When to Use a Cascade (Waterfall) Chart When to Use a Cascade Chart Use a Cascade (waterfall) chart when you want to map changes in key variables (profit, contribution or sales) between periods and show why they changed. Some examples of when you would use a Cascade Chart are to illustrate: • Cost Breakdown • Profit Breakdown • Profit Change • Multi-Year Profit Change • Growth Breakdown • Growth Breakdown—Vertical • Growth Over Time by Category • Comparing an Average and a Top Performer Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Cost Breakdown $15M $2.2M 10 $0.8M $0.4M $0.7M $12.2M Other Total Expenses $1.8M $6.3M 5 0 Salary Benefits Rent Technology Training You can use a Cascade chart to breakdown total expenses into its component parts. The above example could be the cost structure of an IT consulting firm. Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Profit Breakdown Profit Contribution by Practice Area $20M $2.1M -$0.4M $3.6M 15 $15.4M -$0.7M $4.5M 10 $6.3M 5 0 Strategy Process Technology ERP Cloud Corporate Total Overhead Expenses You can perform a similar analysis to the cost breakdown for revenue or profit. This is an example of profit by division or practice area. You can show both positive and negative contributions to profit. This is not the case if you used a pie chart. Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Profit Change Net Income Change from 2010 to 2011 $3,000M $1,737M 2,000 -$367M -$243M -$244M -$159M -$37M 1,000 $1,000M -$293M $606M 0 2010 Net Revenue Cost of Marketing Income Increase Revenue & Sales R&D G&A Other Taxes 2011 Net Income One of the most common uses of a Cascade chart is to show profit change from year to year. Start with year 1 profit, show the key change elements, and end with year 2 profit. Source: The Facebook Waterfalls Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Multi-Year Profit Change Net Income Change from 2010 to 2012 $800M 600 $606M $22M $34M $662M $12M New Products 2011 Net Income Current Product Growth $46M $720M New Products 2012 Net Income 400 200 0 2010 Net Income Current Product Growth You can extend the Cascade to display multi-year profit changes. In this example, new products contribute significantly to growth. Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Growth Breakdown 100 38% 100% Other cities and rural Global GDP Growth 80 19% 60 18% 40 13% 20 0 Number of Cities Share of Population 12% Megacities (>10M population) Large Midsize Small Middleweights Middleweights Middleweights (5-10M) (2-5M) (150K-2M) 23 45 144 388 - 5% 5% 7% 7% 75% Cascade charts can break down growth over time. It could be revenue, profit or in this case global GDP growth. This chart is a bit more complex, but it has a powerful message. 60% of global GDP growth between 2007 and 2025 will come from the 600 largest cities, even though these cities make up only 25% of the world’s population. Data columns added to the Cascade show number of cities and share of population. Source: McKinsey, Urban world: Mapping the economic power of cities Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Growth Breakdown - Vertical Contribution to Global GDP Growth 2007-2025 Number of Cities Global GDP Growth Share of Population 100% Other cities and rural 38% Small Middleweights (150K-2M) 19% Midsize Middleweights (2-5M) 18% Large Middleweights (5-10M) 13% Megacities (>10M population) 12% 0 25 50 75 - 75% 388 7% 144 7% 45 5% 23 5% 100% You can also view Cascade charts vertically. In this case, it’s easier to see the relationship between GDP growth, and share of population. Source: McKinsey Global Institute Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Growth Over Time by Category Projected global energy supply mix in quadrillions of BTUs 600 500 18 24 4 7 7 10 3 16 2 Nuclear Renewables Nuclear 400 Renewables Renewables Fossil Fuels 591 Natural Gas Natural Gas Coal Coal 200 Liquids Liquids 0 2010 Natural Gas Coal (China) Coal (ex China) Liquids Liquids Nuclear (China) (ex China) Hydro Wind Other 2020 renewables(forecast) You can breakdown change over time. In this chart, we examine the growth in energy supply between 2010 and 2020. Two-thirds of the growth will come from fossil fuels with a shift to natural gas and an increased consumption of oil and coal in China driving the growth. Source: Bain & Company, Eight Great Trillion Dollar Growth Trends to 2020 Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Comparing an Average and a Top Performer Cost per degree delivered $80,000 75,000 $74,268 7% 70,000 5% 65,000 8% 60,000 3% $57,153 Non-core services Top Quartile 55,000 50,000 Average Completion efficiency Instruction Core supports You can illustrate how an average performer differs from a top performer. In this example, we compare the cost per degree delivered in an average competitive bachelors/masters program to a top quartile program. Source: McKinsey, Winning by Degrees Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved. Choosing the Right Chart for the Job A successful business chart should help you as well as your audience make sense of what would otherwise be complex numbers and ideas. When designed poorly, charts just confuse. But choosing the right chart and utilizing good chart design will convey your message clearly and effectively. For more information on other charts available in Mekko Graphics and when the right way to use them please explore the following resources: Mekko Graphics charts not available in PowerPoint: Marimekko Chart Bar Mekko Chart Our Chart Finder and Sample Presentations can help you learn about other charts enhanced by Mekko Graphics Copyright 2012 © Knowledge Management Associates, LLC. All rights reserved.