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“Glorious Past is no longer any guarantee for Future Success. A new world is demanding Agility, Speed of Response, Innovation with calculated risk, and Adaptability in any system.”
Throughout the past decades, we find numerous terms in the popular business and social world that refer to an increasing inability to grasp the world and deal with the things happening around us. Examples include uncertainty, turbulence, rapid change, dynamism, disruption, complexity, hyper-competition, high-velocity markets, and flux. For a couple of years, the notion of “VUCA” is gaining popularity as a term to cover the various dimensions of this ‘uncontrollable’ environment. Do you aware of what the VUCA means?
History of VUCA
VUCA is an acronym – first used in 1987, to describe or to reflect on the accelerating rate of change (volatility), the lack of predictability (uncertainty), the interconnectedness, of cause-and-effect forces (complexity), and the strong potential for misreads (ambiguity) of general conditions and situations. Thereafter, VUCA was coined by the U.S. Army in the 1990s to describe the post-Cold War world.
The deeper meaning of each element of VUCA helps to foresee the behaviour of groups or individuals in organizations. It explains systemic failures and behavioural failures, which are characteristic of organizational failure.
- V = Volatility reflects the nature and dynamics of change, the speed and turbulence of change.
- U = Uncertainty means the lack of predictability, the prospects for surprise, and the sense of awareness and understanding of issues and events.
- C = Complexity indicates the multiplex of forces and vastness of interdependencies in globally connected economies and societies.
- A = Ambiguity conveys the multitude of options and potential outcomes resulting from them.
The idea of VUCA has since been embraced by leaders in all sectors of society to describe the nature of the world in which they operate. The particular meaning and relevance of VUCA often relate to how people view the conditions under which they make decisions, plan forward, manage risks, foster change, and solve problems. In general, the premises of VUCA tend to shape an organization’s capacity to:
- Anticipate the Issues that Shape
- Understand the Consequences of Issues and Actions
- Appreciate the Interdependence of Variables
- Prepare for Alternative Realities and Challenges
- Interpret and Address Relevant Opportunities
For most organizations – a business, the military, education, government, and others – VUCA is a practical code for awareness and readiness. Beyond the simple acronym is a body of knowledge that deals with learning models for VUCA preparedness, anticipation, evolution, and intervention.
However, VUCA types of factors are not new. They have always been integral to scenario planning and in PESTLE analysis (Political, Economic, Social, Technological, Legal, and Environmental) of the external environment in issue management.
V for Volatility
Volatility is the “V” component of VUCA. It refers to the speed of the change in an industry, market, or the world. It is associated with fluctuations in demand and turbulence in the market. The more volatile the world is, the more and faster things change. Everybody is aware of the same, but the question is what leads to such volatility in the demand even though markets/buyers/people/socio-economic conditions are almost the same which were there while such marketing plan/production plan/social plan designed by an organization/company/society or Government?
It is due to the tendency of humans which acts differently in different situations. People respond differently to different social or environmental situations. The same way people perceive such acts differently and respond differently generates Volatility. The dynamics can change due to any shift in a situation, whether it is social, technical, biological, or anything of the like.
Let’s understand Volatility at the personal level. So, what does volatility look like in your life? I am giving my real-life example. I went to work with a well-thought-out list of ten things that I had to accomplish. The emails and phone calls I received prior to finishing my first cup of tea that morning were so urgent and so unconnected, yet influential on each other, that I struggled to find five minutes to eat “lunch” and had to seat late at night in the office. When I left my office near 09.00 pm, I had accomplished no tasks accomplished from the list I made and accumulated 5 additional ones. Volatility can leave us feeling overwhelmed, alone, and utterly unprepared to lead effectively. In today’s economy, that makes your volatility as severe as mine.
Relatively unstable change. The challenge is unexpected and may be of unknown duration, but it is not necessarily hard to understand; knowledge about it is often available.
Prices fluctuate after a natural disaster, such as when a fire, high water tide, or drought affect the entire supply chain.
