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Flexible Ships: Business Case Modeling by Applying Strategic Real Options and Monte Carlo Simulation Modeling

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The current global security environment is changing at a faster pace than ever before with higher levels of complexity and competitiveness, with a complex dynamic of possibilities. The U.S. Navy not only needs more ships, but it needs them with design features that allow them to adapt to changes with new technologies and operational concepts. Examples of Flexible Ships design features include decoupling payloads from platforms, standardizing platform-to-payload interfaces, implementing allowance for rapid reconfiguration of onboard electronics and weapons systems, preplanning access routes for mission bays and mission decks, and allowing for sufficient growth margins for various distributed systems. This article illustrates the application of strategic Real Options Valuation methodology within the Integrated Risk Management process to assess the total future value of Flexible Ships design features and for use in the Future Surface Combatant Forces' Analysis of Alternatives. The research goal is not to provide any detailed decision recommendations but, rather, to propose a reusable, extensible, adaptable, and comprehensive advanced analytical modeling framework to help the U.S. Navy in quantifying, modeling, valuing, and optimizing a set of ship design options to create and value a business case for making strategic decisions under uncertainty.

Document Type: Research Article

Publication date: March 1, 2021

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  • The Naval Engineers Journal is the peer-reviewed journal of the American Society of Naval Engineers (ASNE). ASNE is the leading professional engineering society for engineers, scientists and allied professionals who conceive, design, develop, test, construct, outfit, operate and maintain complex naval and maritime ships, submarines and aircraft and their associated systems and subsystems.
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