How To Measure Anything Tue 22 Sep 09

Hubbard's Book A Good Guide To Measuring Business Intangibles

A friend recently recommended that I read "How to Measure Anything: Finding the Value of "Intangibles" in Business " by Douglas W. Hubbard.  I found this very interesting and thought provoking and you may want to take a look if you are faced with questions such as:

• what is the value of the increased security from investing in a particular system
• how do you measure how much downtime might be prevented by putting in an UPS (Uninterruptible power supply)
• how do you measure the change in customer satisfaction or increased sales from implementing a new system.

All these are seemingly "unmeasureable" or "unquantifiable" which makes justify the expenditure of time, resources and effort such a difficult sell to management.  However, Hubbard does an excellent job of showing how you a way you can approach these questions that can help you better decide if the results justify the investment.

Recognizing the pre-conception of unmeasurabilty Hubbard early on offers some reassurance that has an almost zen-like calming effect.

FOUR USEFUL MEASUREMENT ASSUMPTIONS

1. Your problem is not as unique as you think.
2. You have more data than you think.
3. You need less data than you think.
4. There is a useful measurement that is much simpler than you think.

One of the techniques that Hubbard suggests is decomposition which he describes as "figuring out how to compute something very uncertain from other things that are a lot less uncertain or at least easier to measure."

A great example of this that Hubbard cites is Emily Rosa who at the age of 11 became the youngest ever person to have her research paper published in the prestigious Journal of the American Medical Association (JAMA). Rosa's study involved the practice of "Therapeutic Touch" (TT) where by a practioner was able to relieve pain by placing their hands on or near the patient and manipulate the patient's "energy fields."

Rather than try to tackle the difficult to measure concept of whether or not this practice really relieved pain, Rosa instead measured in her experiment whether or not Therapeutic Touch practioners were able to detect an energy field at all.  In the experiment TT practioners were asked to identify which of their hands a test subject was holding their hand near without the TT practioner being able to see it.  If they were able to detect an energy field they should be able to determine which of their hands was near the test subject.  The tests revealed that the TT practioners were no more able to correctly determine which hand was near the test subject than anyone else could have done by simply guessing.  That the Tt practioners couldn't find the energy field than someone merely guessing strongly questions how the could "manipulate" it do what they claimed.

Hubbard then goes on to show this type of approach in an example more related to what we would encounter in the IT world.  He talks about his review of an article for CIO Magazine regarding some information solutions from Mitre Infrastructe Information (MII) that were supposed to improve quality and innovation in decision making.

Hubbard writes:

"Like Emily, I proposed that Mitre not ask quite the same question the CIO might have started with, but a simpler, related question.  If quality and innovation really did get better, shouldn't someone at least be able to tell that there is any difference?  If the relevant judges (i.e., the customers) can't tell, in a blind test, that post-MII research is "higher quality" or "more innovative" than pre-MII research, then MII shouldn't have any bearing on customer satisfaction or, for that matter, revenue.  If, however, they can tell the difference, then you can worry about next question: whether the revenue improved enough to be worth the investment of $7 million by 2000.  Like everything else, if Mitre's quality and innovation benefits could not be detected, then they don't matter."

From these example I think you can see how Hubbard's methods could apply to many of our projects with intangible benefits and help us to either sell the project or verify vendor claims.

Be forewarned the book does contain a fair amount of statistics but it would be a mistake to consider this a statistics textbook.  It does however give you an excellent methodology for evaluating projects, risks, benefits and all those other "unmeasurable" things we encounter every day.  I highly recommend that you read and use this book.

If this topic was of interest, you might also like these:

• It's Not What You Say, It's What People Hear
• Conquering Organizational Change
• Leaving Our Past Successes Behind
• Or the posts in the Books category