Real Options

Please note the related website Real Options, which states: "To use a familiar phrase, Real Options is about "deferring decisions to the last responsible moment," which is an explicit principle in the Lean Software approach. By avoiding early commitments, you gain flexibility in the choices you have later." The key message appears to be that there is definite and, in principle, measurable value in "keeping your options open".

Latest discovery:

Dr F. Peter Boer's lucid paper on combining the real options approach with the decision-tree approach: Risk-adjusted Valuation of R&D Projects.

For starters, see:

Software Design as an Investment Activity: A Real Options Perspective by Kevin Sullivan, Prasad Chalasani, Somesh Jha and Vibha Sazawal. This is a very accessible introduction to the key concepts.

Evaluating Architectural Stability with Real Options Theory by Rahmi K Bahsoon. This is a PhD thesis: quite readable, but with the usual academic baggage.

Quantitative Approaches for Assessing the Value of COTS-centric Development by H Erdogmus. Although dealing with the application of real option thinking in the context of COTS-centric development, much of the thinking appears transferable to other contexts where possible approaches differ significantly. Quantitative Approaches for Assessing the Value of Evolutionary Development might have produced a very similar paper!

The Wikipedia article contains further links of a more general nature.

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