Visualizing Your Business: Let Graphics Tell the Story with CD

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Provides the tools effective management needs to present sound analysis with clarity and insight

This invaluable guide provides managers, business owners, and consultants with the necessary tools to manage information, set goals, measure progress, and make fast decisions by quickly evaluating financial information and communicating it to their companies. Packed with real-world examples and dozens of illustrations from both the "do" and "don't" categories of information design, ...

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Overview

Provides the tools effective management needs to present sound analysis with clarity and insight

This invaluable guide provides managers, business owners, and consultants with the necessary tools to manage information, set goals, measure progress, and make fast decisions by quickly evaluating financial information and communicating it to their companies. Packed with real-world examples and dozens of illustrations from both the "do" and "don't" categories of information design, this book shows managers how to make memorable presentations that demystify complex issues and artfully integrate both financial and nonfinancial information. This book takes managers step-by-step through the process of creating visually effective exhibits that will enhance presentations and improve the understanding of key financial information necessary for management decisions. Plus, a CD-ROM is included with twenty-five key examples of graphical displays prepared in PowerPoint and Excel.

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What People Are Saying

Bill RaddiChief
Herrmann's book is an essential handbook for business executives who are seeking a clearer understanding of the nature and performance of their business. The reader is presented with a compendium of 101 charts and graphs, which visually characterize business operations and strategy. Herrmann gives meaning and structure to many of the charts and graphs that most of us have used over the years.
Technology Officer Powerware Electronics
Burton Malkiel
Keith Hermann has provided business executives with an indispensable guide for exhibiting data with clarity and effectiveness to ensure successful business presentations.
Professor, Princeton University and Author of A Random Walk Down Wall Street
David A.J. Axson
All too often great analysis is lost in a fog of spreadsheets. The ability to present sound analysis with clarity and insight distinguishes great analysts from good number crunchers. Keith Herrmann's ideas provide invaluable wisdom on the practical realities of combining insight and communication to enhance decision making.
Managing Director Answerthink Consulting Group
Frederick Smith
Keith Herrmann's book should be required reading for managers at all levels.
Chairman and CEO, FedEx Corporation
Gary DiCamillo
Mr. Herrmann addresses an increasingly important communication area with clarity and breadth.
Chairman and CEO, Polaroid Corporation
J. Thomas Barranger
This book is an excellent guide and reference book for using tools which will enable your company's managers to deal with and understand the high volume of data presented to them. They will learn how to weed out irrelevant data and turn it into more meaningful information.
Corporate Headquarters Manager Financial Systems & Budget Lockheed Martin Corporation
Mark Baric
Herrmann's book is like a Swiss army knife; with it, you will be prepared for just about any contingency.
President and CEO, Virtus Corporation
Roger G. Ibbotson
My passion has always been to make large quantities of investment data accessible to everyone. Keith Herrmann's new book provides 101 ways to better communicate business information. It's fun and easy to read.
Professor, Yale School of Management Chairman, Ibbotson Associates
Sid Cato
Mr. Herrmann has done it again: taken a seemingly simple task, preparing (and, of course, delivering) charts and graphs, and turned it into a learned if entertaining treatise-as usual, with a deft touch and an intimate knowledge of how thirsting for knowledge CEOs and other corporate executives are. He has turned a simple subject into a minor masterpiece. All you never knew you needed to know concerning charts and graphs and their preparation.
President of Cato Communications Publisher of Newsletter on Annual Reports
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Product Details

  • ISBN-13: 9780471371991
  • Publisher: Wiley, John & Sons, Incorporated
  • Publication date: 4/1/2001
  • Edition description: BK&CD-ROM
  • Pages: 264
  • Product dimensions: 7.31 (w) x 10.24 (h) x 1.00 (d)

Meet the Author

Keith R. Herrmann is a Controller with BlueStar Systems Group. He has held key strategic planning and financial positions with Black & Decker, Exide Electronics Group, Invensys Plc, and Midway Airlines.
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Read an Excerpt

1.
Introduction

(Please note: Illustrations cited in the following text refer to the print edition of this work, and are not reproduced here.)

