What is a VUCA world and how does it affect digital business?
There is no doubt we live in a complicated and unpredictable reality. But the world has never been so extremely turbulent as it is today. In the last few decades, we have observed a phenomenon that’s linked with broad access to data and a change in human mindset due to the intensification of extreme and unexpected world events (stock market crashes, natural disasters, pandemic…). Nothing seems stable, constant, or reliable anymore. This new reality has a name - it’s called a VUCA world. What is VUCA? How can it affect digital organizations? How to adapt to it?
Table of contents
Short history of the term ‘VUCA’
The idea of VUCA originates in the leadership theories of Burt Nanus and Warren Bennis (1987). Primarily, it had been established for U.S. military purposes. In the twenty-first century, U.S. Army War College students started using the VUCA acronym in relation to the overall world situation. In 2009, an American researcher from the Institute for the Future (IFTF) in Silicon Valley, Bob Johansen, adapted the VUCA concept for business. Now it’s used not only to describe the current economic situation but also to grow organizations in this challenging reality.
What is VUCA world?
The VUCA acronym is nowadays widely used to describe various aspects of reality and the world in general. Let’s decode the mysterious VUCA acronym:
- V stands for Volatility
- U stands for Uncertainty
- C stands for Complexity
- A stands for Ambiguity
Volatility
Volatility relates to the pace of the changes that occur in a particular area of life or business. It represents the difficulty of creating any patterns for sudden fluctuations in the area. And the more volatile the area is, the harder it is to forecast the future. Here at Boldare, we experience an intensely volatile reality, as the digital industry is highly dynamic.
Uncertainty
The second letter in the VUCA acronym describes the world’s uncertainty. Relating to our digital field, it describes unpredictable future user needs for digital products and services, market demands, or strategies of the competition.
Complexity
The VUCA world’s complexity brings chaos and confusion. The amount of data available online, the overload of information, and the large number of interactions between various systems creates a constantly transforming chain of interrelationships that are impossible to understand or control.
Ambiguity
On top of all this, there is ambiguity, which can also be described as a lack of clarity. It comes from a lack of experience. When you face a challenge for the first time, and no one has ever faced it before, you don’t really know how significant the challenge is, what factors are influencing it, or how to overcome it. A good example can be found in the coronavirus pandemic. It suddenly arose and dealing with it is like walking blindfolded through an unknown territory full of traps.
How does the VUCA world influence the digital industry?
The digital industry is strongly influenced by the VUCA world. Technologies and solutions that can adapt to and run in a VUCA reality require new skill sets, innovation, and the use of agile frameworks.
Software development is driven (and there is no other way) by customer needs (conscious and unconscious), so it’s crucial to interact with users and analyze their expectations at each level of product design and development. The VUCA world forces product strategists, product owners, or any other business stakeholders to not only gather user feedback but also continuously monitor the digital market situation and competition. High levels of volatility and complexity make it very demanding. Specialists need to consider various factors that interact in diverse ways and influence different aspects of a digital product’s development. They also need to set the right measures and metrics.
Another challenge is to build and manage development teams. In the U.S., we are observing a phenomenon called The Great Resignation (Big Quit) as a result of the COVID-19 pandemic. This is the ongoing and widespread trend of employees quitting their jobs voluntarily. The phenomenon includes software developers, product designers, and digital product development leaders. It’s getting hard to hire people and keep them on board. Next to this, there is a wide-ranging crisis in the area of employment. HR agencies are struggling to find digital specialists and technology leaders, and to create job offers that would attract them. Thus, digital companies need to be open to new solutions, such as external services (e.g. CTO as a service).
The challenges of managing people in a VUCA world
A volatile, uncertain, complex, and ambiguous environment can bring a lot of uncommon challenges when it comes to managing people. The use of rigid, long-term strategies may not work anymore and an autocratic style of management may not be the most effective in a VUCA reality. CEOs and boards of directors should concern themselves with how a VUCA world might affect people in and outside of the organization: employees, clients, product end users, business partners, etc. Here are some examples of potential scenarios:
- key employees might suddenly resign (the Big Quit phenomenon),
- team members might strongly resist change,
- clients and partners might hesitate in making decisions,
- people’s confusion might lead to an increased number of bad decisions,
- digital product users might get impatient and irritated more often,
- people might feel overwhelmed, and thus demotivated,
- VUCA might infect people’s sense of security, resulting in chaos and destabilization of the whole company.
