The most impactful role of data is to use the power of math to illuminate the business inputs, or "levers," not just outputs.
In the past, data investments were primarily used to measure outputs. The business would make decisions, act, and operate, and data would follow, calculating outputs and providing measurements.
Financial reporting was the classic use case - how is the business performing on key output metrics? This now extends to every function, including sales, marketing, product, and operations.
It's no surprise that the vast majority of the data tooling ecosystem is geared towards this use case:
- Measuring more metrics
- Measuring more accurately
- Disseminating the measurements
- Displaying the measurements
But the power of math and the role of data truly shine when we understand the relationships between inputs and outputs. This is the frontier of value generation, where data shifts from being part of a reactive process to a proactive process.
Metric trees are a powerful yet simple mechanism for expressing these relationships between inputs and outputs. For example, consider a B2B SaaS enterprise that has a trial workflow for new accounts and a strong add-on/upsell process for existing accounts.
This tree captures succinctly:
- The trial workflow - the inputs and segments involved in the process to generate new trials, the channels involved, the industry segments being targeted, and the base ASP.
- The upsell workflow - how the current usage of features and products among existing accounts helps identify and target accounts for additional revenue.
The elevated role of data is clear - to illuminate these input levers, to work alongside sales, marketing, product and customer success to direct impact the growth of new accounts and drive additional revenue among existing accounts. It also clarifies how each node in the graph ladders up to the ultimate output metric - total revenue.
Finally, this also highlights the frontier of analytics tooling: the ability for software to automatically comprehend such a tree and operate on it seamlessly.