A chief executive officer (CEO) is floating in a hot-air balloon. He's lost. He maneuvers the balloon down closer to the ground to find out where he is. He sees a man in a field and floats over to him, about 40 feet off the ground.

"Excuse me," he calls, "Can you tell me where I am?"

The guy looks up: "Sure. You're in a balloon. Forty feet off the ground. Over a field."

The CEO looks down and shouts: "You must be a consultant. You gave me data that is technically correct but isn't useful."

The guy on the ground looks up and exclaims: "And you, sir, must be a CEO."

"Why do you say that?" asks the perplexed CEO.

The guy on the ground says: "Because you have no idea where you are. No idea where you are going. And you assume it's all my fault!"

Like the CEO in the hot-air balloon, many of today's business leaders are lost. They have no idea where they are and no idea where they are going. They fall under the delusion that mere data is enough. If we have the facts, then what more do we need?

Business leaders are like artists during the Renaissance. The Renaissance artist might take a commission for a portrait one day, carve a tomb the next, and then design a palace or work out a problem in military engineering. Business leaders, who must run all aspects of a company, are asked to do the same.

A superior individual in the Renaissance, however, could assemble in his or her own head all the significant data of the time. Because of the extreme quantity of data and the diversity of the problems to which we are exposed, a businessperson in the twenty-first century cannot possibly do this. A 10-year-old child today has more data available than Leonardo da Vinci had at his prime. A small business or industry is already too complex to be handled by a single individual. The problem is how to cope effectively with increasing quantities of data.

This book seeks to enlarge your capacity to process the vast quantities of data that you possess. The book is a treasury of the best 101 examples of business graphics. If you are lost like the CEO in the hot-air balloon, then it will help you become a more skillful navigator. If you are trying simply to navigate data overload, then it will help you to interpret reams of data. You need informative and eye-appealing charts and graphs to make data meaningful. You can see in graphic form what was not so clear before and pull out that nugget you might have missed that will make your business decision the right decision.

This book, however, is not for studying "everything." Delineating a clear direction is a prerequisite for success. Knowing when to use the available tools is also a key to success, and there is no substitute for the hard work of selecting and using these tools to craft solutions tailored to your company's unique context and needs. We will tear ourselves to pieces, trying to go in 100 different directions at the same time, unless we find out what we want most and make that the goal of our supreme effort. Demonstrating leadership requires the willingness to assess situations, think through the available options, decide on the tools to be used and how to adapt them as needed, and then accept accountability for the decisions made and the results achieved.

I have tried to address those questions about charts and graphs that managers seem to be most interested in and to do so in a way that provides answers that are both understandable and useful. One of the myriad challenges I faced when writing this book was to address the needs of my readers from the perspective of the skill sets that they already possess. This proved to be a delicate balancing act: not only to provide the neophyte with a sweeping portrait of charts and graphs but also to give the more experienced reader additional insight from these charts. I wish neither to confuse the novice with technicalities nor to insult the seasoned professional with platitudes. This book is not intended as a scholarly text, still less an exhaustive one. For those of you who may already be familiar with certain charts and graphs included here, I hope that you understand the need for their inclusion. Whenever I mention a business concept (such as return on investment or statistical process control), I have also tried to include a reference. Consult the reference material if you are unfamiliar with these terms or are interested in finding out more about them.

This book is an introduction to its subject for those who feel the same curiosity about it that I do. Charts and graphs have to be tailored to the unique characteristics of the organization and situation for which they are made. My intent is for each chart or graph to be modified and used as needed, at whatever level of complexity, in the manner that is most appropriate to the task at hand.

Finding the Graphics You Need

To make it easier to find related graphics, the book is organized into 16 chapters plus three appendices. Many of the charts and graphs could have been included in more than one section, but they are classified according to their dominant characteristic.

