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Model-based decision processes for agenda building and project funding

Model-based decision processes for agenda building and project funding. Eeva Vilkkumaa Lectio praecursoria. The document can be stored and made available to the public on the open internet pages of Aalto University. All other rights are reserved. Business concept development.

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Model-based decision processes for agenda building and project funding

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  1. Model-based decision processes for agenda building and project funding Eeva Vilkkumaa Lectio praecursoria The document can be stored and made available to the public on the open internet pages of Aalto University. All other rights are reserved.

  2. Business concept development Intelligent products Future resources Big data Outsourced energy management Improvement of energy efficiency Integrated Billing Self-organizing systems E-energytrading.com Print-on-wood Aesthetic features CyberRetail.com Efficient substitution E-notification Outsourced energy management Online environmental management E-biz in a box

  3. One million No. of people on earth No. of insects on earth

  4. Multiple stakeholders Values Decision model Decision recommendations Uncertainties Risk attitudes Objectives

  5. Value increases for stakeholder 1 B C G A YES! NO! H L D E F K M I J Value increases for stakeholder 2 NO! YES!

  6. B C G A 40%... H L D E F K M Precise importance weights → Single recommended portfolio I J 60%!!

  7. B C G A >25% H L D E F K M Incomplete importance weights → Set of non-dominated portfolios I J = Core project – agree to select >25% = Borderline project – negotiate = Exterior project – agree to reject

  8. F: Investment in renewable energy technologies Global scenarios for 2025 + 30% 28% 35% 37% • 2. Adaptation to scarcity • Strong regulation • Renewable resources, recycling and resource effiency • 1. Digital economy of global networks • Technology and markets rule • Huge global growth 25% 23% 10% 12% • 3. Global economic crisis • Tax evasion, corruption and black economy • Infrastructure and public services deteriorate quickly • 4. World of conflicts • Superpowers and realpolitik rule • Tension between cultures - + A: International cooperation against tax havens B: Increased armament D: Protectionism? B: Increased armament? A: International cooperation against tax havens? C: Decreased armament? H: Leave the EU? ʻScenario 2 is more probable than scenario 1’ F: Investment in renewable energy technologies? G: Free trade agreements? ʻSelection of project B makes the probability of scenario 4 higher than 15%’ E: Investment in nuclear energy? I: Abolish euro? Source: Huoltovarmuuden skenaariot 2025, Huoltovarmuuskeskus, 2014.

  9. = Core project – select regardless of what happens = Borderline project – wait and see = Exrterior project – reject regardless of what happens M Incomplete scenario probability information → Set of non-dominated portfolios A D C B K I L G E F H J

  10. The inevitable Dilbert strip

  11. True value of each project True cost of each project Distribution of estimation error F F E E F A B C D E A D C B B A

  12. Average escalation μ=27,6% Frequency (%) Cost escalation (%) Source: Flyvbjerg et al. (2002), Underestimating Costs in Public Work Projects – Error or Lie? Journal of the American Planning Association, Vol. 68, pp. 279-295.

  13. Prior mean Distribution of estimation error Prior distribution of the values of similar projects A A Value estimate for candidate project Adjusted estimate for candidate project

  14. Select Re-evaluate and reconsider A 6 B 5 E C Selection threshold 4 D D E E Estimated value (M€) F 3 Reject G 2 H 1 I J Projects

  15. Prior mean Distribution of estimation error Prior distribution of the values of similar projects A Value estimate for candidate project Adjusted estimate for candidate project

  16. Photocopier Rejected by Kodak as a bad idea in 1940s – later made Xerox a huge success Personal computer Idea rejected in 1970s by 17 companies such as Xerox, IBM, and Hewlett Packard – the rest is history Gene targeting of mammalian cells Received unanimously negative reviews at National Institutes of Health in 1980s – Nobel Prize in 2007

  17. To maximize short-term performance To fund exceptionally valuable projects CF= conditional funding R = rejected projects C = continued projects A = abandoned projects FF = full funding R = rejected projects

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