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	= Example in Portfolio Management =		= Example in Portfolio Management =
−	[[File:Sankey2.png|550px|thumb|right|Technology Portfolio Management example of Sankey Diagram]] The main purpose of the Sankey Diagram is to visualize the flow of resources quickly and easily. This section will focus on how a Sankey Diagram can be useful in a Portfolio management case. First, there is a need to define some basic terminology used in a Technology Portfolio as this example is based on one.	+	[[File:Sankey2.png|550px|thumb|right|Technology Portfolio Management example of Sankey Diagram (made by author)]] The main purpose of the Sankey Diagram is to visualize the flow of resources quickly and easily. This section will focus on how a Sankey Diagram can be useful in a Portfolio management case. First, there is a need to define some basic terminology used in a Technology Portfolio as this example is based on one.

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Revision as of 18:03, 6 March 2022

By Sonia Guerra Loji (s203379)

The article's aim is to highlight the usefulness of the Sankey diagram in a project & portfolio management context. The article includes a discussion of the diagram's pros and cons from the Managements perspective.

Contents 1 Abstract 2 Elements of the diagram 3 Types of Application 3.1 Analyzing Flow [6] 3.2 Analyzing Time-Based patterns [8] 3.3 Analyzing Hierarchy type data [9] 3.4 Quick trick to replace Machine-learning [11] 4 Example in Portfolio Management 5 Programing 6 Limitations 7 Conclusion 8 Annotated Bibliography 9 References

Abstract

Within project & portfolio management it has become even more important that leadership is able to visualize where resources are being allocated and used. This is in terms of simple supervision over the projects, but also to optimize the limited resources an organization has. The Sankey diagrams are a graphical way of visualizing the flow of resources in a team, project, process, company, etc. Resources mapped in a Sankey diagram can be anything from materials, monetary funds, people allocation, activities, etc.

Beginning in 1898, the Sankey diagram was first used by an Irish captain named Matthew Henry Phineas Riall Sankey. This first implementation of the diagram showed the energy efficiency of a steam engine. ^[3] Nowadays there are four main implementations of the Sankey diagram. First, to analyze flow, flow being whatever has movement (like resources) in the scope defined by the diagram. Second, to analyze time-based patterns, this type can visualize the behavioral change of a specific persona, group, thing, over a specific time-lapse. Third, to analyze hierarchy type data, this is used when there are connected relations between the data but a hierarchy between the data has been defined. This hierarchy defines the order in which the data will be split and mapped in the diagram. And finally, the "quick trick" to replace Machine-learning, the Sankey diagram can be used to find and understand patterns in the data instead of using machine learning. ^[4] All four applications of the Sankey diagram can produce valuable insights to data in a visual and straightforward way to understand.

Correct application and automation of the Sankey diagram can provide fast and easy access to complicated data. The purpose of the article is to dive further into the possible applications and key characteristics of the Sankey diagram, as well as the benefits and limitations it can bring to upper management when making decisions in terms of resources and strategy.

Elements of the diagram

The Sankey Diagram is made up of five essential parts; this is flow, nodes, origin points, endpoints, and widths of the flow. As seen in the example diagram to the left, the nodes are identified by colored lines and letters. The nodes represent the activities, projects, people, etc. that are part of the visualized system. The flow of resources is visualized in the diagram by gray waves that connect the nodes, these gray waves widths represent the number of resources being passed from one node to another as well as the path the resources take through the system. This means that if the width of the gray wave is thin, few resources are being passed on to the next node. While if the gray wave is thick, a substantial number of resources are being passed on to the next node.

As mentioned previously the resources can be anything from money, human labor, materials, etc. The system as a whole can represent the flow of a process like a steam engine to the circulation of a global economy. For this reason, it is important to identify the origin points (where the system begins) and the endpoints (where the system ends). In the case of the example diagram, the origin points are nodes A and B, while the endpoints are nodes R, S, and T. In general terms the system flow should be read from left to right, and therefore when mapping the system's nodes the origin points should be towards the left extreme and the endpoints towards the right extreme. The Sankey Diagram can also show the equality or inequality between the inputs and outputs of the nodes. In the example diagram, it can be seen that node Z receives and gives the same flow, but nodes X and Y have a higher input than output. These visualizations of types of inequalities can help decision-makers notice areas of improvement faster. Depending on the program and style used to create the visualization, features like the color of the flow waves can be changed to resemble the color of the node it is originating from. Other more advanced features can be added to the code to create a more self-explanatory diagram, for the purpose of this article only the basic features are mentioned.