  • "Introduction." This chapter discusses where to start, when to use graphics, and how to get numbers to tell the story.
  • "Tracking." This chapter contains eight charts for tracking fundamental financial concepts such as sales, cash flow, and income statements. The use of these charts will provide you with a business overview.
  • "Variances and Comparisons." This chapter covers eight techniques to display systems of interrelated values so that deviations, groupings, and the relative sizes of more than one element can be seen at the same time.
  • "Trends and Change." You will find 13 ways to depict trends, change, and quality control procedures.
  • "Relationships." This chapter contains 12 charts and graphs, including supply and demand, Venn diagrams, and other ways to show relationships.
  • "Presentation." Ten techniques that have a wide variety of applications are covered here.
  • "Value Ranges." This chapter covers confidence intervals, high-low graphs, and candlestick charts.
  • "Schematics and Maps." This chapter covers schematics, process diagrams, and maps.
  • "Organizing Data and Information." Structure charts and other ways to organize data are presented here.
  • "Planning, Scheduling, and Project Management." This chapter covers time charts, including time lines, PERT charts, and Gantt charts.
  • "Probability, Prediction, and What-If." This chapter covers decision trees, payoff tables, and bright-line charts.
  • "Strategy." You will find life cycle analysis, growth/share matrix, and value chain in this chapter. How to structure, test, and quantify strategies are covered here, as well as how to visualize your competitive advantages and disadvantages.
  • "Finance." This chapter contains case studies of how to present more detailed financial concepts.
  • "Marketing." This chapter contains case studies of how to present sales and marketing analysis and marketing positioning.
  • "Performance." This chapter contains case studies of how to present various other business performance measurements.
  • "A Thousand Points of Data." This chapter includes a brief summary.
  • "Appendices." The appendices discuss the anatomy of a chart, defining chart types, and financial charting in Excel 97.

The tools in this book will help you to set guidelines and measure progress. They will help you to convey your company's story, and they will reveal your company's location and orientation. They will help you to set your course and to select your destination. And they will help you to arrive at your destination more quickly. While some of these tools may already be familiar to you, others will be new. What is not new is the need for the courage to manage: to assess situations, set an overall course or focus, think through options, develop plans, take action, modify plans, learn, and go forward.

Moving at the Speed of Business

Today, more than ever, companies have to work harder to keep up with the pace of change and increased global competition. To succeed in multichannel, high-speed environments, you need to leverage the data you have at your disposal. You need to harness the knowledge inherent in your organization--at both the individual and the corporate levels. These exercises can be vital to your organization's survival, because helping managers understand and remember complex data can give your organization a competitive edge. The tools in this book will help managers deal with the ever-increasing volumes and types of internal and external data. Using effective charts and graphs enables the knowledge worker to become more productive and effective, thus increasing both personal and corporate knowledge.

From the shop floor to the boardroom, everybody talks about the speed at which things are changing. We hear a lot about the emergence of new technologies that render entire markets obsolete overnight; about the increased speed of communication, which allows shock to travel instantaneously across the planet; and about the shifting of boundaries between industries and the emergence of new competitors.

While there is nothing new about the inevitability of change, there is perhaps a new way of thinking about the rate, or speed, of change. Consider the advances in one area of scientific accomplishment: the basic acceleration of travel as measured against time. In 1520, Magellan's crew circumnavigated the globe in a wood-hulled ship. About 350 years later, people circumnavigated the globe in a steel steamship; 60 years after that, in an airplane; and after another 35 years, in a space capsule. To circumnavigate the globe, the wood-hulled ship took two years, the steel steamship two months, the airplane two weeks, and the space capsule took only a little over one hour. This example contains not one but two dimensions of acceleration. The first acceleration is the contraction of the lags between the successive circumnavigations from 350 years to 60 years to 35 years. The time that elapsed between the four states of the art of circumnavigation grew shorter each time. The second acceleration is the contraction of time taken to actually circumnavigate the globe from two years... to two months... to two weeks... to one hour.

