DAO Web Page of Fame

Celebrating Summer Successes Since 2006

  INDUCTEE:  Anand Veeraraghavan

YEAR:   2008

CATEGORY: Optimization

 


In order to select the best options for growth across five business units of an Indonesian energy company, Anand Veeraraghavan used a stochastic optimization model (built using Crystal Ball’s Optquest) that accounted for 25 key uncertainties and linkages across the business units. 

Anand worked on a growth case for an Indonesian energy company over the summer. The company had five business units—each with multiple growth options. The goal was to select the growth options that would maximize the NPV of combined business. 

Selecting the growth options presented a unique challenge - the growth options were interlinked across business units. For example, pursuing an aggressive expansion strategy in the geothermal business would create goodwill with the government (since developing geothermal is a key mandate of the government). This goodwill could potentially help the company win a contract extension with an oil & gas field. The reverse was true as well. 

The solution was a two-step process. The first step was the define linkages across all business units. Two linkages were defined - handshakes (representing goodwill) and petrotechs (skilled resources that were hard to find in the industry).  For each growth option, the number of petrotechs and handshakes required and/or produced was defined. This served as a basis to link the various growth options. The second step was to maximize the NPV by optimizing the linkages. Since the NPV from each growth option was a distribution, CrystalBall's OptQuest was chosen instead of Excel Solver to find the optimal solution.