM THINKING?
If we look at how many businesses are run these days, we have to observe that long-term thinking is quickly becoming a rare sight. We are so focused on making our next quarter’s numbers that we often loose sight of our vision. We cut expenses to make margins today but we sacrifice our ability to innovate which will hurt us in the long-term. We push customers to purchase our goods and services at times when we should be investing in long-term relationships. Investors are impatient and the day and age of the Internet seems to have taught many people that they should expect instantaneous gratification. Most of us know that this wrong and we often hear bloggers, analysts and managers complain about this periodic short-term thinking.
There is so much opportunity out there today. Much more opportunity than we have ever had. But we are often at risk of not fully leveraging the moment, by wanting to take it all today. Making a bold vision happen is very difficult if we are guided by short-term thinking. Shouldn’t we start shifting our focus back towards longer-term decision-making? Shouldn’t we strive to give up a little bit right here and right now to ensure that we are more successful in the future? This is true for our companies and for our personal lives. Why don’t we reconnect with our personal vision and the vision of our company? Let’s make a change today and start building some castles!
FINAL REMARKS: One could argue that the King followed the wrong vision. He did spend a fortune on his projects and the value was not quite apparent at that time. Unfortunately, King Ludwig II. ultimately paid the highest price: His ministers were discomforted by his behavior and managed to have him declared insane. He was arrested at Neuschwanstein and admitted to a mental hospital at Lake Starnberg. His dead body was found the next day. He supposedly drowned in knee-deep water. He remains extremely popular in Bavaria and many people suspect that he was killed (he was known to be an exceptional swimmer).
One of the interesting and really fun things to watch is young kids learning about cause and effect. They pull on a string and music starts playing. They giggle. They push a car and the car begins to roll. And so we learn to be curious at an early age and we learn to look for cause and effect relationships. And this an especially useful skill to have in business. The discovery of relationships can help us make better decisions: what happens to our revenue, if we increase marketing spending, what happens to our customer inquiries if we lowered the price of our top product? Answers to these questions can provide valuable insights.
WHAT IS THE RELATIONSHIP?
How can we go about testing and identifying these relationships? One option would be to combine two data sets in a chart. Let’s say we wanted to analyze the relationship between our price and customer inquiries. How do customers react to a price increase or decrease? We could create a combination chart for our products which outlines the price (red line) and the inquiries (green bars):
When you look at these charts it seems that there is a loose relationship between price and inquiries for Alpha but a stronger relationship for the Charger product. But it is hard to really tell. Especially for Alpha. Overall, this chart is not all that useful. We need more information.
This is where scatter charts come in handy – they allow us to quickly analyze the relationship between two numeric variables. We basically take a regular Cartesian 2D coordinate system with our two numeric variables plotted on each axis. The general norm is to plot the independent variable (in this example the price) on the horizontal axis and the dependent variable on the vertical axis (customer inquiries). Here is a simple example that I created with IBM Many Eyes:
The dots represent the values for individual marketing campaigns. We mark the amount of spending on the x-axis and the resulting revenue from the campaign on the y-axis. We can easily tell that there is a relationship between marketing spending and revenue – we could almost draw a line between the dots. There is just one outlier on the bottom of the right-hand side. By the way, it is really easy to create these charts with IBM’s Many Eyes tool. Check it out when you get a chance!
PRICE AND INQUIRIES
Back to the initial problem. Let’s see how price sensitive Alpha and Charger are. Let’s take a look at the resulting scatter plots. We have created these charts in Cognos 10 using the same data set. We have also included a trend line to make it easier to see a potential correlation:
Both of these graphs now tell a clear story: Alpha’s dots are literally scattered throughout the chart. There are plenty of outliers. This shows that there is just a weak correlation between price & inquiries. The picture is different for charger: The dots are more clustered and we can draw a good line, i.e. the correlation is pretty high.
