Technology portfolio management: optimizing interdependent projects over multiple time periods

TLDR

Companies must continually invest in technology projects, but limited resources force strategic allocation, and existing tools assume independent projects, making optimization of interdependent projects across multiple periods highly complex. This paper introduces a model for Boeing to optimize a portfolio of product‑development improvement projects. The model employs a dependency matrix to quantify interproject relationships and solves a nonlinear integer program that balances risk, objectives, and portfolio cost–benefit. After determining the optimal strategy, the model allows rapid assessment of minor portfolio adjustments.

Abstract

In order to maintain competitiveness, companies need to continually invest in technology projects. However, resource limitations require an organization to strategically allocate resources to a subset of possible projects. A variety of tools and methods can be used to select the optimal set of technology projects. However, these methods are only applicable when projects are independent and are evaluated in a common funding cycle. When projects are interdependent, the complexity of optimizing even a moderate number of projects over a small number of objectives and constraints can become overwhelming. This paper presents a model developed for the Boeing Company, Seattle, WA, USA, to optimize a portfolio of product development improvement projects. Using a dependency matrix, which quantifies the interdependencies between projects, a nonlinear, integer program model was developed to optimize project selection. The model also balances risk, overall objectives and the cost and benefit of the entire portfolio. Once the optimum strategy is identified, the model enables the team to quickly quantify and evaluate small changes to the portfolio.