Strategic Decision Sciences

Presentation to the
Project Management Institute
Clear Lake/Galveston Chapter
March 23, 2006

Before it’s a Project,

Is it a Model Project?

Dr. Scott M. Shemwell

 A Solution to enable Complex Decision Making

Complex Decision Making provides Project Managers

with a means to ...

positively impact the bottom line through timely, informed

decisions on project options,

Complex Decision Making enables management, PMO

personnel, to know before you go...with business goal alignment,

by providing a common decision process, better capital allocation,

focus on risk outliers, working vocabulary,
and a more experienced team.

Strategic Decision
Sciences
 Distinctive Value Proposition
(DVP)
l Only Available
Viable Solution to Upstream Energy Example

Lean Energy
Management
l PMI Best Practices
l Directly measurable
l Strategically
important to
Source: Strategic Decision Sciences

customers
 Deployments

Companies utilizing Simulation Solutions:

BP, Chevron, Exxon, Shell, ConocoPhillips, Occidental

Supply Chain Management, Downstream, Large Capital Projects

Strategic Decision
Sciences
Lean Energy Processes &
Analytics

Source: Oil & Gas Journal

 Upstream Energy - Technical Issues

• 100’s of Computer-Based Systems

• 100,000’s of Measurements
• 100,000,000’s of Records
• Different types of data – relational and time series
Preparation &
Deployment
Management Approval

Drilling
Planning & Scheduling Operations

Real Time Support

& Reporting Reservoir
Analysis

Strategic Technique
Improvements
Decision Post Analysis Lab Work
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Strategic Decision
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 Impact of a Disaster on
Operational Decision-Making
Decision Cycle Time Degradation
Normal Operating State
Ability to Impact Business

Field Information
Office
Operations Flow

Feedback

Field Information
Office
Operations Flow

Feedback Reduced Capability

Flexibility / Responsiveness
Source: Strategic Decision Sciences
 Recovery: Return to Normal
Operational Decision-Making
Decision Cycle Time Recovery
Normal Operating State
Ability to Impact Business

Field Information
Office
Operations Flow

Feedback

Field Information
Office
Operations Flow

Feedback Reduced Capability

Flexibility / Responsiveness
Source: Strategic Decision Sciences
 Case Study: Refinery Simulation
Remediation Solution

Percentage of reduction in man-hours and project duration

0.0%
Percentage of reduction

-2.0%

-4.0%

-6.0% Project Duration

-8.0% Man-Hours

-10.0%

-12.0%

-14.0%
Scenario 1 Scenario 2 Scenario 3 Scenario 4
Project Duration 0.0% -3.4% -7.7% -12.0%
Man-Hours 0.0% -1.4% -3.6% -5.5%
Time &
l Refinery Fabrication & Module assembly Money
l Fabrication of 100,000 dia. Inches of pipe spools & assembly of 244
pipe-rack modules
l Drafting hours: 10,000 / Fabrication hours:120,000 / Module assembly hours:
500,000
 Drilling - The Business

• Dynamic market conditions, rig

availability & materials
• HP/HT well technology
• Deep-water environmental impact
• SCM coordination and logistic support,
helicopters, boats
• Need for improved productivity
• Skilled workforce
• Regulatory pressures – environmental, compliance
• Aging assets have driven a reliability and safety focus
• Health, safety, and environmental concerns require
accountability
Strategic • Aging workforce have led to a movement to capture
Decision
Strategic Decision
knowledge & business practices
Sciences
Sciences
 what customers have told us

• Complete information requires access to

multiple systems
• Access to existing applications difficult and time consuming
• Information not always in context or within the required
timeframe
• Business implication of data is not always clear
• Users are often left with only a partial picture of situations,
resulting in decisions based upon incomplete information
• Decisions pushed up in the organization result in a sluggish,
untimely response
• When faced with making decisions on unexpected events,
need better understanding of impacts
Strategic
Decision
Strategic Decision
Sciences
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 The Solution:

modeling to gain insight

• Design • People Optimization Loop 1
• Construct • Facilities
• Processes • Supply Chain
• Completion • Technology

