In Praise of VUCA – a method for looking at a crazy world
The term VUCA sounds particularly ugly but is very effective in stimulating strategic thinking. A key skill for a strategist is to make sense of what’s happening in the external environment of their organisation and assessing these factors under volatility, uncertainty, complexity and ambiguity provides a neat method of structuring a management team’s thinking.
Volatility is perhaps the most straightforward to categorise. Exchange rates and commodity prices are clearly factors that change on a constant basis. Sometimes politics and the tweets of the US president are discussed or the state of the Irish or European economy, but I suggest that they are better discussed under what tends to be the longest list of factors which is uncertainty.
It’s a bit of a cliché to claim that there are unprecedented levels of uncertainty in the world today. While certain political and technological tectonic plates are certainly shifting, for most organisations the external uncertainties are not too daunting. However, from the political machinations of the Conservative party over the Brexit negotiations to the upswing in the European economy, there is no shortage of factors to discuss for any organisation.
Opportunity in the Complexity
This is also an opportunity to begin to consider challenges such as talent attraction and retention which are proving to be significant strategic challenges for most organisations. What is important is to begin to ask questions about which uncertainties are most important for the strategy and to determine priorities.
A question about whether organisational life has become more complex often provokes a collective sigh of identification. Asked to identify the reasons, increased levels of regulation and oversight are usually first on the list followed quickly by the impact of technology.
The millennial challenge of how to keep newly recruited younger colleagues motivated and engaged is a topic relating to organisational complexity that is increasingly raised. These discussions are of particular use in later decisions about how an organisation should consider changing its structure in order to address some of the complexity challenge.
Ambiguity often provokes the most interesting discussions. Once consensus is reached that volatility, uncertainty and complexity do all pose significant organisational challenges and opportunities, there is usually an acceptance that the inevitable result is an increase in the level of ambiguity in making sense of the external environment.
This insight provides an opportunity to consider the significance of our individual and collective unconscious behavioural biases in any strategy process. It also clarifies that ambiguity is not only inevitable in any strategy process but should be embraced to allow for continued discussion and challenge.
Getting the Big Picture
The purpose of a VUCA discussion is clearly not to decide upon immediate strategic action. Instead it plays two key roles; first, it gives a very clear external focus to the subsequent analysis and helps to avoid the classic issue of considering strategy from the “inside out” as opposed to the “outside in”.
Second, it gives the participants the license to return to the VUCA factors in the subsequent analysis of the organisation through the lens of different strategy tools. This allows for different scenarios to be considered, gaps in capability assessed and the key challenge of prioritising the key choices that the team and the organisation must make.
Sadly, there is no guarantee of strategic success even with the most informed deliberation. But a focused VUCA assessment at the outset of a strategy process does ensure an informed collective understanding of the external challenges and opportunities which is a great first step.
Dr. Jonathan Westrup is the Programme Director of the IMI Diploma in Strategy and Innovation and of the IMI Diploma in Regulatory Management. His expertise is in the areas of business, organisational and regulatory strategy and corporate governance.