Wirthlin, Major Robb

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lean.mit.edu©2008 Massachusetts Institute of Technology   4/22/2008Enterprise Product DevelopmentEngineering Systems DivisionPh.D. ProgramResearcherRobb Wirthlin, Major, USAFPhD Candidaterobbw@mit.eduAdvisorWarren Seeringseering@mit.eduCommitteeDonald LessardSheila WidnallWarren SeeringResearch ContributionEffect and Quantification of Risk in Enterprise Product Development PortfoliosOutcomes1. Measures of risk and procedures useful at the enterprise product portfolio level2. Heuristics and practices for managing risks at the enterprise level in product development3. Demonstration of applicability of metrics and practices to an existing product development portfolio4. Conference and Journal Papers5. Doctoral dissertation June 2008MethodologyUsing a combination of:• Interviews with portfolio managers• Simulation modeling of PD portfolios• Field researchProvide:• Metrics and methods for assessing risk at the Enterprise/portfolio level• Best practices for managing risk at the Enterprise/portfolio levelEnterprise Risk and Product Development Portfolios"The views expressed on this poster are those of the author and do not reflect the official policy or position of the United States Air Force, Department of Defense, or the U.S. Government. "US Air Force Case study data•Done at USAF Product Center•Majority of ‘Portfolio Leaders’interviewed•All said risk was important•Most said ‘Portfolio management’ is art; quadrant III reflects their capabilities•Only 1 leader resonated with ‘Portfolio risk’ and claimed to manage portfolio using itCan Risk be used to create an advantage across a product development portfolio?Few product development (PD) enterprises consistently create new products on time and on schedule.  This research explores how risk management at the enterprise portfolio level may help enterprises to manage their entire PD value stream more effectively.Assertion: A product development portfolio objective is to maximize value in the presence of uncertainty, not to necessarily minimize riskKey Questions:•How should risk be aggregated to the portfolio level? •How does a portfolio manager make use of aggregate risk information?Initial Observations:1. Using risk information at the portfolio level is not well understood2. Risk aggregation methods that bridge the gap between individual programs and a portfolio are lacking3. Traditional “Portfolio Leaders” in USAF Acquisition do not have real portfolio authoritiesResearch TimelineComplete                           Wrapping up              Underway                         Summer 2008           Fall 2008Complete Literature Review, Model IdentificationInterviews, case study, initial simulation & modelingRefine & calibrate model, data analysisComplete cases, data analysis, portfolio applicationFinish analysis, finish thesis, publish results, graduate!Project selection ability(none to full)Resource Fungibility(none to full)Requirements(as given to tradeable)I IIIII IVRequirements OfficersAcquisition ProcessContractorsRequirementsDocumentsContract &specificationsAir Force Programming ProcessAir Force Planning ProcessEVMAExpenditure ratesSAF/AQP&R DocsAward Feemeetingsverbal communicationsStrategicPlanningGuidance(November)Year 2 and 4(on budget)NationalMilitary Strategy(November)All Years(on/off budget)NationalSecurityCouncilJointChiefs of StaffJointPlanningDocument(November)Year 2 and 4(on budget)JointProgrammingGuidance(drives POM)(June)Year 2 and 4(on budget)IntegratedPriorityList(May)Year 2 and 4(on budget)OSDAppraisals of Issues andMajor Problems(before SPG issued)UsersCombatant CommandersNationalSecurityStrategy(November)All Years(on/off budget)Material usedto preparefor QDR(November)Year 2(on budget)ComprehensiveFiscal Guidance(Feb - May)Year 4(on budget)RestrictedFiscal Guidance(Feb - May)Year 1 and 3(off-budget)MajorBudgetIssue (MBI)Review(Dec and Jan)Year 2 and 4(on budget)QuadrennialDefenseReview(February - May)Year 2(on budget)OSDProgramObjectivesMemorandum(June - July)Year 2 and 4(on budget)ProgramChangeProposals(June - July)Year 1 and 3(off budget)IssueBooksProgramDecisionMemorandum (PDM)(September)Year 2 and 4 (on-budget)Year 1 and 3 (off-budget)JointChiefs of StaffReview ofServicesubmissions(August - September)BudgetEstimateSubmission (BES)(June - July)Year 2 and 4(on budget)BudgetChangeProposal (BCP)(August)Year 1 and 3(off budget)Review ofServicesubmissions(August - September)OMBProgramBudgetDecision (PBD)September (draft)Year 2 and 4(on budget)President'sBudget(February)All years(on/off budget)CongressMajorBudgetIssue (MBI)Review(October - Dec)Year 2 and 4(on-budget)BudgetExecution (BE)Review(October - Dec)Year 1 and 3(off-budget)OSD Budget(January)All years(on/off budget)DefenseAppropriationsBill(signed byPresident)Appropriation CategoriesR,D,T&EProcurementShipbuilding & ConversionOperation and MaintenanceMilitary PersonnelMilitary ConstructionDefense Working Capital FundUS TreasuryTreasuryWarrentsissuedApportionmentto DoDFundingAllocationto ComponentsOSD ComptrollerMAJCOMsHQ AIR FORCEFallReviewSpringReviewQuarterlyExecution ReviewsOSD PA&EMid-YearReviewProgramAdjustmentsmakeTo componentsComponentsuse JPG to developPOM and BES(June - July)Year 2(on budget)Componentsuse JPG to developPOM and BES andrefine alignment