Leading Digital Organizations in a VUCA World

COVID-19 and its impact on VUCA

The digital age, what many call the Fourth Industrial Revolution, is fueled by VUCA elements, that of ever-increasing volatility, uncertainty, complexity, and ambiguity; and COVID-19 has amplified the situation even more. The good news, however, is that there are a lot of tools, techniques, and approaches that can – along a solid digital vision and strategic plan (the importance of which cannot be overstated) – help our teams successfully prepare and respond accordingly. This blog article will provide an overview of what VUCA is as well as the ways we can prepare ourselves and our teams to not only survive, but thrive in these ever-changing, chaotic times.

What does VUCA Mean?

VUCA Origin and Definitions

The acronym, VUCA, was developed in the late 1980s, made popular in the military, and is now widely used in the public and private sectors when discussing the topic of strategic leadership. Here are some short definitions of each element of the VUCA acronym:

• Volatility: the speed of change in an industry, market, or overall environment
• Uncertainty: the lack of predictability and ability to predict the future
• Complexity: the number of forces, issues, and confusion that surrounds the organization
• Ambiguity: the lack of clarity and potential for misreading situations

The purpose of understanding and studying VUCA is to help us hone our skills in predicting, planning, and responding to this type of environment.

VUCA as Shown in Images

I really like the below image from Forbes that shows each VUCA element using simple images. It’s important to note, however, that multiple VUCA elements can occur at the same time. On the upside, several of the approaches and questions included below can help strengthen one or more VUCA element at once.

An Overview of VUCA Characteristics

This short Harvard Business Review article also provides a good overview of the VUCA elements, organized by how much we know about the situation (along the x-axis) and how well we can predict the results of our actions (along the y-axis). It shows very clearly and succinctly the difference between each of the elements, explaining the characteristics, providing a straightforward example, and giving a couple of potential approaches, all of which we will go into more detail below.

Volatility – Characteristics, Approaches, and Questions to Ask

In delivering IT products and services, volatility is determined by how quickly the demand for a product or service can go up or down – similar to the volatility of, say, the stock market. It is often difficult to predict when volatility will happen as well as how long as it will last, and COVID-19 has been no exception.

Flexibility

The biggest problem presented by a volatile environment is the potential for widely varying demands placed on our resources and services.  Since demand can be difficult to forecast in these circumstances, the best way to address the issue is with flexible capacity.  Leveraging cloud-based resources offering highly elastic capacity (or capacity on demand) is a good way to ensure the ability to respond quickly to changing demand patterns when it comes to data storage or computing power. For other resources, it may make sense to enter into a contract with a vendor who can provide skilled resources on demand (for example as a prepaid bucket of hours to be used as needed over a period of 12 months).

Reserves, Processes, and Preparedness

In an ideal world, we would have plenty of reserves and resources on hand when things quickly spike or plummet. It’s something we should absolutely address as part of our strategy and ensure we have financial reserves and strong processes in place to allow for large swings in either direction. Cyber security and continuity/disaster recovery preparation (through regular simulations, role playing, and training) are two other areas where our staff can prepare and ready themselves to address and respond to volatile situations.

Outward, Customer Focus

Another great way to combat volatility is to focus on our customer. One way to do that is to think about and address those things that actually remain unaffected by volatility, for example, the wants, needs, and desires of our customers that will remain true for the next 10 years. This may include things like their desire for affordable products and services, outstanding customer service, ease of purchasing, etc. Once we determine what those areas are, we work to further improve them. In fact, Jeff Bezos (you may have heard of him) says that in answering this question, “over time you build a better and better service for your customers on the things that genuinely matter to them”.

Here are some key questions that will help our teams better combat volatility:

• What areas do we need to immediately improve in preparation for our next volatile situation (cumbersome or non-existent processes, lack of certain skill sets, insufficient planning, legacy technology, etc.)?
• What are the top three needs our customers will always have (the ability to connect, communicate, etc.)?
• What can we do today to know our customers better than we currently do (consistent “face-to-face” conversations, inviting them to regular product demo sessions, etc.)?