Likewise in business, there are (at the very least) two types of acceleration: Time to market is shrinking and product life cycles are collapsing. Consider the change in the amount of time it took to launch a new car or truck at the beginning of the twenty-first century. In 1990, it took U.S. manufacturers six years to go from concept to production of an automobile; now it takes just two years to bring automotive products to market. Remember when it took weeks to get eyeglasses? Now it takes under an hour.

In a similar fashion, product life cycles are shrinking. It is difficult to predict where the marketplace is going in the short term, and no one knows what the best-selling products will be one year from now. Because product sales are hard to predict, many companies have abandoned traditional annual budgets in favor of budgets with shorter time horizons. For example, the budgets at Nortel extend only for the next six months. In the telecommunications industry, it is more than likely that the cell phone that was "cutting edge" yesterday has become obsolete virtually overnight.

The new enterprise needs to be a real-time business, making adjustments now to changes in market conditions and consumer needs. Wait, and by the time you get to market, it will be too late. Conditions will have changed, and customers will be demanding new and different products. This is an environment that favors agile businesses that can respond quickly to the marketplace.

Your company needs to be fast, and your company needs to be faster than that. Why? Because your customers demand it. Customers are no longer satisfied with the old paradigm of "cheaper, better, and faster"; they literally want your products and services "free, perfect, and now." You can improve your agility by improving the clarity of your analysis and presentations with meaningful charts and graphs. Using the types of charts and graphs in this book will help you to gain insights faster.

Helping your company managers understand your data will enable them to make better decisions and to perform their jobs more efficiently and effectively.

What Gets Measured Gets Done

From the point of view of business leadership, what matters is understanding how people react in times of uncertainty. During these times, managers have less ability to control their external environment. However, when managers have a framework within which to measure and implement change, then these focused measurements put change in perspective. As conditions change, focused measurements can enable a company to move both quickly and assuredly in order to seize new opportunities. How can your company begin to use focused measurements? To answer this question, we first need to understand what exactly focused measurements are.

One example of focused measurements is a baseball scoreboard. For example, at the end of the last game of the 2000 World Series, the scoreboard read:

By looking at the scoreboard, we know that the Yankees beat the Mets. If the measurements for the game were unfocused, then the scoreboard might look something like this:

These measurements would make ridiculous headlines in the sports section of the newspaper the day after this game. Even though these statistics may be unique to this game, the fans do not need to know them. What the fans want and expect is the number of runs, hits, and errors, and then the detail on the runs, inning by inning. That is why the baseball scoreboard is such an effective tool.

Perhaps the runs-hits-errors approach is not to be held up as an ideal--it is not data rich, while we have the potential to generate great graphics of baseball nowadays. Instant replay boards in stadiums display a lot of graphics now; the current baseball scoreboard is more vibrant and data rich than the old-fashioned one. TV coverage has rich graphics of baseball.

The runs, hits, and errors are the vital statistics that create uniformity among the outcomes of the games and enable the tabulation of results. Each team needs these measurements to record the results of the game and to participate in baseball league play. So, too, do public companies need certain numbers, reports, and information for the shareholders, stock exchanges, regulatory agencies, and others. Moreover, what both baseball teams and businesses look at and measure individually will help determine the future numbers and the statistics for improved performance over the next season or quarter. And both baseball teams and businesses have to make choices even though they cannot know, with complete certainty, where they will end up as a consequence of the actions taken today.

The reporting of business performance is similar to the use of a scoreboard to report on baseball performance; both are at the tail end of a process that begins with defining information needs. Who won the game? What were the quarterly earnings per share? The reporting can begin only after the appropriate measurements have been determined. To extend this analogy just a little bit further, defining information needs in business is often a race without a finish line, since businesses are constantly changing. Change makes the information needs of businesses dynamic because what is important to them changes with time. For example, a start-up company may begin by measuring customer acquisition; as the company matures, measuring customer retention becomes more appropriate. The questions are moving targets. Providing the right information in a timely fashion requires anticipation.

