Metric trees can serve as essential “systems-of-record” for aligning organizations even before they become valuable operating artifacts.
Let’s explore this concept by taking the example of a business model that at the core is about monetizing online consumer traffic - this can span well known models like e-commerce to traffic aggregator-type models where you direct traffic to external partners in exchange for referral revenue.
Imagine onboarding a new employee into an organization operating on such a model. It's natural to map out the flow of processes being managed and optimized. In well-instrumented organizations, this often translates directly into one or more metric trees.
In the attached visual, the initial step in the business process maps to the "sessions" metric, representing traffic. This traffic then progresses to higher-value actions such as clicks, leading to the ultimate desired transaction and revenue generation. Each step in this process can be mapped to relevant metrics and their interrelationships.
While revenue serves as the primary output metric, it's important to note that it cannot be directly controlled. Instead, it results from various upstream input steps, each with varying degrees of controllability.
This visual also captures which teams are responsible for the steps in the overall process. While sessions is under the ownership of marketing, as you go up the tree, you see different functions contributing to the final output, such as the partnership team negotiating referral rates.
This metric tree can be further disaggregated into meaningful segments at various levels. For instance:
- Sessions can be broken down into different marketing channels, each possibly managed by separate teams.
- Conversion to clicks depends on factors like channel quality, device experience, and user interaction with different content verticals.
- Transaction completion is influenced by preceding steps and product offerings.
This visual encapsulates vital information about the business, serving as a crucial "system of record" to align organizations on how various teams collaborate to drive overall value.
Designing and operating within this framework represents the next frontier for data-driven organizations.
