Transcript PresentationTemplate - University at Buffalo

The Evolution of
Decision Analysis
By
Ali Abbas
[email protected]
Lecturer
Department of Management Science and Engineering
Stanford University
Presentation Contents
1. History of Decision Analysis
2. Applications from practice
3. The Decision Education Foundation
1
Decision Analysis: Applied Decision
Theory, 1966
•In 1966, Ronald Howard
coined the term “decision
analysis” as a formal procedure
for the analysis of decision
problems.
•Early structure of the Decision
Analysis Cycle.
2
How did it start?
•Doctoral work in Markov decision processes
(Policy Iteration).
•Met Myron Tribus at MIT and was introduced to
the probabilistic traditions of Laplace, Jeffreys, Cox,
and Jaynes.
•Invited by Bill Linvill to become a Visiting
Professor at Stanford for 1964-1965.
•Invited to present a course on Markov Decision
Processes at the General Electric nuclear power
division in San Jose in 1965.
•After a few sessions, an engineer in the course,
Howard Cook, asked if he could apply these
concepts to an actual decision problem.
•The decision was whether a super heater should be
added to their current power reactor.
•Ron replied, “Why not?”
3
Ronald Howard
Stanford Research Institute (SRI) Decision
Analysis Group
•
Established 1966
•
Joint program with Stanford University - Engineering
Economic System Department
•
Many of the early practitioners did “internships” with this
group and/ or joined it as permanent staff.
4
In 1968 the SRI group wrote two
publications that were best sellers at the
time.
5
In 1966, Ron wrote a paper:
Information Value Theory
•This enabled calculation of the “Value of Perfect
Information” and “Value of Imperfect Information” as
well as the value of testing.
6
Special Issue: IEEE Transactions
Systems Science and Cybernetics, 1968
7
In 1968, in a conversation at Harvard, Ron
convinced Howard Raiffa that Decision
Analysis is the right name for the field.
*Some of Howard Raiffa’s Contributions:
Statistical Decision Theory
Conjugate Prior Distributions
Multiattribute Utility
8
In 1968, in a conversation at Harvard, Ron
convinced Howard Raiffa that Decision
Analysis is the right name for the field.
*Some of Howard Raiffa’s Contributions:
Statistical Decision Theory
Conjugate Prior Distributions
Multiattribute Utility
9
By 1976 research contracts led to
envisioning of automated aids, including
influence (decision) diagrams.
10
Decision diagrams are graphical representations
of decision situations. They contain..
Uncertainty Node
Decision Node
Deterministic Node
Value Node
F(x,y)
x
y
11
The original influence diagram dealt with
unrest in the mid-east – still a current
problem.
12
Here is that initial diagram
(Signal flow graph of uncertainty)
13
Other notable early applications.
•
New Drug Product Development
•
Mars Contamination from Earth
•
Earth Contamination from Mars
•
Mine Opening Decision
•
Petrochemical Plant Investment
•
Exxon R&D Portfolios
•
Hurricane Seeding
•
Forest Fires
•
Synthetic Fuels
•
Nuclear Reprocessing
14
Decision Analysis Spread
•
Spin off of several individual to Decision Focus Inc (DFI)
•
Another spin off to Applied Decision Analysis (ADA)
•
Key figures founded Strategic Decisions Group (SDG) in
1981
– Ronald Howard, Jim Matheson, Carl Spetzler, Jeff Foran & others
– Many tools and applications developed in practice.
•
40 Students conducted research and graduated with PhD’s at
the Stanford Decision Analysis program.
