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How to Measure Anything: Finding the Value of Intangibles in Business
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How to Measure Anything: Finding the Value of Intangibles in Business
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Overview
This insightful and eloquent book will show you how to measure those things in your own business, government agency or other organization that, until now, you may have considered "immeasurable," including customer satisfaction, organizational flexibility, technology risk, and technology ROI.
- Adds new measurement methods, showing how they can be applied to a variety of areas such as risk management and customer satisfaction
- Simplifies overall content while still making the more technical applications available to those readers who want to dig deeper
- Continues to boldly assert that any perception of "immeasurability" is based on certain popular misconceptions about measurement and measurement methods
- Shows the common reasoning for calling something immeasurable, and sets out to correct those ideas
- Offers practical methods for measuring a variety of "intangibles"
- Provides an online database (www.howtomeasureanything.com) of downloadable, practical examples worked out in detailed spreadsheets
Written by recognized expert Douglas Hubbard—creator of Applied Information Economics—How to Measure Anything, Third Edition illustrates how the author has used his approach across various industries and how any problem, no matter how difficult, ill defined, or uncertain can lend itself to measurement using proven methods.
Product Details
ISBN-13: | 9781118836446 |
---|---|
Publisher: | Wiley |
Publication date: | 02/24/2014 |
Sold by: | JOHN WILEY & SONS |
Format: | eBook |
Pages: | 432 |
Sales rank: | 953,819 |
File size: | 5 MB |
About the Author
Read an Excerpt
Table of Contents
Preface to the Third Edition xiiiAcknowledgments xix
About the Author xxi
Part I The Measurement Solution Exists 1
Chapter 1 The Challenge of Intangibles 3
The Alleged Intangibles 4
Yes, I Mean Anything 5
The Proposal: It’s about Decisions 7
A “Power Tools” Approach to Measurement 10
A Guide to the Rest of the Book 11
Chapter 2 An Intuitive Measurement Habit: Eratosthenes, Enrico, and Emily 15
How an Ancient Greek Measured the Size of Earth 16
Estimating: Be Like Fermi 17
Experiments: Not Just for Adults 20
Notes on What to Learn from Eratosthenes, Enrico, and Emily 25
Notes 27
Chapter 3 The Illusion of Intangibles: Why Immeasurables Aren’t 29
The Concept of Measurement 30
The Object of Measurement 37
The Methods of Measurement 40
Economic Objections to Measurement 48
The Broader Objection to the Usefulness of “Statistics” 52
Ethical Objections to Measurement 55
Reversing Old Assumptions 58
Notes 65
Part II Before You Measure 69
Chapter 4 Clarifying the Measurement Problem 71
Toward a Universal Approach to Measurement 73
The Unexpected Challenge of Defining a Decision 74
If You Understand It, You Can Model It 80
Getting the Language Right: What “Uncertainty” and “Risk” Really Mean 83
An Example of a Clarified Decision 84
Notes 90
Chapter 5 Calibrated Estimates: How Much Do You Know Now? 93
Calibration Exercise 95
Calibration Trick: Bet Money (or Even Just Pretend To) 101
Further Improvements on Calibration 104
Conceptual Obstacles to Calibration 106
The Effects of Calibration Training 111
Notes 118
Chapter 6 Quantifying Risk through Modeling 123
How Not to Quantify Risk 123
Real Risk Analysis: The Monte Carlo 125
An Example of the Monte Carlo Method and Risk 127
Tools and Other Resources for Monte Carlo Simulations 136
The Risk Paradox and the Need for Better Risk Analysis 140
Notes 143
Chapter 7 Quantifying the Value of Information 145
The Chance of Being Wrong and the Cost of Being Wrong: Expected Opportunity Loss 146
The Value of Information for Ranges 149
Beyond Yes/No: Decisions on a Continuum 156
The Imperfect World: The Value of Partial Uncertainty Reduction 159
The Epiphany Equation: How the Value of Information Changes Everything 166
Summarizing Uncertainty, Risk, and Information Value: The Pre-Measurements 171
Notes 172
Part III Measurement Methods 173
Chapter 8 The Transition: From What to Measure to How to Measure 175
Tools of Observation: Introduction to the Instrument of Measurement 177
Decomposition 180
Secondary Research: Assuming You Weren’t the First to Measure It 184
The Basic Methods of Observation: If One Doesn’t Work, Try the Next 186
Measure Just Enough 188
Consider the Error 189
Choose and Design the Instrument 194
Notes 196
Chapter 9 Sampling Reality: How Observing Some Things Tells Us about All Things 197
Building an Intuition for Random Sampling: The Jelly Bean Example 199
A Little about Little Samples: A Beer Brewer’s Approach 200
Are Small Samples Really “Statistically Significant”? 204
When Outliers Matter Most 208
The Easiest Sample Statistics Ever 210
A Biased Sample of Sampling Methods 214
Experiment 226
Seeing Relationships in the Data: An Introduction to Regression Modeling 235
Notes 243