Optimization Loop 2

Strategic
Decision
Strategic Decision
Discovery of Emergent Properties
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 What are the benefits

Optimal Solution
“Without
simulation, even
the best • Visualization of processes & outcomes for a multi-discipline team
conceptual to review - “Beforehand”
models can only
be tested and • Common vocabulary for multi-discipline teams
improved by
relying on
• Resulting in real-time synergistic decisions to Complex Problems
learning
feedback...is very
slow and often Cause – Effect with iterations
rendered
ineffective by
dynamic
complexity”

– Sterman (2000)

Strategic
Decision
Strategic Decision
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 Quantifying the benefit

Demonstrated an Internal Rate of Return – 400%*

Documented ROI
Reduction in operating expenses 8% An independent ROI
9% analysis of an actual
Increase in utilization
implementation:
Increase in operational availability 2.5%
“It was obvious that
Increase in productivity the unification of an
11% empowered, engaged
workforce and highly
capable set of real-
time information-
based, decision-
Strategic •The results of an independent ROI study conducted on an Drilling
support tools can
Decision
Strategic Decision
implementation deliver impressive
Sciences
Sciences business results”
 How to use Simulation -

Chicken/Egg • Models must be necessary & sufficient representations

Understand • Build and assembly modules to accommodate Hard
Quantitative and Soft Qualitative concepts & variables
problem before
• Comprehensive testing of results to gain insights
simulating or
simulating
problem to 6.Actions to improve
understand It? 5.Feasible,
1.Problem desirable
unstructured changes...

2.Problem 3.Root
expressed definitions 4.Conceptual
Strategic models
Decision
Strategic Decision
Sciences
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 What is Simulation?

Model of a precise set of mathematical relationships

Drilling Risk Assessment Process Model
Data from Other Group Models - Demo Only

Project Scope
Statement

Organizational Process Project Resources

Assets Availability

Project Resources
Capabilities
External Factors
Quality of Drilling
Project Management Human Resources
HR Availability Assumptions
Plan Quality Quality of Horizon Maps

HR Capability

Confidence in the Model

Quality of Earth Model Cost of Additional Data

Type of Well
HES
Number of Offset Wells

Confidence in the
Final Model

Form Initial T eam Quality of Preliminary Final D- RAT

Model Confidence of Program
Drilling Option A
Number of Other Basin
Wells

Value Proposition Option B

Project Risk

Quality of Other Data Quality of Engineering

Model Fit for Purpose
Contingenciies Option C
Service Company
Input

Initiation Phase Planning Phase

Project Risk Module Data Validation Module Service Company Module Type of Well Module Drillimg Options Module
Low Confidence
Option B
Confidence in the Model Service Company Input Shallow Validate Drilling
Assumptions Drilling Option A
Type of Well
Company A
Medium Confidence

Strategic
Project Risk Refine G&G Assumptions
Intermediate
Project Schedule
Meets Cost Criteria

Decision
Option C

Confirm Engineering
Confidence Selection Company B
Strategic Decision High Confidence Company C Well Selector HTHP Assumptons
Drilling Practices

Sciences
Sciences Copyright 2005 Strategic Decision Sciences LLC. All Rights Reserved.
 Inputs to Model – Soft/Hard

Outside Issues
Scenario Control Panel - Drilling Risk Assessment Model

Stage One -- Preliminary Drilling Risk Assessment

From Other Processes

2) Logic
Earth Model Service Companies
Organizational Process Assets Project Scope Statement Number of Offset Wells Company A

0.2 0.4 0.6 0.8 1.0 0.2 0.4 0.6 0.8 1.0 Small 3 6 9Large Low 3 6
Average 9 High
Low Impact High Impact Poorly Defined Well Defined

External Factors Project Resources Availability Quality of Horizon Maps Company B

0.2
Low Impact 0.4 0.6 0.8 Impact
High 1.0 0.2 0.4 0.6 0.8 1.0 Low 3 6
Average 9High Low 3 6
Average 9 High
Low Average High

