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VUCA – Volatility, Uncertainty, Complexity, Ambiguity. You’d think it was an acronym designed specifically for these very different times in which we currently live. In fact, though, it was coined in the late 80s by the US Army War College to describe the rapidly changing world as the Cold War ended.

Of course, the pandemic, with the massive changes it has brought about, has highlighted just how pertinent this concept is for the world today, and how business leaders can work with it to enhance their businesses.

So what is it, and how can you help your business through these times?

Volatility – the unexpected changes, instability in the market and consequent lack of predictability in your business at present. You might well understand what’s happening – such as price changes due to international energy price rises – but cannot really cater for it as the timing, direction and amplitude of the changes are unclear.

To counter it you need to be highly adaptable in your decision making – able to change direction with the forces in the market as quickly as possible. You also need to have risk-mitigation where possible (perhaps greater levels of inventory, for example), but to balance the costs of these with the risk.

Uncertainty – this is more about completely new entrants or markets emerging which can disrupt your business. Because you don’t know where the next change is coming from, or what it might look like, it’s difficult to prepare for it.

Countering this means upgrading information resources to be able to quickly hear about potential changes, to analyse them and to determine any appropriate courses of action. Wide-ranging “What if” risk analysis is a useful tool here, provided it is done on a very regular basis, and flexibility in your processes and systems to cater for rapid change is essential.

Complexity – in our increasingly interconnected and complex world, there are more and more “moving parts” to consider in strategy and decision-making. As the number of decision points grow, so do the opportunities for error.

To cope effectively with the rapid growth in complexity, you need to work constantly to simplify and streamline processes and procedures, understanding the links between cause and effect and recognising the transient nature of business models. Make the generation of new ideas a key strategy in your business, too – if you can get out ahead, rather than following, you have a strategic advantage.

Ambiguity – this really is about dealing with the “unknown unknowns” in business. Not only is there a lack of clarity about an issue, but often one might not even properly understand what the situation is – no real precedents exist. There could well be many different possible solutions, the issue being which direction to choose.

To manage this, you need to ensure you are constantly seeking out, and listening to, information and different viewpoints. Use this to build new hypotheses and test them – don’t be afraid to experiment, and then learn the lessons these experiments give, looking at what, and where they can be more broadly applied.

None of this is easy, of course, and much will need new ways of looking at things. The good news, though, is that all your competitors are in the same position, so your ability to operate effectively in this VUCA world can give your business a significant boost.

The organisation’s leadership is the key driver here. You must have an open and honest bi-directional communication culture, a commitment to ongoing training for your team, a drive to digital transformation and an environment where experimentation and listening to different ideas are encouraged. This will go a long way to giving your business the resilience it needs and the necessary edge.

I like the approach to this that Bill George, a senior fellow at Harvard Business School, proposed – VUCA 2.0. He suggests that all layers of the business (and life for that matter) should have the following foundational qualities:

  • Vision
  • Understanding
  • Courage
  • Adaptability

Building these qualities into your business will enable you to cope with this constantly changing world and to grow your business in a sustained way.

 

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