Valuing technological capabilities – the strategic options perspective

Achieving the best performance presupposes the continuous upgrading of tools for performance analyses. The traditional tools that have their roots in accounting calculations and process engineering reactively emphasise ex post analyses, whereas obtaining and sustaining business excellence proactively needs an ex ante orientation. A recent method enabling future orientation in the strategic performance analysis toolkit is the Real Options Approach (ROA), which has its roots in finance. In the paper, we look at the pros and cons of using this approach when dealing with strategic management issues that, in turn, are the bases for successful performance in a turbulent environment. By means of technology management illustrations, we emphasise the strategic advantages of the real/strategic options. As a theoretical focal point, we use the dynamic capability view of the firm that is suitable when coping with tangible and, more importantly, intangible resources and capabilities. In addition, a numerical example is introduced to demonstrate how a new capability can be valuated.