Have you heard of VUCA, one of the buzzwords in strategy today ?
VUCA is the acronym used to describe the state of our business environment.Not only business, by the way, but also political and societal.
VUCA stands for Volatility, Uncertainty, Complexity, Ambiguity
Volatility
When I started teaching strategy, back in the 80’s, the best of the best tools was the “long term strategic plan”. I’ve seen dozens of such plans: 80-100 pages of details about investments to make, market shares to gain, factories to locate and countries to conquer… All that was based on assumptions that the world 5-10 years down the road would be more or less the same as the present. Well, we know now that change is the only status quo. Not only that: the way we compete, our customers behaviors, our political and regulatory environment are moving constantly. Business and financial investors don’t like that. That’s why Brexit generated so much volatility on finacial markets too.
Uncertainty
Linked to volatility is the unpredictability of the framework in which our decisions will be executed. Management techniques were always based on assumptions about the future and the use of planning as a major tool of management and control.But , as said above, , change is constant in this volatile world. We don’t know anything about the future. That’s why “planning, budgeting and control” methods lead to endless discussions in companies today. It just doesn’t work anymore. So, what can we do ? Strategists talked about scenario planning i.e. generating several scenarios about the future and the probability of occurrence. Good ! But…it doesn’t really help much. Look at Brexit again. Everyone knew that the “leave” decision of voters had a 50% chance of occurrence but a few hours later the consequences of it were nevertheless still hard to predict.
Complexity
Our world is now so complex that great decision makers are those who can point the key issues in an information jungle.And great executers are those who can keep focus on key actions. Everything became complex: supply chains, customers’ behaviors, big data systems, economic models, financial products,…So the danger is overcomplexification leading to a lack of vision or oversimplification due to a misunderstanding of key issues . Brexit again is a good example. Consequences of this political factor will be economical, commercial, regulatory and…emotional. Moreover, all consequences will link together making the whole a kind of never seen patchwork.
Ambiguity
I believe that one of the main challenges of our times is to accommodate paradoxes. For centuries, mankind was characterized by simple problems that could be dealt with simple solutions. The complexity of today, as mentioned here above, is leading to a gigantic confusion. As most people still reason in terms of dichotomy (good or bad, right or wrong , desirable or not desirable, …) we end up with never ending debates leading to no solution. Today, we must think differently. We should accommodate the extremes. We cannot escape solutions that are wright and wrong, baring consequences that may be good and bad, being finally desirable and undesirable at the same time. This how we should see Brexit. Whatever the vote, there was no “good” solution for all. Now that the vote is done, we will need to manage and negotiate the outcomes intelligently.
To conclude, Brexit is a good example of VUCA. But VUCA is everywhere now. We live and we manage in a global interlinked societal, political and economical environment. What is happening somewhere on the globe bears consequences everywhere else. Let’s be attentive and understand this complexity the best we can.
Be inspired !
Jean-Pierre Baeyens 