Strategy consulting firms love to use macro charts in their slides.
And there's a good reason for this Mekko charts can be a great
way to answer multiple questions with a single visualization.
Especially for data heavy presentations, like what you might find in a consulting
strategy or finance environment.
For example, this chart from McKinsey is able to show global payments revenue
broken down by region, and then by revenue type, the downside to Mekko
charts though, is they can be a little bit difficult to understand and even
more difficult to use correctly.
In this video I'll explain how to read a Mekko chart and when you
should use them, plus I'll show you some great tips for how to make
sure yours is clear and insightful.
I'll show you real examples from the consulting industry, including the one
you just saw and explain what they're doing so well and how you can do the
same, all that, and more coming up.
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In order to understand how a Mekko chart works let's first
start with a basic column chart.
As we all know, column charts, let us see data along a set of categories.
Here, we've got a breakdown of home furniture, sales by brand.
So you've got your leader here with 88 million in revenue, second place
at 64 million in revenue and so on.
And just a basic column chart is great for this kind of data, because it lets you
easily compare the total of each category.
You could also show this data in a stacked column chart.
Here you can still compare the overall revenue for each company,
but now you get to see an additional layer, which is revenue by region.
This wouldn't be good for comparing the different regions across
companies, but it does provide additional context to the data.
For example, you can clearly see that despite being the second highest in terms
of revenue, the Ben Smith brand actually does quite poorly in the north region
bringing in only 6 million in revenue.
A variation on this chart would be the 100% stacked column chart where
instead of displaying the value for each region, you can see it represented
as a percentage of the total.
So for example, with import one 7% of sales come from the West.
In this chart, the emphasis is on how the breakdown of
revenue compares across brands.
What you lose with this chart though, is the ability to compare
the totals with each other.
Each of the columns is the same height, so it doesn't show us visually how
much revenue each brand generated.
So this is where the Mekko chart comes in.
The Mekko chart, lets you use the width of the columns to
bring in an additional variable.
In this example, the width of the columns represents the total
amount of revenue for each brand.
As the widest column, posh has the greatest amount of
total revenue at 88 million.
Likewise Rhoog has the narrowest column and also the least
amount of revenue at 30 million.
In addition to this, you can still see a percentage breakdown
of that revenue by region.
Posh has total revenue of 88 million and 20% of that revenue
came from the east region.
What's more, each of these rectangles is now proportional to
how much revenue they represent.
In other words, the area of each of these provides a value, whereas before
it was only the height that mattered.
So, if I wanted to, I could change these data labels to show the revenue
of each region, instead of just the percentage total for that brand.
And here's where the real power of a Mekko chart comes into play.
The total revenue for each of these brands combined is about 287 million.
If I take any one brand, let's say posh here, it's going to take up space in
proportion to the total size of the chart.
They did 88 million in revenue, which is about 31% of the total revenue.
Visually posh makes up about 31% of the chart.
Likewise.
If you take any one section, you can do the same thing.
Spencer's did 24 million in revenue in the east region, which is why that section
makes up about 8% of the chart or about 39% of the area for Spencer's only.
Having this kind of visualization can be really valuable when you're
trying to get a quick glance at the size and breakdown of a market.
Here's a great example from McKinsey that really shows the value of a Mekko chart.
It's from an article called the global payments 2021 transformation
amid turbulent undercurrents, which we'll link to in the description.
It shows the total amount of global payments revenue broken down by
region and also by payment type.
And these values in each box represent the percentage of
payment revenue for that region.
So for example, 5% of payments revenue in Latin America came from
commercial cross border transactions.
So looking at the chart, I can quickly get a sense for how the market's break down.
It's clear that Asia Pacific makes up a good portion of global revenue,
which incidentally is the message that's reflected in the title.
I can also see that commercial account related liquidity is not only the
largest source of revenue for Asia Pacific, but also the largest source
of payment revenue across the globe.
And then I can also see that consumer credit cards in north America are
a large chunk of revenue as well, especially compared with other
sources of revenue in that region.
You can see that McKinsey also took it a step further to classify these
into commercial and consumer revenue sources by color coding, into hues of
gray on the top and blue on the bottom.
The end result is a nice looking chart with clear insights and a simple takeaway.
Now the Mekko chart isn't without criticism.
For one thing, it's difficult to compare the size of each of the
different categories against each other.
In our original chart, for example, it's hard to tell visually which group
is bigger Posh's sales in the east, or Import One's sales in the north.
For these types of precise comparisons, you're much better
off with a column or a bar chart.
Another criticism is that they can be difficult to read, especially for
anyone that's not familiar with them.
The goal of your slide should be to make it as easy as possible for your
audience to understand the key insights.
And if they're hung up on the chart, that's difficult to do.
But despite its flaws, the humble Mekko chart can actually be quite
powerful in the right situation.
Another type of Mekko chart is the bar Mekko chart where the height
of the columns is a measure of units rather than a percentage.
In a regular Mekko chart, each of the columns is the same height,
but in a bar Mekko chart, the height of each column is different.
To illustrate this, let's take a look at our original chart.
Here the height of the columns represents revenue, but let's say we
wanted to introduce another variable.
The number of stores for each brand as represented by the width of each column.
This still shows me revenue for each brand, but now I have
more context for those numbers.
I know for example, that Ben Smith is bringing in a lot of
revenue with only 12 stores.
The focus is still on the height of the columns because that's,
what's easiest to compare, but the width provides additional content.
Now, if I wanted to, I could also make these stacked columns to show revenue
by region again, but generally speaking, these types of charts tend to be a bit
confusing because there's just too many visual components to process at once.
It's best to keep it simple by focusing on a single variable with
a second variable, that's only there to provide the supporting context.
Here's another example from McKinsey that illustrates this concept well,
albeit in a slightly different way.
It shows the level of cybersecurity, maturity of different survey response.
There's black column, for example, represents the top 10% of organizations
in the sample, a group that's nearly at level three in terms of maturity.
Then this next group represents 20% and is less devout.
And then this final group is the remaining 70% with the lowest level of maturity.
But instead of just grouping these into three different columns of equal
width, like what you might do in a standard column chart, they've let
the width represent the percentage of organizations in the survey.
So when I'm looking at this, not only do I see how each group scored, but I also have
some important context, what percentage that group makes up of the whole.
When using a Mekko chart, there's a few important things you want to keep in mind.
First, make sure everything on the chart is clearly labeled.
It should be clear to your audience what each axis represents.
This is especially important for bar Mekko charts, where the width of the columns
might not be clear at first glance.
The second tip is to make sure you include outlines for each rectangle to
make sure it's easy to differentiate between the different valves.
Third, add additional information to your chart that you think might help
the audience understand your message.
This can be arrows, text, or even lines.
As in the case of this line that shows the average revenue for the industry.
Then lastly, don't use a Mekko chart unless it makes things
easier for your audience.
It can be useful in the right circumstances.
Like when you just need to get a quick understanding of the data and direct
comparisons aren't as important or in the case of the bar Mekko chart,
when you only need to compare a single variable, but adding an additional
variable can provide important context.
Otherwise you're probably better off with a simple column or bar chart.
Thanks for watching today's video.
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