how to choose the right projects to meet your objectives and resources?
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Advanced approach to project selectionTRANSCRIPT
http://makeitrational.com
How to Choose the Right Projects to Meet Your Objectives and Resources?
(Advanced approach to project selection)
Project Cost
Project 1 1 700 000
Project 2 2 000 000
Project 3 1 500 000
Project 4 600 000
Project 5 2 500 000
Project 6 3 500 000
Total 11 800 000
Over budget
Project Cost
Project 1 1 700 000
Project 2 2 000 000
Project 3 1 500 000
Project 4 600 000
Project 5 2 500 000
Project 6 3 500 000
Total 7 700 000
In budget
How to choose between projects?
How to choose between projects?
1. Prioritize projects against your objectives.
2. Create spreadsheet.
3. Install and start Solver.
4. Set up Solver parameters.
5. Run Solver and see results.
Prioritize projects (1/2)
• The better project meets your objectives the higher priority it has.
• You can learn how to prioritize projects here: http://makeitrational.com/prioritization
• Projects with higher priority have priority access to portfolio.
• The goal is to find portfolio that meets your budget with the highest total priority of included projects.
Prioritize projects (2/2)
Project Cost Priority
Project 1 1 700 000 20
Project 2 2 000 000 10
Project 3 1 500 000 25
Project 4 600 000 5
Project 5 2 500 000 30
Project 6 3 500 000 10
Total 11 800 000 100
How to choose between projects?
1. Prioritize projects against your objectives.
2. Create spreadsheet.
3. Install and start Solver.
4. Set up Solver parameters.
5. Run Solver and see results.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Decision variable (DV). Determineswhether the project is included in theportfolio (DV = 1) or not (DV = 0). At thestarting point the portfolio is empty (DVfor each project is 0).
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Assessed priority. Project priorityestablished at the first step(projects prioritization).
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Allocated priority = DV · Assessed priorityPriority included in portfolio.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Needed funding. Resources (in this casefunding) needed to start this project.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Allocated funding = DV · Needed fundingResources (in this case funding) allocatedto project.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Total assessed priority. If we could start allof the projects we would achieve 100% ofpriorities.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Total allocated priority. We can’t start allof the projects (due to limited resources).This is the value we want to maximize.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Total needed funding. Resources (in thiscase funding) needed to start all of theprojects.
Spreadsheet
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Total allocated funding. Resources (in thiscase funding) allocated to all of theprojects in portfolio. This value must meetour constraints (e.g. budget).
Download spreadsheet
http://makeitrational.com/files/download/resource-allocation/basic.xls
How to choose between projects?
1. Prioritize projects against your objectives.
2. Create spreadsheet.
3. Install and start Solver.
4. Set up Solver parameters.
5. Run Solver and see results.
Install and start Solver
Solver is an optimization add-in for Excel. You can learn how to install and start it here: http://www.wikihow.com/Use-Solver-in-Microsoft-Excel
How to choose between projects?
1. Prioritize projects against your objectives.
2. Create spreadsheet.
3. Install and start Solver.
4. Set up Solver parameters.
5. Run Solver and see results.
Solver parameters
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Maximize total allocated priority
Solver parameters
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
By changing DV values
Solver parameters
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Restrict DV values to 1 (whenproject is chosen to portfolio) or 0(when project is rejected)
Solver parameters
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
0 Project 1 20 0 1 700 000 0
0 Project 2 10 0 2 000 000 0
0 Project 3 25 0 1 500 000 0
0 Project 4 5 0 600 000 0
0 Project 5 30 0 2 500 000 0
0 Project 6 10 0 3 500 000 0
- Total 100 0 11 800 000 0
Keep total allocated funding inbudget e.g. 8 000 000
How to choose projects portfolio?
