Douglas W. Hubbard began How to Measure Anything, Finding the Value of “Intangibles in Business” Third Edition with the statement that
“Anything can be measured. If something can be observed in any way at all, it lends itself to some type of measurement method.”
In today’s business environment, decisions are made on a nearly continuous basis. The decisions always have consequences, and sometimes those consequences will be negative. Measurement is a tool to reduce risk, gather knowledge and to generate feedback quickly.
Hubbard’s premise is that we care about measurements for one of three reasons (or a combination):
- Measurement informs key decisions.
- Measurement data has its own market value that can be sold for a profit.
- Measurement provides information to satisfy a curiosity.
If we buy into to the premise that data is important for decision making, profit and knowledge, then the act of measurement is an important tool to generate that knowledge. Designating important attributes as intangible (code for unmeasurable) increases the risk of for any decision by designating swaths of information as unknowable.
One of the primary steps to conquering those ‘intangibles’ begins by asking the right question or questions. Changing the question often reframes what can and can’t be measured. For example, asking the question “what is the impact of co-location on a team” is harder to measure “what is the impact to team productivity of co-location.” Everyone that makes decisions needs a method to reduce the uncertainty and risk inherent in every decision. That’s the goal of measurement.
In order to use measurement in a consistent and repeatable manner, Hubbard proposes a framework that can be used in a range of circumstances to measure anything. The framework is applicable to nearly any scenario, even if that scenario was not explicitly addressed in the book. The framework is:
- Define the decision. If you do not know the decision you are attempting to make, measurement difficult at best.
- Determine what you know. What you know is a jumping-off spot for gathering additional information to make a decision.
- Compute the value of additional information. If the value of additional information is low then you are done (go to step 5).
- Measure where the information value is high. After collecting new data, repeat steps 2 and 3 until further measurement does not provide enough additional value.
- Make a decision; act upon it.
After making a decision and acting on that decision, the cycle typically repeats as the next decision presents itself. The remainder of the book is structured to explain and leverage Hubbard’s framework.
As an exercise Hubbard proposes that the readers write down all the things that they perceive as being unmeasurable, or at least that the reader is not sure how to measure. The goal of the book is to teach the reader to be able to measure the items in their list.
My list of items that are unmeasurable, or that I do not know how to measure, is:
- The impact of my family on my happiness.
- The impact of my blog and podcast on my business.
- The impact of a chronically mediocre baseball team on real estate value in downtown Cleveland.
What are the intangibles you would like to tackle during the re-read?
We measure in order to make better decisions. While waiting and collecting perfect information is rarely a viable option when making decisions, we can often do significantly better. The act of defining, collecting and analyzing measurement data helps decision makers to build a better base of information and knowledge.
Other entries in the re-read of How to Measure Anything, Finding the Value of “Intangibles in Business” Third Edition