Why Use Graphics?

This book uses many kinds of charts and graphs to focus measurements and to enable managers to unlock the potential hidden in their business data. Graphics for business purposes are used daily by millions of people for such things as:

  • Improving efficiency and effectiveness
  • Improving quality
  • Solving problems
  • Planning
  • Teaching
  • Training
  • Monitoring processes
  • Looking for trends and relationships
  • Reviewing the status of projects
  • Developing ideas
  • Writing reports
  • Studying sales results
  • Reducing costs

With ever-increasing amounts of data, businesses often use charts and graphs to increase productivity and improve quality. Fortunately, as a result of developments in computer equipment and software, most of the popular charts and graphs used on a daily basis can be generated rapidly, easily, and with little or no special training. Yet the choice of which charts and graphs to use is still an arbitrary process.

An important note: The recommendations offered in this book are guidelines, not hard and fast rules. In some cases, aesthetic concerns, context, or your intended emphasis may override my advice. Moreover, the recommendations occasionally may interact in unexpected ways. Nevertheless, some guidance at a fairly general level is possible. It is sometimes helpful to generate a rough sketch of several alternative displays that follow the recommendations and then to evaluate each one. This is particularly easy to do on a personal computer with a good graphics program.

Many of the charts and graphs presented here were created using the Microsoft Office Suite of software (PowerPoint and Excel). The CD included with this book has templates that will save you much of the initial time required to set up the graphics; then these formats can be used multiple times. Subsequent use is much less time-consuming.

Many books are available on computer graphics. These other books tend to focus on topics such as websites; three-dimensional graphics; geometry and mathematics; engineering; or how to use a specific software package, such as CorelDraw or Freelance Graphics. None of these other books combine management and graphical presentations in the way that Visualizing Your Business: Let Graphics Tell the Story does.

Where to Start

Clarity is the first aim, economy the second, grace the third. --Sheridan Baker

All too often great analysis is lost in a fog of spreadsheets. The ability to present sound analysis with clarity and insight distinguishes great analysts from good number crunchers. I believe that the ability to produce good charts and graphs is the result of thinking about an issue as a complex network of problems. Charting is therefore both a science and an art. As a science, it is a tool to analyze problems. As an art, it helps to coordinate the activities of other employees. It is one way to describe an issue from a particular point of view at a particular point in time. The best charting of which we are capable requires at least as much science as it does art. I am as interested in improving the art as I am in improving the science.

Most managers agree: It is easy to get data, but it is increasingly difficult to convert this data into meaningful information. Managers today complain of "drowning in data while thirsting for information." Data is everywhere, but it never seems to be what the managers want. Most database reports get thrown away without ever being looked at. How can that be? The answer is simple: Data and information are not the same thing! There is a need to reduce the vast array of data to a smaller set of information that is useful for decision making and understanding. Information tells you something. It informs you. That is the key characteristic that makes information valuable to managers.

You might say that a manager's use of a chart to present a business issue is not unlike what a movie director, using a technique such as montage, might do with something called "boy meets girl." Or what the super high-speed camera does with a flame at the instant that it is snuffed out. The clarity being sought is achieved only by accepting increasing complexity and establishing a common framework within which issues can be related and evaluated. If things never changed, then getting all the right information to all the right people in any organization would be a simple matter of time. Eventually all the important data would be available, and all the important views of the business would be known. But the reality is that business is dynamic. No matter what business you are in, nothing stays the same for long. Change leads to competition, competition fuels ingenuity, and ingenuity drives change. New products and services get introduced. Old ones become obsolete. New opportunities pop up--along with new competitors. Managers reorganize to align with new market realities. New processes replace old ones. This cycle of change presents opportunities to those willing to rise to the challenge.

A chart is a special kind of picture that has no visible resemblance to the physical world. It is an abstraction, in much the same way that letters and numbers are abstractions. And just as there are 26 letters in the alphabet and 10 Arabic numerals, there are also a finite number of chart types that can be counted and indexed.