Project Resources Capabilities Company C

Selection Criteria
Engineering Model
Well Type
0.2 0.4 0.6 0.8 1.0 3 6 9 High
Low Average High Low Average
Shallow Number of Other Basin Wells
Intermediate
Project Management Plan Quality
HTHP

3 6 9
Small Large Project Schedule
Confidence in Model
0.2 0.4 0.6 0.8 1.0
Low Average High
Low Quality of Other Data
Medium
High On Schedule
1.0 1.1 Degree
1.2 1.3 Early
1.4 or1.5
Late

Low 3 6
Average 9High

1) Process
Stage Two -- Final Drilling Risk Assessment

3) Subjective
Assumptions Human Resources
Options
Quality of Drilling Assumptions HR Availability Option A

Refine G&G Assumptions Validate Drilling Assumptions

Low 3 6
Average 9 High 3 6 9
Low Average High
0.2 0.4 0.6 0. 8 1.0 0.2 0.6 1.0 1.4 1.8
Contingenciies Low Meet Exceed Low Meet Exceed
HR Capability

Meets Cost Criteria Drilling Practices

3 6 9 3 6 9High
None Many Low Average

Low 0.2 0.6Meet

1. 0 1.4 1.8
Exceed Poor 0.2 0.4
Good0.6 0.8 1. 0
Excellent
Cost of Additional Data

Confirm Engineering Assumptons

Confidence in Drilling Option
Low 3 6 9
High

Strategic
0.2 0.6 1. 0 1.4 1.8
HES Low Meet Exceed
3 6 9
Low High

Other Option Summary Profiles

Decision
3 6 9
Low High Option B Option C

Sciences
0.2
Low Quality 0.4 0.6 0.8 Quality
High 1.0 0.2
Low Quality 0.4 0.6 0.8 Quality
High 1.0

Copyright 2005 Strategic Decision Sciences LLC. All Rights Reserved.

 Output of Model - Sensitivity Scenarios

Scenario Output - Drilling Risk Assessment Model

Quality of Final Risk Confidence in Final

Preliminary Risk Assessment Value Risk Model
Assessment Proposition
Scenario Output - Drilling RiskOutput
Scenario Assessment Model
- Drilling Risk Assessment Model

Scenario
Quality ofOutput - Drilling
FinalRisk
of Assessment
Risk
Quality Scenario
Model
Confidence
Final Output
in Final - Drilling
Risk RiskinAssessment
Confidence Final Model
Preliminary Risk Assessment Value
Preliminary Risk Risk Model
Assessment Value Risk Model
Assessment Proposition
Assessment Proposition
Best Drilling Option Preferred Service Project Risk
Company
Quality of Final Risk Quality ofin Final
Confidence Final Risk Confidence in Final
Preliminary Risk Assessment Value Preliminary Risk
Risk Model Assessment Value Risk Model
Ranking

Drilling Option A

Ranking
Assessment Proposition
Option B
Assessment
Company A Proposition
Company B
Option C
Company C

Best Drilling Option Preferred

Best DrillingService
Option ProjectService
Preferred Risk Project Risk
Company Company

Copyright 2005 Strategic Decision Sciences LLC. All Rights Reserved.

Ranking

Ranking

Drilling Option A Drilling Option A

Ranking

Ranking

Company A Company A
Option B
Best Drilling Option Best
Preferred ServiceOptionCompany
B Drilling
BProjectOption
Risk Preferred Service
Company B
Project Risk
Option C Option C
Company Company C Company Company
C
Ranking

Ranking

Drilling Option A Drilling Option A

Ranking

Ranking
Company A Company A
Option B Option B
Company B Company B

Strategic
Option C Option C
Company C Company C
Copyright 2005 Strategic Decision Sciences LLC. 2005
Copyright All Rights Reserved.
Strategic Decision Sciences LLC. All Rights Reserved.

