You are previewing How to Measure Anything: Finding the Value of "Intangibles" in Business, Second Edition.
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How to Measure Anything: Finding the Value of "Intangibles" in Business, Second Edition

Book Description

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 clich?s 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. --This text refers to an alternate Hardcover edition.

Table of Contents

  1. Copyright
  2. Preface
  3. Acknowledgments
  4. 1. Measurement: The Solution Exists
    1. 1. Intangibles and the Challenge
      1. 1.1. Yes, I Mean Anything
      2. 1.2. The Proposal
    2. 2. An Intuitive Measurement Habit: Eratosthenes, Enrico, and Emily
      1. 2.1. How an Ancient Greek Measured the Size of Earth
      2. 2.2. Estimating: Be Like Fermi
      3. 2.3. Experiments: Not Just for Adults
      4. 2.4. Notes on What to Learn from Eratosthenes, Enrico, and Emily
      5. 2.5. Notes
    3. 3. The Illusion of Intangibles: Why Immeasurables Aren't
      1. 3.1. The Concept of Measurement
      2. 3.2. The Object of Measurement
      3. 3.3. The Methods of Measurement
        1. 3.3.1. Assumption 1
        2. 3.3.2. Assumption 2
        3. 3.3.3. Assumption 3
        4. 3.3.4. Assumption 4
      4. 3.4. Economic Objections to Measurement
      5. 3.5. The Broader Objection to the Usefulness of "Statistics"
      6. 3.6. Ethical Objections to Measurement
      7. 3.7. Toward a Universal Approach to Measurement
      8. 3.8. Notes
  5. 2. Before You Measure
    1. 4. Clarifying the Measurement Problem
      1. 4.1. Getting the Language Right: What "Uncertainty" and "Risk" Really Mean
      2. 4.2. Examples of Clarification: Lessons for Business from, of All Places, Government
      3. 4.3. Notes
    2. 5. Calibrated Estimates: How Much Do You Know Now?
      1. 5.1. Calibration Exercise
      2. 5.2. Further Improvements on Calibration
      3. 5.3. Conceptual Obstacles to Calibration
      4. 5.4. The Effects of Calibration
      5. 5.5. Notes
    3. 6. Measuring Risk through Modeling
      1. 6.1. How Not to Measure Risk
      2. 6.2. Real Risk Analysis: The Monte Carlo
      3. 6.3. An Example of the Monte Carlo Method and Risk
      4. 6.4. Tools and Other Resources for Monte Carlo Simulations
      5. 6.5. The Risk Paradox and the Need for Better Risk Analysis
      6. 6.6. Notes
    4. 7. Measuring the Value of Information
      1. 7.1. The Chance of Being Wrong and the Cost of Being Wrong: Expected Opportunity Loss
      2. 7.2. The Value of Information for Ranges
      3. 7.3. The Imperfect World: The Value of Partial Uncertainty Reduction
      4. 7.4. The Epiphany Equation: How the Value of Information Changes Everything
      5. 7.5. Summarizing Uncertainty, Risk, and Information Value: The First Measurements
      6. 7.6. Notes
  6. 3. Measurement Methods
    1. 8. The Transition: From What to Measure to How to Measure
      1. 8.1. Tools of Observation: Introduction to the Instrument of Measurement
      2. 8.2. Decomposition
      3. 8.3. Secondary Research: Assuming You Weren't the First to Measure It
      4. 8.4. The Basic Methods of Observation: If One Doesn't Work, Try the Next
      5. 8.5. Measure Just Enough
      6. 8.6. Consider the Error
      7. 8.7. Choose and Design the Instrument
    2. 9. Sampling Reality: How Observing Some Things Tells Us about All Things
      1. 9.1. Building an Intuition for Random Sampling: The Jelly Bean Example
      2. 9.2. A Little about Little Samples: A Beer Brewer's Approach
      3. 9.3. Statistical Significance: A Matter of Degree
      4. 9.4. When Outliers Matter Most
      5. 9.5. The Easiest Sample Statistics Ever
      6. 9.6. A Biased Sample of Sampling Methods
        1. 9.6.1. Population Proportion Sampling
        2. 9.6.2. Spot Sampling
        3. 9.6.3. Clustered Sampling
        4. 9.6.4. Stratified Samples
        5. 9.6.5. Serial Sampling
      7. 9.7. Measure to the Threshold
      8. 9.8. Experiment
      9. 9.9. Seeing Relationships in the Data: An Introduction to Regression Modeling
      10. 9.10. One Thing We Haven't Discussed—and Why
      11. 9.11. Notes
    3. 10. Bayes: Adding to What You Know Now
      1. 10.1. Simple Bayesian Statistics
      2. 10.2. Using Your Natural Bayesian Instinct
      3. 10.3. Heterogeneous Benchmarking: A "Brand Damage" Application
      4. 10.4. Bayesian Inversion for Ranges: An Overview
      5. 10.5. Bayesian Inversion for Ranges: The Details
      6. 10.6. The Lessons of Bayes
      7. 10.7. Notes
  7. 4. Beyond the Basics
    1. 11. Preference and Attitudes: The Softer Side of Measurement
      1. 11.1. Observing Opinions, Values, and the Pursuit of Happiness
      2. 11.2. A Willingness to Pay: Measuring Value via Trade-offs
      3. 11.3. Putting It All on the Line: Quantifying Risk Tolerance
      4. 11.4. Quantifying Subjective Trade-offs: Dealing with Multiple Conflicting Preferences
      5. 11.5. Keeping the Big Picture in Mind: Profit Maximization versus Purely Subjective Trade-offs
      6. 11.6. Notes
    2. 12. The Ultimate Measurement Instrument: Human Judges
      1. 12.1. Homo absurdus: The Weird Reasons behind Our Decisions
      2. 12.2. Getting Organized: A Performance Evaluation Example
      3. 12.3. Surprisingly Simple Linear Models
      4. 12.4. How to Standardize Any Evaluation: Rasch Models
      5. 12.5. Removing Human Inconsistency: The Lens Model
      6. 12.6. Panacea or Placebo?: Questionable Methods of Measurement
      7. 12.7. Comparing the Methods
      8. 12.8. Notes
    3. 13. New Measurement Instruments for Management
      1. 13.1. The Twenty-First-Century Tracker: Keeping Tabs with Technology
      2. 13.2. Measuring the World: The Internet as an Instrument
      3. 13.3. Prediction Markets: A Dynamic Aggregation of Opinions
      4. 13.4. Notes
    4. 14. A Universal Measurement Method: Applied Information Economics
      1. 14.1. Bringing the Pieces Together
      2. 14.2. Case: The Value of the System that Monitors Your Drinking Water
        1. 14.2.1. Phase 0
        2. 14.2.2. Phase 1
        3. 14.2.3. Phase 2
        4. 14.2.4. Phase 3
        5. 14.2.5. Epilogue
      3. 14.3. Case: Forecasting Fuel for the Marine Corps
        1. 14.3.1. Phase 0
        2. 14.3.2. Phase 1
        3. 14.3.3. Phase 2
        4. 14.3.4. Phase 3
        5. 14.3.5. Epilogue
      4. 14.4. Ideas for Getting Started: A Few Final Examples
        1. 14.4.1. Quality
        2. 14.4.2. Value of a Process, Department, or Function
        3. 14.4.3. Innovation
        4. 14.4.4. Information Availability
        5. 14.4.5. Flexibility
        6. 14.4.6. Flexibility with Options Theory
      5. 14.5. Summarizing the Philosophy
      6. 14.6. Notes
    5. A. Calibration Tests (and Their Answers)