Types of Application

According to writer Pranay Dave, there are four main use-cases for a Sankey diagram ^[5]. Depending on the use-case, the diagram can visualize simple flows as well as aid in advanced analytics. Dave's main observation of the Sankey diagram is that it can be a powerful visualization tool if and only if it is used in the correct context and purpose.

His reasoning for this is that a visualization tool used incorrectly can serve little purpose and provide little to no insight to the user. An example he uses in his article to explain the incorrect use of diagrams is that of using a bar chart to visualize sales trends. Even though the bar chart can provide insight, a trend line chart could more effectively represent the changes in sales trends over the years. Under this logic, Dave has defined four use-cases in which it makes sense to use a Sankey Diagram.

Analyzing Flow ^[6]

At its most basic form, the Sankey diagram visualizes the flow of resources that enter and exit the system under study. At the core of the diagram, its purpose is to identify at what stage of the process resources are leaving the system and at what rate that is. In the example figure, there is a process whose origin point is Primary availability and endpoint is Consumed. Applying this same flow to the life cycle of cow meat, the cow would be the Primary Availability where we have 100% of the cow. In the Retail Availability, the cow is now divided into different cuts of meat and 16% of it has gone to waste (such as organs and other undesirable parts). In the Consumer availability, 76% of the original cow is being sold at the market but 8% of it is not selected by consumers while the meat is still fresh and therefore must be thrown away. Finally, in the Consumed stage, only 55% of the original cow is used and consumed. 4% of the cow is wasted due to the expiration date after the purchase and 18% is wasted due to cooking losses and/or left-over food not being eaten. Mapping the flow of resources can identify the areas of the system where the most waste is occurring, allowing decision-makers to develop actions plans to counteract and prevent waste.

Analyzing Time-Based patterns ^[8]

Sankey diagrams can also be used to identify time-based patterns. Author Dave describes this approach as understanding the customer's journey through time. In this example, the Sankey diagram represents a person's living quarters choices. Depending on the life path the individual is in, he/she can choose to move out of their parent's home to live with a roommate, a significant other, or alone. As life progresses the individual sharing his living quarters can decide to rent or buy his own place.

Companies typically create personas to identify who their potential clients are and what their needs and wants are. In many cases, the studies go as deep as to simulate the personas' decision-making pattern. The Sankey diagram in a time-based perspective can visually show the pattern trail personas typically take. This creates a roadmap for companies to target people that fit into the persona identity with products depending on the stage of the pattern trail they are at that moment. For example, someone that has just moved out of their parent's home doesn't have a lot of money to spend on furniture, so IKEA starts targeting that person with their affordable and stylish furniture. In comparison with someone that has been living on their own for a while and has greater purchasing power, they would like to invest in something more permanent. In that case, a company like Jacobsen could target this potential buyer as this person is now at a stage where this would be considered a reasonable purchase as opposed to when they first moved out of their parent's home.

Analyzing Hierarchy type data ^[9]

In Dave's article, he describes the Hierarchy Sankey diagram as a flow diagram that follows hierarchy type data. What this means is that the data must follow a specific order and it must not mix one type with the other at the same level in the diagram. For example, in his article, Dave explains that he is provided with a dataset on African mobile distribution. This dataset provides the country, city, region, segment, sales, and profits. The data is classified as hierarchical and it must follow the order of the country first, then the city, and finally the segment. This hierarchy formulation makes it easier to compare data between its equals. In the example diagram, it is clear that Nigeria is the country with the most mobile users while Liberia is the country with the least mobile users. At a city level, it can be concluded that all the African cities have a quite different distribution when splitting into the three segments, but there is a clear preference for one of the segments over the others. While at the segment level there is not much overall difference between the three options. What can be taken from the diagram is that each mobile segment can identify what parts of the African continent require their services and invest more heavily in the infrastructure to expand their market.

Quick trick to replace Machine-learning ^[11]

In his article Dave makes a bold statement that Sankey diagrams are able to replace Machine learning to a certain degree. Machine learning at its core is used to analyze multiple inputs and outputs and identify patterns from the data.

The idea that the Sankey diagram can represent a visual embodiment of the machine learning analysis is not so crazy when the data is not too extensive. In Dave's example, a bank has gathered information about the individuals they send marketing campaigns to. The point of the analysis is to identify which type of individuals are more likely to respond to marketing and who are less likely. The analysis involved the individual's occupation, level of education, marital status, and whether they responded to the marketing campaign or not.

