Real Options and IT Platform Adoption. By Robert G. Fichman Presented by: Dominic Almeida Da Silva

Introduction “The pace of change in the information Technology Field has been rapid over the past decade, with a host of promising new technologies confronting forward looking organizations.”

Real Options needs and difficulties Uncertainty in benefits Irreversibility –Training –Infrastructure Managerial flexibility (Dynamic) –Process –Result

Real Options give us Give us the right but not the obligation to –Benefits –Growth options –Positioning investments –Other possible Real Options Prolonging the undertaking of a “Real option” –Delays benefits associated with it –Often prolonging adoption gives no benefits

Six Criteria of “Real Options” 1. Net Payoffs resulting from follow on project 2. Asymmetric negative and positive payoffs 3. Redirecting away from negative payoffs

Six Criteria of “Real Options” 4. Value of the option increases with increasing expected value of potential value 5. Value of the option increases with increasing variance of potential payoffs 6. Increases in managerial flexibility increase the value of the option

Where do “Real Options” come from? Technology strategies Organizational learning Innovative bandwagons Technology Adaptation

Real Options

Technology strategy perspective Radicalness Strategic importance of affected products or processes Sustainability of advantage Innovative capabilities

Technology strategy perspective

Organizational learning perspective Knowledge Barriers Learning related environments Contributions to exploitable absorptive capacity

Bandwagon perspective Susceptibility to network externalities Prospects for network dominance – Class Prospects for network dominance - Instance

Adaptation perspective Interpretive flexibility Divisibility

Real Options Is his model new? Are there any “Real Options”?