Author Description

Designing flexibility in a system with real optionsis one method for managing uncertainty. However,designing flexibility in a "complex system" is onlyone of several tasks that must be accomplished if theflexibility is to be deployable and of value. Many potential challenges exist throughout anoption’s life-cycle that makes design, evaluation,exercise and management of an option complex.“Complex real options" are composed of more than asingle or simple change or addition to a system tocreate flexibility. Rather, a complex real option islikely composed of interconnecting technological,organizational and process components. A complex realoption may be embedded in a complex system, which hastechnical and social system components and thebehaviors that go along with this.To meet the need for considering flexibility incomplex systems the concept of Life-Cycle Flexibility(LCF), or flexibility from “cradle to grave”, isintroduced. LCF considers both physical and socialsystems and spans the entire life-cycle of an option,starting with activities to ready an enterprise forflexible systems and continues through systemmonitoring and option exercise decisions.