Decision
Strategic Decision
Sciences
Sciences Copyright 2005 Strategic Decision Sciences LLC. All Rights Reserved. Copyright 2005 Strategic Decision Sciences LLC. All Rights Reserved.
 Causal Loop Diagram

Causal Loop Diagram

Project Procurement Management

Develop Contracting
Plan
Develop Contract SOW Quality of Contracting Plan

Contract Type
Develop Procurement Assessment
Management Plan Bid Risk ProfileVendor Response

Bid Tabulation
Project Management
Selected Vendor
Plan

Resource Plan Contract Administration

Payments Change Controls

Strategic Reporting Auditing

Decision
Strategic Decision
Sciences
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 Standards Based Methodology
PMI – Body of Knowledge (PMBOK)

Strategic
Decision
Strategic Decision
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 Other Considerations:
Risk Breakdown Structure
Drilling Risk Breakdown Structure (RBS)
Risk
Impact Scale
Association Cost Time Scope Quality Impact Ave
Technical
Requirements 2 0.05 0.1 0.2 0.8 0.2875
Technology 3 0.1 0.2 0.4 0.8 0.375
Complexity & Interfaces 3 0.2 0.2 0.8 0.2 0.35
Performances and Reliability 4 0.4 0.4 0.8 0.4 0.5
Quality 3 0.2 0.3 0.4 0.4 0.325
External
Subcontractors & Suppliers 3 0.4 0.4 0.4 0.2 0.35
Regulatory 3 0.4 0.2 0.4 0.8 0.45
Rig Availability 1 0.05 0.2 0.1 0.1 0.1125
Customer 3 0.4 0.4 0.1 0.05 0.2375
Weather 1 0.2 0.2 0.1 0.04 0.135
Organizational
Project Dependencies 4 0.4 0.4 0.8 0.4 0.5
Resources 3 0.4 0.2 0.2 0.2 0.25
AFE Approval 4 0.4 0.4 0.4 0.4 0.4
Prioritization 5 0.8 0.8 0.8 0.8 0.8
Project Management
Estimating 1 0.1 0.1 0.1 0.1 0.1
Planning 2 0.2 0.4 0.4 0.1 0.275
Controlling 4 0.2 0.2 0.4 0.8 0.4
Communication 3 0.4 0.4 0.4 0.8 0.5

Average 2.89 0.29 0.31 0.40 0.41 0.35

* Dummy Data Input RA Legend Impact Legend

Very Low 1 Very Low 0.05

Strategic Low
Moderate
2
3
Low
Moderate
0.1
0.2
Decision
Strategic Decision
High
Very High
4
5
High
Very High
0.4
0.8
Sciences
Sciences
Where Risk Association Average is the Mean
and Imjpact Ave (Average) is the Standard Deviation
 Our Process – ‘Vee Model’

Understand stakeholder
Demonstrate and
requirements. Develop
Validate Model to VP
Model Validation Plan (VP)

Integrate Model and

Develop Model Perform Model
Specification Verification to Model VP

Expand Model
Assemble Model Sectors
Specification to Create
and Perform Verification
Sector Specification
to Spec. and Sector VP
Develop Sector VP
Expand Sector
Spec. to create Module Test Module to “Build-to”
Spec. Develop Module Documentation and VP
VP

Code Module to “Build-

Strategic to-Documentation”
Decision
Strategic Decision
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 Deliverables

• Concept maps of key stakeholders

• Causal maps or influence diagrams
• An operating ‘System Dynamics’
model
• Project:
A list of policy-oriented action steps
• A strategy for immediate
implementation

Strategic
Decision
Strategic Decision
Sciences
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 How is Simulation Implemented -

Field &
Management Back Office External
Systems Information

Non-Interruptive

Add-on

Best Analysis
Practice
Strategy
Strategic
Decision
Strategic Decision Complex Decision Making (CDM)
Sciences
Sciences
 Summary

l Simulation will transform PMP

vocabulary
l Enabling Lean Project Management
l Do it on the computer before you cut steel
l Integrated with contemporary PM software
solutions
l The future of project management?
l 3 – 5 years all will be PMP led?
l Within 3 years all large CAPEX projects will
Strategic be simulated – HP, BP
Decision
Strategic Decision
Sciences
l Grandfather your PMP now!
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