Metric trees are so much more than mere visualizations. Through three compelling examples, we will explore their operational power as they capture the core business models and how different domains within organizations contribute to key outputs.
1. Revenue Tree:
First, let’s consider the canonical “revenue” metric tree for a retailer where the top node is gross revenue, which is decomposed into customer segments and transaction channels.
As this tree directly reflects how the business generates $, it has the elegant property that functions like acquisition and retention marketing, or business units like ecommerce or physical retail, can map their activities to nodes on these trees. In other words, heterogenous business domains can effectively map onto one tree as their workstreams align against the critical output metric of interest.
2. Active User Tree:
In the second example, let’s imagine a metric tree where the key output is active users. This is common in say ad-sponsored business models where active users usually correlates to revenue, and as a result, it is critical to understand the drivers of user growth or decay.
In such organizations, the product org typically manage the overarching goal of active users, while individual product squads focus on components such as acquiring new users, reactivating lapsed users, and reducing churned users. This division of labor empowers teams to optimize specific aspects of user engagement but the metric tree ladders up these disparate efforts into one key desired output.
3. Sales Funnel Tree:
Third, let’s envision a sales process that takes marketing generated leads and moves them through various stages to contract conversion. Unlike the previous examples, here, a single team oversees the end to end process though different sub-teams or individuals augmented by workflow software often execute the various stages.
This detailed operational process nets to an output metric like new contracts that in turn can be a node in a next-level tree that tracks active contracts.
These examples demonstrate how metric trees capture domain contributions to critical business metrics across different business models. Leveraging advanced software capabilities, metric trees not only visualize but can drive operational excellence across organizations.
