Using portfolio analysis to provide shared Bo I

Using portfolio analysis to provide shared Bo. I decision-making between supplier and customer David Exelby dave. exelby@hvr-csl. co. uk HVR Consulting Services Ltd Slide 1 HVR Ref: ISMOR 21 Portfolio Presentation

Introduction Management of complex defence systems requires trade offs throughout the project lifecycle Focus for study Trade-offs throughout the acquisition cycle C A D M I D Technology platform System options Sub-system options Updates/Modifications Smart Acquisition acknowledges the need for Shared understanding between all stakeholders Development of through life management plans HVR Consulting Services Ltd Slide 2 HVR Ref: ISMOR 21 Portfolio Presentation

Developing through life management plans Military context Stakeholders (who are they, what are their needs, what is their influence? ) • What are the project outputs? • When are they needed? • What are the decisions (plus their criteria) and activities needed to deliver the outputs? • When are these decisions and activities needed and what do we need to do to get there? • Where does the responsibility lie? • What resources and processes do we need to put in place? • What do we need from other people? Business and ‘political’ Environment Time/Cost/ Performance Trade-offs Whole life Whole system Monitoring, review Project parameters and targets Resources Risk, Safety, ILS, legislation, etc. . . Source: http: //www. ams. mod. uk/ams/content/docs/tlmp/tlmdocs/writetlm. doc HVR Consulting Services Ltd Slide 3 HVR Ref: ISMOR 21 Portfolio Presentation

Case study centres on the need to develop a long term strategy for prioritisation of work programmes and effective resource expenditure to support a major defence asset sub-system through-life. Key objectives for Mo. D customer and supplier Develop a long term work plan out 3 -5 years Ensure effective dialogue between Mo. D and its industrial partner Prioritise a wide range of potential work packages Developed a programme of work – HVR working with Mo. D and industrial partner: Identifying risks associated with the asset Assess impact Explore mitigation options Prioritise a work plan HVR Consulting Services Ltd Slide 4 HVR Ref: ISMOR 21 Portfolio Presentation

The risk based balance of investment (RBBOI) process Knowledge capture • Knowledge capture driven from identification of key risks RBBOI Prioritisation Spares or Maintenance R&D Programme HVR Consulting Services Ltd Business Cases Operational Changes Slide 5 New Design Work Physical Testing HVR Ref: ISMOR 21 Portfolio Presentation

Interacting with the decision maker The customer and supplier needed a shared data repository and analysis framework to develop their long term strategy jointly Mo. D Data and analytics Data collected on individual safety and availability issues and associated mitigations – open book and fixed HVR Consulting Services Ltd Supplier Global data for what ifs e. g. resource productivity and cost Slide 6 HVR Ref: ISMOR 21 Portfolio Presentation

Top level user requirements Visualise sets of complex data in an intuitive way Provide an aid to communication between supplier and Mo. D Provide a methodology to support balance of investment decision making. Mitigation options will be limited by available funding and the study team needs to be able to identify which options can provide maximum benefit Ensure that a full audit trail is provided from data collection through to decision making Ensure that supplier and Mo. D are easily able to update the data on an ongoing basis HVR Consulting Services Ltd Slide 7 HVR Ref: ISMOR 21 Portfolio Presentation

Visualisation - portfolio analysis and the Boston Matrix A technique for charting or categorising the different businesses in a firm’s portfolio and determining implications for resource allocation. Including GE Matrix, these approaches have become universal in business Low l Cash cow – today’s breadwinner l Dog – also ran l Question mark – tomorrow’s star? l Star – tomorrow’s cash cow Low Market growth rate High Relative market share HVR Consulting Services Ltd Slide 8 HVR Ref: ISMOR 21 Portfolio Presentation

