Although many plans begin as dreams, a dream is not a plan. The crucial distinction is that a plan deploys resources against an objective. Until the resources are in place, we are dealing merely with a dream.

The corollary of this statement is that plans do not need to be captured in writing. A strategic position itself is the source of flexibility, and a smart leader can build flexibility into his or her plans. We shall explore the view that position is a necessary, but not a sufficient, condition for the generation of a plan. The option may exist in principle, but it typically requires intelligence, information, and creativity to frame it and analytical skills to value it. These steps are the prerequisite to an actionable real option: namely, (1) frame, (2) analyze, (3) act.

To put it more simply, to make the distinction between plans and dreams, just ask if the plan is currently actionable. If so, you own a real option. The financial analogy is that to exercise a financial option, you first have to own it. To own it entails a cost or a premium. In the end, your profit will be the value of the option minus the cost of the option.

Real options derive from plans. But a real option is ambiguous in regard to the moment of ownership because full ownership may not arise from a single event. Let us explore this point for a hypothetical case.