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DAMA-FSP_Assign.2

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Francisco Silva Pinto

on 29 May 2014

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Transcript of DAMA-FSP_Assign.2

Decision Analysis Models and Application
s
Assignment 2
Instructors: Prof. Carlos A. Bana e Costa
Prof. Mónica Duarte Oliveira
May 29, 2014, Lisboa - Portugal
Exploring the impact of evaluating strategic option
A Scenario-based Multi-criteria Framework
Presented by: Francisco Silva Pinto
frcsilvapintop@ist.utl.pt
To assess systematically the value and robustness of strategic options after scenario development. To examine 3 case-studies within the Action Research framework for insights on decision-making and areas for improvement.
Overview
Deep uncertainty
Unavailability of trustworthy risk models (probabilities)
Disagreement on likely impacts (options)
Uncertainty on available alternatives
Objective
Premature focus on salient alternatives,
probably not the best!
Wide range of options
best/ worst/ likely outcomes
or
Hypothetical future that evolve from the present (different drivers/ key events)
Inter-scenario risk and robustness measures
or
threshold levels of performance for each scenarios
2X + 2 set of scenarios, combination of extreme lvls of
X
uncertainties
Presentation based on the following paper:
Ram, C., & Montibeller, G. (2013). Exploring the impact of evaluating strategic options in a scenario-based multi-criteria framework. Technological Forecasting & Social Change, 80 (4), 657-672.
A decision support method: MCDA evaluation - multiple scenarios
Presentation based on the following paper:
Ram, C., & Montibeller, G. (2013). Exploring the impact of evaluating strategic options in a scenario-based multi-criteria framework. Technological Forecasting & Social Change, 80 (4), 657-672.

Thank you for your attention!
Questions?

Decision Analysis Models and Application
s
Assignment 2
A Scenario-based Multi-criteria Framework
May 29, 2014, Lisboa - Portugal
List
uncertainties
and trends to the strategic question
Build "Level of importance" - "Level of uncertainty"
Pick "High/High"
Elicit
objectives
- use a value hierarchy
Shortlist independent
options
(meet objectives)
"Best" and "Worst" levels of achievement of objectives
(until unplausibility) [1]
Build scenarios, swinging 1 uncertainty at a time from best (BB...B) and worst (WW...W) possible scenarios
Check for consistency
Weights
: "If you were in scenario A, and one criterion could be moved to its best level, which would you choose?" Receives
100
and the other weights are given accordingly. Normalize weights
Values
: "If you were in scenario A, which option would perform best relative to others in terms of its ability to help achieve criterion i?" Receives
100
, the least -
0
and the rest accordingly
Consistency checked
Calculate
cost equivalent
performance (for scenario
r
)
i. The range of MCDA performance units:
w(cost,
r
)*100 = 0.4*100 = 40
ii. Range of cost/ range of MCDA units for cost:
range €/ 40 = (90m€-10m€)/ 40 = 2m€
iii. CEP = MCDA perf.*CE per unit of MCDA perf.:
55*2m€ = 110m€
Plot
expected regret
: each option across all scenarios
Performance of option
k
in scenario
r
, where:
v
is the value of option k in terms of helping to achieve a desired level of criterion
i
in scenario
r
w
is the weight assigned to criterion
i
in scenario
r
Scenario Planning + Aims to identify and create robust and strategic options +
Multi-Criteria Decision Analysis (MCDA) Multiple, conflicting objectives.
Scenario snapshots/ vignettes
+
use of regret.
Reasons
: Do not impact the benefit of a broad set of outcomes
+
likelihoods are not known
Scenario planning
Sense of ownership through a small number of detailed narratives
Representative sample - weighting of judgements
Debate between DM and facilitator for plausible outcomes
All uncertainties have equal weight, build scenarios
Snapshots/ vignettes presented for feedback (e.g. clarity)
Judgements of experts and non-experts in "a few" cues.
New features
The decision support method: The details

Use of regret
Leads to lower experienced regret
Focus on vulnerability relative to a norm
How could have happened? How could one change it/ prevent it?
Normalize under
cost equivalents
- no market considerations/
observed prices
Caution with awkward interpretations (i.e. implies monetary values)
The decision support research methodology
Characteristics:
Qualitative research paradigm
Action research as the strategy inquiry - personal involvement and researching collaboratively with the DM
Applications:
Public sector decision making: 1. multiplicity of factors in the development context 2. review the 2020 strategic development plan for Trinidad and Tobago
Conditions
:
1. Existence of deep uncertainty
2. Conflicting objectives not easily monetized
3. The decision was irreversible and involved a long amortization plan
DM chosen: Knowledgeable and experienced in decision making
Stages of the process:
In-person pre-intervention interview: inputs/str current process; uncertainty/multiple obj handled; knowledge
rate current process and ideal process
Intervention interview: tape recorded, and with inputs from data (multiple stakeholders)
Post-intervention interview: inputs/str process; uncertainty/multiple obj handled; key areas for improvement
rate process
The research methodology: Comparing the methods
Quality dimensions:
Perceived transparency
: comprehensibility of each stage of the process, with limitations of the method clearly identified in. This criterion is akin to ease of use, ease of understanding and justification.
Adaptive approach to change
: prompted to consider a range of possible surprises in the external environment when selecting strategic options.
Rational
: supported the decision-maker in using meaningful and reliable information to make clear value trade-offs and use logically correct reasoning.
Challenge current strategic priorities
: active questioning of the way strategic choices is currently made.
Stimulate creation of options
: generation of additional options/improvements.
Additional layer of analysis
Time varying
indicators (experts)
form
inputs
to an
econometric model
, used to predict future
scenarios
and
test the robustness
of the proposed solution
Ad-hoc judgment
- sizing potential communal benefit. Allocated funds
"shared equally"
(all areas), project approvals -
chairman as facilitator
.
The research methodology: Significant remarks
Scenario planning

MCDA
Strategic lens on decisions “rigorous [approach] based on hard facts and your
vision when there are scarce resources”.
Problem with several scenarios, not reflective value hierarchy - focusing on a broader range/
reference for elicitation and option improvement.
Multiplicative effect although significant
Stakeholder perception similar weights across scenarios
Robustness and flexibility: Degree of uncertainty costly enough to consider flexibility
Group decision making (sharing/ aggregating/ comparing)and other techniques as portfolio management should be considered!
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