measurement of intangibles
Measure what Matters, Make better Decisions
Good decisions are made in part due to having the right data. But too many decision-makers make bad decisions because they don’t make the effort of getting the right data – and that’s often because they believe key intangibles can’t be measured. If it matters, it can be measured – even an intangible – and if it can be measured, it can help management make better decisions by having the right data.
Decision-makers are faced with countless decisions each year. A small percentage of these decisions are mission-critical, life-altering ones for an organization, but even the ones that aren’t can have an outsized impact if the wrong decision is made – and wrong decisions are made far too often.
Organizations make decisions that range from less optimal to downright bad due to a concept known as measurement inversion, which broadly means this: the more important something is to a decision, the less we tend to understand it and the less we tend to measure it.
Put another way, the factors that matter the most to an organization and to a particular decision are often imprecise and by nature difficult to measure. The inverse is true: the things that matter the least are typically easy to measure. So, given human nature to gravitate toward the easy, it’s no wonder why decision-makers at all levels use simple, unscientific measurements – if they use any measurements at all.
Defeating measurement inversion and making better decisions through better decision analysis means understanding why measurement inversion happens – and coming up with a proven plan that works.
one mistaken belief that is holding organizations back
One major misunderstanding that holds organizations back is the fact that many decision-makers believe intangibles – anything from brand perception to consumer loyalty, political sentiment, and the effectiveness of leadership – can’t be measured.
That results in many critical factors being completely left out of the decision analysis and risk analysis processes that are supposed to drive good decision-making.
In Doug Hubbard’s book How to Measure Anything, he identifies one reason why intangibles appear to be so difficult to measure and evaluate: “Business managers need to realize that some things seem intangible only because they just haven’t defined what they are talking about. Figure out what you mean and you are halfway to measuring it.”
This relates to the principles we follow at Hubbard Decision Research:
- If it matters, it can be observed or detected.
- If it can be detected, then we can detect it as an amount or in a range of possible amounts.
- If it can be detected as a range of possible amounts, we can measure it.
Every intangible, no matter how nebulous, can be observed and measured in some meaningful way once we figure out what, precisely, we are measuring and why it matters.
In short, if there are intangibles that should be part of your decision calculus, they matter. And when you measure what matters, you can make better decisions.
using the applied information economics (AIE) framework
The quantitative analytical framework invented by Doug Hubbard, called Applied Information Economics (AIE), is based on the premise that anything can be measured. It uses a combination of economics, actuarial science, and various mathematical methods that together form a scientific way to quantify and evaluate anything that matters to an organization.
We have used AIE to measure and evaluate intangibles ranging from the meaning of sustainability to the economic value of information itself. One major benefit is the reduction of uncertainty, of which there is always plenty when it comes to any decision. The less uncertainty you have, all other things considered equal, the higher the probability you’ll have of making a good decision.
Hubbard Decision Research has helped organizations of all sizes, in both the public and private spheres, measure variables that were previously thought to be immeasurable. With our help, the decision-makers at these organizations have made better decisions by reducing their uncertainty – made possible by measuring the very things they thought couldn’t be measured.
These decisions have ranged from saving hundreds of millions of dollars through refining logistics processes to creating a framework to alleviate the impact of famine through sustainable agriculture.
work with hubbard decision research
If it matters to your organization, it can be measured, and if it can be measured and analyzed, you can make better decisions faster and with more confidence.
Contact Hubbard Decision research to learn more about how we help organizations reach their fullest potential through quantitative analysis of intangibles, through consulting or our proven training process.
Measure what matters, and make better decisions, with Hubbard.
Contact HDR today to set up your consulting and quantitative risk assessment.