MODELING TECHNOLOGY AND KNOWLEDGE IMPACTS ON UNCERTAINTY OF INVESTMENTS DECISIONS

Abstract

This thesis aims at modeling the impacts of technology and knowledge on uncertainty in the investment decision making of a case company operating as a part of the Finnish energy industry. The uncertainty is modeled with the help of three methods: The Analytic Hierarchy Process, the sand cone model and the knowledge and technology (K/T) rankings. AHP was used to weight the investment criteria, K/T rankings to calculate variability coefficients depicting the uncertainty and sand cone model to illustrate the weighted criteria and collapse risks caused by the uncertainty.

The used methods detected some uncertainty in the investment decision making of the case company. This uncertainty could be seen in the sand cone layers as collapses which question the decision making and the comparison of the departments. From the K/T questionnaire results could be analyzed that spearhead technology was the main source of uncertainty. Therefore, interviews were organized in order to find the reasons behind the uncertainties and also to validate the results with the weak and semi-strong market tests of the market-based validation.

The interviewees accepted the uncertainty showed by the models and thus the weak market test was passed. Also the analysis of few past projects confirmed the uncertainty related to spearhead technology. This led to accepting the semi-strong market test as well. Interpretation of spearhead technologies, state authority decisions and the real costs of backup power were seen as reasons for uncertainty in spearhead projects. To the high uncertainty an internal strategy round, TOM training and a more democratic decision making were proposed as solutions.