Managing Operational Flexibility in Investment Decisions: The Case of Intel


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    We are grateful to Andy Bryant, Gerry Parker, Mike Splinter, and David Layzell of Intel Corporation for their support and cooperation in the conduct of this study. Many helpful comments were received from seminar participants at Georgetown University, INSEAD, London School of Economics, Michigan State University, University College Dublin, University of Glasgow, University of Manchester, University of Southern California, and the University of Ulster at Jordanstown. We are obliged to the British Design Council, the Centre for Analysis of Risk and Regulation, and PricewaterhouseCoopers for financial support.


Significant attention has been paid to how real options analysis can help in valuing operating flexibility when making major capital investment decisions. But there has been far less study of how to manage such flexibility, particularly in cases where a decision to defer, contract, or expand any one investment program affects a range of other programs, including those outside the firm. Such interrelated investments are increasingly common in a “connected” economy where products and technologies are designed across firms and industries.

Based on a field study at Intel, this paper describes and analyzes one set of practices for coordinating such diverse systems of investments. It shows how information about interrelated investments is communicated within and between companies so that coherent changes can be made at the level of an overall system. The authors argue that studies of investment appraisal need to move beyond the predominant focus on valuation to encompass the wider organizational processes by which operational flexibility is exercised in the modern economy.