Faculty
Professor Peter J. Regan
Objectives
Professional Decision Modeling extends and applies the first-year Decision Science course content in the context of a case drawn from professional decision consulting practice. By following the case through several stages, refining and enhancing the analysis at each stage, this course approximates a professional decision analysis consulting experience of applying decision science techniques in a professional setting.
Spreadsheet modeling of a business situation is central to the course. Through a combination of student work on group assignments, peer review in class of other groups’ work, sessions devoted to particular spreadsheet techniques, and instructor feedback, the course aims to expand your spreadsheet modeling toolkit.
The fundamental case question is a generic one: what is a particular asset worth? Asking this question in the midst of merger negotiations enhances the richness of the decision situation. The asset’s value under various capital investment alternatives is central to determining the best alternative and highest valuation. Analysis assists in understanding the shifting regional industry dynamics that are responsible for widely disparate estimates of asset value.
We apply the decision science techniques of simulation, optimization, and decision analysis to yield insight into the case. Simulation using Crystal Ball assists us in forecasting the regional supply of the commodity processed by the production facility at the heart of the case. Optimization using Excel’s Solver yields insight into the regional network transportation logistics. Finally, decision analysis provides an overall framework for the case and, more specifically, is used to formulate, analyze, and appraise the various alternatives of interest. Each student group integrates their results to present their bottom-line position regarding the value of the asset and a recommended course of action.
Each week has a similar rhythm. With the exception of the final week, on Thursdays we discuss new case information, brainstorm approaches, and illustrate with simple examples how decision science techniques can be applied to problems of the type presented by the case. The instructor’s role on Thursdays is to facilitate discussion and to introduce techniques relevant to the new assignment. Also on Thursdays, starting with the second week, the instructor highlights modeling approaches of interest from an initial review of work submitted the previous day.
Students then have until the following Wednesday to work in groups to prepare a spreadsheet model for the assignment distributed at the end of the previous Wednesday’s class. Each week’s modeling assignment must be submitted to the instructor by e-mail no later than Wednesday at 8:30 AM.
On Wednesday, members of one group present their results and summarize their modeling approach. Members of a second group present their approach to key modeling challenges from that week’s assignment. Students from all groups are invited to ask questions and relate the presentations to their own work.
The two groups responsible for these main class presentations on Wednesday are identified when the assignment is distributed the previous week. Each presenting group is encouraged to coordinate planning for the presentation with the instructor. The instructor’s role on Wednesdays is to moderate the discussion and to highlight student work of particular interest.
Incrementally refining each week our understanding of the case problem and the corresponding asset valuation, we focus in the last two weeks on recommending a course of action for our case client. During the last week, two groups prepare to present their recommendation. Other groups may be asked to pair off and conduct a negotiation to determine if a consensus valuation and transaction deal terms can be agreed.
An invited guest provides a reality check on our work.
On Wednesday, October 14, Jim Lang (Tuck ’89, former President and COO of Cambridge Energy Research Associates and Strategic Decisions Group) joins us in class. Jim, who was the partner for the consulting project on which the course is based, will act as the client champion to whom you present your final recommendations. He will listen to your presentation, ask questions, and make you aware of the key concerns of his senior management peers to whom, in a real project, you would present shortly thereafter.
Subject to schedule changes, Jim will be available for lunch with interested students on the day of his campus visit. Details will be announced in class.
Although the main case is adapted from management consulting, this course is targeted to the broad spectrum of students who wish to expand their spreadsheet modeling skills. Similarly, although the main case deals with a single industry, the techniques used have widespread application across industries. The skills gained in this course should be useful for anyone who expects to do spreadsheet modeling in their post-MBA work, whether it is in management consulting, financial service firms, major industrial corporations, or elsewhere.
Requirements
Laptop Use in Class
You are expected to bring your laptop to each class except the last class.
Materials
Course Materials
There is no text for this course. Case materials are provided as needed.
