Engineering Systems Analysis for Design      (MIT Fall Semester subject, ESD 71J)

Introduction

Administration Course Material Discussion

This course provides the conceptual and analytic basis for a new approach to design: the use of flexibility to increase the financial value or performance of Engineering Systems.

    The aim is to maximize expected performance over time.  We do this by building flexibility into a project, to enable owners to adapt the system to the circumstances that eventually prevail. The idea is to give system developers the capability to avoid downside risks and take advantage of new opportunities, and thus to shift the distribution of possible outcomes advantageously.

   The approach recognizes that forecasts are "always wrong", that the future is full of surprises.  Contrary to conventional practice that designs around a "most likely" estimate, we acknowledge that the future is uncertain and the need to design for a range of scenarios.

    The flexible approach to design represents a paradigmatic shift in engineering practice.  It moves us away from the traditional focus on meeting fixed specifications, toward the active management of uncertainty in the implementation of engineering systems. 

    The development of flexible approach is one of the central concerns of the MIT Engineering Systems Division.  It is a major new topic for engineering practice, which conventionally has not dealt with the many factors (such as technological, market and regulatory changes) that determine the ultimate value of any system.  Many applications indicate that this new approach can lead to major increases in performance over traditional practice, easily on the order of 25%.

    The approach is valid across the spectrum of technological design.   It is thus an MIT Engineering School-wide elective, in the curricula of many departments (ESD71, 1.146, 3.56, 16.861, and 22.821).

    Many MIT faculty and graduate students are working in this area. Conceptually, it is situated midway between traditional engineering design and financial "real options analysis".   We are developing improved techniques, adapting them to specific domains, and demonstrating their use through real-world applications. This  research offers many possibilities for theses and publications.

Professor de Neufville is responsible for the subject.  He has received MIT and international awards for his teaching and contributions to Engineering Systems Analysis.  He has appointments in both Engineering Systems and Civil and Environmental Engineering.  From 1975 to 2000, he was the Founding Chairman of the MIT Technology and Policy Program.  See his personal website for publications, and his resume for career details.  


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