This report describes a decision methodology, real options theory, which explicitly aims at exploring rather than minimising uncertainties. All else equal, increased uncertainty implies that the probabilities for negative as well as positive outcomes increase. If increased flexibility can be achieved in an organisation, these positive outcomes can be utilised. Real options theory is a framework for decision support where negative outcomes are minimised and positive outcomes are utilised. The purpose of this work is to lay out a foundation for the application of real options theory within research and development (R & D) planning under great uncertainty, especially in the field of military R&D. The conclusion is that, despite the fact that most efforts in real options theory goes in the direction of investments in the commercial sector, there are indeed methodological insights and methods that can be used in R&D planning in the defence sector.