1. Prioritize projects against your objectives.
2. Create spreadsheet.
3. Install and start Solver.
4. Set up Solver parameters.
5. Run Solver and see results.
Results
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
1 Project 1 20 20 1 700 000 1 700 000
1 Project 2 10 10 2 000 000 2 000 000
1 Project 3 25 25 1 500 000 1 500 000
0 Project 4 5 0 600 000 0
1 Project 5 30 30 2 500 000 2 500 000
0 Project 6 10 0 3 500 000 0
- Total 100 85 11 800 000 7 700 000
Projects with DV = 1 areincluded in portfolio
Results
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
1 Project 1 20 20 1 700 000 1 700 000
1 Project 2 10 10 2 000 000 2 000 000
1 Project 3 25 25 1 500 000 1 500 000
0 Project 4 5 0 600 000 0
1 Project 5 30 30 2 500 000 2 500 000
0 Project 6 10 0 3 500 000 0
- Total 100 85 11 800 000 7 700 000
Portfolio meets the budget(8 000 000)
Results
DV ProjectPriority Funding
Assessed Allocated Needed Allocated
1 Project 1 20 20 1 700 000 1 700 000
1 Project 2 10 10 2 000 000 2 000 000
1 Project 3 25 25 1 500 000 1 500 000
0 Project 4 5 0 600 000 0
1 Project 5 30 30 2 500 000 2 500 000
0 Project 6 10 0 3 500 000 0
- Total 100 85 11 800 000 7 700 000
Solver found the most valuableportfolio that meets the budget
How to take into account multiple types of resources?
DV ProjectPriority Funding Consultants
Assessed Alloc. Needed Allocated Needed Alloc.
0 Project 1 20 0 1 700 000 0 5 0
0 Project 2 10 0 2 000 000 0 7 0
0 Project 3 25 0 1 500 000 0 5 0
0 Project 4 5 0 600 000 0 2 0
0 Project 5 30 0 2 500 000 0 8 0
0 Project 6 10 0 3 500 000 0 7 0
- Total 100 0 11 800 000 0 34 0
How to take into account multiple types of resources?
DV ProjectPriority Funding Consultants
Assessed Alloc. Needed Allocated Needed Alloc.
1 Project 1 20 20 1 700 000 1 700 000 5 5
0 Project 2 10 0 2 000 000 0 7 0
1 Project 3 25 25 1 500 000 1 500 000 5 5
0 Project 4 5 0 600 000 0 2 0
1 Project 5 30 30 2 500 000 2 500 000 8 8
0 Project 6 10 0 3 500 000 0 7 0
- Total 100 75 11 800 000 5 700 000 34 18
How to model dependencies between projects?
• Exactly 1 from the group
• At most 1 from the group
• At least 1 from the group
• Contingent
• Mutual contingent
• Mix and match
Exactly 1 from the group
• There is a group of projects from which we must choose exactly one (not 0, not 2, not more).
• In an empty cell add a formula that sums DV values of projects from the group.
• Add a constraint on that cell: value = 1
Maximum 1 from the group
• There is a group of projects from which we can choose at most one.
• In an empty cell add a formula that sums DV values of projects from the group.
• Add a constraint on that cell: value <= 1
Minimum 1 from the group
• There is a group of projects from which we must choose at least one.
• In an empty cell add a formula that sums DV values of projects from the group.
• Add a constraint on that cell: value >= 1
Contingent
• If A then B (but B is independent of A).
• E.g. you can renovate building (dependent project) only if you buy it but you can buy a building (independent project) without renovation.
• In an empty cell add a formula: = DV of independent project - DV of dependent project
• Add a constraint on that cell: value >= 0
Mutual contingent
• 2 of the projects must be chosen together (both or none)
• In an empty cell add a formula that subtracts DV values of both projects.
• Add a constraint on that cell: value = 0
Mutual contingent
• There is a group of 2 (or more) projects that must be chosen together (all of them or none).
• Merge projects into 1 with added priority and resources.
Mix and match
Use these basic dependencies to create complex scenarios.