1 Helsinki University of Technology Systems Analysis Laboratory RPM-Explorer - A Web-based Tool for Interactive Portfolio Decision Analysis Erkka Jalonen and Ahti Salo Systems Analysis Laboratory Helsinki University of Technology P.O. Box 1100, TKK, Finland

Helsinki University of Technology Systems Analysis Laboratory 2 Robust Portfolio Modelling (RPM) n Extends Preference Programming to portfolio problems –A subset of project proposals is selected in view of multiple evaluation criteria –Project and portfolio value expressed as a weighted sum of criteria scores –Admits incomplete information about criterion weights and projects’ scores n Focus on non-dominated portfolios (NDP) –A rational DM would not choose a dominated portfolio  focus on NDPs –All NDPs are computed with specialised algorithms –Core Index value convey the share of NPDs that contain a given project n Liesiö, Mild, Salo (2006). Preference Programming for Robust Portfolio Modeling and Project Selection, EJOR (to appear).

Helsinki University of Technology Systems Analysis Laboratory 3 n Dominance relations depend on the information set S –Loose statements lead to a large number of non-dominated portfolios (NDP) –Complete information typically leads to a unique portfolio n Additional information makes the set of NDPs smaller –This information is modelled through a smaller weight set ( ) and/or narrower score intervals ( ) –Several preference elicitation methods can be employed –No new portfolio can become non-dominated n Elicitation efforts can be focused on borderline projects –Additional information affects the Core Index of borderline projects only ðNarrower score intervals needed for borderline projects only Impact of Additional Information (1/2)

Helsinki University of Technology Systems Analysis Laboratory 4 Impact of Additional Information (2/2) n No information  A rank-ordering n 542 NDPs  109 NDPs n 104 borderline projects  64 borderline projects

Helsinki University of Technology Systems Analysis Laboratory 5 Add. exter. Decision Support in RPM Selected Not selected Decision rules, heuristics Additional information Large set of projects Multiple criteria Resource and portfolio constraints Borderline projects  focus on Exterior proj.  discard Core projects  choose Borderline Negotiation, iteration Compute non-dom. portfolios Update ND portfolios Add. core Preceding core proj. Preceding exterior Loose statements on weights and scores

Helsinki University of Technology Systems Analysis Laboratory 6 RPM-Explorer - Background n Old: Analyses often suggest a single optimal solution –Recommendation often stated in written documents –Such documents provide little support for the interactive exploration of results n New: Provide an interactive interface to the analysis –Allow stakeholders to specify their preferences about the importance of criteria –Produce decision recommendations based on the stakeholders’ preferences –Visualise decision recommendations for projects based on Core Index values –Make use of widely available communication technologies (=Internet)

Helsinki University of Technology Systems Analysis Laboratory 7 Add. exter. Decision Support Tools for RPM Selected Not selected Decision rules, heuristics Additional information Large set of projects Multiple criteria Resource and portfolio constraints Borderline projects  focus on Exterior proj.  discard Core projects  choose Borderline Negotiation, iteration Compute non-dom. portfolios Update ND portfolios Add. core Preeding core proj. Preceding exterior Loose statements on weights and scores RPM-Solver© RPM-Explorer © E.g Opinions-Online© (voting tool)

Helsinki University of Technology Systems Analysis Laboratory 8 Application of RPM-Explorer - Case Study (1/4) n Development of the strategic research agenda for the Association of Packaging Industry in Finland n Collaborative consultation process (i) producing research themes (70 participants) (ii) commenting and elaboration of themes (the same participants as in previous phase) (iii) evaluating of themes (10 evaluators) (iv) analysing them first personally and then jointly in a workshop (15 decicion makers) n Research themes treated as ’projects’

Helsinki University of Technology Systems Analysis Laboratory 9 Application of RPM-Explorer - Case Study (2/4) n Themes (~80) evaluated with regard to three criteria (i) innovativeness (ii) feasibility (iii) relevance –evaluated on a 1-to-7 Likert-scale –theme-specific scores computed as the mean of evaluators’ ratings n Results communicated by RPM-Explorer and as pdf-documents n Interactive analysis of themes with DMs in two workshops –First one with the Board of the Association (14 leading industrialists) –Second with 10 including external stakeholders

Helsinki University of Technology Systems Analysis Laboratory 10 Application of RPM-Explorer - Case Study (3/4) Opinions- Online© Database Internet RPM-Explorer analysis applet RPM-Explorer configuration files RPM- Solver analysis software Theme Producers Theme Evaluators Decision Makers Opinions-Online © questionnaire software

Helsinki University of Technology Systems Analysis Laboratory 11 Application of RPM-Explorer - Case Study (4/4) n An Example: Theme Group 4: Packaging MaterialsTheme Group 4: Packaging Materials

Helsinki University of Technology Systems Analysis Laboratory 12 RPM-Explorer in Use (1/2) Specifications of preferences results in corresponding adjustments in real- time

Helsinki University of Technology Systems Analysis Laboratory 13 RPM-Explorer in Use (2/2) Several visualization tools Explicit support for project selection

Helsinki University of Technology Systems Analysis Laboratory 14 RPM-Explorer - Conclusions n Positive feedback from users –RMP-Explorer clearly stimulated workshop discussions n Generic software for many problem contexts and uses –Personal learning through Internet-mediated preference analysis –Collaborative decision making in facilitated workshops n Software may introduce several benefits –Decision making: Personal interests, sensitivity analyses –Communication: Increased commitment, enhanced understanding –Information elicitation: Guidance for focusing the elicitation efforts

Helsinki University of Technology Systems Analysis Laboratory 15 RPM-Decisions© (1/2) n RPM-Decisions© –Combines RPM-Solver and RPM- Explorer –Under intensive development –Demo available n New Features –Web-interface to analysis (RPM- Explorer) –Criteria hierarchies –Project interdependencies –Soft budget constraints n

Helsinki University of Technology Systems Analysis Laboratory 16 RPM-Decisions© (2/2) n Spread-sheet form data input –Scores, costs and constraints –Preference elicitation wizard –Constraint wizards n Computation –Approximative algorithms for large problems –Exact algorithms for up to 70 projects n Interactive analysis –Core indexes, decision rules, robustness –Score scatter plots, additional information –Export for interactive analysis web-interface

Helsinki University of Technology Systems Analysis Laboratory 17 On-going RPM Applications n Management of infrastructure assets –Optimization of road and bridge maintenance and repair programmes –Allocation of resources among different asset classes in view of multiple criteria n Voluntary conservation of forest reserves –Evaluation of conservation value of sites offered by forest owners –Design of optimal decision analytic evaluation process n Innovation management –Valuation of intellectual property rights (Nokia Wireless Technologies) –Evaluation of longitudinal data from innovation programmes (Salo et al., 2006) –Solicitation, commenting, evaluation and selection of innovation themes