Bet Impact Model

What is the Bet Impact Model?

The Bet Impact Model helps you understand how your strategic initiatives (called “bets”) will affect your key business metrics. Think of it as a crystal ball that shows you the potential impact of your decisions before you make them.

What you need to get started

Your strategic bets – Define your initiatives with expected outcomes and completion timelines
Your metric relationships – Set up how your metrics connect and influence each other
Historical data – Provide past performance data for more accurate predictions

What you’ll get back

Impact forecasts – See how each bet will likely affect your metrics over time
Confidence levels – Understand how certain you can be about these predictions
Priority rankings – Discover which bets will have the biggest impact on your goals

How it works

Step 1: Setting up your analysis

You can customize how the model works by adjusting settings like how far into the future to forecast, how confident you want to be in the results, and how quickly impacts fade over time. Don’t worry – we provide sensible defaults that work for most situations.

Step 2: Creating baseline predictions

The model first looks at your historical data to predict what your metrics would look like if you didn’t make any changes. This gives you a “business as usual” baseline to compare against.

Step 3: Calculating bet impacts

For each of your strategic bets, the model calculates how much they’ll likely move your metrics. It considers factors like:

How complete each bet is
When it will be implemented
How confident you are in the expected results

Step 4: Understanding ripple effects

The model doesn’t just look at direct impacts – it also considers how changes in one metric might affect others. For example, if more users sign up, that might also increase revenue and reduce support costs.

Step 5: Ranking and prioritizing

Finally, the model gives you a clear ranking of which bets will have the biggest impact on your most important metrics, helping you make better decisions about where to focus your efforts.

How reliable are the results?

The accuracy of your predictions depends on the quality of your inputs:

Better data = better predictions – The more historical data you have, the more accurate your forecasts will be
Realistic expectations matter – If your expected impacts are too optimistic or pessimistic, your results will be too
Relationships need to be accurate – The model assumes the connections between your metrics are correct

Important limitations to keep in mind:

Results are estimates, not guarantees – use them to guide decisions, not make final calls
The model works best with straightforward cause-and-effect relationships
Seasonal patterns and complex business cycles might not be fully captured
Past performance doesn’t always predict future results

Bottom line: Think of these results as educated guesses that help you make better decisions, not as crystal-clear predictions of the future.

When to use the Bet Impact Model

Perfect for:

Comparing initiatives – When you have multiple projects and need to decide which ones to prioritize
Planning roadmaps – Understanding how different features or changes will affect your key metrics
Resource allocation – Deciding where to invest your time and money for maximum impact
Setting expectations – Getting realistic estimates of what your initiatives might achieve

Think twice if:

Your business is highly complex – If your metrics have complicated, unpredictable relationships
You don’t have good data – If you can’t provide reliable historical data or realistic impact estimates
You need perfect accuracy – If you need precise predictions rather than directional guidance
Your industry is very seasonal – If your business has strong seasonal patterns that are hard to predict

Getting the best results

Start with good data:

Make sure you have enough historical data for each metric (at least 6-12 months)
Clean up any obvious data errors or outliers before running the analysis
Be realistic about your expected impacts – it’s better to be conservative than overly optimistic

Set up your metric relationships carefully:

Think about how your metrics actually influence each other in real life
Don’t overcomplicate things – start simple and add complexity as needed
Test your assumptions by looking at past data to see if the relationships make sense

Review and refine:

Check if the most impactful metrics in your results match your expectations
If something looks wrong, double-check your input data and relationships
Update your model as you learn more about how your business actually works

Use it as a planning tool:

Don’t treat the results as final decisions – use them to inform your thinking
Compare different scenarios to see how changes might affect your outcomes
Revisit your analysis regularly as new data comes in and your understanding improves

The Bet Impact Model works best when you use it as part of your decision-making process, not as the final word on what to do.

Composition Introduction