withstrategy & programs(June - July)Year 4(on budget)To componentsFrom componentsJCIDSAir Force Requirements ProcessDefenseAcquisition Board (DAB)Capability AreaReviewsOther componentsOSDAT&LJoint Concepts& ScenariosAF StaffAcquisitionRequirementsBudgeting and ProgrammingPlanningAcquisition(M/M/s) (Erlang C)Item of Interest: Program Office CapacityContractors(suppliers)(M/M/s) (Erlang C)Item of Interest: Capability End Item deliveryBudget Process: includes BES through Congressional action(Planning)(M/M/1) (Erlang C?)Item of Interest: Budget Line ItemsProgramming Process: developing FYDP and POM(strategy)(M/M/s) to (M/M/s) (Erlang C?)Item of Interest: POM Portfolio itemsRequirements Process: unique materiel capability requests(Marketing)(M/M/s)Item of interest: Requirement documentsRequirements output/Budget output/Acquisition InputsName                                                                                          AttributeDocument                                            KPP, Sepcifications, Arrival TypeMoney    Color, Time period, Goals (Obs & Exp), Amount, Arrival TypePersonnel                                                    Rank, Skill, # of, Arrival typeBudget Documents                                         Amount, Plan, Arrival typeFYDP                                                        $$, Color of money, scheduleInformation                          Verbal, Dynamic, Annual rate, Artifact typeUncertainty                                                                                              Variability                                                                                                Output Acquisition/Input othersName                                                                         AttributeContract                                    $$, Schedule, SpecificationsMoney                                                     Progress PaymentsInformation          Verbal, Dynamic, Arrival Rate, Arrival typeUncertainty                                                                             Variability                                                                                Final OutputsName                            AttributeEnd Item   Performance, QualityOther Input/OutputName                                                              AttributeInformation                  Verbal, Written Dynamic, TypeProgramming Output/Budget InputName                                                                      AttributePOM                                      $$, Color of money, scheduleportfolio                                         programs, delivery itemsInformation        Verbal, Dynamic, Annual rate, Artifact typeDocument                         KPP, Specifications, Artifact typeuncertainty                                                                            variability                                                                              Requirements OutputName                                                                 AttributeDocument                   KPP, Specifications, Artifact typeInformation Verbal, Dynamic, Annual Rate, Artifact typeParametersArrival Rate: PoissonService Time: ~6 - 12 monthsQueue capacity: ~25/monthSystem state (integer number of documents): ~100?(Source: ACC Requirements personnel)ParametersArrival Rate: PoissonService Time: 12 monthsQueue capacity: Sum of all portfolios must be less than/equal to TOA;out-years bring programs to completionSystem state (integer number of documents): current number of programs?(Source: XC discussions)ParametersArrival Rate: PoissonService Time: not less than 12 monthsQueue capacity: TOASystem state (integer number of documents): current number of programs?(Source: SAF/AQX discussions)ParametersArrival Rate:PoissonService Time: 3 monthsQueue capacity: ???System state (integer number of documents): contract actions(Source: personal info; ESC discussions)ParametersArrival Rate: PoissonService Time: variesQueue capacity: variesSystem state (integer number of documents): End item unit(s)(Source: personal info; ESC discussions)CustomersCustomer output/Requirements inputName                AttributesIntegrated Priority List (IPL)Comprehensive Joint AssessmentIssue Nominations/Change ProposalsMost Pressing Military Issues (MPMI)Joint Urgent Operational Needs (JUONS)COCOM EngagementC/S/A WFCsHub tripCBAsCGAsJoint LL'sCWIDACTD/JCTDOther S/AetcDefinitionsEnterprise Risk – Risk reflected in cost, schedule or performance of programs by threshold or risk impacting multiple programs, sharing either common operational or common organizational objectives that may or may not have independent resource and decision-making structures.Enterprise Risk Management - A framework for identifying, planning and reducing cost, schedule and technical risk exposure across multiple programs that share either common operational or common organizational objectives but that may or may not have independent resource and decision-making structures.  Not Project Risk management or Program Risk managementEnterprise Model DevelopmentRefined Enterprise Model

Enterprise Risk and Product Development Portfolios

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Enterprise Risk and Product Development Portfolios

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