Tuesday, May 5, 2009

Measuring Anything

I recently read a book entitled How to Measure Anything - Finding the Value of Intangibles in Business by Douglas W. Hubbard.  This was an excellent book and helped me to think about how I could measure ANYTHING and how, when necessary to think about how I estimate values.  There are some great exercises to stretch your brain in here.

I hear from my OEM's quite often that they can't measure things because they are too complex to calculate.  Think about a Security Vendor.  How can they measure Risk Exposure?  There's nothing in their database that is called Risk Exposure.  How can a CRM vendor measure Campaign Effectiveness?  How does a Higher Education vendor measure Educator Effectiveness?  These are not simple calculations of x+y=z.  But they could be easily calculated or estimated within ranges. 

Risk Exposure may be calculated by evaluating the trend (not necessarily the actual #) of several things, including Security Threats or numbers of Viruses detected, Security Violations by employees such as non-standard equipment or software, Sensitivity of the asset in violation (the CEO having BearShare or Kaazaa is worse than someone in Accounting having Texas Hold 'em), Value of the asset in violation (the email server vs. one of 100 print servers), etc.  All of these things combined can give you some sense of what your Risk Exposure is.  You may not have a value of Risk Exposure = 123.53, but you may be able to determine a Risk Exposure of High, Medium or Low which could be backed up by all the specific metrics which go into the calculation.  

To demonstrate that truly Anything can be measured.  I found this website which calculated some pretty difficult things to measure, the Seven Deadly Sins: Greed, Envy, Wrath, Lust, Gluttony, Sloth and Pride.  Check it out, it is a very interesting read - http://scienceblogs.com/gnxp/2009/05/map_of_seven_deadly_sins.php.

ISV's and BPO's need to think about why people buy their software and how can they measure the Effectiveness of their software, not necessarily the Efficiency, see the blog post Effectiveness vs. Efficiency.  I highly recommend picking up the book above and reading through it.  Then, schedule some time to review your partner's or prospect's website and literature.  Pick out 3-5 things that they say they do for their customers.  Then, think about how you would measure that?  Avoid looking for things like "We can process 1 kazillion transactions per second...".  That provides little or no value to their client.  Look for the true Value Statements. 

I like what I heard from a Higher Education vendor the other day, when they told me "We help Teachers Teach Better and Students Learn Better".  Ok, how can you prove that?  How do you measure Teacher Effectiveness and Student Learning Ability?  Is it strictly by grades?  What about drop-out rates?  What about student Engagement?  What about class participation?

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