Conduct risk analysis, build in spare capacity, and allocate resources to preparedness – for instance, stockpile inventory or overbuy talent. These steps are typically costly and therefore management should only commit where the cost is justified by the downside.
U for Uncertainty
Uncertainty is the “U” component of VUCA. Uncertainty is a grey area when the availability or predictability of information in events is unknown. Uncertainty often occurs in volatile environments that are complex in structure involving unanticipated interactions that are significant in uncertainty. It happens when people don’t have clear information and their predictions are based on assumptions and opinions. It is also known as social categorization and it may be for gender (A Nurse always assumed as female and not male) and race (A Basketball player assumed to be black and golf player assumed to be white due to origination and popularity of the particular game in particular region/race). But, in reality, this is not the case, it is just a lack of proper information which leads to assumption and its outcome is uncertain.
Such uncertainty hinders our ability to conceptualize the threats and challenges facing the organizations we lead. A typical mistake during uncertainty is we thought we had a lot more time than we actually have and the mitigation plan fails due to the same.
It is human nature to see every challenge as something similar to what we’ve encountered before. That’s how our brains work and for good reason; if we had to assess every situation as the novel we wouldn’t be as efficient as we need to be. However, relying too heavily on them might lead to the faulty assumption that yesterday’s solution to a seemingly similar challenge today is appropriate.
Lack of knowledge. Nevertheless, the situation’s basic cause and effect are known.
A competitor’s expected product launch can change the future of the business and the market.
Increase business intelligence activities. Collect, interpret and share relevant information. Engage in serious boundary-spanning collaboration.
C for Complexity
Complexity is the “C” component of the VUCA framework that refers to the number of factors that need to take into account, their variety, and the relationships between them. The more factors, the greater their variety, and the more they are interconnected, the more complex an environment is. Under high complexity, it is impossible to fully analyze the environment and come to rational conclusions. The more complex the world is, the harder it is to analyze.
Complexity refers to the conditions which demand a perspective to analyze the situation as a whole and beyond the viewing threats and opportunities as a collective and interactively. It required joint efforts of the entire organizational infrastructure and outside environment to get the desired outcomes. In complex environments, actions and results are interlinked and affect each other that required a detailed action plan and work allocation. It is like Rubik’s cube, wherein if you focus on a single colour and single side to match all yellow colour squares on one side, you cannot solve the same forever. One has to see all aspects and dimensions at the same time to solve the same.
Complexity can leave us frustrated, feeling solely responsible for success or failure, while at the same time feeling alive in the critical moment.
Complexity variables are the easiest of the 4 factors to understand, but managers or leaders can’t know what they don’t know, which compounds the complexity of the situation. Managers may know the likely outcomes but not the unintended consequences of complexity factors. For instance, writing a new computer code may open up the further complexity of unforeseen security risks. Some information is available or can be predicted, but the volume or nature of it can be overwhelming.
The company operates in many countries, each of which has its own regulatory environment, tariffs, and cultural values.
Restructure, bring in or develop specialists and increase resources adequate to address the complexity.
A for Ambiguity
A lack of clarity to interpret something is called Ambiguity. A piece of incomplete information that sounds contradicting or too inaccurate to draw clear conclusions leads to an ambiguous situation. It is also called vagueness in ideas. The more ambiguous the world is, the harder it is to interpret.
Ambiguity is the “A” component of VUCA. Ambiguity is different than Uncertainty, however many people cannot differentiate both clearly. Uncertainty is when relevant information is unavailable and unknown, and ambiguity where relevant information is available but the overall meaning is still unknown.
Ambiguity provokes one to assume answers based on available information and complete the link. For example, unless a person is open about their own sexual orientation, people will automatically assume that they are heterosexual. But if a man possesses feminine qualities or a female possesses masculine qualities then they might be portrayed as either gay or lesbian. Ambiguity leads to the categorization of people without further important details that could lead to untrue conclusions.
Ambiguity cannot diagnose from a single perspective and cause an inability to accurately conceptualize threats and opportunities before they become lethal.