I have found that even though businesses create an enormous and perishable mass of data, limited numbers of enduring chart types are used to present that data. Businesses tend to convey similar issues over and over again using the same types of charts and graphs. While you may have used only a fraction of these charts, the larger your portfolio of charts, the more likely it is that you will find a chart that is ideally suited to convey your message.

The huge volume of information generated as a by-product of managing an enterprise demands a pragmatic new approach to filtering out the nonessential data and correlating one piece of data with another. Using graphics is a technique for dealing with the dual demands of handling complexity while simultaneously providing simplicity. Graphics are abstract pictures that can communicate the information contained within numbers to allow a better understanding of the numbers and therefore enable better decisions. For this book to be beneficial, the proper (or most useful) graphic must be selected. Even after selecting the type of graph, a large number of decisions related to the actual representation must be made. To optimize the effect of a graphic, you must look at the details of a representation and ensure that the data is revealed rather than obscured.

A primary purpose of an accounting system is to accumulate and to communicate economic data for use by those making decisions. Due to the proliferation of computers, over the past several years there has been an explosion of information available to these decision makers. There has also been a shift in organizational culture toward increased employee involvement in decisions. This means that there is an increase in the number of nonfinancial people involved in the organization's decision-making process. Many organizations are moving rapidly to situations in which more complex information is being interpreted and acted upon by decision makers without extensive financial experience.

Graphics have become an essential element in the communications arsenal of the modern business. Internally or externally, powerful graphics can send an unambiguous message. The best graphics are not puzzles to be pondered. They gracefully display a well-developed idea and well-researched numbers or facts. Virtually anyone can read them immediately. They help make people care about the point you are trying to make.

When to Use Graphics

A picture is worth ten thousand words. --Chinese proverb

Nearly any kind of business will benefit from some form of chart or graph. Shareholders will have a better grasp of earnings or losses when a chart shows them where the money went. A vice president of operations will better understand his or her cost objective when a chart shows how the objective fits into the overall financial plan. People truly do stretch more when they can put their actions in the context of goals.

Charts and graphs are classified as presentation types when they are used primarily in formal or semiformal presentations. Graphics are often an essential component of a presentation. Charts and graphs are a "must" whenever it is essential that your audience retains your message and the presentation includes numbers or mathematical calculations. Another major classification is operational charts and graphs, used primarily for activities such as analyzing, planning, monitoring, decision making, and communicating in the ongoing running of a business. They are used to supplement or replace tabulated data and written reports. Both presentation and operational charts and graphs tend to expedite group decisions and shorten meeting time.

Did you know that most humans absorb more than 80 percent of what they learn through the sense of sight? That means that if you show something to people, they are far more likely to remember it, at least for a while, than if you tell something to them. Show and tell at the same time, and your audience will remember even more. People retain more information when they hear it and see it rather than just hear it. Two senses are better than one. But the chart must complement, not distract from, the oral presentation.

Even so, numbers do not easily yield their meaning when displayed in the typical spreadsheet format. Rows and columns communicate meaning poorly, because numbers are visually similar. In addition, relative position is a big aspect of visual communication, and yet it provides almost no information in a spreadsheet format. In a sea of numbers, grasping relationships between data points requires relatively detailed examination of each data point to convert the absolute value of the data points into their relative value. On the other hand, charts and graphs communicate meaning far more quickly and efficiently because the relative nature of the information is the most prominent feature. The exact value of any particular data point is visually subordinate to its relationship to other data points. In other words, charts more directly illustrate the context, which in turn provides meaning. No wonder that adding graphics to your presentations will increase the amount of information retained by your audience, and the use of graphics can reduce meeting time.

Geri McArdle, in Delivering Effective Training Sessions, writes that adding graphs, charts, maps, or photos to a presentation increases the amount of retained information by as much as 55 percent. For example, people who have attended a show-and-tell presentation will retain about 65 percent of the information after three days, compared to about 10 percent retention for audiences who have simply heard the information.

