VUCA best describes the business environment that has become the new global economy. The recession has given way to a slow and struggling recovery in the U.S. while Europe is facing a depression and economies around the globe are finding themselves in uncertain terrain.
V.U.C.A. (pronounced voo – ka) is an acronym developed by the military to describe an environment that is dominated by:
- Volatility – The nature, speed, volume, magnitude and dynamics of change;
- Uncertainty – The lack of predictability of issues and events;
- Complexity – The confounding of issues and the chaos that surround any organization; and
- Ambiguity – The haziness of reality and the mixed meanings of conditions. CEOs are struggling with how best to lead
Because they were designed for more predictable times, business models and business planning processes fail to perform well in this chaotic environment. This is because in a VUCA environment change happens more frequently, more unpredictably and with enough size to makes them “disruptive.” So the question for business leaders becomes, “how do you effectively grow sales, profits and customer loyalty in an unpredictable environment where literally everything changes in months rather than years?” Since you can’t avoid VUCA you must understand it and develop skills that will help your company adapt to the chaos it produces.
In a VUCA economy change is a constant. As markets and customers become less predictable businesses must vigilantly watch the landscape. Trends start quickly and can develop overnight bringing with it either great threats or tremendous opportunities. This often leads to shorter life cycles of products and services. With shorter life cycles market leadership is short-lived , as is the opportunity to minethe profit potential of the leadership position. Being the market leader in the past, meant years of market domination (think about IBM, Kodak, Nokia, Sears and Polaroid). In the New Economy market leadership is often measured in months. The key to success is how quickly and effectively you can recognize and respond to market trends.
Leaders must dramatically modify or stop doing the following things to prepare for a VUCA environment.
- Stop seeking permanent solutions to existing problems
- Stop relying on the past and trends as an accurate predictor of the future
- Stop assuming that long-term market leadership is possible without major innovations
- Stop assuming that the strategies and people who got you here will get you to the next level
- Stop assuming that the corporate culture and corporate values will remain the same
What are you doing to prepare your company to function in a VUCA marketplace?