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VUCA – More Clarity, Less Uncertainty

It’s time to reinvent leadership!

 

It is the next round of a wrestling match and a revolution in the world of business and society as a whole – a struggle that started years ago. Digital transformation and Industry 4.0 are just the precursors of an imminent metamorphosis, yet nobody seems to be in the slightest bit clear about how important human factors will be. If there’s one thing we do know at the moment, however, it’s that nothing is certain anymore. There is a fitting term for this situation, an acronym that has the potential to explain many things: VUCA. Wolfgang Natzke, director of the Steinbeis Transfer Institute for Business Management and Innovation, explains what VUCA means and describes the changes affecting management in an era of digital transformation.

VUCA is a useful acronym for summarizing the challenges companies (and people burning to instigate change) face in successfully transforming our world in an era of digital solutions. It stands for volatility, uncertainty, complexity, and ambiguity.

Volatility describes the extent of fluctuation within a short period of time, thus pointing to a situation that is unstable, erratic, and thus difficult to predict. If a company asks itself who and where its customers will be in the future, this kickstarts a period of heightened innovation activity, which has every propensity to accelerate. This requires a culture of innovation, one the people at the company accept and believe in. Uncertainty regarding customers and the competition goes hand in hand with uncertainty regarding market developments. Introducing tactical measures, such as identifying worst-case scenarios to work out what would be the best case, poses a dilemma for firms. The big question is, “How and through whom will the company generate the revenues it requires in the future?” To pave the way for the future, it is essential for HR management to be 100% effective and, at the same time, flexible. The complexity part of VUCA points to the need, more than ever, for a core competence (especially given the highly complex and thus extremely fragile nature of structural factors): mental agility. This is an important skill if managers want to maintain a 360° overview. In the future, “strategists” will be needed who are able and willing to quickly leave their comfort zone, managers who are adaptable and able to deal with and get into completely foreign situations. As for ambiguity, this is about circumstances having different possible explanations. When there are no obvious causal dependencies and tried-and-tested business models are likely to start going wrong, companies are increasingly forced to find individual solutions. Just because people have certain know-how or can point to best practice, this is no guarantee that they will continue to enjoy success. It’s a bitter pill to swallow, but the more radical change becomes, the more quickly we realize that our knowledge is finite – as is experience. What were previously considered boundary posts for an industry are becoming more and more fuzzy. And then something unexpected happens – things go full circle and the next VUCA cycle begins.

So which factors need putting under the microscope for a firm to embark on a journey of digital metamorphosis? The experts at Business Management and Innovation, a Steinbeis Transfer Institute at Steinbeis University Berlin, have pulled together a number of ideas they consider useful for business. They are certainly thought-provoking, and to help with this process, they offer a specialist seminar on “Shaping up for the world of VUCA.” This provides an entry point for the fascinating world of digital transformation. The experts offer the following helpful ideas:

It is important that a company believes in and reflects a culture of trust. A leading German bank once ran an advertising campaign proclaiming that trust is the starting point for everything. All human relationships are built on a foundation of trust. When people behave with integrity, adhere to arrangements, support one another and mean well, and they communicate openly and honestly with one another, they sow the seeds of trust. That said, checking things – like simply monitoring a situation – also makes sense.

Errors or misconceptions are not mistakes – something that managers need to think about consciously. This is because ultimately, there is only room for mistakes if people define what’s “right.” But if complex systems are typically unique in nature, there can be no “right,” so there can also be no such thing as a mistake. If anything, there are just misconceptions. This is why trying to point fingers at people is rarely useful. The task for managers and other employees is to take risks – even if this could result in errors – so that they can learn together without apportioning blame.

Swarm intelligence comes before individual intelligence. To have any chance of capturing and understanding complexity, a company needs diversity, the exchange of ideas and changes in perspective in relationships of equals

Another important factor is that people are willing to take responsibility. If people consistently stop engaging in witch hunts it becomes much easier for everyone at a company to decide if they want to be victims, or the kind of people who take responsibility.

It is also important to adopt the right mindset. Even if making errors can be seen as a setback, talking about how people feel this has affected them and their reactions helps to rebuild confidence.

Systematic networking rather than hierarchies: Beyond the realms of existing formal structures lies a world of openly exchanging views, in all areas of the business at all levels of the hierarchy, and this should be aspired to and actively promoted. Putting the right infrastructures in place (dialogue based on relationships of equals, a culture of feedback, etc.) is a key responsibility of management.

Skills rather than hierarchies: There are huge advantages in allowing key decisions to be made by people in the places where the highest level of competence is held. Currently, many decisions are made by people who are simply responsible for others, or where hierarchical power is held (or both).

Agility rather than rigid planning structures: Best-practice solutions usually fail in complex situations and it’s simply futile trying to draft the perfect plan. What does help is if you allow for plenty of flexibility and just experiment by taking the next step. To do this, you need to be able to stand back, trust people’s intuition, and allow for visions.

Make improvements rather than seek perfection: The complexity aspect of VUCA entails a high degree of unpredictability, so this is a world shaped by interdependencies that are not always easy to spot. This is why reworking things is absolutely normal, if not essential.

Swap roles as necessary: To be agile as a company, people have to be able to switch roles and revise how they see leadership. Managers should be a kind of moderator who focuses on solutions, people who maintain the focus on the mission, vision, and strategy of the company. They are responsible for ensuring decisions can be made within a given set of circumstances.

Managers need to be aware of the fact that general management strategies previously considered universally valid will have zero effect in the new world of VUCA. Linear approaches to solving problems, linear thinking, linear management and linear career models are definitely not the way forward in a dynamic, ambiguous world – an environment that is not only volatile but also dictated by change. If anything, linear practices are a serious problem. The new core competences are methods and processes that promote innovation, incubation, restructuring, and change management. Models that hail the virtues of managers “taking to the helm of a company” are most certainly doomed to extinction.

Contact

Wolfgang Natzke

Wolfgang Natzke is Director of Business Management and Innovation, a Steinbeis Transfer Institute at Steinbeis University Berlin (SHB). His institute offers services with a clear three-pronged focus on problems, solutions, and success. These range from certification courses to the planning and running of practice-based workshops, training, and specialist seminars in the following areas: organizational and personnel development, recruitment, innovation management, and the optimization of leadership.

Wolfgang Natzke
Steinbeis-Transfer-Institute Business Management and Innovation (Porta Westfalica)