VUCA
First coined in 1987 by the US Army War College to describe the world after the Cold War, then the term gained more popularity after the fall of the Berlin Wall. In the 21st century, it became a pillar term in the business world to explain the chaotic and rapidly changing environment.
The four components of VUCA – V for volatility, U for uncertainty, C for complexity, and A for ambiguity describe the condition of our local and global business environment
VOLATILITY
Volatility is when a problem is unstable or unexpected and its duration is unknown but it’s understandable and information about it is often available.
Example: demand causes prices to fluctuate after a hurricane
UNCERTAINTY
Uncertainty is the lack of knowledge as to whether a situation will have big consequences. The situation’s basic cause and effect are known. Change is possible, but it is not guaranteed.
Example: a competitor decision negatively affects the market and other business
COMPLEXITY
Complexity is when a situation has numerous interrelated parts and factors, some information is available and can be predicted, but the volume or nature of it can be hard to process.
Example: doing international business means you have to be ready for a different environment and unique cultures
AMBIGUITY
Ambiguity is the lack of knowledge as to “the basic rules of the game”; cause and effect are not understood and there is no precedent for making precedent as to what to expect.
Example: launching a different style of product in a market that is new to your brand
WHY IS IT IMPORTANT?
VUCA develops a model that helps people with understanding the realities of issues met by companies and organizations over which they may believe they have little control, this also helps us realize that old methods of operating are no longer reliable, and that success in a VUCA world requires agility and the ability to adjust to changing circumstances. Our path will not always be straightforward, and there is a growing need to live in the moment and adapt as needed.
The VUCA dangers refer to security, economic, market, and workforce conditions across our global environment. This impacts leaders’ decisions, plans, and their daily basis strategies to solve problems. Leaders must turn VUCA dangers into opportunities for vision, understanding, clarity, and agility to be positive change agents during constant chaos.
HOW IS VUCA USEFUL IN THE WORKPLACE?
VUCA demands that you avoid traditional, outdated approaches to management and leadership, and day-to-day working. Understanding the formidable factions that may appear, and gathering the acquired skills can turn an organization in a positive light – thus making said organization a VUCA environment can be slightly disruptive, but it encourages many to battle the adversities and commend a vision with proactive values for the betterment of one’s workspace. The outbreak of Covid-19 and the strains it caused is a great example of a VUCA environment in the workspace. What makes a business thrive in this setting is the counteractive responses they provide from experiences that no one deems to have control over. Reacting and coping with the positions and collaborating as a collective to destress and merge as one to complete tasks for the betterment of a workspace. Thus, benefitting from an improvement of communication and collaboration skills; routinely altering the workspace, and providing stronger relationships between peers.
Examples of VUCA in the workplace:
- (Volatility) – “Change is rapid and unpredictable in its nature and extent.” In a security market, the essence of the stock market fluctuates in percentages rather than being sustained over a period of time.
- Organizations can tackle volatility by staying informed on industry trends and global events that impact the business. Designing an adaptable business process fosters innovations and new growth opportunities that promote competition. Fluctuations in the stock market, for example, highlight the need to review risk management portfolios and diversify investments.
- (Uncertainty) – “When the outcomes are unpredictable.” Airbnb and Uber are prime examples of innovating the market world and what it provides. Through the immense rise in technology and the economy resting solely along the development of technology, the subtle ease these applications provide to either book a residence or ride to one’s destination.
- Organizations can navigate uncertainty by encouraging flexibility to help the business stay agile during changes and challenges. Airbnb and Uber transformed the hospitality and transportation industry by adopting emerging trends in technology. While changes can be unpredictable, an environment that nurtures versatility can maintain its competitiveness.
- (Complexity) – “The notions of chaos and lack of order.” The interconnection of gas prices and the correlation it has to other branches that are not directly connected, but are highly affected – the “cause-and-effect” dilemma.
- Organizations can manage complexity by facilitating cross-functional collaboration amongst diverse perspectives and expertise. Shared insights offering a wide-range view of a market can provide an organization with tools to address complex challenges in an effective manner. In this cause-and-effect relationship, monitoring the factors influencing gas prices can allow organizations to devise ways to mitigate risks and anticipate potential outcomes.
- (Ambiguity) – “The disclosed/unseen factions that may cause confusion and also can be mistakenly misinterpreted.” A business launches a new product without the proper research and knowledge of the market they are promoting. Thus, causing a negative connotation and impacting a business.
- Organizations can address ambiguity by sharing goals through open lines of transparency and learning from failure. Businesses need to identify potential market indicators for consumer needs to validate their concept. In an ambiguous business environment, a culture that fosters learning can lead to better decision-making and position the business to succeed.