Scatter charts are pretty simple to create and they do tell a good story if used for the right purpose. They are also ideal for large data volumes. However, they do ignore time. The combination charts I showed above would do a better job at that. But if we want to focus solely on the relationship, the scatter plots are better suited. Even though scatter plots are relatively easy to read, I would not recommend using them in an executive dashboard. You definitely need to know how to use them. They are probably better suited for analytical people. Also, keep in mind that while these charts help identify relationships pretty well there might still be other influence factors. But that is really common sense. So, next time you want to explore your data in a different way try scatter charts!
A picture says more than a thousand words, right? Managers drown in pages of numeric reports. But as John Medina, author of the famous book ‘Brain Rules’ clearly pointed out: “Vision trumps all other senses“. In other words: we are much better at absorbing information through visuals than we are at reading numbers and letters.
To see how effective visuals can be at delivering complex information we just have to look at something that we are all surrounded by: Cartoons. They are in newspapers, they are on websites, they show up on twitter. Cartoons are drawings. A single picture that tells a humorous or critical story. Once you look at them carefully you will notice how deep and smart they can be: They tell a thoughtful joke or story in a single picture.
Talk about the power of visualization! Remember the scandal about the Danish cartoonist a few years ago? A single picture set a huge scandal in motion. To convey the same message, a writer would have to fill a lot of pages. And those pages wouldn’t be all that powerful.
To learn more about cartoons I ended up watching this short Ted presentation by Patrick Chappatte. It is quite entertaining and it highlights the power of visualization. We should all strive to learn something from this. Shouldn’t we all use more visuals in our daily lives? Should we toss those endless 2-dimensional reports and replace them with good, solid visuals that tell a clear story? You know my answer.
London Heathrow, Terminal 5. 6pm GMT. I am tired. Really tired. Museum visits, shopping trips and conference whirlwinds belong to a category of highly rewarding and fun activities, yet they also belong to the category of activities that can only be classified as “Holy smokes, why am I so exhausted?” type of things.
THE GARTNER BI SUMMIT
Gartner does a fine job of producing highly relevant and engaging events. The 2011 EMEA Summit was no different. Over 700 people attended the well organized event at the Westminster Plaza hotel in London.
The opening day offered some great presentations. I liked the Gartner keynote which highlighted some of the key themes that are happening in the market. A few interesting things that came up include:
62% of all EMEA organizations have a BI strategy. That is a positive change from the prior years.
BUT…only 1/3 of all organizations have a real BICC. But Gartner highlighted that a BICC is somewhat of a ‘secret sauce’ for success in BI.
Organizations are very interested in Predictive Analytics, In-Memory, Master Data Management & Dashboarding
Success means going for BIG BI: not just platform but rather a complete view of people, process & technology.
Nigel Rayner hosted a great and fun panel session with participants from the main BI vendors. Peter Griffiths represented our IBM Cognos team. Nigel did a great job with the panel and he got the audience actively involved by voting on certain topics. A few interesting points:
A big majority of the participants believe mobile BI will play a huge role in the future. Not a big surprise.
Collaboration & social media will change the game for BI
Many people believe that a large portion of BI spending will go SIs instead of software vendors.
90% of the audience members believed that predictive analytics will become accessible to a broader user spectrum
Many delegates are unsure whether BI hardware & software should be bundled
OUR KEYNOTE & WORKSHOPS
On the second day of the conference, Leah Macmillian and I delivered the IBM keynote. It was great to see so many people in the room. We spent almost 50% of our allocated time on showing Cognos 10. Many people in the audience seemed surprised as we were the only vendor to show product. A bit of a surprise to me. Why would you spend so much time talking about future direction instead of showing what you can do now? Everybody has great ideas but at the end of the day we need to deliver value now. Right? No surprise: We did get a ton of questions following our presentation.
Kudos to Gartner. It was a great event. Excellent content and excellent participants. I really enjoyed the networking with so many great people. It was cool to see that our IBM portfolio pretty much covers all the main trends that were discussed at the Summit: Mobile, Collaboration, In-Memory, Predictive Analytics etc.. Cognos 10 is a great platform. Gartner’s assessment of IBM’s position in the market clearly highlighted this.