Improving the strategic investment decisions: The essence of active decision support system

Abstract

Strategic investment decisions are both important cnnd difficult as they concern very serious issues /requiring a lot of investment in terms of finance and /manpower which is considered as important and • critical in any serious organisation. These strategic investment decisions are more easily understood and controlled than most of the other activities undertaken within the framework of strategic management. Traditional approaches to strategic investment appraisal have been criticised on a number of grounds among which are their narrow organisational perspective, exclusion of nonfinancial benefits, overemphasis on short-term, faulty assumptions about the status quo alternative, inconsistent treatment of inflation and promotion of non-value adding behaviour. Yet in spite of these apparent flaws with traditional investment appraisal techniques, businesses continue to rely upon them; as a consequence, there is a possibility not only for misguided investment decisions but also the possibility of a perversion of senior manager's business imperative: instead of investing in the company's long-term core business, senior managers become side-tracked and start investing for short-term cash flows. In the light of these criticisms, two basic approaches that can be taken to develop alternative investment appraisal techniques were proposed; with the first approach involving the modification of the traditional investment analysis framework to correct its various technical shortcomings such as inflation inconsistencies, the use of inappropriately high discountfactors and its narrow focus expanded to include commonly neglected benefits such as improvements in flexibility, improvements in information quality, timeliness etc. while the second approach involves reliance on analytical framework that represent significant departures from the traditional methods; such as strategic cost management, the multi-attribute decision model, value analysis, the analytical hierarchy method, uncertainty method etc. Beyond these available alternatives, this paper concludes that since Hyperknowledge, an active support systems have been used as problem solving and decision support environments for strategic management and for strategic decision making in a number of industries in recent years; it appears that the logic of a strategic investment decision is complex enough for a decision maker to benefit from the use of a hyperknowledge environment, and that a hyperknowledge support system could help a management team to control the problems with deciding, launching and following up on strategic investment projects.