This is the first video of a three-part interview series with Dr. Rolf Hichert.
Dr. Rolf Hichert is the president of International Business Communication Standards (IBCS) Association. On his recent visit to Ljubljana, our CEO Andrej Lapajne did an interview with him.
In this video, you'll learn why it's important to introduce standardization in business communication, how a monthly sales report should look like and what are the most important concepts in IBCS.
The importance of standardization of business reports, dashboards and presentations
Andrej: Hello, my name is Andrej Lapajne, CEO at Zebra BI. Today I'm very fortunate that we have Rolf Hichert discussing IBCS standards in detail.
I think it's going to be a very interesting discussion. Dr. Rolf Hichert was working at Fraunhofer Institute, was a consultant at McKinsey and Co., worked at two software companies, founded one, was a professor at the University of Constance and eventually started his company, now called HICHERT & FAISST where he developed SUCCESS rules, which are very well known and have solved communication problems and reporting issues within companies. Now all this is culminating in International Business Communication Standards (IBCS).
Rolf, welcome to Ljubljana.
Rolf: Thank you, Andrej.
Andrej: Let's get straight to the point. Why should a company implement International Business Communication Standards?
Rolf: Short question that requires a complex answer. Let's first talk about the quality of standards in other applications. Standards in traffic signs, standards in music, standards in engineering, standards in the plugs ... I brought my computer, the plug fits in your socket. It's practical if we have standards for all kinds of aspects.
I think it's practical if we agree on standards also in communicating business content. So if I give a report to you showing sales or head count or profit margins and I use the same notation concept as you, it makes it easier for you and your colleagues to understand it. Standards are visualization standards, standards in terms, colors - all aspects of communication.
Today we talk about presentation material - PowerPoint reports, dashboards, etc. for communicating business content.
Andrej: What is wrong with spreadsheets, PowerPoint slides and dashboards that people are using today in internal business communication?
Rolf: Nothing is wrong. You can use it and you will use it in the future. The suggestion of our association is that we use the same expressions and the same visualization for the same content. Today you can tell if you look at an Excel sheet or PowerPoint slide who produced it or which company made it. The author is very easily identified. But I think it should be always the same. If you talk about monthly sales or about average head count or certain margin, it should be the same notation, wording, colors.
We don't have this today. Today the CEO might get blue line charts for sales from one department and maybe a red pie chart from the next department, maybe some columns or bars. Every author of reports decides himself or herself how report should look like.
Andrej: It would be very hard to drive if we saw a different sign on every crossing, right? It's much easier if I get a blue round shape with an arrow. I know I have to turn right even if I go across the country. It’s standard, I can drive.
Rolf: Think about red and green lights. It's practical that in Slovenia and Germany and Switzerland, even in United States and UK red means stop and green means go. Just imagine if we would change it and in some countries it would be the opposite...
We agree on standards in every part of our daily life - from the electrical sockets, to the voltage, to the driving on the right or left hand side. Architects are using standards, so are electrical engineers. Even the chess notation is standardized worldwide. Except in business!
If I ask you how does monthly sales look like today? Well, today maybe it's a green line and tomorrow it's a blue pie chart.
Andrej: That’s exactly my next question: how does monthly sales look like according to IBCS? You're also using red and green colors, what do they mean?
Rolf: Let's start with red and green. Everything that is green has a positive variance to a certain goal, budget or previous year. That is better than expected. We don't use the color green for any other purpose. Red is a negative deviation of something - of competitors, average, company goals, ... This means the colors red and green are taken and we cannot use it for corporate design or any other purposes. We don't use red for negative values, but only for negative variances or deviations.
Now to your question about how does monthly sales look like? It depends. If we wanted to show the structure of sales, we would use a bar chart, with the bars representing different countries, products, etc. The axis is vertical, the bars with the values are horizontal. If we wanted to show the time development over months, for example twelve months of a year, then we use columns. In the beginning they are black or dark grey, because we don't have any other content yet. Later we add more details, but in the beginning everything is grey and black. That's how we start with the visualization.
Andrej: And then it can develop. For example, if I want to show the budget for the next year, it looks different than the actuals of this year, right?
Rolf: This is a very important dimension in our business. Variances and comparisons are very important in business communication. We compare all the time. All visualizations are meant to compare data. Comparisons are one of the basic challenges that we have.
If we compare actual to budget, then actual is (as I said before) a black bar or column. And budget is an outline because it has not been filled with the actual data yet. The forecast – in between budget and actual - is a hatched [diagonal stripes, annot. by editor] bar or column. Previous year is already gone, it's in the past, already gone, faded away, so it's a grey color. This is one of the top ten ideas that the IBCS tries to convey: we need a concept for the categories - actual, previous year, budget, forecast.
Andrej: So, the basic scenarios that every company has - budget and so on - are completely standardized.
Andrej: What would you say are the five most important concepts within the IBCS and what do they cover?
Rolf: There are three pillars of IBCS. The first pillar is certain conceptual rules. What do I want to say, what is my message, the structure, the storyline. This has nothing to do with visualization. The next big pillar of IBCS is the perceptual part: how do I express it, what kind of visualization do I use, scaling, which chart or table should I use, do not cut axes, do not use pie charts because there might be better visualizations. The third pillar is new. It deals with the question of semantics, the meaning. We talk about this at the moment. Scenarios mean something. Blank means budget. Grey means previous year.
We have 5 or 6 important aspects of semantics. The first one is measures. How do basic measures look like compared to ratios. How do values (currencies) look like compared to volumes (units), how do absolute variances look like compared to percentage variances. How does time development look like compared to a structure. I think these concepts already cover about 70% of the problems we have.
We're not talking about the churn rate of a telecommunication company or the hotel bed usage in a certain hotel. Those are specific business-line ratios and key factors of success. I would not try to standardize these. But as you said, sales, profit, months, actual, years - that's the same in a bank, an insurance company and beverage company.
Andrej: This means that actually internal reports of companies across industries or different locations in the world and of different sizes should look the same.
Rolf: This would be ideal, yes. If I'm an international organization that operates in 50 different countries worldwide, from China to United States, Finland, Poland and Germany, and I'm using these concepts for the business figures, it's very practical. If the people that send you the reports are using the same notations it's very practical.
It's possible to transfer these concepts from banks to insurance companies or airlines or hotel chains. They all have months and sales and profit and head-count. The basic business terms are the same.
Andrej: Even much more than that… the cost centers, accounts, calculations like YTD, etc.
Rolf: Even comparisons and the ratios are very often the same. We have to standardize the basics. We have to define about 30-40 rules and not every detail. For example if you have 2 or 3 different forecasts (FC1, FC2, and FC3) it's your decision how to visualize them. Our suggestions are to have standards for the overall dimensions. The details, that’s your decision.