Practical Optimization: Working with the Realities of Decision Management

摘要

Portfolio management tools are designed to aid senior management in the development and analysis of portfolio strategies, however, most of the commercial portfolio optimization packages are relatively inflexible. Most are not able to answer the key questions posed by senior management. Additionally, most senior managers are unfamiliar with the power and advantages provided by a true comprehensive portfolio tool. In order for management to make decisions and to set strategic objectives, these portfolio tools must first provide practical, goal oriented output. This output must be applicable and directly pertinent to the decisions and issues faced by company. The output must provide information that allows decisions to be made that take into account optimization of all scarce resources in the context of the evolving longer-term portfolio. Practical portfolio optimization requires the efficient spending of all scarce resources: Capital, Time, and Human Resources. A real data set is used to show the results of different ranking and optimization methods, from Markowitz to Meta-heuristics, for a portfolio having prospects at various stages of maturity. The prospects transition along a development path from “pre-identified lead” stage to “targeted effort” stage and then on to “capital allocated” stage where they prove success and capture value. It is vital that this evolution of prospects be captured in any optimization method. The example portfolio includes optimization of technical and business development personnel. The inclusion of personnel cycle time (varied by functional area), spin-up, and skill set development enables optimal human resource management within the context of longer-term strategy implementation and risk balanced value maximization. Disconnecting the time dependent prospect generation and acquisition activities from the optimal portfolio composition may provide the optimal mix now at the expense of the future prospect development cycle. The preferred optimization methodology must be able to handle strategic business search activities as a portion of the portfolio even though these activities are seldom rigorously quantifiable.