How to Measure Anything

by Douglas W. Hubbard

• ISBN13: 9780470110126
• ISBN10: 0470110120
• Format: Hardcover
• Copyright: 2007-08-01
• Publisher: Wiley

Summary

Praise for How to Measure Anything: Finding the Value of Intangibles in Business "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. 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, PhD, M.D. Chief Technology Officer at CyberTrust and inventor of the first antivirus software "Doug Hubbard has provided an easy-to-read, demystifying explanation of how managers can inform themselves to make less risky, more profitable business decisions. We encourage our clients to try his powerful, practical techniques." -Peter Schay EVP and COO of The Advisory Council "As a reader you soon realize that actually everything can be measured while learning how to measure only what matters. This book cuts through conventional clichés and business rhetoric and offers practical steps to using measurements as a tool for better decision making. Hubbard bridges the gaps to make college statistics relevant and valuable for business decisions." -Ray Gilbert EVP Lucent "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 MetraMetrics, Inc.

Author Biography

Douglas W. Hubbard is the inventor of Applied Information Economics (AIE), a measurement methodology that has earned him critical praise from The Gartner Group, Giga Information Group, and Forrester Research. He is an internationally recognized expert in the field of IT value and is a popular speaker at numerous conferences. He has written articles for Information Week, CIO Enterprise, and DBMS Magazine. Formerly with Coopers & Lybrand, he has over twenty years' experience in IT management consulting, including twelve years' experience specifically in teaching organizations to use his AIE method. Dozens of Fortune 500 companies and government agencies have applied his method to IT investments, military logistics, venture capital, aerospace, and environmental issues. Find out more at www.howtomeasureanything.com.

Table of Contents

Preface	p. xi
Acknowledgments	p. xv
Measurement: The Solution Exists
The Intangibles and the Challenge	p. 3
An Intuitive Measurement Habit: Eratosthenes, Enrico, & Emily	p. 7
How an Ancient Greek Measured the Size of Earth	p. 8
Estimating: Be Like Fermi	p. 9
Experiments: Not Just for Adults	p. 12
Notes on What to Learn from Eratosthenes, Enrico, and Emily	p. 16
The Illusion of Intangibles: Why Immeasurables Aren't	p. 19
The Concept of Measurement	p. 20
The Object of Measurement	p. 24
The Methods of Measurement	p. 27
Economic Objections to Measurement	p. 33
The Broader Objection to the Usefulness of "Statistics"	p. 34
Ethical Objections to Measurement	p. 36
Toward a Universal Approach to Measurement	p. 39
Before You Measure
Clarifying the Measurement Problem	p. 43
Getting the Language Right: What "Uncertainty" and "Risk" Really Mean	p. 45
Examples of Clarification: Lessons for Business from, of All Places, Government	p. 47
Calibrated Estimates: How Much Do You Know Now?	p. 53
Testing Your Ability to Assess Odds	p. 53
Calibration Exercise	p. 55
Further Improvements on Calibration	p. 59
Conceptual Obstacles to Calibration	p. 61
The Effects of Calibration	p. 65
Measuring Risk: Introduction to the Monte Carlo Simulation	p. 71
An Example of the Monte Carlo Method and Risk	p. 74
Tools and Other Resources for Monte Carlo Simulations	p. 79
The Risk Paradox	p. 82
Measuring the Value of Information	p. 85
The Chance of Being Wrong and the Cost of Being Wrong: Expected Opportunity Loss	p. 86
The Value of Information for Ranges	p. 89
The Imperfect World: The Value of Partial Uncertainty Reduction	p. 92
The Epiphany Equation: The Value of a Measurement Changes Everything	p. 95
Summarizing Uncertainty, Risk, and Information Value: The First Measurements	p. 99
Measurement Methods
The Transition: From What to Measure to How to Measure	p. 103
Tools of Observation: Introduction to the Instrument of Measurement	p. 105
Decomposition	p. 109
Secondary Research: Assuming You Weren't the First to Measure It	p. 113
The Basic Methods of Observation: If One Doesn't Work, Try the Next	p. 115
Measure Just Enough	p. 117
Consider the Error	p. 119
Choose and Design the Instrument	p. 124
Sampling Reality: How Observing Some Things Tells Us about All Things	p. 127
Building an Intuition for Random Sampling: The Jelly Bean Example	p. 132
A Little About Little Samples: A Beer Brewer's Approach	p. 133
The Easiest Sample Statistics Ever	p. 138
A Biased Sample of Sampling Methods	p. 141
Measure to the Threshold	p. 147
Experiment	p. 151
Seeing Relationships in the Data: An Introduction to Regression Modeling	p. 155
Bayes: Adding to What You Know Now	p. 161
Simple Bayesian Statistics	p. 161
Using Your Natural Bayesian Instinct	p. 165
Heterogeneous Benchmarking: A "Brand Damage" Application	p. 170
Getting a Bit More Technical: Bayesian Inversion for Ranges	p. 174
Beyond the Basics
Preference and Attitudes: The Softer Side of Measurement	p. 183
Observing Opinions, Values, and the Pursuit of Happiness	p. 183
A Willingness to Pay: Measuring Value via Trade-offs	p. 187
Putting It All on the Line: Quantifying Risk Tolerance	p. 192
Quantifying Subjective Trade-offs: Dealing with Multiple Conflicting Preferences	p. 195
Keeping the Big Picture in Mind: Profit Maximization versus Subjective Trade-offs	p. 199
The Ultimate Measurement Instrument: Human Judges	p. 203
Homo absurdus: The Weird Reasons behind Our Decisions	p. 204
Getting Organized: A Performance Evaluation Example	p. 207
Surprisingly Simple Linear Models	p. 208
How to Standardize Any Evaluation: Rasch Models	p. 210
Removing Human Inconsistency: The Lens Model	p. 214
Panacea or Placebo?: Questionable Methods of Measurement	p. 219
Comparing the Methods	p. 226
New Measurement Instruments for Management	p. 229
The Twenty-First-Century Tracker: Keeping Tabs with Technology	p. 229
Measuring the World: The Internet as an Instrument	p. 232
Prediction Markets: Wall Street Efficiency Applied to Measurements	p. 235
A Universal Measurement Method: Applied Information Economics	p. 243
Bringing the Pieces Together	p. 244
Case: The Value of the System That Monitors Your Drinking Water	p. 248
Case: Forecasting Fuel for the Marine Corps	p. 253
Ideas for Getting Started: A Few Final Examples	p. 260
Summarizing the Philosophy	p. 267
Calibration Tests	p. 269
Index	p. 279
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