When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the state of science. -Lord Kelvin
Anything can be measured. If a thing can be observed in any wayat all, it lends itself to some type of measurement method. No matter how "fuzzy" the measurement is, it's still a measurement if it told you more than you knew before. And those very things most likely to be seen as immeasurable are, virtually always, solved by relatively simple measurement methods.
As the title of this book indicates, we will discuss how to find the value of those things often called "intangibles" in business. There are two common understandings of the word intangible. First, it is routinely applied to things that, while they are literally not tangible (i.e., touchable, solid objects), can still be measured. Things like time, budget, patent ownership, and so on are good examples of things that you cannot touch but yet are measured. In fact, there is a well-established industry around valuing intangibles such as copyright and trademark ownership. But the word "intangible" has also come to mean utterly immeasurable in any way at all, directly or indirectly. It is in this context that I argue intangibles do not exist.
You've heard of "intangibles" in your own organization-things that presumably defy measurement of any type. The presumption of immeasurability is, in fact, so strong that no attempt is even made to make any observations that might tell you something-anything-about the alleged immeasurable that you might be surprised to learn. You have may have run into one or more of these real-life examples:
The "flexibility" to create new products
The risk of failure of an information technology (IT) project
The public health impact of a new government environmental policy
The productivity of research
The value of information
The chance of one political party winning the White House
Quality
Public image
Each of these examples can very well be relevant to some major decision an organization must make. It could even be the single most important impact of an expensive new initiative in either business or government policy. Yet in most organizations, because the specific "intangible" was assumed to be immeasurable, the decision was not nearly as informed as it could have been.
One place I've seen this many times is in the "steering committees" that review proposed projects and decide which to accept or reject. Often the proposed projects are related to IT in some way. In some cases, the committees were categorically rejecting any investment where the benefits were primarily "soft" ones. Important factors with names like "improved word-of-mouth advertising," "reduced strategic risk," or "premium brand positioning" were being ignored in the evaluation process because they were considered immeasurable. It's not as if the project was being rejected simply because the person proposing it hadn't measured the benefit (a valid objection to a proposal); rather it was believed that the benefit couldn't possibly be measured-ever. Consequently, some of the most important strategic proposals were being overlooked in favor of minor cost-savings ideas simply because everyone knew how to measure those things and didn't know how to measure others.
The fact of the matter is that a few organizations have succeeded in analyzing and measuring all of the listed items, using methods that are probably less complicated than you would think. The purpose of this book is to show organizations two things:
1. Intangibles that appear to be completely intractable can be measured.
2. This measurement can be done in a way that is economically justified.
With a title like How to Measure Anything, anything less than a multi volume text would be sure to leave out something. My objective does not include every area of physical science or economics, especially where measurements are well developed. Those disciplines have measurement methods for a variety of interesting problems and are already much less inclined even to apply the label "intangible" to something they are curious about. The focus here is on measurements that are relevant-even critical-to major organizational decisions and yet don't seem to lend themselves to an obvious and practical measurement solution.
This book addresses some common misconceptions about intangibles, describes a "universal approach" to show how to go about measuring an "intangible," and backs it up with some interesting methods for particular problems. Throughout, I attempted to include some "inspirational" examples on how people have tackled some of the most "immeasurable" things I could find.
Without compromising substance, this book will also make some of the more seemingly esoteric statistics around measurement as simple as it can be. Whenever possible, math is converted into simpler charts, tables, and procedures. Some of the methods are so much simpler than what is taught in the typical "intro to stats" course that we should be able to overcome many phobias about the use of quantitative measurement methods. The reader does not need any advanced training in any mathematical methods at all. Readers just need some aptitude for clearly defining problems.
Readers are encouraged to use this book's Web site at www.howto measureanything.com. There, you will find a library of downloadable spreadsheets for many of the more detailed calculations shown in this book. There will also be additional learning aids, examples, and a discussion board for questions about the book or measurement challenges in general. It also provides a way for me to discuss new technologies or techniques that were not available when this book was printed.
I have one recommendation for a useful exercise to try. As you read through the chapters, write down those things you believe are immeasurable or, at least, you are not sure how to measure. After reading this book, my goal is that you are able to identify methods for measuring each and every one of them.
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Excerpted from How to Measure Anything by Douglas W. Hubbard Copyright © 2007 by Douglas W. Hubbard. Excerpted by permission.
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