Project Safeguards: Operationalizing Option-Like Strategic Thinking in Infrastructure Development.

When business strategists use option-like thinking to inform investments in physical infrastructure, developers need to operationalize leaving the options open at project implementation. This study defines safeguard as the design and physical development work for ensuring, or enhancing, the embedment of an option in the project outcome. Safeguards account for design changes stemming from option exercising if the environmental uncertainties resolve favorably in the future. They range from a design effort to secure space in a master plan (passive) to the construction of an integral component (active). A multiple-case study on the expansion of Heathrow airport shows how the confluence of two contingencies underscores decisions to safeguard under a limited budget. Safeguarding is more attractive when: 1) the assumed uncertainty that the option will get in the money is low because the outlay sunk on safeguards is more likely to pay off; and 2) the infrastructure architecture is modular because only the interfaces between components may require safeguarding. Irreversible investments on safeguards increase the option cost and reduce the exercising costs in the future. Safeguards therefore play out as a control point for strategic option-like thinking at project implementation. The empirical findings are summarized in a conceptual framework. [ABSTRACT FROM AUTHOR]