The need for strategy in a VUCA world

“…Without a compass bearing, a ship would neither find its port
nor be able to estimate the time required to get there.” – Peter Drucker

Drucker was talking about business objectives and strategy. Without a sense of direction, a business either follows the rest of the market or takes a wandering course, reacting to whatever it encounters. In today’s world, a ‘making-it-up-as-you-go’ approach can lead you into dangerous waters.

We all know that change is constant but the last few years seem determined to emphasise just that. Between a global pandemic, a cost of living crisis, a transformed relationship with Europe, and even accelerating global warming, the UK business environment has radically changed. Wherever you want to be, passively following along won’t get you there – in a VUCA world, you need direction; you need strategy.

VUCA?

Adapted by IFTF researcher Bob Johansen for business use, VUCA is an acronym standing for:

Volatility – A rapid pace of change, difficult to rely on trends or patterns due to sudden fluctuations or unexpected events.

Uncertainty – The world is dynamic and therefore hard to predict; this includes customer needs, market demands, and competitors’ strategies.

Complexity – Nothing is straightforward and this is compounded by the sheer volume of data that is potentially available to factor in to your decision-making.

Ambiguity – A lack of clarity, not least due to the lack of previous experience inherent in new situations; when everything is changing how much can we rely on the expertise we’ve gained in the past?

Does that sound like the market – the world – your business operates in?

Managing in a VUCA world

The potential business challenges of a VUCA world include:

• Increased change can mean increased resistance to change.
• Reluctance to make key decisions due to lack of information.
• Poor decisions due to lack of information.
• Customers are more demanding/impatient.
• New ways of working must be adopted (e.g. the post-COVID increase in home/flexible working).
• Uncertainty can lead to demotivation, and increased employee turnover.

More and more, it becomes a game of anticipation: What systems or practices are now out of date? What new customer needs can you anticipate? What new services can you offer? What new skills do you need to recruit/develop?

To stay afloat and even thrive in these circumstances requires a clear (and appropriately flexible!) strategy.

Back to Bob Johansen who, as well as introducing VUCA to the business world, offered a neat response:

Vision – a clear, common purpose can unify an organisation.

Understanding – information is key, more than ever you need to know your customers and your market.

Clarity – the time for silos and secrets is past (not that it was ever a particularly good thing) and instead, clear and transparent communication that transcends hierarchical roles and departments is needed.

Agility – a rapid response, based on the information available, that can be adjusted and adapted as new data emerges is far better than waiting to make a single, ‘perfect’ decision (it doesn’t exist and besides, you never have all the relevant information!)

Like any other bit of jargon, the term VUCA will come and go, but the reality it describes – an increasingly rapid and unpredictable pace of global change – is likely to remain. And in such an environment, a clear and focused business strategy is a necessary guide to where you want to be.