Originally, it is said to have been used by the U.S. military to describe the treacherous conditions of war and post-war, and encourage awareness of the defining facets of the respective environments. Now, VUCA is now a key principle in executive coaching, aptly describing the circumstances to which effective leadership must be tailored today.
VUCA stands for “volatile, uncertain, complex and ambiguous” and acts as a catch-all for the challenges of a rapidly evolving business environment. These include the speed of technological progress and the respective repercussions for operations, business models and data privacy, rapid change across the board, dynamism, disruption and fierce competition. All against the backdrop of high-velocity markets and flux, and a whole host of additional considerations as regards the environment, corporate social responsibility and even public health. These diverse factors are purely examples of the myriad issues in which companies are entangled, adding up to a general feeling of a lack of control.
However, Harvard Business Review cautions that the abbreviation may mistakenly lead you to believe that this conflagrated term is so abstract that strategic planning cannot be applied. On the contrary, each of the four distinct challenges require specific managerial preparation and responses. These must now be taken into account when considering how to coach new managers, as must the various ways in which they influence and exacerbate one another.
Let us take a closer look at the four aspects to bear in mind when developing leadership in global organizations:
Volatility refers to the speed and unexpected nature of change. It applies at several levels: volatility on a certain market, in a specific industry or in the world in general, for example. It alludes to a certain instability, with not only the timing of change being unpredictable, but also its duration. Aspects such as fluctuations in demand, turbulence and short time to markets characterize volatility. In high-volatility environments, change occurs frequently and quickly, and may be far-reaching.
Uncertainty refers to a lack of predictability of future outcomes. This is based on an absence of pertinent information - either because said information does not exist and cannot be generated objectively speaking, or because the individual or organization requiring certainty does not have access to or does not understand the perquisite knowledge. In an uncertain environment, change may be impending or not, and the nature of change remains an unknown.
Complexity refers to the number and diversity of parts and variables interconnected in any one situation. The volume and/or nature of information required to fully grasp the situation may be overwhelming. In a highly complex environment, there are several factors to consider which differ greatly and correlate to one another in various ways. This renders the environment difficult to gauge and analyze, impeding managerial ability to make far-sighted decisions.
Ambiguity refers to an absence of clarity. A situation may be difficult to interpret if the available information is suboptimal. Incomplete, inaccurate and/or contradicting information can make a situation seem ambiguous or be indicative of a factually ambiguous situation. Highly ambiguous environments lack useful precedents and meaningful causal relationships. They are vague and blurred, and leave management open to an array of potential avenues, which may prove to be fruitful or disastrous, depending on how the situation further crystallizes over time.
Forbes provides an excellent visualization of each of these components.
As the above breakdown demonstrates, VUCA is more than just a catchy phrase or flashy acronym with which to feather your bow. Instead, it speaks to a mindset of awareness and agility. It describes the challenges of the workplace, the markets and the world at large. In doing so, it highlights the need for cognitive flexibility, inclusivity and both computational and lateral thinking in leadership. It’s a good thing EHL Advisory Services is here to lend a helping hand.