Helsinki University of Technology
Systems Analysis Laboratory
Standardization Portfolio Management for a
Global Telecom Company
Ville Brummer
Systems Analysis Laboratory
Helsinki University of Technology
P.O. Box 1100, FIN-02015 TKK
Finland
1
Helsinki University of Technology
Systems Analysis Laboratory
Objectives

Support company’s standardization management by developing a portfolio model

Define concepts and mechanisms for target setting and business analysis
–
–
Create a framework for treating each activity as a measurable unit for business
» Return on Investment (ROI) value
» Uncertainties and risks
» Balance with company’s strategies
Collect all activities as a part of one managed portfolio for decision making, analysis, discussion and
consistent presentation

How should resources be allocated among standardization and development
activities in order to maximize expected sales?

Additional questions
–
–
–
How efficient is the current allocation of resources between activities?
» Expected sales
» Risks
Is it possible to increase expected sales by shifting resources from standardization to development
or vice versa,
What kind of activity resourcing changes would be warranted if more emphasis is placed on selected
strategies (e.g. if 30% of resources are aligned with Strategy C) or sales channels (e.g. 20% of sales
from channel 2)?
Helsinki University of Technology
Systems Analysis Laboratory
Standardization portfolio management
Standardization activities
E
B
F
D - Enable sales increase
A
C
Evaluation
90
80
70
60
50
40
30
20
10
0
0
50
100
150
200
250
Point estimates on
- Costs
- Probabilities
- Sales increase
- IPR
- Strategic targets
- Sales channels
- Uncertainties related to the standardization
and development activities
- Support strategic targets in different
sales channels and time frames
- Increase company’s IPR portfolio value
Decision recommendations
Increase funding
A
D
Keep the present funding
B
Maximize
expected sales
increase
Optimization
- Standardization activities
- Development activities
F
Decrease (or end) funding
C
E
Helsinki University of Technology
Systems Analysis Laboratory
Definitions

Activity
– Unit of analysis
– Activity is successful if company’s
targets related to the activity are
achieved
» Only success or failure possible

Resources
– Standardization resources
– Develoment resources

Portfolio
– Consists of activities where
Standardization and Development
resources are committed
Activity
A
B
C
D
E
Standardization resources Development resources
500
300
0
800
400
1200
600
100
100
0
Helsinki University of Technology
Systems Analysis Laboratory
Milestones of a standardization activity

Standardization success
– Company’s standardization targets related to the activity are achieved
– Depends on
i) Standardization resources (Rs)

Development success
– Development targets related to the activity are achieved
– Enables sales increase
– Depends on
» Standardization success
» Development resources (Rd)

Sales increase is estimated as value interval

Uncertainties are modelled through probabilities
– ps = Probability of standardization success
– pd = Probablity of dominant design concept success
Helsinki University of Technology
Systems Analysis Laboratory
Probabilities and resources
Decision node
Uncertainty node
Value node
Sales
yes
Development
successful?
yes
pd|s=1(Rd )
no
1-pd|s=1 (Rd )
No Sales
ps(Rs )
Commit Rs and Rs
resources
Standardization
successful?
1- ps(Rs )
no
yes
Sales
pd|s=0 (Rd )
Development
0
successful?
no
1-pd|s=0(Rd )
No Sales
Helsinki University of Technology
Systems Analysis Laboratory
Probabilities and resources: Evaluations
Probability of Development
Success is evaluated conditional
to both Standardization success
and Standardization failure
Probability of standardization success
Propability of
standardization success

Standardization and Dominant
Design Concept success are
evaluated at different levels
100
80
60
40
20
0
0
50
100
150
200
Standardization resources
Probability of dominant design success
Propability of Dominant
Design success

100
80
60
40
20
0
0
50
100
Standardization resources
150
200
Helsinki University of Technology
Systems Analysis Laboratory
Probability of Dominant Design Concept success
70Probability of
60Dominant
design
50 concept
Probability of
Development
40 success
success
30
20
10
0
150
Development
resources
Development
resources
200
100
Standardization resources
50
0
0
Standardization resources
Helsinki University of Technology
Systems Analysis Laboratory
Interactions among standardization activities
 Activity A depends
on activity B, if Standardization success
and/or Standardization failure of B, essentially changes the
probability of Standardization success of A.
– Negative and positive correlations
Helsinki University of Technology
Systems Analysis Laboratory
The model

Objective function
– Expected sales of the porfolio

Decision variables
– Resource allocation of standardization and development resources for
activities

Resource constraints
– Available standardization and development resources

Other constraints
Helsinki University of Technology
Systems Analysis Laboratory
Portfolio balance requirements
 Alignment with the company’s strategies
– Resources can be allocated to support the diffent strategies
 Sales distribution channels
– Resources can be allocated so that certain percentage of total expected sales
related to the standardization activities would come from the defined sales
channels
 Time distribution of future sales
– Resources can be allocated so that certain percentage of total expected sales
related to the standardization activities would be obtained within certain
milestones
Helsinki University of Technology
Systems Analysis Laboratory
Portfolio indicators
 Provide additional information on the portfolio
– Reasons for sales increase characterizes how much sales increase will be
achieced with diffent mechanisms
– IPR value illustrates the IPR value of the portfolio
– External necessity defines what “obligatory” activities are included the portfolio
and what are not.
Helsinki University of Technology
Systems Analysis Laboratory
Analysis 1: Expected sales vs budgeting
 Analysis
on how the expected sales changes if total i)
standardization or ii) development budget changes
– x-axis: Budget
– y-axis: Expected sales
– In the analysis on the impact of standardization budget development budget is
kept in the current level and vice versa
 Pareto
surface illustrates the portfolios that maximize the
expected sales in certain rerource level
– On each point in the surface, corresponding portfolio can be identified
Helsinki University of Technology
Systems Analysis Laboratory
Illustrative results: Pareto Surface
Optimal expected sales if
current resources were
allocated optimally
Optimal resource
allocation
that would enable
current expected sales
Current
resource
allocations
Helsinki University of Technology
Systems Analysis Laboratory
Illustrative results: Pareto surface
Current
resource
allocation
Optimal resource allocation
that would enable
current expected sales
Helsinki University of Technology
Systems Analysis Laboratory
Illustrative results: Decision recommendations
Activity
A
B
C
D
E
Standardization resources Development resources
Increase A
Keep the current
Decrease B
Decrease C
Decrease D
Increase E
Keep the current
Increase F
Decrease G
Increase H
Activity
A
B
C
D
E
Standardization resources Development resources
Increase A
Decrease B
Decrease D
Keep the current
Decrease E
Increase F
Keep the current
Increase G
Decrease H
Keep the current
Helsinki University of Technology
Systems Analysis Laboratory
Illustrative results: decision recommendations
Helsinki University of Technology
Systems Analysis Laboratory
Analysis 2: Expected sales vs risk
 Analysis
on what expected sales can be achieved in different
risk levels
– x-axis: Risk
– y-axis: Expected sales
 Pareto
surface illustrates the portfolios that maximize the
expected sales in certain risk level
– On each point in the surface, corresponding portfolio can be identified
Helsinki University of Technology
Systems Analysis Laboratory
Illustrative results: Pareto surface
Activity
A
B
C
D
E
Standardization resources
Increase A
Decrease B
Decrease C
Keep the current
Decrease D
Pareto surfaces
with different
resource levels