Even though Dave creates an interesting point of discussion by proposing to replace machine learning with a simpler Sankey diagram, I would have to disagree with him to an extent. It is true that the diagram can visualize the flow between the different customer attributes and analyze that most customers do not respond to the marketing. But there is one big flaw when using a Sankey diagram instead of machine learning, that is that we cannot trace back from those that did respond to the marketing to which were the attributes that contributed to this answer. One of the major flaws of the Sankey diagram is that there is no way of tracing back your steps from the endpoint to the origin point. This is because the diagram is made in such a way that the number of resources that are input into a node are then redistributed when inputting them into another node.

For example, in the image, it is shown that most of those that responded to the marketing campaign are married. But out of those that we know that are married how many had university degrees, high school degrees, or basic education? The answer is inconclusive, as the diagram cannot clearly define where those married individuals came from. In conclusion, if the bank wanted to analyze the data to identify which type of people responded better to their marketing campaign this approach is not optimal and they would be better with using machine learning. But if their goal is to only visualize the general consensus of who and who many were targeted and responded to then the Sankey diagram is a clever way to understand your data.

Example in Portfolio Management

The main purpose of the Sankey Diagram is to visualize the flow of resources quickly and easily. This section will focus on how a Sankey Diagram can be useful in a Portfolio management case. First, there is a need to define some basic terminology used in a Technology Portfolio as this example is based on one.

As many companies have transitioned from a traditional Waterfall methodology where actions are dependent on other actions to an Agile methodology where actions can be done in parallel, a new terminology like Epics and User Stories have been introduced ^[13]:

• Stories, "also called "User Stories," are short requirements or requests written from the perspective of an end-user."
• Epics, "are large bodies of work that can be broken down into a number of smaller tasks (called stories)."
• Milestones, "are collections of epics that drive toward a common goal."

In a Technology Portfolio, Scrum Teams are formed to tackle the Stories and Epics. A Scrum Team is "typically between five to nine individuals, who work toward completing projects and delivering products. The fundamental scrum team comprises one Scrum Master, one Product Owner, and a group of developers."^[14].

In a Technology Portfolio, the head of the portfolio must be able to assess the status of all projects within the portfolio at any given time. This means that all activities must be accounted for and must align with at least one of the milestones of the portfolio. Tasks that do not align with a milestone do not add value and therefore are considered a waste of resources. At the same time, a Portfolio Manager can compare the planned vs actual resource allocation as well as in what direction each Scrum Team is benefiting the bottom line of the portfolio. In the technology example, each Scrum Team works in individual User Stories, and the combination of the User Stories makes up an Epic. Meaning that even though each team works separately at the User Stories level they might be working together at an Epic level. From a manager's point of view, the diagram can raise red flags visually when User Stories or Epics are not getting the attention needed from the Scrum Teams. This red flag can create an alert for management that more resources are needed in a specific area. These resources could be the need for more Scrum Teams as the workload demands more people or that guidance from upper management is needed to steer the team towards the right direction. In many cases, as portfolios are so big and made up of many platforms with their own subdivisions, a clear view of what the portfolio is collectively working toward is unclear. A Sankey Diagram can serve as an overview dashboard for Portfolio Managers to quickly assess the status of the Portfolio and be able to make decisions for the future quarters. These decisions can be in increasing the workload through the creation of more User Stories and Epics as the teams can produce more, forecasting the number of people that need to be hired to meet deadlines, and refocusing on the milestones with the highest priority for the quarter. The current alternative, due to not having an overview, is that this information must be gathered by having individual meetings with the Scrum Teams to inform of their status and completion of tasks. This process is time-consuming for managers and can create major delays when decisions need to be taken by upper management.

Programing

^[15]

Limitations

Conclusion

Annotated Bibliography

References

1. ↑ "[1]
2. ↑ "[2]", Kennedy, A. B. W.; Sankey, H. R. (1898). The Thermal Efficiency of Steam Engines. 12 February 2022
3. ↑ "[3]", Kennedy, A. B. W.; Sankey, H. R. (1898). The Thermal Efficiency of Steam Engines. 12 February 2022
4. ↑ "[4]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
5. ↑ "[5]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
6. ↑ "[6]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
7. ↑ "[7]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
8. ↑ "[8]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
9. ↑ "[9]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
10. ↑ "[10]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
11. ↑ "[11]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
12. ↑ "[12]", Dave P. (2020). 4 use-cases for Sankey Charts. 13 February 2022.
13. ↑ "[13]", Rehkopf, M. (2022). Stories, epics, and initiatives. 20 February 2022
14. ↑ "[14]", Indeed Editorial Team. (2021). A Guide to Scrum Teams. 20 February 2022
15. ↑ "[15]", Google Charts. Sankey Diagram. 20 February 2022. https://developers.google.com/chart/interactive/docs/gallery/sankey