Decide Which Risks You Are Willing to Own

With all of that said, some services may be better outsourced entirely in a volatile environment. Perform a value stream mapping exercise for your core business. If a service is not part of your core value proposition, the option to transfer the costs and risks associated with managing volitiliy to a third party can be a sensible approach.

Uncertainty – Characteristics, Approaches, and Questions to Ask

Uncertainty means that the future need for products and services is highly unpredictable. Let’s use COVID-19 again as an example. We understand the cause of this volatility and uncertainty (the virus), but we don’t have experience to rely on because our generation has never faced this before. This leads to more uncertainty around how our society and/or our customers will respond to our evasive actions. For example, when Beyond20 looks at training, it’s hard to predict how people will view in-person training in the future. It’s uncertain whether people will prefer virtual training classes going forward, or whether organizations will be excited to host training as a team building event to take advantage of the human interaction and collaboration that will, in fact, return to pre-pandemic levels. It has become very difficult to predict. When it comes to uncertainty, information – from our customers, market or industry trends, and information that’s shared amongst our teams – can help.

Knowledge Sharing and Decision-Making

Knowledge sharing and continuous learning, as well as strong communication, collaboration, and coordination skills, can help us better align across the organization and disseminate important information quickly. Another way to combat uncertainty is through cross-training and teaching “role elasticity” to those in our organization. Building “generalizing specialists” can be extremely helpful as work-needs shift, allowing individuals and teams to jump in quickly and continue to get work done.

Pushing decision making to the team level as much as possible and making it clear who has decision-making authority in different situations allows decisions to be made quickly by the appropriate party and can reduce uncertainty across the organization.

Market Analytics and Customer Data

Increasing our understanding of the marketplace through market analytics and customer data can help us lessen uncertainty. In addition, building our organization’s level of “digital literacy” is critical in educating our staff in emerging technologies, market trends, etc. and allows us to better translate customer needs and data into viable digital solutions. Together, these skills allow us to strengthen our “absorptive capacity”, essentially our ability to recognize the value of new information and/or opportunities and quickly put them to good use in delivering the products and services our customers want and need.

Redundancy and Diversification

Things never seem to go as planned. As such, we should make sure we have options in place. Our Plan B should have a Plan B. One of the positive side effects of COVID-19 is that everyone now understands the importance of having back-up plans in place as well as the fragility of our systems. We want to be able to answer the question “When things don’t happen as we expect, what then?” We need to be able to pivot to another idea/approach/option and ensure we have some plans and preparations ready to change our course of action. It is also extremely helpful to build redundancy into critical systems and supply chain components to quickly respond to disruptions and changes.

Preparing for the VUCA Offensive

In a VUCA world, the more we can play “offense” rather than just “defense”, the less we will be surprised and left scrambling for survival. I love how this Medium article states that in a VUCA world, we as leaders must move away from our familiar mindset of straight-forward planning and analysis to a “mindset shift toward preparing and enter a state of readiness.” The more we can coach our teams to become more VUCA-minded and resilient, the better equipped we will be to handle what’s thrown at us.

Diversifying Our Products and Services

Another way to protect ourselves from uncertainty is to diversify our product and services offerings. We at Beyond20 were fortunate that as a company, when demand for training dramatically decreased overnight, we had diversified our services to include several different kinds of consulting and software implementation services. It’s worth noting that diversification of our organization’s capabilities takes time to develop. However, listening to our customers’ needs and determining where else we can be of help to them will help us drive a more diverse portfolio of offerings.

Here are some key questions that will help our teams better combat uncertainty:

• What are our top areas of uncertainty, and how are we going to address them?
• How can we as an organization elevate the ways we gather and share knowledge (daily, 15-minute huddles, weekly retrospective discussions, etc.)?
• In what areas do we need better data/visibility and how do we address them (creation of a digital dashboard, etc.)?
• Where can we diversify in support of our customers’ needs?

