VUCA: Buzzword or vital strategic consideration?
In this article we will explore the concept of VUCA, giving clear definitions to each of the four pillars, before exploring two different case studies, to understand how much impetus leaders should give to VUCA and its effects.
The world of business has, arguably, never been more tumultuous. With global pandemics, late-cycle economics, geo-political instability, and cultural unrest, leaders have much to contend with in securing the future success of their businesses. In troubling times, it is natural for us to try and find explanations for our shortcomings, and the business world is no different. When external challenges and threats present themselves, leaders often rush to defend their positions and decisions, in an effort to appease shareholders and stakeholders alike. In these situations, leaders look to established strategies and frameworks to help them navigate, and VUCA is a relatively new addition to the discussion around strategic leadership.
The term ‘VUCA’, which is an acronym for volatility, uncertainty, complexity, and ambiguity, was coined by the United States Military at the end of the Cold War, and is frequently invoked in times of corporate distress. The precepts of VUCA leadership often overlap with those of business agility, and are being thrust to the fore of the evolving conversation around strategy and leadership. But what does VUCA really mean? Do leaders use this as a plaster to cover up problems that should otherwise be addressed? Or should leaders be addressing this concept in their strategies for the future?
In this article we will explore the concept of VUCA, giving clear definitions to each of the four pillars, before exploring two very different case studies, to understand how much impetus leaders should give to VUCA and its effects.
Understanding our VUCA world
In order to evaluate the concept of VUCA, we must first be clear on its meaning. The term is often used as a blanket ‘catch-all’, when in reality each of the four pillars of VUCA require individual consideration. Here we will define volatility, uncertainty, complexity, and ambiguity separately to be clear on their individual meanings.
Volatility: A lesson in preparedness
Volatility is the pillar of VUCA that is the most difficult to predict. It denotes instability or unexpected changes to the external environment that adversely affect a business. An example of volatility would be fluctuation in oil prices caused by a natural disaster. The best way to address the issue of volatility is for leaders to build preparedness into their business as usual. This requires dedicating extra resources to their business’ resilience, which could take the form of over-hiring talent, or stockpiling inventory.1
Uncertainty: The power of information
Uncertainty is the component of a VUCA world that is most clearly defined. In the case of uncertainty, we often know the fundamental cause and effect of the event, but not necessarily the timeline on which it will take place, or that it will take place for certain. The best way for organisations to prepare for uncertainty is to invest in data. Data will help to create statistical models to predict outcomes surrounding the variable event, and will enable leaders to determine the most rational way forward in light of associated probabilities and risks.
Complexity: Letting specialists lead the way
In the case of complexity, there are a warren of variables, risks, opportunities, and threats, which in isolation can be understood. Their volume, however, makes them overwhelming, and leaders often struggle to stay on top of the rate and volume of changes taking place. In the case of complexity, prudent VUCA leadership involves hiring specialists, who can take on the responsibility of being subject matter experts in each area of complexity that requires attention.
Ambiguity: Finding the solutions in experiments
In Broadwell’s ‘Hierarchy of Competence’, the case of ambiguity risks placing leaders in the ‘unconsciously incompetent’ quadrant.2 In these cases, leaders don’t know what they don’t know. It is here that wrong intuition can be used, and this must be avoided at all costs. That said, it is not the leaders' fault: in these circumstances, there are ‘unknown unknowns’, which makes analysis and intuition near impossible. In the case of ambiguity, experiments are key. Encouraging trial and error, learning from it, and developing an approach based on continuous learning will enable leaders and organisations to seize opportunities and mitigate threats.
Now that we understand each of the pillars of VUCA, let’s move on to some real-world examples, so that we can learn from successful VUCA leadership.
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VUCA Leadership: Learning to dance in the rain
VUCA Leadership demands the ability to adapt, to continuously learn, and to make the most of situations as they develop. These tenets are also the fundamentals of agile leadership, which encourages leaders to embed continuous learning and adaptability into the DNA of their organisations.
In order to explore effective VUCA leadership, let’s examine some real world examples of how organisations have responded to the VUCA world by adopting an agile approach to leadership at scale.
Lenovo: Protect and attack
Chinese computer giant, Lenovo, is an excellent example of effective leadership in a VUCA world. In the early 2000s, the company had struggled to gain market share outside of China, and had responded poorly to developments in the market - illustrated by the sale of its smartphone and tablet division in 2008 for $100M, only to buy it back one year later for $200M.
By 2014, however, Lenovo had overtaken Apple in China, acquiring 14.2% of the smartphone market. So, how did this turnaround happen? According to a study in the International Journal of Current Research, Lenovo’s success hinges on two principles - both of which are examples of VUCA leadership.3 These are:
1. Balancing their ‘Attack and Protect’ strategy
Lenovo’s ‘Attack and Protect strategy’ is likened to a boxer, who shields his face with one hand when jabbing his opponent with the other. Lenovo protects the areas where it already has a lead, whilst attacking areas where it believes the potential for growth exists. Having garnered more than 34% of the personal computer (PC) market in China, Lenovo simultaneously focussed on maintaining its dominance here, whilst setting its sights on growth in the smartphone market. This approach helped them to gain considerable market share, and has helped facilitate growth in the face of an increasingly competitive and destabilised VUCA environment.