Leaders must provide clarity so that work assignments and goals are not as ambiguous as the environment. Ambiguity doesn’t paralyze workers; it makes them insecure and stirs them up. Competent employees, when faced with ambiguity, will do what they are most comfortable doing in order to feel as if they are contributing something appropriate. Doing something, whether it’s helpful or not, makes us feel good. A leader must provide clear direction and synchronize the efforts of others while continually communicating any adjustments.
On a positive note, ambiguity boosts learning opportunities and employees become more vigilant, active, and efficient.
Causal relationships are completely unclear. No precedents exist; management faces “unknown unknowns.”
The company decides to move into developing markets or to launch new types of products that are outside its previous experience.
Companies need to be prepared to take on risk, perhaps initially in trial markets, to evaluate outcomes. Lessons learnt can be applied progressively over time to other markets.
VUCA – All 4 elements details
We have understood all 4 terms individually along with what measures are required in the individual condition. But, the division in the individual element is just for the sake of understanding the concept. In practice, the four terms are inter-related and shall be considered and applied at the same time. The more complex and volatile an industry is, the harder to predict and therefore more uncertain it will be which creates more ambiguity. Yet, all four represent distinct elements that make our environment – the world, a market, an industry – which is difficult to understand and deal with. The distinct nature of these four elements can be further clarified by visualizing them
Although the leadership challenges in an increasingly VUCA world are significant, they’re not impossible to achieve for those who are willing to look beyond old thinking and approaches. Here’s some pragmatic guidance to craft a strategy.
VUCA doesn’t mean that everything is unpredictable. Following are the major predictions in the VUCA world to be taken care of by all leaders.
· Urban concentrations: Population concentration in the cities is the trend of the last century and the same will continue to increase in this century as well. Developing the world’s big cities are growing at a very fast pace whereas the developed world’s largest cities are already developed and no more scope of development. Hence, by mid of century, most of the top 10 mega-cities in the world will be in the developing world. With urbanization generally come longer life expectancies, lower birth rates, and greater economic prospects.
· Climate changes: While the debate continues over the exact timing and consequences of climate change, but the truth is human activity has already started altering the climate. We are already witnessing rising sea levels, extreme weather conditions and natural calamities, raining and water resources are depleting and agricultural production will be less reliable.
· Demographic shifts: Globally, the North and West are getting older, and the greatest concentrations of youth will be in the South and East. Tensions are likely to rise as the bulk of economic wealth and opportunity remain beyond the reach of many people.
· Technology advances: 21st Century is indeed the era of Technology and with the inventions of Artificial Intelligence (AI), Internet of Things (IoT), Industry 4.0, Smart Factories, we will be ever-more connected by devices that are smaller, faster, and less expensive. Hence this era would be sure of Technology disruption.
Thus, we live in a VUCA world wherein Business has a very challenging landscape wherein
1) Technology is changing at a pace which was there never before i.e. Rise of Android OS fails the Cell phone giant Nokia who stitches to Symbian OS and later on shifted to Window OS but measurably failed. The rise of AI, IoT, and Industry 4.0 has changed all rules of the games.
2) Redefining Business models i.e. AirBNB is the largest hotel providing company without owning any property and Uber is the largest taxi provider without owning a single taxi at a global level. Such out of box ideas and their implementation may help to stand your company growing in this VUCA world.
3) Change in the perspective to measure the value of the product i.e. Customer’s conscience has been shifted from cost-effective value for money family cars to luxurious premium sedans and SUVs.
4) Cutting Edge innovation: More and more players are coming with innovative technology and solutions by changing the complete span and horizons of the particular sector. The automotive sector has never thought of the launch of “Cybertruck” by Elon Musk’s Tesla which has started a very new competition of innovation with a premium tag.
VUCA can be conquered with VUCA only. Confused?
Volatility, Uncertainty, Complexity and Ambiguity can be conquered with Vision, Understanding, Courage and Adaptability.
What’s your VUCA (Vision, Understanding, Courage and Adaptability) to conquer the VUCA world?