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Intel’s portfolio management

by Patrick Leach on November 10th, 2014

I just attended Intel’s presentation on their approach to portfolio management.  Their portfolio is more complex than most to manage because 1) so many of their projects are interrelated (you can’t do project A without first doing project B, project C enhances project D, etc.), 2) projects involve the commitment of significant resources, so once you start one, it’s not trivial to stop, and 3) many of their products are only on the market for a couple of years (or less) before being replaced by something better.

As a result, they have adopted what I think of as the Deep Blue approach to portfolio management.  Deep Blue was IBM’s chess playing computer (or one of them – there was a series of them).  It’s approach to chess was to start with every possible combination of moves, and then whittle it down to the one that made it most likely to achieve its objectives (e.g., controlling space on the board or capturing a key piece in the early part of the match, achieving checkmate in the latter part of the match).  When Deep Blue played Garry Kasparov in a rematch in 1997, Deep Blue won.

Likewise, Intel has created an algorithm that starts by generating every possible portfolio, cuts out the impossible ones, reduces the set down to non-dominated ones (the efficient frontier), and then applies things like budgetary constraints and strategic direction.  This is a change from most portfolio management, which often starts with strategic direction and then generates a manageable number of portfolios to evaluate and learn from, with the idea that you use what you learn from the early analyses to create a portfolio that is better than anything you came up with originally.

I was pleased to see that Intel’s approach does not just punt the portfolio decision to the calculations, though.  As they put it, “The analysis informs the intuition, and the intuition informs the analysis.”  It’s an iterative process between assessing, modifying, and reassessing various possible portfolios based on what senior management wants and believes, and also putting senior management in the position of reassessing their instincts and strategic direction based on the results of the analyses.  So it’s sort of like letting Garry Kasparov use Deep Blue to inform his decisions during the chess match.

It was a pretty cool presentation.

Pat Leach

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