Check out the summary of a white paper, written by Kirk Lawrence:
In The World Is Flat, Thomas Friedman notes that the rate of change today is much different than in the past. “Whenever civilization has gone through one of these disruptive, dislocating technical revolutions—like Gutenberg’s introduction of the printing press—the whole world has changed in profound ways,” he writes. “But there is something different about the flattening of the world that is going to be qualitatively different from other such profound changes: the speed and breadth with which it is taking hold….This flattening process is happening at warp speed and directly or indirectly touching a lot more people on the planet at once. The faster and broader this transition to a new era, the more likely is the potential of disruption.”
This flattening is creating a new environment that strategic business leaders are increasingly calling a “VUCA” environment. Coined in the late 1990’s, the military-derived acronym stands for volatility, uncertainty, complexity, and ambiguity—terms strategic business leaders use to describe the chaotic, turbulent, and rapidly changing business environment that has become the “new normal.”
By all accounts, the chaotic “new normal” in business is real. The financial crisis of 2008-2009, for example, rendered many business models obsolete, as organizations throughout the world were plunged into turbulent environments similar to those faced by the military. At the same time, rapid changes marched forward as technological developments like social media exploded, the world’s population continued to simultaneously grow and age, and global disasters disrupted lives, economies, and businesses.
This new VUCA environment is taxing even the most able of leaders who may find their skills growing obsolete as quickly as their organizations change in this volatile, unpredictable landscape. Leadership agility and adaptability are now required skills if organizations are to succeed in this VUCA world.
VUCA and the VUCA Prime
The “V” in the VUCA acronym stands for volatility - the nature, speed, volume, and magnitude of change that is not in a predictable pattern. Volatility in business is occurring more frequently than in the past. A Boston Consulting Group study found that half of the most turbulent financial quarters during the past 30 years have occurred since 2002. Other drivers of turbulence include digitization, connectivity, trade liberalization, global competition, and business model innovation.
The “U” in the acronym stands for uncertainty, or the lack of predictability. These volatile times make it difficult for leaders to use past issues and events as predictors of future outcomes, making business forecasting extremely difficult and decision-making challenging.
The “C” stands for complexity. This new layer of complexity in business, added to the turbulence of change and the absence of past predictors, adds to the difficulty in decision making. It also leads to confusion, which can cause ambiguity, the last letter in the acronym.
Ambiguity is the lack of clarity about the meaning of an event, or as Col. Eric G. Kail wrote in a Harvard Business Review blog, ambiguity is the “inability to accurately conceptualize threats and opportunities before they become lethal.”
The VUCA Prime
The VUCA model is helpful in identifying the internal and external conditions that affect organizations today. The VUCA Prime model, developed by Bob Johansen, distinguished fellow at the Institute for the Future, flips the VUCA model and focuses on the characteristics and skills business leaders must develop to counter the effects of a VUCA environment. Johansen proposes that the best VUCA leaders have vision, understanding, clarity, and agility.
In the VUCA Prime, volatility can be countered with vision because vision is even more vital in turbulent times. Leaders with a clear vision of where they want their organizations to be can better weather volatile environmental changes such as economic downturns or new competition by making business decisions to counter the turbulence while keeping the organization’s vision in mind.
Uncertainty can be countered with understanding, the ability of a leader to stop, look, and listen. To be effective in a VUCA environment, leaders must learn to look and listen beyond their functional areas to make sense of the volatility and to lead with vision.
Complexity can be countered with clarity, the process to try to make sense of the chaos. In a VUCA world, chaos comes swift and hard. Leaders, who can quickly and clearly tune into all of the minutiae associated with the chaos, can make better, more informed business decisions.
Finally, ambiguity can be countered with agility. Vision, understanding, clarity, and agility are not mutually exclusive in the VUCA prime. Rather, they are intertwined elements that help managers become stronger VUCA leaders.
These skills and abilities are a far cry from the more function-specific skills and abilities leaders needed in the past to succeed. Business leaders must refocus their leadership skills to hone these more strategic, complex critical-thinking skills.