Understanding Performance Drivers: Why Comfortable Growth is a Trap
Executive Summary: The 1-Minute Read
Revenue and profit matter, but they are only lagging indicators. On their own, they do not tell you what is really driving performance.
The better approach is to break outcomes into the drivers underneath them, whether that is traffic, conversion, average order value, pricing, or channel mix.
Once you build budgets and reporting around those drivers, you can explain month-to-month and year-to-year performance far more clearly.
In scale-ups, this also creates a cultural shift because it increases accountability and visibility, so it often works best when introduced gradually.
The goal is to stop managing the scoreboard and start understanding the game
In my time working across finance and operations, I’ve sat in countless boardrooms discussing business performance.
Most of the time, those conversations revolve around the scoreboard: revenue, sales, and profit. These are the headline numbers, and in the early days of a startup, they are usually enough. If the top line is growing, the founding team breathes a sigh of relief.
But as I explored in Endless Curiosity, this phase of comfortable growth is incredibly dangerous for scale-ups. When the results are strong, there is a natural tendency to stop asking questions. You have proven the model. You are hiring more staff. Why dig deeper if the revenue keeps climbing?
The problem is that revenue and profit are purely lagging indicators. They tell you what has happened, not why it happened. On their own, they offer almost zero insight into the operational reality of your business. If you rely solely on these outcome metrics, underlying structural flaws can remain hidden for months – or even years – before they finally rupture your bottom line.
To truly understand your business as it scales, you have to stop looking at the outcomes and start obsessing over the performance drivers.
The Onion Effect
Think of business performance like an onion. The top layer is the headline outcome, but the performance drivers sit underneath it.
Take an online business as an example. Revenue might be broken down as:
Revenue = Website traffic × Conversion rate × Average order value
Even that first layer gives you more insight than the top-line number alone. If revenue has grown, is it because more people visited the site, because a higher proportion converted, or because customers spent more once they were there?
But you can keep going.
Website traffic is driven by:
Organic search visibility.
Paid media performance.
Referral traffic.
Email and CRM activity.
Conversion rate is driven by:
Website usability.
Page speed.
Product page quality.
Trust signals such as reviews, delivery information, and returns policy.
Average order value is driven by:
Pricing.
Product mix.
Bundling or upsell activity.
Promotional strategy.
These are the core performance drivers of the business and each of those has its own deeper drivers.
Take paid media performance. That may itself be shaped by:
Ad creative quality.
Audience targeting.
Channel mix.
Cost per click.
By the time you reach this level, you are no longer looking at a financial result. You are looking at the operational levers that actually shape performance.
This is the logic behind driver-based planning and value driver trees: connecting financial outcomes to the operational factors beneath them, so leaders can move from observing results to understanding causation.
When Gut Feel Stops Being Enough
In the early days of a startup, leaders often stay close enough to the action to explain performance instinctively. They know why sales are up. They know which campaign worked. They know which product change made the difference.
That breaks down as the business scales.
Once the company grows, teams become more specialised, activity spreads across channels, and performance becomes harder to interpret from instinct alone. If all you can say is that revenue is up or down, you do not yet understand the business well enough to manage it properly.
The value of driver analysis is that it turns vague commentary into useful action.
For example:
If traffic is rising but conversion is falling, the issue is not demand. It is likely the website experience, the proposition, or the quality of the traffic.
If revenue is growing but only because paid acquisition spend is rising, you may be buying growth rather than building a healthier engine.
If average order value is dropping while traffic remains strong, that may point to a pricing, product mix, or discounting issue.
That is the point. Once you understand the drivers, you can actually do something.
Make It The Engine Of Your Planning
This sort of work should not be treated as a one-off exercise to help you understand the business a bit better. The real value comes when you build your budgets and forecasts around the same performance drivers.
Too many budgets are still built from the top down. A leader decides what revenue number feels achievable, costs are added underneath it, and the result is called a plan. That may work while the market is forgiving. It does not work nearly as well once growth becomes harder to sustain.
A much stronger approach is to build the budget from the drivers up. For an online business, that means planning revenue through assumptions such as:
Website sessions.
Conversion rate.
Average order value.
Channel mix.
Repeat purchase behaviour.
Once you do that, performance management becomes much sharper.
Month to month, you can see why you beat or missed budget. Was traffic weaker than expected? Did conversion drop? Did discounting damage average order value? Instead of talking in generalities, the conversation becomes specific.
Year to year, the same framework helps you understand whether the business is genuinely improving. You can see whether SEO is getting stronger, whether conversion is becoming more efficient, whether customer economics are moving in the right direction, and whether growth is becoming more sustainable over time. That is where finance stops being a reporting function and starts becoming a management tool. KPMG’s framing of driver-based planning makes the same point: better planning comes from connecting financial and operational levers through value driver trees.
The Cultural Shift No One Talks About
There is another side to this, especially in scale-ups. A driver-based approach changes the culture of the business. It creates more visibility. It makes performance more transparent. It increases accountability. That is good for management, but it can feel uncomfortable for teams who are used to operating with more ambiguity.
In some businesses, that discomfort is minor. In others, it is significant. When people are suddenly asked to explain not just what happened, but which performance drivers changed, they can feel exposed. If a team has historically been judged on outcomes alone, bringing the underlying drivers into the open can feel like a threat rather than support.
That is why this sort of framework often works best when introduced in layers. You do not need to map every driver immediately. In many cases, going down one or two layers is more than enough to begin with. That gives the business better visibility without overwhelming people or turning the exercise into a spreadsheet marathon. This is similar to the change-management approach discussed in Beyond “Good Enough” – start with the most useful level of detail, build trust, and only then go deeper.
Then, as the value becomes clearer, curiosity tends to grow. Teams start to see that understanding drivers is not about blame. It is about getting to better answers, making smarter decisions, and managing with more confidence. Over time, that curiosity creates the openness to go deeper.
For scale-ups, that matters. You are not just building better reporting. You are building a more mature operating rhythm.
From What Happened To What Drove It
The real shift here is simple: stop asking only what happened and start asking what drove it.
Every important number in a scaling business should be traceable back to a set of underlying performance drivers. If it is not, you are probably looking at the business at too high a level.
The leaders who manage this well do not get distracted by the headline result alone. They keep peeling back the layers until they understand what is truly moving the business. That is how you avoid complacency. That is how you refine your planning. And that is how you turn performance management from hindsight into something genuinely useful.