Complexity – Characteristics, Approaches, and Questions to Ask

Organizations are highly complex entities, and navigating change is often a challenge. There are steps, however, we can take to simplify and streamline how we work. This includes “attacking waste” within our organization as well as simplifying and automating how our teams work. I’ve seen several customers increase how quickly teams can work by getting rid of unnecessary steps, handoffs or interactions, approvals, or dependencies and getting rid of and/or consolidating duplicate or unused tools.

Value Stream Mapping

There are always places where we can become a leaner organization (it’s often a combination of people, processes, and technology/tools). Further, there is real value in mapping out our organization’s value streams as it shows us where our “high value” work is and where we have waste, so we can start to address and, ultimately, eliminate it.

Here are some key questions that will help our teams better combat complexity:

• What are some key areas where can we start to streamline?
• Where can we remove duplication or waste?
• What key product or service “value streams” should we start to map out?

Ambiguity – Characteristics, Approaches, and Questions to Ask

Ambiguity is often the least fun VUCA element as it’s dealing with the unknown. This is where innovation and invention often take place – when creating a new product or service that’s never been done before, either by our organization or within our market or industry. These are pretty scary endeavors as we “don’t know what we don’t know”. Several mistakes will undoubtedly be made along the way including, but not limited to, complete failure of said product or service, wasted time, money, effort, tarnished reputation, and the like.

Build a Team to Handle Storms

I’ve always felt that the best hedge against ambiguity is to hire smart, motivated people. I’m also a big believer in “generalists”, though that is a topic for another article. If you don’t know what the sailing conditions are going to be like, you want to set out in a boat built to handle the worst case scenario.  The same goes for businesses: hire smart people and religiously invest in training and development, and you’ll sleep well knowing you’re equipped to handle whatever comes your way.

Experimentation and Prototyping

One way to combat ambiguity is to run small experiments to test all of our hypotheses. Experiments give us data, and data helps us make better future decisions. Rapid prototyping is one inexpensive way to test out our assumptions and allow customers to interact with our ideas, giving us immediate, invaluable feedback.

It’s helpful to think about what’s the most inexpensive, simple way to get some data and/or customer feedback to quickly find out whether something is going to work before we invest a ton of time, money, and/or energy into it. If something isn’t feasible, it’s better to learn it quickly and move on to more useful endeavors. Organizations that respond best in an ambiguous environment are the ones that learn quickly and continue moving forward.

Here are some key questions that will help our teams better combat ambiguity:

• How can we test and measure our assumptions?
• What’s the least expensive way we can get clarity around ambiguity­­?
• What are the critical skills our team should develop to better combat VUCA?

What ITIL 4 Says About VUCA

The topic of VUCA is covered throughout the ITIL 4 library, most extensively as part of the ITIL 4 book and course on “Digital and IT Strategy”. What’s pretty great about the 3-day ITIL 4 Digital and IT Strategy course is students complete several in-class activities that allow them to put concepts into immediate practice using a case study. One of the in-class activities specifically walks through the elements of VUCA and is a great way to learn about VUCA at a deeper level and get a chance to apply it to a real-world situation.

The Future of our VUCA World

The less-than-great news is that VUCA elements will never go away. They will only intensify. We can, however, plan for, anticipate, and respond to VUCA elements, find new and interesting opportunities, reconnect with our customers, and thrive in this environment. In fact, there’s an interesting bit of work around how we as leaders can develop our own skills in combatting VUCA – through the development of Vision, Understanding, Clarity, and Agility. In short, the more rapidly we can adapt, respond, and combat VUCA and look to the future and lead our teams through crisis, the more this way of working will become a habit, the more prepared we will be, and the nimbler (and happier) we as an organization – and our customers – will be.