How can you prevent these negative scenarios? How can you adapt to the VUCA world? How can you run an organization in a VUCA reality? If you’re asking yourself these questions, you are on the right path to survive in the market and grow your business in this rapidly changing environment.
How to navigate a VUCA world? What is inverted VUCA?
Bob Johansen, who brought the VUCA concept into the business area in 2009, three years later came up with the inverted VUCA model, which describes possible responses to the VUCA reality. Inverted VUCA proposes to apply:
- Vision - as a response to volatility
- Understanding - as a response to uncertainty
- Clarity - as a response to complexity
- Agility - as a response to ambiguity
These four values can help you run a business in a VUCA world with no major interruptions, and even with increasing profits. Key factors for incorporating the values into organizational culture are: transparency, trust, debate, and collaboration. You need to step away from a multi-level organizational structure and autocratic management. As a leader, you need to acquire a high level of readiness for the VUCA world’s surprises. VUCA demands innovation, transformation, and constant adaptability.
Firstly: clear and rebuild your vision. A strong team with a common purpose becomes a powerful force for organizational growth.
Secondly: understand the current situation of the VUCA environment by observing market trends, analyzing data and discussing the gathered information with your teams.
Thirdly: implement new communication tools and acquire new mindsets for better flow of information (don’t hide information, and empower employees to take part in decision-making). Communication may also improve if you apply a high level of transparency within the organization.
Digital companies which successfully deal with VUCA are usually working with Agile methodologies. Agile culture supports a fast response to quickly changing market demands and customer needs. It helps to adapt to VUCA conditions.
Benefits of smooth operation in a VUCA world
The VUCA reality is challenging. Old systems and ideas don’t work anymore. But does VUCA trigger any positive effects? Of course. It pushes companies towards reorganization and transformation with plenty of beneficial outcomes, e.g.:
- it encourages wise and agile leadership,
- it helps to improve collaboration,
- it initiates new skills and mindsets,
- it encourages cross-sharing of knowledge,
- it forces innovation & digitalization,
- it optimizes internal processes,
- it leads to improvement in customer service and satisfaction,
- It strengthens human relations and helps to release people’s full potential.
How is Boldare responding to VUCA?
The above list of benefits is much more than merely theoretical. Here at Boldare, we practise adaptation to VUCA every day. The most significant shift for us took place when we transitioned to holacracy four years ago and became a fully self-organized company. We introduced radical transparency and started working without product managers. Now, we invest in smart, Agile leadership development within our organization. We build our own league of leaders by running the Boldership Academy, which provides valuable education and necessary tools to our employees.
We have shifted to a human-centered mindset, which is much more effective in the rapidly changing VUCA world. We reinforce collaboration and exchange of skills between team members. When it comes to digital products, we use scrum and full-cycle product development (we build products in short iterations, phases, each focused on a specific business goal).
Moreover, we have widened our offer: we help our clients at each stage of their product development (from early conception through to scaling). We also support digital transformation processes.
As you can see, the VUCA world brings not just anxiety, chaos, and a lack of clarity, but new opportunities too. It’s extremely important to be aware of its impacts, use the chances on offer, and limit any potential harm.
The VUCA world won’t let us ignore it. It affects almost every aspect of our reality: social, political, cultural, environmental, economic, and so on. It influences business organizations by forcing changes in mindset, leadership style, and strategy. Working with inverted VUCA and implementing an Agile culture are crucial factors for organizations that wish to survive and grow in this turbulent environment. We should always keep in mind that the VUCA world is constantly speeding up, and we have to hold on tight if we still wish to bring highly-valued, extraordinary products to our users.
Share this article:
