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Robust Portfolio Modeling in the Development of National Research Priorities. Ville Brummer and Ahti Salo Systems Analysis Laboratory Helsinki University of Technology P.O. Box 1100, 02015 TKK, Finland http://www.sal.tkk.fi [email protected] . RPM – Robust Portfolio Modelling.

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Robust portfolio modeling in the development of national research priorities l.jpg

Robust Portfolio Modeling in the Development of National Research Priorities

Ville Brummer and Ahti Salo

Systems Analysis Laboratory

Helsinki University of Technology

P.O. Box 1100, 02015 TKK, Finland

http://www.sal.tkk.fi

[email protected]



Robust portfolio modelling rpm l.jpg
Robust Portfolio Modelling (RPM) Research Priorities

  • Liesiö, Mild, Salo (2006). Preference Programming for Robust Portfolio Modelling and Project Selection, forthcoming in EJOR

  • Projects

  • Evaluation with regard to multiple criteria

    • Score of project with regard to the i-th criterion

    • Criterion weights

  • Additive representation of project value


Project portfolios l.jpg
Project Portfolios Research Priorities

  • Portfolio p = a subset of projects

  • Portfolio value = sum of its projects’ values (Golabi et al. 1981)

  • Feasible portfolios satisfy linear constraints

    • E.g., budget constrains

  • Maximize portfolio value

    • Zero-one linear programming problem (ZOLP)


Incomplete information in portfolio selection l.jpg
Incomplete Information in Portfolio Selection Research Priorities

  • Elicitation of complete information (point estimates) on weights and scores may be costly or even impossible

  • Weights constrained by the DMs preference statements

    • Several kinds of preference statements impose linear constraints on weights

    • (Incomplete) rank-orderings on criteria (cf., Salo and Punkka, 2005)

    • Interval SMART/SWING (Mustajoki et al., 2005)

  • Intervals of project-specific scores

    • Lower and upper bounds on criterion-specific scores of each project

  • Information set


Dominance concept for portfolios l.jpg
Dominance Concept for Portfolios Research Priorities

  • Portfolio p dominates p’ on S, denoted by , if

  • Portfolio p’ can be discarded because p yields higher value!

  • Non-dominated portfolios (NDP)

    • Restrict attention to NDPs only

    • All NDPs computed by a dedicated dynamic programming algorithm

    • Multi-Objective Zero-One LP (MOZOLP) problem with interval-valued objective function coefficients


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Recommendations at the Portfolio Level Research Priorities

  • Core Index of a project,

    • Share of non-dominated portfolios (NDP) that contains

  • Core projects, i.e. , can be surely recommended

    • Would belong to all NDP even if additional information is acquired

  • Exterior projects, i.e. , can be safely rejected

    • Cannot enter any NDP even with additional information

  • Borderline projects, i.e. , need further analysis

    • Negotiation / iteration zone for augmenting the set of core projects

    • Narrower score intervals help reduce the set of borderline projects


Non dominated portfolios and core index l.jpg

* Research Priorities

A

B

D

Overall value at extreme point 1

Overall value atextreme point 2

Overall value atextreme point 3

B

*

C

A

*

*

C

A

E

E

*

D

C

D

*

E

B

Non-dominated Portfolios and Core Index

  • Non-dominated portfolios (NDP)

    • No other feasible portfolio gives higher overall value with all feasible weights and scores

  • Project’s Core Index (CI)

    • Core proj. are included in all NDP (CI=1)

    • Exterior proj. not included in any NDP (CI=0)

    • Borderline proj. included in some NDP (0<CI<1)

A

10

B

4

5

C

3

2

1

6

7

9

8


Core index analysis l.jpg

Core projects Research Priorities→ accept

Hundreds of projects

Multiple criteria

Portfolio-level constraints

Incomplete information

Borderline proj→ focus

Computenon-dominated portfolios

Exterior proj→ reject

Core Index Analysis

  • Core Index is a performance of a measure which accounts for

    • Incomplete information on weights and scores

    • Project cost and competing proposals

    • Budget and other feasibility constraints

  • Helps classify projects



Forest based sector technology platform ftp l.jpg
Forest-Based Sector Technology Platform (FTP) Research Priorities

  • One of the over 30 European Technology Platforms

    • Coordination of industry-lead European R&D activities

    • Establishment of the European Research Area (ERA)

  • This particular Technology Platform initiated by

    • European Confederation of Woodworking Industries

    • Confederation of European Forest Owners

    • Confederation of European Paper Industries

  • Over 30 countries involved

    • Launched in 2003

    • Long-term perspective (2030)

    • Development of the Strategic Research Agenda (SRA) in 2005 in member states and at the European level


Strategic research agenda sra for the ftp l.jpg

1 Research Priorities

2

3

4

5

6

7

8

9

10

11

12

Organisation established

Value-chain leaders elected.

