Technology portfolio management: Optimizing interdependent projects over multiple time periods

In order to maintain competitiveness, companies need to continually invest in technology projects. However, resource limitations require an organizati on 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 techn ology projects. However, these methods are only applicable when projects ar e independent and are evaluated in a common funding cycle. When projects ar e interdependent, the complexity of optimizing even a moderate number of pr ojects over a small number of objectives and constraints can become overwhe lming. This paper presents a model developed for the Boeing Company, Seattl e, WA, 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 proj ect selection. The model also balances risk, overall objectives, and the co st and benefit of the entire portfolio. Once the optimum strategy is identi fied, the model enables the team to quickly quantify and evaluate small cha nges to the portfolio.