2. Developing the next generation of VUCA leadership
Lenovo believes firmly in developing leaders so that they can think across borders and cultures, and thrive in the face of VUCA conditions. For this reason, the company rotates its key leaders’ jobs every three years to ensure that their leadership remains adaptable and versatile. This manifests ownership and accountability, and enables leaders to retain a cross-functional view of the company instead of forming siloes. Lenovo’s approach to VUCA leadership can be broken down into 5 P’s, also known as the ‘Lenovo Way’, which are:
- Planning: ‘We plan before we pledge’
- Performance: ‘We perform as we promise’
- Prioritisation: ‘We prioritize the company first’
- Practice: ‘We practice improving every day’
- Pioneering: ‘We pioneer new ideas.’
By developing leaders who embody these values, Lenovo ensures growth and profitability in spite of a VUCA world. Some of these principles are neatly aligned with those of agile working, where the focus is placed on innovation, customer-centricity, and continuous improvement, as opposed to hierarchy and established working practices.
Siemens Healthineers: Emotional intelligence as well as technical expertise
Siemens Healthineers recognised that VUCA factors were impacting performance amongst the leaders of its business in Brazil, and when traditional approaches didn’t work, they decided to think outside of the box.
Instead of focussing on the problems at hand, they decided to focus on their people, taking the view that addressing their organisational culture would be more effective in equipping leaders for a VUCA environment than trying to predict the nature of the outside world.
Upon closer inspection, Siemens Healthineers realised that a culture of individualism and a siloed mentality had developed in their Brazilian leadership team, and this has created an atmosphere of distrust and blame. They concluded that whilst historically they had focussed on the technical expertise of their leaders, this alone would not be enough to lead their healthcare business in Brazil to success in a VUCA world.
Siemens Healthineers’ approach to tackling this issue was two-fold: Firstly, they confronted their cultural issues head-on and acknowledged the need for change, and then they invested in retraining their leadership.
By conducting emotional intelligence tests with their leaders and undergoing a 360° review process, Siemens Healthineers were able to identify the gaps in leaders’ skill sets, and create individual development roadmaps to ensure that these were addressed. The outcome of this exercise was that overall employee engagement increased 45%, and there was a 139% increase in ‘highly engaged’ leaders.4
By focussing on soft skills such as emotional intelligence, rather than merely assessing technical abilities, Siemens Healthineers were able to drastically reinvigorate their workforce in Brazil, and better-equipped them to deal with the challenges of our VUCA world.
Strategy implementation as the vehicle of VUCA success
The common thread in both the case of Siemens Healthineers and Lenovo is the successful implementation of a VUCA strategy. Therefore, at this stage, it is important to consider the ways in which organisations can successfully implement strategy in order to thrive in a VUCA environment.
According to Forbes5:
Successful strategy implementation can be broken down into three Cs: clarify, communicate, and cascade.
Strategy needs to be clarified so that it has meaning at all levels of your organisation. Distilling your strategy from high-level statements into actions that will resonate lower down in your corporate structure is essential in order to rally support for implementation at all levels.
Your strategy needs to be communicated at all levels in your organisation. This should include internal communication channels such as blogs and emails, but should also permeate your meetings, which are perhaps the most powerful strategic instrument at your disposal. So, be sure to equip your leadership team with a purpose-built meeting management solution to help ensure flawless communication.
According to Forbes, cascading is ‘the rubber hitting the road’ and is the means by which your strategic ‘whats’ are translated into tactical ‘hows’. This requires buy-in from your management, who must commit to implementing your strategy in their respective areas of your organisation.
VUCA: A vital consideration
Therefore, having defined what we mean by VUCA, and having explored two very different approaches to VUCA leadership in both Lenovo and Siemens Healthineers, one thing is clear: VUCA is a vital strategic consideration that requires a proactive approach. Waiting until situations arise is a recipe for failure, as by then it will be too late. Instead, organisations need to pre-empt VUCA situations and have strategies in place that will help their people to thrive.
This process begins, as with the Siemens Healthineer’s example, with ensuring that leaders have the right personality traits, skills, and training in order to lead their teams to success. Then, in the case of Lenovo, it requires a strategic approach to growth that allows companies to protect their existing dominance and attack fresh opportunities simultaneously. Technology also has a pivotal role to play in helping organisations to prosper in the VUCA world. By investing in tools that aid collaboration and improve strategic implementation, leaders enable their workforces to weather the storms of the VUCA environment.
By learning from these examples, you will be able to set the tone for VUCA leadership in your organisation, and strive for growth in the face of the unknown. In addition to this, making steps to ensure successful strategy implementation in your organisation is vital.
1 'What VUCA really means for you’, HBR, 2014.
2 'Teaching for Learning', Martin M. Broadwell, 1969.
3 'Leadership in a VUCA world: A case of Lenovo', Das & Ara, 2014.
4 'How to lead people in a VUCA world: Lessons from Siemens Healthineers', Stillman & Aldan De Araujo, 2018.
5 'Three Cs of Implementing Strategy', Edinger, 2012.