Question

In the real options reading, your instructor argues that:

options:
A. Real options works better for IT projects and systems than traditional approaches to strategy because both overlook the role of volatility and uncertanity
B. Real options works better for IT projects and systems than traditional approaches to strategy because they do not share with the latter assumptions about the enviornment of the project being predictable in advance.
C. The seperation of "can do" and "must do" elements of an IT project is a futile exercise because technology itself is changing at lightning speeds. (Think about your smartphone and how outdated it gets in two years flat.)

Answer 1

The real options approach is considered more effective than traditional strategies for IT projects because it accounts for the uncertainty and volatility in the technology sector. It allows for flexibility, like making investment decisions that are adaptable to changing conditions and future developments.

Step-by-step explanation:

In exploring the efficacy of the real options approach to IT project and system strategy, it is crucial to understand why it can provide better outcomes than traditional strategies. The reason real options may work better is that they account for the inherent uncertainty and volatility of the IT environment, unlike traditional methods that often assume predictability in project outcomes. This aspect of real options makes it advantageous for handling a landscape characterized by rapid technological changes and unpredictable market shifts.

Real options allow decision-makers to make investments in a staged manner, granting the flexibility to adjust, abandon, or expand projects based on emerging information. This approach mirrors life strategies where one must navigate choices under existential uncertainty, opting for paths that remain viable under various future scenarios. By considering the potential shifts in technology and market forces, real options provide a structured yet dynamic framework for strategic IT decision making.