How are you responding to VUCA?

March 24, 2016

VUCA is now the new normal. How are you responding to it?          

 

 

If you don't already know this, VUCA is the acronym for "volatile, uncertain, complex and ambiguous".  It is a term to describe the economic environment under which we operate these days. Volatile really describes how we see the wild swings in commodity and stock prices, often very sharp deviations from the norm, and done shockingly quick. The new year Chinese stock market plunge is one example. Even the sharp drop in oil prices is another case in point.

 

Uncertainty is almost a way of life now, but not three decades ago. When you were growing up in the 70s and 80s, you will know that there are certain constancies. You could predict the rainy seasons, you could predict the stock market movements (flat), you could predict export volume, you could even predict consumer behaviour. But not so now. Perhaps with the advent of the Internet, and the unlocking of knowledge and power from the hands of the few and at the touch of a button, things have sped up tremendously (except the rainy season. That is impacted by global warming!) And with that comes greater unpredictability. It is not necessarily a bad thing because we have also seen a country rise from third world to first in just one generation, riding on the back of the electronics boom as a result of the Internet explosion. But I suppose we cannot now dial it back and say that we want it to be less uncertain. Technology, and our reaction to it, has made the environment more uncertain, and we have to live with it.

 

We fear complexity because that means that we have to work harder at appreciating a situation, and to finding a lasting solution. The commingling of the volatile and uncertain environment has undoubtedly made things more complex. This is further complicated by a reductionist mindset that wants things to be lean and simple, sometimes more than they should be. It was Einstein who wrote, "Everything should be made as simple as possible, but no simpler." This means that while we should not throw irrelevant information into a situation, it should also not be reduced to a point where we have a simple yes/no decision. This takes out the important nuances that make the situation unique, albeit complex. To a hammer, everything is a nail. That may be over-simplifying matters. And this is something we tend to want to do these days.

 

Lastly, ambiguous. When I was COO of a medium-sized organisation, people would ask my advice or seek clearance for a certain course of action. Many a times, my answers would be ambiguous, not because I wanted to maintain an aura of mystery, but because the environment itself was ambiguous. The government agency which we dealt very closely with for funding purposes got extremely vague from the beginning of 2015, and that grew into complete radio silence for certain issues. So when they don't know how to respond to the policy changes that they have instituted, the ripples that move through the industry are huge. This ambiguity is magnified several more times when it moves through the layers of my organisation. Ultimately, it became an expensive, waiting game.

 

VUCA may have been a military jargon when it was first coined in the 1990s, but it has become the mainstay of economic vernacular today. It is important to understand that VUCA is now the new normal. As they say, expect the unexpected. Here are 5 ways to go forward in such an environment 

 

(1) Ditch the fixed mindset

You cannot expect a stable and predictable environment. More data will not help you because there is no precedence in the first place! Learn to roll with the punches.

 

(2) Go out there and make small bets

You need to bite the bullet, absorb some risk and make small bets. We are not asking you to mortgage your home to chase a hunch (although sometimes that may be precisely what you need to do) but you need to have some skin in the game to learn what works, and what don't.

 

(3) Don't be fixated on your first success

So you made a great call today and hit on a success. Good for you! Congratulations! Just don't expect it to be there tomorrow. Always be on the lookout for when your success will turn into a failure and launch your next success.

 

(4) You can't rest on your laurels

This means that, in a VUCA environment, you have to constantly be on the move. You cannot stop for one minute and savour your prize. Well, maybe one minute. But when that minute is up, you must start a new race, even while you're running this one! There is no rest for the weary simply because the environment is constantly shifting.

 

(5) Be contrarian

If the status quo is so uncertain, why bother remaining there? Be contrarian; after all, if you already know it doesn't work, why would you still want to try to squeeze water from the same rock? Move onto another rock, and even if you "failed" there, at least you would have found one MORE rock to avoid. But perhaps now it is time to move onto something more like a sponge? The last thing you'd want is to spend inordinate amounts of time and money on something that everyone has already shown doesn't work. Don't fool yourself into thinking you will be different. Statistics will tell you that you're not.

 

So how are YOU responding to VUCA?

 

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