The HVR generic framework for portfolio analysis This is tailored to each individual study e. g. HVR involvement in current study centres more on approach and tool development rather than data collection • Ongoing appraisal Identify factors to score Decompose sub factors and metrics Objectives • To identify dimensions on which to map options Activities • Interviews with • Interviews senior managers • Desk based research • Review workshops HVR role HVR Consulting Services Ltd • To provide a scoring schema for detailed assessment Score options against metrics • Initial scoring of options • Interviews • For large portfolios e. g. defence ministries, proformas can be issued Consulting support Slide 9 Analysis of portfolio and recommendations Determine sub factor weightings • To determine the relative importance of each sub factor • Workshop • Structured weighting exercise applying well tested approaches e. g. Saaty, Swing weight • To explore the portfolio space and identify opportunities and prioritise • Data input to portfolio models • Develop portfolio maps • Review workshop HVR’s Rapid Options Analysis tools HVR Ref: ISMOR 21 Portfolio Presentation

Developing a factor tree Simplified A framework of factors and sub-factors was developed Overall Mitigation Option Score £ Mitigation £ Material and Manpower £ Failures £ Other £ Failure £ Material and Manpower Uncertainty Reduction # Failures £ Other # Components Probability of Mitigation Success Reduction in Uncertainty Failure Rate Asset Years Remaining HVR Consulting Services Ltd Slide 10 HVR Ref: ISMOR 21 Portfolio Presentation

Visualising the factors The factor framework coupled with the visualisation allows portfolio mapping of options HVR Consulting Services Ltd Slide 11 HVR Ref: ISMOR 21 Portfolio Presentation

Data collection Identify factors to score Decompose sub factors and metrics Score options against metrics Determine sub factor weightings Analysis of portfolio and recommend-ations Supplier undertook extensive interviews using SMEs Identifying risk scenarios Assessing risk impacts Drawing up mitigation options Assessing required mitigation resources Generated a large volume of numerical and textual data Collated in database application Approximately 1500 records in initial scan HVR Consulting Services Ltd Slide 12 HVR Ref: ISMOR 21 Portfolio Presentation

Development of software support tool – RBBOI Options Analysis Tool Identify factors to score Decompose sub factors and metrics Score options against metrics Determine sub factor weightings Analysis of portfolio and recommend-ations HVR developed a bespoke software support tool for all stakeholders Database functionality Easy updates of raw data Analytics Rapid visualisation of factor scores Prioritisation algorithms Ability to save and exchange scenarios Ability to filter option universe HVR Consulting Services Ltd Slide 13 HVR Ref: ISMOR 21 Portfolio Presentation

Data is easily reviewed within the application Source: RBBOI Options Analysis Tool HVR Consulting Services Ltd Slide 14 HVR Ref: ISMOR 21 Portfolio Presentation

Using the factor scores Disguised data HVR Consulting Services Ltd Slide 15 HVR Ref: ISMOR 21 Portfolio Presentation

Interpreting the portfolio Limited benefits? MA cost Priority actions? Secondary criteria based on • Failure cost • Uncertainty reduction Problem children? Overall MA benefit HVR Consulting Services Ltd Slide 16 HVR Ref: ISMOR 21 Portfolio Presentation

Analysis process Identify factors to score Plan Explore Select key criteria Visualise data Prioritise Decompose sub factors and metrics Score options against metrics Determine sub factor weightings Analysis of portfolio and recommend-ations Explore Outlier analysis Prioritise majority data Reality checks Several stages Plan the analysis in terms of initial factors to plot, prioritisation mechanism, global data Initial exploration of the data Prioritisation Re-explore the emerging insights to challenge/explain prioritisation, sensitivity on global data (charge rates, etc) HVR Consulting Services Ltd Slide 17 HVR Ref: ISMOR 21 Portfolio Presentation

Developing prioritisation approaches Prioritisation can be made on any of the factors. Recommended prioritisation factors • Overall mitigation option score • “Value for money” Mitigation Benefit Score • Mitigation cost • Cost of all aspects of mitigation (materials, manpower, environmental and availability) • Failure Cost • Cost of all aspects of failure (material, manpower, environmental and availability) • Uncertainty Reduction • Likely impact on knowledge gaps (probability of success and impact if successful) • Options can be selected through filtering and sorted • Prioritisation for the selected options can be performed for: • Best Estimate • Best Case • Worst Case HVR Consulting Services Ltd Slide 18 HVR Ref: ISMOR 21 Portfolio Presentation