A study done by the Wharton School of Business demonstrated how the use of graphics reduced meeting times by as much as 28 percent. Another study found that audiences believe presenters who use graphics are more professional and credible than presenters who merely speak. And still other research indicates that meetings and presentations reinforced with visuals help participants reach decisions and consensus in less time. That's a strong case for translating numbers into graphics!

The following are the reasons for using presentation charts and graphs.

  • They assist in the rapid orientation of an audience.
  • They aid in the audience's understanding and retention of the material presented.
  • The audience receives graphical material more favorably.
  • The presenter is perceived as more prepared, professional, and interesting. The following are the reasons for using operational charts and graphs.
  • Data can be organized such that analysis is more rapid and straightforward.
  • Viewers can more rapidly determine and absorb the essence of the information.
  • Large amounts of facts can be more conveniently and effectively reviewed.
  • Deviations, trends, and relationships stand out more clearly.
  • Comparisons and projections often can be made more easily and accurately.
  • Key concepts tend to be remembered longer.

To understand the power of charts and graphs, consider the story of how a chart helped change the placement of armor plating on Allied bombers during World War II. In this instance, a chart saved 1,000 Allied lives, maybe more. During the war, the mathematician Abraham Wald was trying to determine where to add extra armor to planes. He conducted painstaking research on the planes. Convinced that his hypothesis was correct, he plotted the pattern of bullet holes in returning aircraft. His conclusion was to determine carefully where returning planes had been shot and put extra armor every place else! Wald drew an outline of a plane and then put a mark on it where a returning aircraft had been shot. Soon the entire plane had been covered with marks except for a few key areas. Wald concluded that since planes had probably been hit more or less uniformly, those aircraft hit in the unmarked places had been unable to return. Thus those were the areas that required more armor. He presented his graphic to Air Force commanders, who added the armor. Wald helped prevent future Allied casualties by discovering how the planes had been shot down and making his case through the use of effective graphics.

Contrast Wald's wartime use of graphics to January 1986 when engineers at defense contractor Morton-Thiokol had a hunch that the space shuttle Challenger should not be launched because the cold weather might cause failure of the O-rings that helped seal joints on the rocket motors. To argue their point, they faxed 13 charts to NASA. However, according to informational graphics expert and Yale professor Edward Tufte, not one made a clear enough connection between cold temperatures and O-ring failures. The NASA decision makers were not convinced. The space shuttle was launched, the O-rings failed, Challenger exploded, and seven astronauts died.

Many graphics lack impact. While today's personal computer software packages, with their do-it-yourself graphics and programs to present images, have put graphics capabilities into many people's hands, these capabilities are often misused. By selecting the most meaningful tool from those presented in this book, charts and graphs can help make effective arguments in any profession--as long as the data is presented with both force and integrity. "There are displays that reveal the truth and those that do not," writes Tufte in Visual Explanations. The Allied bomber crews, the Challenger astronauts, and the CEO in the hot-air balloon all would agree that if the matter is an important one, then getting the displays of evidence right or wrong can possibly have momentous consequences.

Getting Numbers to Tell the Story

You've got to see it to believe it. --Anonymous

Charts and graphs are often used to communicate focused messages. One of the most powerful ways to present numerical data is with charts and graphs--formats that can instantly translate an enormous collection of numbers instantly into concise, eye-appealing statements.

Here is a simple formula to remember when trying to get numbers to tell a story: Data + Relevance + Context = Information. Data is only one of the required ingredients in the recipe for information. To deliver information to decision makers, we must, at a minimum, provide relevance and context, in addition to data. In any given situation, only a limited number of the available data points are relevant. The first step in extracting information from data is sorting the relevant from the irrelevant. The next step is establishing context. Context is the multitude of important relationships that govern the interaction of one data point with another. Context is essential because decision makers are keenly interested in cause and effect and in where data points fit in relation to one another. Context provides meaning.

