What does “VUCA” mean? What consequences for the company

The abbreviation of VUCA stands for “Volatility, Uncertainty, Complexity and Ambiguity”. It is used to describe an environment that is constantly changing, unpredictable, complex and ambiguous. What practices should the company adopt to face these challenges?

Definition of VUCA: “Volatility, Uncertainty, Complexity and Ambiguity”.

“VUCA” is the acronym for Volatility, Uncertainty, Complexity and Ambiguity. Which means in French “Volatility, Uncertainty, Complexity and Ambiguity”. VUCA is used to describe the characteristics of the environment in which the company operates. It materializes the fact that the world around us is experiencing increasingly dynamic changes. A dynamic change can be defined as a sudden event, process or action that has an effect on someone or something.

The origins

The origins of VUCA stem from military strategy: when soldiers began to realize that they could not predict their enemy’s next move with certainty, they had to adapt quickly. While this concept may seem strange in the field of business management, it turns out that military terminology can actually be very useful, especially considering the degree of uncertainty that prevails in modern working environments and not to mention the effects of the COVID-19 pandemic.

Focus on the parts of the VUCA

Volatility

The term “volatility” is used to describe situations where frequent, sudden changes, both downward and upward, can occur without really being predictable. This fluctuation affects the company which encounters difficulties in predicting demand, consumer reaction, competitor movements…

To understand what volatility is, let’s take the example of the stock market. The stock market exhibits high volatility during times of economic uncertainty, it can peak one day and then crash the next – and low volatility when things are stable.

These erratic movements destabilize organizations.

Uncertainty

This is the lack of knowledge and confidence in the future. Uncertainty means that the company does not know if or when a particular event will occur in time or space.

Complexity

It refers to the interconnectedness of events and issues in an organization or system. Complexity can be described as a situation in which many parts continuously interact to create a system leading to unpredictable results and multiple interpretations.

Ambiguity

Regarding ambiguity, it is the difficulty of understanding a situation, or why certain events occur. This ambiguity makes it difficult to choose how to react correctly. Ambiguity refers to a situation in which the information is unclear and the outcome unpredictable.

For example, when you expect approval from your manager, but they don’t answer your calls or emails, you don’t know if your request has been approved or rejected. This can lead to confusion and conflict because you don’t know if your idea is coming to fruition.

An individual definition of each term of the acronym VUCA is simplistic, because it is necessary to know that they are linked: for example, complexity generates uncertainty, which itself results in a certain volatility.

What are the consequences for the company of suffering from this environment?

If the management is not really aware of the challenges of this type of environment and does not take the relevant measures to shape its organization, the consequences can be numerous and serious:

• an ineffective strategy,
• unattainable goals
• sluggish competitiveness
• bad decisions
• financial difficulties
• internal crises,
• high turnover
• high absenteeism
• a decline in motivation

How to manage in such an environment?

To lead a business in today’s volatile world, the use of acronyms like VUCA helps to understand and integrate the situations experienced by the organization and its employees. It is also a point of support for developing a strategy consistent with this new deal, building an appropriate organization and using a mode of management for the occasion. It also involves strengthening collaboration with its customers to position itself as far upstream as possible in expressing their needs.

One option is to build an agile and flexible business to constantly adapt to changes in the environment and constantly reinventing itself.

Strategy

No more rigid and detailed strategic planning. The management committee sets a course and short-term objectives. It reinforces management to keep a close link with the results of actions. Decisions may be reviewed as events change. Thus, she can easily adapt to changes in the market and quickly implement new strategies and tactics in response.

Innovation is a central strategic axis to create value, to renew and not to be locked into an aging business model.

Agile companies use iterative development processes that involve multiple cycles of design, development, and testing before releasing a product to market. This is to ensure that the products are ready for the market (correspond to current demand) when they are launched.

Organization

Agility is the key word. The organization must be able to respond quickly to changing conditions without sacrificing quality or efficiency. The structure must constantly adapt. To make an organization evolve quickly, the managers must change their mindset.

Operational excellence is efficient, teams maximize their resources to do even more with the means available. Transversal management is favored through projects involving different departments within the same process.

Digital transformation is very often one of the first projects to carry out, but be careful not to forget the human component of the project.

Management

Managerial practices must put the employee and the team at the center of the company’s concerns. The role of the manager is to support his team towards greater individual and collective efficiency. Its levers:

• develop everyone’s skills
• promote autonomy
• motivate and federate the team
• promote collaborative work
• use collective intelligence

For such a type of management, it is useful to train the managers of tomorrow to acquire new managerial skills: by developing their leadership, by training them in coaching techniques, project management… to support employees in their development.

Training is essential. Employees need to understand what each step of the process they are involved in looks like, and how their role fits into the bigger picture. This way they can make changes quickly when needed and keep things moving smoothly.

In such an environment, people are highly motivated and empowered to make decisions based on what they believe is most effective for the organization as a whole (and not just for their own department).

The manager is in constant communication with his team – he/she shares information with them so they can be proactive rather than reactive. This can have a considerable impact on the culture of the company with a positive point which is to make employees happier and more engaged in their work.

Close collaboration with customers

Agile companies collaborate with customers during all phases of the product development process. This allows them to identify the features that create the most value for customers, which helps reduce costs and improve quality. Shorter development cycles allow a better understanding of the needs of its customers.

It is useful to rely on consultants to support the organization in its transformation by providing an outside perspective.

Sources: Consultant4Companies, PinterPandai, Harvard Business Review

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