Digital Coaching for Real Options Support

Abstract

Classical management science is making the transition to analytics, which has the same agenda to support managerial planning, problem solving and decision making in industrial and business contexts but is combining the classical models and algorithms with modern, advanced technology for handling data, information and knowledge. In work with managers in the forest industry, we found out that there is a growing interest to replace the classical net present value (NPV) with real options theory, especially for strategic issues and uncertain, dynamic environments. Uncertainty and dynamics motivate the use of soft computing, i.e. versions of the real options methods that use fuzzy numbers (intervals), macro heuristics, approximate reasoning and evolutionary algorithms. In general, managers can follow the logic of the real options theory but the methods require rather advanced levels of analytics; when the methods are implemented, they will be used by growing numbers of people with more of a business than analytics background. They find themselves in trouble pretty quickly as they need to master methods, they do not fully understand and details of which they forget from time to time. We propose that digital coaching is a way to guide and support users to give them better chances for effective and productive use of real options methods.