Concepts like “metric trees,” “driver trees,” “growth models,” and “business equations” all capture the core idea that a business model is an ecosystem of interconnected variables.
Let’s explore these terms and how they frame the interconnectivity of metrics.
1. Driver Trees: A driver tree is a familiar concept, where a metric is broken down into its component drivers. These drivers often represent segment slices of the metric—such as categorizing customers into new and existing, or breaking down traffic into its various sources.
This structure is typically MECE (mutually exclusive, collectively exhaustive), making it easier to perform root cause analysis and metric diagnostics.
2. Business Equations: Business equations are also widely recognized, with ratio metrics and conversion equations serving as canonical examples.
The goal here is to establish well-defined mathematical relationships between metrics, allowing for clearer insights and decision-making.
3. Metric Trees: A metric tree combines the features of driver trees and business equations, offering a broader framework to link metrics across the business ecosystem, regardless of their interrelationships. This versatility allows organizations to visualize, monitor, understand analyze and operate on their metrics more comprehensively.
4. Growth Models: A growth model is a specific instance of a metric tree, where the root output node represents a growth metric. These models integrate acquisition and retention processes into one cohesive framework, highlighting the potential of metric trees not just for retrospective analysis, but also for simulating the future and forecasting growth.