15
Classification of Decision Problems
•Organizational Complexity
• Many parties in conflict
• Individual and organizational
differences
–
–
–
–
–
Values, desires, and
motivation
Initial convictions
Fundamentally different
frames
Personalities and
competencies
Degrees of power and
resources
High
Facilitative
Leadership
Dialogue
Decision
Process
(DDP)
Low
Decide
Now
Traditional
Decision
Analysis
• Group dynamics—human
nature in groups
Low
High
Analytical Complexity
•
•
•
•
•
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Uncertainty
Dynamics
Many interrelated factors
Many alternatives
Multiple, interrelated decision criteria
Source: Strategic Decisions Group
Dialogue Decision Process developed at
SRI in the late 1970s:
Dialogue Decision Process
Decision
Board
Project
Team
Recognize
Situation
Approve
Frame
Approve
Alternatives
Make
Decision
Frame
Alternatives
Evaluated
Alternatives
Assess
Situation
Develop
Alternatives
Evaluate
Alternatives
Approve
Plan
Plan
Plan for
Implementation
Getting the decision makers involved
17
Source: Strategic Decisions Group
Applications
18
In 1988, General Motors decided to design
an all new, fifth-generation Corvette.
Corvette logo goes here
Source : SDG
19
Three norms were used because the
decisions were both organizationally and
analytically complex.
1. Use a common decision process, teach people how
to use it, and then continuously improve it.
2. Involve the right people in a decision dialogue.
3. Use powerful tools to improve communication,
creativity, and analysis.
20
“An almost perfect car,” says Automobile
magazine editor. “A big boy’s toy that
First Wives’ club may co-opt.”
Time, April 14, 1997
21
In March, 2000, the Society of Automotive
Engineers selected the C5 Corvette “the
best engineered car of the 20th Century.”
Without a disciplined decision making process it probably would have been
a marketing disaster.
22
Stanford- GM Research Project
23
GM Vehicle Development Process
Engineering and styling
decisions
Stanford CRL Effort
General idea
High Level definition
High Level Program Targets
24
Charter
Imperatives*
Vehicle Concept
Initial
Design
Concepts
Comprehensive
Business Case
for the vehicle
Given the imperatives
VPI
Vehicle Program
Initiation
Go to contract
after that
Decision Education Foundation
25
The teaching team relied on a variety of
techniques to bring the material to life…
• Lecture and
discussion
The teaching team: Carl Spetzler, Ali Abbas, Steve Tani, Kim Keller, and Josh Cohen.
• Interactive
activities
Students
enjoyed
analyzing
decisions
from a
variety of
media.
• Decisions in pop
culture
• Term projects
• Homework
A student group presents its term project.
26
The teaching team discovered that failing to
recognize a decision situation is the biggest
failure mode
Being Reactive
Cruising Along
Stimulus
Being Pro-active
Stimulus
Conscious
Choice
27
Automatic
response
Decision analysis adds clarity to Hamlet’s
dilemma: “To be or not to be”…
Suffer the slings
and arrows of
outrageous fortune
Be
A. Bear the
ills we have
Not Dream
Take arms against
a sea of troubles
Not Be
p
Bear whips and scorns of time
oppressor’s wrong
proud man’s contumely
pangs of dispriz’d love
law’s delay
insolence of office
spurns that patient merit
of the unworthy takes
B.
End the heartache
and the thousand
natural shocks that
flesh is heir to;
a consummation
devoutly to be wished
1-p
Dream
28
C. Ills we know not of
The Decision Education Foundation
This Summer Make Math
Come Alive for Your Students
“Decision Analysis – Math in the Real World”
A Two-week Course for High School Mathematics Teachers
August 4-15, 2003
On the Campus of Stanford University
Academic Credit Offered
Use math to address real issues in students’ lives!
Especially applicable to Algebra l and ll and Prob/Stat, but useful for all classes.
“Enrolling in the Decision Skills class has been one of the best decisions I have ever made.” – Brian Wu, Student
Better Decisions—Better Lives
For more information, fill out the form at www.sdg.com/defsurvey
29
Decision Analysis is being applied professionally in
many industries like oil and gas, power generation and
distribution, automobile manufacturing, insurance,
financial institutions, complex medical decisions, and
to teach teens to lead better lives.
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Thank You!
31
Acknowledgements
•Ronald Howard
•Jim Matheson
•Steve Barrager
•Wei Chen
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