Setting up the guidelines

Step 1: Collection of inputs

Step 2: European priorization

Step 3: Strategic objectives and research themes

Step 4: Open discussion and finalising

Developing SRA document

Final SRA

1. Dec.

Strategic Research Agenda (SRA) for the FTP

  • Step 1: Each country was requested to identify 10 -15 most relevant research themes in view of national priorities


Challenges l.jpg
Challenges Research Priorities

  • New policy instrument  No established approaches

  • A very wide range of issues to be covered

    • Many stakeholder groups (e.g., pulp and paper industry, bioenergy, forestry)

    • Long time scale  considerable uncertainties

  • Tight timetable

    • Only 7 weeks  Need for a structured decision support process

  • Multiple interfaces to other policy processes

    • E.g., preparation of Framework Program (FP7) in Europe

  • Forest sector is a key industry in Finland

    • 24 % of exports


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Finnish Case: National SRA Process for the FTP Research Priorities

  • Systematic process to engage Finnish key stakeholders

    • Development of the national SRA

    • Linked explicitly to the Vision 2030 document at the European level

  • Five value chains

    • Forestry, Wood Products, Pulp and Paper, Bio Energy, Specialties/ New Businesses

    • Independent but interrelated process for each value chain

  • Identification and assessment of research themes

    • Internet questionnaires – MCDM analysis - interactive decision workshops

  • Synthetisation of national results at the end of the process


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Participants and Roles Research Priorities

  • Steering Group

    • Coordinators and selected key persons (~ 10 people)

  • Coordinators

    • Chairs of national value chain Working Groups (5 people)

  • TKK Group

    • Research team of Prof. Ahti Salo at the Systems Analysis Laboratory / TKK

  • Respondents

    • 20-30 participants within each value chain

  • Referees

    • 6-10 participants within each value chain


Process design l.jpg
Process Design Research Priorities


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Task 1: Solicitation of Research Themes Research Priorities

  • Timetable: April 27 – May 8

  • Participants: 20 -30 Respondents / Value chain

  • Task: In each value chain, respondents proposed research themes with the Opinions-Online decision support tool

  • Result: Total 146 research themes

  • Task 1

  • Example


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Task 2: Assessment of Research Themes Research Priorities

  • Timetable: Mid-may

  • Participants: 6 -10 Referees / Value chain

  • Task: In each value chain, referees assessed research themes with Opinions-Online©

  • Result: Numerical assessment of research themes with regard to different criteria

  • Task 2


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Task 3: Analysis on the Results Research Priorities

  • Timetable: Mid-may

  • Participants: Research group at TKK

  • Task: TKK group analysed the results using RPM-methodology

    • ”Research theme” as ”project” treated as equal unit

    • Scores defined as average of criterion specific evaluations

    • Highlight 7 the most interesting themes from the whole set (Budget: )

  • Result: Shortlist of ’the most interesting’ themes on each value chain

  • Example


Task 4 value chain workshops l.jpg
Task 4: Value Chain Workshops Research Priorities

  • Timetable: May 23 -31

  • Participants: Value chain working groups

    • Selected respondents, referees and other experts

  • Task: Value chain Working Groups discussed on the results and identified most relevant research themes.

  • Result: 3-7 the most relevant themes from each value chain


Task 5 sra workshops l.jpg
Task 5: SRA Workshops Research Priorities

  • Timetable: June 8

  • Participants: SRA steering group (includes value chain coordinators)

  • Task: Based on the results from previous tasks and especially from value chain workshops, SRA steering group identified the most relevant 15 research themes

  • Result: the most relevant research themes

    • Taken forward to European level


Conclusions l.jpg
Conclusions Research Priorities

  • Systematic way of organising foresight processes

    • Permits extensive stakeholder participation even with tight schedules

    • Is transparent in terms of methodology

    • Supports workshop discussions through MCDA analyses

  • Considerations

    • Formal MCDA inputs are helpful but need to be complemented

    • Supports discussions by synthesizing results based on Core Index values

    • Makes it possible to consider multiple perspectives (criteria & their weights)

  • Applicable in several other contexts, too


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