Adding charts and graphs to your presentations will increase the amount of information your audience retains. These graphics allow the audience to view only the data that is relevant to their immediate needs in the context within which they need to see it. Relevance and context are particularly troublesome for finance groups. The reason is that relevance and context depend on both the individual and the individual's particular situation. What is relevant to a chief financial officer may or may not be relevant to a vice president of marketing or a chief operations officer. Furthermore, because each has a different perspective, the desired information context could be different for each of them as well. To make matters worse, the decision makers themselves may not know ahead of time what data is relevant or what context they will need it in.

Few would argue that simply providing someone with information means that they automatically understand that information. Information is inanimate. Understanding, on the other hand, is the mental grasp or comprehension of that information. Obviously there is a difference, but what impact should that have on your choice of graphics?

If understanding is the objective, then it is important to realize that merely exposing decision makers to information does not necessarily provide the value that you are looking for. Information is not the primary end game, since it is one step further to insight. That is because comprehension is the final step in understanding. The information you make available has to make the journey into the mind of the decision maker and take up residence. Promoting understanding means that your graphics must support decision makers all the way from seeing data through comprehending it.

There are ways to maximize the probability that decision makers transform the information we provide into understanding. One very important step is optimizing the presentation, so its important meaning is communicated most effectively. The vast majority of business information is consumed visually. Whether in paper reports, spreadsheets, or memos, most of us depend on "seeing" to extract meaning. This bias results because our other senses (smell, taste, hearing, and touch) are seriously limited when it comes to communicating information that is largely numeric. The only efficient way to translate such complex information is visually.

Fortunately, with today's spreadsheet software, you do not have to undertake that translation manually. Most of the work is done for you with a few mouse clicks. For some charts, you may need to add a little formatting and a few formulas. The resulting graphic can then be printed or transmitted electronically.

The same data can be displayed in different ways and tell different stories. Consideration should be given to:

  • Scale--for example, different scales for the same data could show a steep slope or a gentle slope, which may tell two different stories
  • Interval--hour, day, month, quarter, year, and so on
  • How you express the value--for example, sales could be number of widgets or dollars
  • Unit of measure--percents vs. whole numbers; change on a small base could tell one story using percents, another using numbers
  • Decimals--the more decimals shown, the greater degree of precision implied; sometimes rounding is more honest

Executive Summary

  • In today's business environment, many of us are lost or uncertain. One reason why we are lost or uncertain is because we are receiving too much irrelevant data and not enough meaningful information.
  • We need tools to make sense out of extreme amounts of data.
  • This book is a reference book, a sourcebook--a treasury of 101 tools to analyze and convey important business issues simply, inexpensively, and quickly yet thoroughly.
  • By having samples of 101 different types of charts available, you will be more likely to pick the correct chart in the correct situation.
  • Using these tools will help you to navigate many business situations and to gain insights faster.
  • Helping your company managers understand data will enable them to make better decisions and to perform their jobs more efficiently and effectively.
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Table of Contents

1 Introduction 1
2 Tracking 17
3 Variances and Comparisons 29
4 Trends and Change 39
5 Relationships 63
6 Presentation 85
7 Value Ranges 103
8 Schematics and Maps 107
9 Organizing Data and Information 119
10 Planning, Scheduling, and Project Management 139
11 Probabilities, Prediction, and What-If 147
12 Strategy 155
13 Finance 181
14 Marketing 193
15 Performance 205
16 A Thousand Points of Data 221
App. A: Anatomy of a Chart
App. B: Defining Chart Types
App. C: Financial Charting in Excel 97
References 232
Index 235
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  • Anonymous

    Posted May 25, 2001

    Valuable, comprehensive 'reference guide' for business presentations

    I find myself referring back to this book frequently when tackling new projects such as financial presentations and investor roadshows. The array of 'real world' examples presented is wide in scope, providing a comprehensive yet detailed look at different approaches for illustrating business data.

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