Overall MA scores Tool allows ranking across factors – user can define multiple ranking schemes HVR Consulting Services Ltd Slide 19 HVR Ref: ISMOR 21 Portfolio Presentation

Reality check – sensitivity to uncertainty Worst case CR 4 -1 -12 -1 CR 10 -1 -3 -1 CR 10 -1 -1 -2 CR 4 -1 -7 -1 CTS 10 -1 -1 -1 CR 10 -1 -2 -2 PP 1 -1 -2 -1 CTS 5 -1 -1 -1 CTS 5 -1 -3 -2 CTS 10 -1 -4 -3 CTS 5 -1 -3 -1 PP 1 -1 -1 -2 CTS 10 -1 -4 -1 PP 1 -1 -1 -1 P 8 -1 -1 -2 PP 5 -1 -4 -2 PP 5 -1 -7 -2 PP 5 -2 -2 -2 PP 5 -1 -3 -2 PP 5 -1 -2 -2 P 8 -1 -1 -3 CTS 10 -1 -1 -2 CTS 10 -1 -5 -1 PP 4 -1 -2 -2 PP 7 -1 -1 -1 HVR Consulting Services Ltd Most likely CR 4 -1 -12 -1 CR 10 -1 -3 -1 CR 10 -1 -1 -2 CR 4 -1 -7 -1 CR 10 -1 -2 -2 CTS 10 -1 -1 -1 PP 1 -1 -2 -1 CTS 5 -1 -1 -1 CTS 5 -1 -3 -2 CTS 5 -1 -3 -1 CTS 10 -1 -4 -3 P 8 -1 -1 -1 CTS 10 -1 -4 -1 PP 1 -1 -1 -2 PP 1 -1 -1 -1 PP 5 -1 -4 -2 PP 5 -1 -3 -2 PP 5 -2 -2 -2 PP 5 -1 -7 -2 PP 5 -1 -2 -2 P 8 -1 -1 -2 CTS 10 -1 -1 -2 P 8 -1 -1 -3 CTS 10 -1 -5 -1 PP 4 -1 -2 -2 PP 7 -1 -1 -1 Best case CR 4 -1 -12 -1 CR 10 -1 -3 -1 CR 4 -1 -7 -1 CR 10 -1 -1 -2 CTS 10 -1 -1 -1 CR 10 -1 -2 -2 PP 1 -1 -2 -1 CTS 5 -1 -1 -1 CTS 5 -1 -3 -2 CTS 5 -1 -3 -1 P 8 -1 -1 -1 CTS 10 -1 -4 -3 CTS 10 -1 -4 -1 PP 1 -1 -1 -2 PP 1 -1 -1 -1 CTS 10 -1 -1 -2 PP 5 -1 -4 -2 PP 5 -1 -7 -2 PP 5 -2 -2 -2 PP 5 -1 -3 -2 PP 5 -1 -2 -2 CTS 10 -1 -5 -1 P 8 -1 -1 -3 P 8 -1 -1 -2 PP 4 -1 -2 -2 PP 7 -1 -1 -1 Slide 20 In this case appears robust to estimates Top 6 remain across all scenarios HVR Ref: ISMOR 21 Portfolio Presentation

Conclusions Mo. D has developed a comprehensive work plan for next year Fully auditable back to source data Rapid negotiation of packages between supplier and Mo. D (both technical and commercial much shortened) Communication through the RBBOI tools sets The RBBOI database and options analysis tool is being updated on a regular basis Additional mitigation options arise Track work package progress Anticipated that approach will be used elsewhere within Mo. D and industrial partner. Collective view is that the approach has strengthened interaction between decision maker and supplier HVR Consulting Services Ltd Slide 21 HVR Ref: ISMOR 21 Portfolio Presentation

Contact details HVR Consulting Services Ltd Selborne House Mill Lane Alton Hampshire GU 34 2 QJ UK Tel: +44 1420 87977 Fax: +44 1420 89819 Email: dave. exelby@hvr-csl. co. uk Web: www. HVRGroup. com HVR Consulting Services Ltd Slide 22 HVR Ref: ISMOR 21 Portfolio Presentation