Reducing uncertainty through risk-conscious strategic evaluation of new business opportunities

Strategic decision-making has been getting harder than ever. This is mainly due to increasing number of company's internal and external uncertainties, complexities in the evaluation and decision-making processes as well as lack of structured information. The importance of managing uncertainty and risk emphasizes especially in the case of new business creation where a time horizon for strategic planning can be even 10 to 20 years. Over the last decades, many intuitive and analytical methods have been developed to evaluate strategic alternatives. However, the intuitive methods lack a structured framework for systematic evaluation and on the other hand, analytical models are often too theoretic and complicated to be used in strategic decision-making in companies. In addition, in the area of integrating risk and uncertainty aspects systematically into the decision-making process, there have been only a few studies. This paper proposes a practical AHP-based framework for strategic evaluation of new business opportunities. The application consists of structuring hierarchies for new business opportunities, pairwise comparison and determination the weights of components of the hierarchies and synthesis to reach overall ranking scores for different business opportunities. The application developed is a decision supporting tool to be used in group decision-making which can primarily be applied in the early phase of new business development.