Leaders today are dealing with a VUCA world where the business climate is constantly and rapidly changing. A climate where the barrier of entry has been diminished due to advances in tech, automation, and artificial intelligence. An environment where customers find it increasingly easy to adopt new tech and new products. All this while facing increased competition due to globalization.
What is VUCA?
VUCA is an acronym coined by the The United States Army War College in 1987 to describe the volatility, uncertainty, complexity, and ambiguity of the radically different and unfamiliar international security situation that was emerging in the world.
VUCA also applies to the opportunities and challenges that teams and organizations face today in our rapidly changing business world.
Volatility – Refers to today’s business climate that is undergoing rapid and unpredictable change
Uncertainty – Refers to the difficulty in determining a current or future path due to the high levels of volatility and unpredictability.
Complexity – Refers to the many interconnected and interdependent components, teams, forces, or market conditions which make analyzing situations very difficult and hard to determine clear cause-and-effect
Ambiguity – refers to having incomplete or inaccurate data due to the uncertainties and complexities that lead to further confusion and misunderstanding of our current and future needs.
The Impact of VUCA on Organizations
Organizations today face major disruptions due to the rapid pace of innovation, deregulation, advancements in technology, lower barriers to entry, lower switching costs, and faster consumer adoption rates. Here are a few examples:
- Amazon disrupted the bookstore business and companies like Borders and Barnes & Noble
- Apple and the iPhone disrupted major cell phone manufacturers like Nokia and Blackberry
- Netflix disrupted the movie rental business and titans like Blockbuster
- Uber disrupted the taxi industry world wide
These are just a few examples of how leading companies or industries faded and failed to compete against newcomers that offered not just newer features but radically different innovative products and business models that better addressed customers’ needs.
Many organizations are spending the bulk of their teams’ time, effort, resources, and budgets on just keeping the “lights on” and ensuring that their products and services are up and running. These organizations are typically dealing with a lot of technical debt that makes their products difficult to operate, maintain, and update and thus makes it hard to make changes and keep up with competitors. In these organizations, a lot of the discussions revolve around modernizing the tech stack and rebuilding the applications all over again in order to be able to compete.
Other organizations with better technical practices that are capable of continuous delivery and regular updates are focused on using data from their existing products to improve production efficiency and produce better products and services at lower costs thus giving them a competitive advantage over others.
Few organizations are on going beyond their existing products and markets and are innovating by producing brand-new categories of products or services or even reinventing their own organizations and creating new business models, thus staying ahead of the competition and avoiding getting disrupted by newcomers.
Yet due to the nature of operating in a VUCA world, many companies today face threats from technologies that have not been invented yet and from companies that have not yet been founded or established. If they are not regularly innovating, they risk not having enough time to respond to these new threats.
The Impact of VUCA on Leadership
The management practices of the 20th century are no longer suitable in today’s world. Top down hierarchical leadership structures and centralized decision-making focused on efficiency and local optimization of processes, teams, and individual productivity, are going to hamper an organization’s ability to quickly adapt and innovate to thwart threats from competitors. The rigid structures and processes that helped organizations succeed and scale in the 1900s are not going to cut it in the fast-paced ever changing business climate of the 2000s.
Today’s leaders need to anticipate and respond rapidly to ever-changing environments and become more strategic, collaborative, and innovative, in order to build, inspire, scale, and sustain high-performing teams and resilient organizations.
Today’s leaders need to:
- Embrace unpredictability by crafting a compelling, clear, shared vision of the future with flexible short-term goals allowing teams to deliver frequently with the flexibility of responding quickly to changes in the environment.
- Establish a learning organization that regularly experiments, learns, grows, adapts, and is well-prepared for diverse scenarios and challenges.
- Create collaborative cross-functional teams to remove dependencies, break down silos, improve domain, technical, and market knowledge, increase the speed of delivery, and build a more flexible workforce ready to tackle the latest opportunities.
- Foster self-managing teams to create small aligned autonomous teams that are trusted, engaged, motivated, creative, and capable of coming up with innovative ideas for the next major product.
