The History of SmartOrg, Inc.

SmartOrg’s roots trace back to pioneering efforts in the field of Decision Analysis (DA) by one of SmartOrg’s founders, Dr. James Matheson. Jim was instrumental in moving DA from academia to commercial practice at the Stanford Research Institute (now SRI International) in the mid 1960s. Over the next 20 years, Jim along with Dr. Ron Howard, who coined the term Decision Analysis at MIT prior to moving to Stanford University, applied DA methodology to projects ranging from NASA’s Voyager to commercial R&D projects for companies throughout the world.

In 1981, Strategic Decisions Group (SDG) was formed. SDG’s founders included Jim, Ron, and several of Jim’s colleagues from SRI’s strategy consulting practice, including Dr. Carl Spetzler. SDG’s purpose was to further develop DA and strategic decision-making processes and to apply them to a broader commercial market. From a core of some half-dozen people, SDG grew over a few decades to more than 100 professional staff members.

Three of these SDG professionals would later join Jim in founding SmartOrg:

• Dr. David Matheson, a PhD graduate from Stanford University’s Engineering Economic Systems department (and son of Jim Matheson), was a principal at SDG.
• Dr. Peter McNamee, a DA expert from SRI and co-author of a leading DA textbook, “Decision Analysis for the Professional,” was a principal at SDG and led development of SDG’s decision analysis software.
• Don Creswell was the head of SDG’s R&D practice development.

As head of the R&D consulting practice at SDG, Jim Matheson and his team virtually invented what we know today as value-based project and portfolio evaluation and management, applying DA and strategic decision-making processes to pharmaceutical, oil & gas, and other companies with heavy investments in R&D and product development.

As the R&D practice matured, it became evident that the growing power of computers and IT technology could be harnessed to carry out much of the analysis and heavy number crunching required to evaluate and manage R&D projects and portfolios. SDG, under Jim’s leadership, embarked on a project to develop an “Intelligent Decision System” that would significantly reduce the time and expertise needed to analyze the economics, risks, and uncertainties inherent in R&D.

The software, later named Decision Advisor®, used “influence diagram” technology to rapidly develop business models and convert them to Excel spreadsheet models in seconds, thus reducing time and avoiding rework and errors in modeling. Decision Advisor is used today by SmartOrg to develop business models that are later converted to templates for use by Portfolio Navigator™, SmartOrg’s web-based project and portfolio value-optimization system.

As part of SDG’s R&D consulting practice, David Matheson initiated a research project to benchmark and identify the “best practices of R&D decision making.” Working with the inventors of benchmarking at Xerox Corporation, David and his team identified 45 best practices and surveys that enabled companies to develop a score of their R&D decision-making capabilities. The report was presented to corporate executives in a series of executive workshops in the U.S. and Europe.

Further research followed the initial benchmarking study to determine the reasons that while many companies benchmarked the practices of “best in class” companies, few were able to effect the organizational change needed to adopt those best practices. The research identified “nine principles of a smart organization” that needed to be in place if a company were to successfully introduce change. This research, coupled with the initial benchmarking study and work by SDG in strategic decision making, culminated in the best-selling Harvard Business Press book, “The Smart Organization: Creating Value through Strategic R&D,” by SmartOrg co-founders Jim and David Matheson.

In 2000, Jim Matheson, David Matheson, Peter McNamee, and Don Creswell determined it was time to bring value-optimization processes, practices, and analytic tools to a wider number of users through the application of advanced software. Portfolio Navigator™ and other SmartOrg tools now used by large, medium, and small companies throughout the world reflect the culmination of SmartOrg’s efforts.

SmartOrg continues to retain a close association with research and academia through links with the Decision Education Foundation, the Institute for Operations and Management Research (INFORMS), and the Stanford University Advanced Management Program, where our founders are lecturers in strategic portfolio management.