Draft Course Agenda
Analysis of Value/Dynamic Strategic Planning I

Spring, 2001

Last modified Mar 16 2001 at 09:27:05 PM

Analysis of Value -- Course Design

The "Analysis of Value" course is the first course in a two course sequence taught to students in the MIB program. The objective of the course is to introduce elements of modern decision analysis to management students, with a primary emphasis on demonstrating the utility of analytical methods for decisionmaking under uncertainty.

The entire two course sequence covers the following elements:

A key element of this course structure is that the first course is a strict prerequisite to the second course in advanced decision methods., taught at the MIB-Paris later in the spring, which introduces multi-attribute utility, both theory and practice, and leads the students to synthesize MAUA and cost analysis into a complete dynamic strategic plan. Further analytical methods, based upon real options theory, also compose a part of the second course in this sequence.

The first course in the sequence will be conducted by Frank Field of the Massachusetts Institute of Technology; the second course will be conducted by Richard de Neufville and Joel Clark of the Massachusetts Institute of Technology.

A complete set of course materials will be supplied, constituting all the textual material necessary for both parts of the two-course sequence. Further, we also recommend that the students have access to Applied Systems Analysis: Engineering Planning and Technology Management by Richard de Neufville. We suggest that the students have reviewed (but not necessarily studied in detail) Chapters 13-19, with the expectation that the course will cover this material in greater detail. Because this book is currently out of print, electronic versions of the relevant chapters are available on the WWW.

As a course in methods, there will be substantial reliance upon computer tools, particularly spreadsheets. Please plan on using available computer facilities, and bring a laptop if you have one available -- particularly for the case study. Furthermore, there will be exercises assigned before the first class session which will be due either electronically to the instructors or on the first day of class. Thus, access to and ability to use WWW browsers will also be a requirement.

The course schedule is being significantly revamped this year, to increase the emphasis of the first course upon demonstration of analytical abilities necessary to complete the second half of the course. However, the first half of the course also stands alone as a course in methods.

The accompanying schedule outlines our plans for coverage of the course material. A more specific schedule, with detailed course coverage, will be provided the first day of class.

Analysis of Value/Dynamic Strategic Planning I
Draft Course Schedule -- Order Of Material To Be Covered
Subject to Revision

Pre Assignment 1
Basic Decision Trees
  1. Read Ch.16 in de Neufville's book
  2. Examine PDF version of decision tree lecture
  3. Do problem 16.12 - Paddy O'Toole - show all work
  4. Review Spreadsheet Sensitivity Analysis
  5. Consider TREEPLAN (an Excel® add-in; not required, however) (The TreePlan WWW page - some documentation)
  6. Do the Robustness Exercise - preferably via spreadsheet data tables - show all work
  7. Turn in materials for (c) and (f), done individually (i.e., not in groups!) by 18:00 GMT 21 March 2000 <Please Note Date Change!!>: please put the phrase DSP#1-Pre in your subject field when you submit your assignment (so I can make sure I sort it correctly).
  8. My e-mail address is furd@mit.edu

    PLEASE NOTE! Students who fail to turn in the assignment by the above date will NOT be allowed to take the course!!!!
Pre Assignment 2
Cost Modeling Data collection and preparation
  1. Read the Cost Modeling Assignment (note that, in this class, the emphasis will be on COST Analysis under uncertainty. Other aspects will be treated in DSP II)
  2. Read the COSTSKEL writeup (note: we will revisit this!)
  3. You may wish to preview the Cost Modeling Lecture materials
  4. You may wish to read the following background material; a chapter on cost modeling and issues in the area from R. Kirchain's PhD thesis on the topic
  5. Prepare and have ready on the first day of class your information for item (a)
Day 1
Topic 1
Introduction to course perspective - decisionmaking under uncertainty
Topic 2
Decision Trees - structure and analysis (review of Pre Assignment) (RdN CH 16)
Topic 3
Bayes Theorem (Rdn Ch15) & Value of Information (RdN Ch 17) - Exercises/Problem Working Session
Value of Information/Decision Tree Exercises
Day 2
Topic 1
Cost Modeling Methods - Examples and Practice 1 2 3
Topic 2
CostSkeleton Modeling Framework
Topic 3
Discussion and Review of Pre Assignment 2 - business model information
Incorporation of Data From Pre Assignment 2 into Cost Model
Day 3
Topic 1
Valuation - Value Functions and Utility Functions
(RdN Ch 18)
Topic 2
Single Attribute Utility Function Assessment - Lotteries
(RdN Ch 19)
Topic 3
Working Session - Cost Model Development
Utility Methods Problems
Day 4
Topic 1
Review of Homework/Utility Exercises
Topic 2
Cost Modeling in Quantification of Risks; Sensitivity Analysis - In-Class Exercise: Writeup and Cost Model (illustrative against your own model)
Topic 3
Workshop in Cost Model Refinement/Preparation for Written Report
Preparation for Exam
Day 5
Topic 1
Dynamic Strategic Planning - Where To From Here; Examples 1 & 2
Topic 2
Examination Period
Topic 3
+1 week
Written report on Cost Structure of Proposed Business
Risks, Opportunities, Possible Business Developments
Cost Analyses and discussion of potential

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