Value Driver Tree: Explained

What is it, how to calculate it, formula, why it's important

As a CFO of a company, I'm constantly looking for ways to add value to our organization. One tool that I've found to be incredibly useful is the Value Driver Tree (VDT). Yes, I know, it sounds like something out of a fantasy movie, but trust me, this tree has some serious benefits.

What is a Value Driver Tree?

A VDT is a framework used by companies to identify and analyze the key drivers of value creation within their organization. Essentially, it's a visual representation of all the factors that contribute to the success of a business.

Why is this important? Well, having a clear understanding of what drives your company's value allows you to make strategic decisions that can increase profits and maximize shareholder value.

How Does it Work?

At its core, a VDT is a hierarchal structure that breaks down value drivers into smaller and more specific components. At the top of the tree are the main drivers of value, which are then broken down into sub-drivers, and so on.

For example, let's say that one of the key drivers of value for our company is customer satisfaction. Underneath this main driver might be sub-drivers like product quality, customer service, and pricing.

Once we've identified all the drivers of value, we can then use the tree to analyze how changes to one driver might impact the others. This allows us to make more informed decisions that take into account the entire ecosystem of our organization.

Benefits of a Value Driver Tree

So, why should you bother with a VDT? Here are just a few reasons:

1. Improved Decision Making

By having a detailed understanding of all the drivers of value within your organization, you can make more informed decisions that take into account the entire ecosystem of your company. This can help you avoid making decisions that might have unintended consequences that negatively impact other drivers of value.

2. Increased Alignment

A VDT can help bring everyone in the organization onto the same page. By having a clear visual representation of what's important, everyone can see how their work fits into the bigger picture and how it contributes to overall success.

3. Better Communication

When everyone is working towards the same goals, it's easier to communicate with each other. With a VDT, everyone can see how their work impacts the work of others and can work together to achieve common goals.

4. Improved Financial Performance

At the end of the day, a VDT is all about increasing the value of your organization. By taking a holistic approach to value creation and making informed decisions that take into account the entire ecosystem, you can improve your company's financial performance.


In conclusion, a Value Driver Tree is an incredibly useful tool for any organization looking to improve their financial performance and make more informed decisions. By taking a holistic approach to value creation, you can ensure that your company is working towards common goals and everyone is on the same page. And who knows, maybe one day you'll be able to say that you climbed the Value Driver Tree to success!

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