Spreadsheet modeling is done using Microsoft Excel and the following Excel add-ins:
Crystal Ball
Excel Solver
The course assumes general familiarity with Crystal Ball and Excel Solver from first-year Decision Science. We do a small refresher problem using Crystal Ball and Excel Solver in the first class. Step-by-step documentation is available on the course website for students who need reinforcement outside class.
The first-year Decision Science course textbook may be a useful reference for this course. Several copies are on reserve in Feldberg Library.
Powell, S.G., and K.R. Baker, he Art of Modeling with Spreadsheets. Wiley Publishers.
Student Teams
By the end of the first week the instructor assigns teams of 3 or 4 students. The instructor accepts requests during the first week for two-person pairs who wish to be included together in a team but he does not promise to honor such requests. This approach balances student desire to have input into team membership and instructor need for flexibility to adjust teams as enrollment stabilizes. Each team works together for the entire course.
Honor Principle
Teams should work independently during this period. Students should also not obtain assistance during this time from others not enrolled in the course without checking first with the instructor.
In previous years the instructor has noticed that students sometimes become aware before assignments are submitted of how their valuation results compare with those of other groups. This should not happen. Independent teams provide the greatest opportunity to encounter significantly different approaches and results for discussion in class.
Attendance
Each student is expected to attend every class. If an absence is unavoidable, you should notify the instructor well in advance so that the student and instructor can make appropriate arrangements.
If a student chooses without advance notice not to attend class, that student is still expected to e-mail the instructor with a brief explanation.
Office Hours
Office hours are on Tuesdays from 3:30 to 6:30 pm.
A sign-up sheet will be posted on the instructor’s office door and brought to class. Advance sign-ups will be given priority.
Individuals or groups are also welcome to request meetings outside of the stated Tuesday office hours. The instructor often continues to circulate among student study rooms on Tuesday evenings after the stated office hours.
Check This Out! Sessions
Time is reserved during some class meetings for tutorial-style workshops on special modeling topics using Microsoft Excel. These sessions typically do not involve content drawn from the main case. Yet past experience shows that students often incorporate these demonstrated topics into their main case assignments. The intent of these sessions is to step outside the main case and to focus directly on specific spreadsheet modeling skills.
A preliminary schedule of topics (subject to change) is included in the Daily Plan on the last page of this document. On-line help will be posted to the course web site to allow students to work through the Check This Out! topics at their own speed outside class.
Grading
Evaluation
Successful professional application of decision science requires a blend of problem formulation, analytical rigor, teamwork, and communication. By the nature of the course, evaluation occurs primarily at the team level. The instructor reserves the right to adjust individual evaluations for perceived discrepancies in level of effort within a team.
Each group of students submits a progress report and supporting spreadsheet model on Wednesday, September 23 and 30 and October 7 and 14. The form and content of the progress report are discussed in class. Typically, groups presenting results prepare a PowerPoint presentation; other groups prepare a memo. Groups presenting their model must also submit a memo. Course participation includes effective involvement in class and the contribution the student makes to his or her case team.
There are no exams.
Oral Presentations 10%
Written Reports 25%
Spreadsheet Models 45%
Course Participation 20%
Schedule
Sept 17
Course Introduction
*Note: Check This Out! Session topics and sequence are subject to change
Course Syllabus, Bombadil Corp.
Case Introduction
Sept 18
Simulation and Optimization Review
*Check This Out! Conditional Formatting
Bombadil Corp. Case, Part A
Sept 23
Simulation and Optimization Results
*Check This Out! Lookup Functions
Sept 24
Problem Formulation
Sensitivity Analysis
*Check This Out! Array Formulas
Bombadil Corp. Case, Part B
Sept 30
Status Quo Valuation Results
Oct 1
Decision Evaluation
Price Modeling
Bombadil Corp. Case, Part C
Oct 7
Alternative Valuation Results
*Check This Out! Excel Buttons and Other Worksheet Controls
Oct 8
Refined Valuations
Capital Productivity
Oct 14
Final Recommendations
