Nugget #1: If you cannot put it in a waterfall, you do not understand it!

This is the first of my knowledge and experience nuggets I will be sharing, hopefully for the foreseeable future. The objective of the nuggets is to get you to think, around some meaningful topic, for at least a little bit. The goal for me is to reflect, problem solve and synthetize in the process.

Waterfall (chart) is a visual way of showing how certain value (number!) is built up from discrete elements or how it de-composes. Why did I pick this particular topic? Because waterfall is more than a chart and visualization technique, it is really a way of thinking, structuring and understanding events, developments, phenomena - it is a mindset, habit and a culture.

For those who think they have not seen it, here is a simple example of a waterfall. You can see how each element contributes to the build-up or build-down of the resulting value, starting from, surprise, a starting value.

The message here is that waterfall forces you to think in terms of concrete, measurable, values, starting point and discrete, mutually exclusive (no overlap) and collectively exhaustive (they explain fully how starting value turns into the ending one) steps.

Now try using it! Always! Think how what you want to say fits into a waterfall. How can you waterfall it? How often can you not assign values to things you really should be able to?! Try hard. Force yourself not to stop until you can waterfall it. Because if you cannot… there is a HIGH chance you do not understand it, cannot explain it to others (simply!) or execute it effectively.

Your revenue changed – how much is volume, how much is mix and how much is price? Waterfall it. You have 5 transformation initiatives which will contribute to efficiency – how much will each of them contribute. If you cannot waterfall it your transformation hinges on hope and will likely fail. In fact, you yourself do not understand your transformation – dangerous place to be.

How do you know you are focusing on the most important things – can you waterfall the impact of each? How much impact is each effort / resource / element supposed to have, or you think it will have, or you are guessing it may have? Whatever the source of the number, you need to quantify it and, in the process, really arrive at understanding it. Waterfall it.

Waterfall really helps you clearly see and show where you are starting from (relevant baseline), what the impact is, step by step (so, no flying blind), what has the biggest impact and what a little less (so you can invest resources; or prioritize), and where you are likely to be ending.

Or the other way around, sh*t happened, performance is down – where is it coming from, what should I address (first, second,…)? Can you build a waterfall backwards or is it just a guess work (or is it a lame excuse like: “it is too complicated”, “there are many factors”). If you do not invest NOW to waterfall it, trust me, it will happen again.

WATERFALL IT! (it is painful, esp to start with, but it will help you more than you can realize!)