Chapter 10 Bayes: Adding to What You Know Now 247
The Basics and Bayes 248
Using Your Natural Bayesian Instinct 257
Heterogeneous Benchmarking: A “Brand Damage” Application 263
Bayesian Inversion for Ranges: An Overview 267
The Lessons of Bayes 276
Notes 282
Part IV Beyond the Basics 285
Chapter 11 Preference and Attitudes: The Softer Side of Measurement 287
Observing Opinions, Values, and the Pursuit of Happiness 287
A Willingness to Pay: Measuring Value via Trade-Offs 292
Putting It All on the Line: Quantifying Risk Tolerance 296
Quantifying Subjective Trade-Offs: Dealing with Multiple Conflicting Preferences 299
Keeping the Big Picture in Mind: Profit Maximization versus Purely Subjective Trade-Offs 302
Notes 304
Chapter 12 The Ultimate Measurement Instrument: Human Judges 307
Homo Absurdus: The Weird Reasons behind Our Decisions 308
Getting Organized: A Performance Evaluation Example 313
Surprisingly Simple Linear Models 315
How to Standardize Any Evaluation: Rasch Models 316
Removing Human Inconsistency: The Lens Model 320
Panacea or Placebo?: Questionable Methods of Measurement 325
Comparing the Methods 333
Example: A Scientist Measures the Performance of a Decision Model 335
Notes 336
Chapter 13 New Measurement Instruments for Management 339
The Twenty-First-Century Tracker: Keeping Tabs with Technology 339
Measuring the World: The Internet as an Instrument 342
Prediction Markets: A Dynamic Aggregation of Opinions 346
Notes 353
Chapter 14 A Universal Measurement Method: Applied Information Economics 357
Bringing the Pieces Together 358
Case: The Value of the System That Monitors Your Drinking Water 362
Case: Forecasting Fuel for the Marine Corps 367
Case: Measuring the Value of ACORD Standards 373
Ideas for Getting Started: A Few Final Examples 378
Summarizing the Philosophy 384
Notes 385
Appendix Calibration Tests (and Their Answers) 387
Index 397
What People are Saying About This
"How to Measure Anything was already my favorite book (just ahead of Hubbard's second book, The Failure of Risk Management) and one I actively promote to my students and colleagues. But the Second Edition, improving on the already exquisite first edition, is and achievement of its own. As a physicist and economist, I applied these techniques in several fields for several years. For the first time, somebody wrote together all these concerns on one canvas that is at the same time accessible to a broad audience and applicable by specialists. This book is a must for students and experts in the field of analysis (in general) and decision-making."
—Dr. Johan Braet, University of Antwerp. Faculty of Applied Economics, Risk Management and Innovation
"Now, performance measures can be defined for even the most difficult problems. Doug Hubbard's book is a marvelous tutorial on how to define sound metrics to justify and manage complex programs. It is a must read for anyone concerned about mitigating the risks involved with Capital Planning, Investment Decisions and Program Management."
—Jim Flyzik, former Government CIO, White House Technology Advisor and CIO Magazine Hall of Fame Inductee
Praise from How to Measure Anything, First Edition
"I love this book. Douglas Hubbard helps us create a path to know the answer to almost any question, in business, in science or in life...Hubbard helps us by showing us that when we seek metrics to solve problems, we are really trying to know something 'better than we know it now,' to put something into context, to find insight to help us get our jobs done, to be more successful, to discover things, or to build things. How to Measure Anything provides just the tools most of us need to measure anything better, to gain that insight, to make progress, and to succeed."
—Peter Tippett, Ph.D., M.D., Chief Technology Officer at CyberTrust and inventor of the first antivirus software
"Interestingly written and full of case studies and rich examples, Hubbard's book is a valuable resource for those who routinely make decisions involving uncertainty. This book is readable and quite entertaining, and even those who consider themselves averse to statistics may find it highly approachable."
—Strategic Finance
"Hubbard has made a career of finding ways to measure things that other folks thought were immeasurable. Quality? The value of telecommuting? The risk of IT project failure? the benefits of greater IT security? Public image? He says it can be done—and without breaking the bank.... If you'd like to fare better in the project-approval wars, take a look at this book."
—ComputerWorld, August 2007
"I use this book as a primary reference for my measurement class at MIT. The students love it because it provides practical advice that can be applied to a variety of scenarios; from aerospace & defense, healthcare, politics, etc."
—Ricardo Valerdi, PhD, Lecturer, MIT
"This book is remarkable in its range of measurement applications and its clarity of style. A must-read for every professional who has ever exclaimed, 'Sure, that concept is important, but can we measure it?'
—Dr. Jack Stenner, Cofounder and CEO of MetaMetrics, Inc.