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Outside-In Measurement

The signs are all around. LinkedIn’s endorsements. Social media wins and losses for companies (did you hear about JP Morgan’s Twitter debacle?). And this great comment by HubSpot founder Dharmesh Shah in Inc:

In the future, you won't just hit Ignore when you get an annoying sales call; you'll also be able to down-vote that phone number. Someday, we won't just see caller ID on our phones but also caller reputation. As new tools are developed, algorithms will do a much better job of evaluating a brand than an individual can, because algorithms will be based on thousands of data reactions.

What do all of these stories have in common? They are showing that measurement is moving from an inside-out activity (measuring using financial and quantitative indicators) to outside-in activity (measuring how stakeholders view the value you create).

At Smarter Companies, we focus most of our attention on intangible capital. That’s because this kind of asset already drives 80% of corporate value and 100% of competitive advantage of the average business today. (I shake my head every day wondering how much bigger the phenomenon has to get before people start paying attention…).

Intangible capital can and should be measured using inside-out metrics. But we focus our attention on the outside-in metrics. That’s because they are more powerful. And they are stakeholder-based. If you want to have a good leading indicator of an organization’s ability to generate growth, innovation and profit in the future, you’ll want to pay attention to whether a company is meeting its stakeholders’ needs.

It’s pretty simple on the surface. (Here’s an example of how we generate these measures). But it is ultimately revolutionary because it shifts the conversation about how to manage and build organizations. Measures that matter evaluate intangibles using stakeholder feedback. Do your measures matter?

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