Intuitive Fuzzy Real Options in Digital Coaching for Strategic Investment Decisions

This paper addresses the digitalization of valuation techniques and learning them within the domain of strategic investments. Real options analysis has been proven more suitable to evaluate dynamic and flexible strategic opportunities than traditional NPV methods. The complexity and high uncertainty inherent in long-term strategic investment decisions further call for using soft computing to handle intervals in real options methods. Real options are for real investments what financial options are for financial investments and the modelling has been rather unintuitive since the Nobel-winning Black-Scholes model until the more intuitive methods, such as the probabilistic Datar-Mathews and the fuzzy pay-off methods. Digital coaching can be used to train and transfer the methodological knowledge on decision analytics and real options techniques to people with various backgrounds. Digital coaching is used by athletes and business organizations as well in their training programmes. In this paper, we show and discuss how real options modelling can be brought to all potential users regardless of their expert level. The intuitions are built through stepwise examples using spreadsheet and free open-source-based decision support tools to evaluate, e.g., expected pay-off profiles from the simplest (fuzzy) triangular types to simulation-based distributions. The valuation examples are of general type and may be applied to any type of strategic investments. The contributions include presenting the novel soft-computing methods in digital coaching environment allowing better intuition-building and learning results for strategic investment decision makers and showing the convergence of the center-of-gravity fuzzy real options method with the probabilistic Datar-Mathews method.