I wanted to share with you a powerful method to visualize the impacts of the different inputs (for example, revenue, costs…) on the final output (for example margin, ROI…).

Value-Driver-Tree-Sample-Model

In his deep dive post “Value Driver Modelling“, Reuben Kearney lists the different uses of a Value Driver Tree (VDT) and offers a template to build your own VDT.

-identify where the biggest constraints are in an organisation’s ability to create value.
-be used in conjunction with sensitivity analysis to show which areas are at greatest risk for failing to deliver value.
-value a range of different investment options to find the optimal combination for creating value.
-provide transparency at the individual employee level to see how they contribute to the creation of value.
-allow you to benchmark operations that were previously too different to compare through traditional benchmarking methodologies.

Some Software provide a tool to create a dynamic visualization of the VDT of a company. Here is an example from SAP :

value-driver-tree-sample

And here is a concrete example with a comparison between 2 different scenarios:Example VDT Production

If you want to know more, consult the deep dive from Reuben Kearney:
https://reubenkearney.com/category/value-driver-modelling/

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