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Strategy

Have We All Been Swimming Naked?

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“You only learn who has been swimming naked when the tide goes out…” – Warren Buffett

This is one of my favorite quotes. Yes, it is a bit folksy, but the underlying truth it reveals is very powerful when you think about it.

It applies perfectly to the current pandemic crisis, which has exposed a number of vulnerabilities in our global and local economies:

  • For many individual workers it has revealed significant issues like the lack of job security, access to affordable healthcare, and not having enough personal savings to survive any gaps in income. I hope in the upcoming post-COVID environment that our politicians, government agencies, and business leaders work together to find solutions for better job protection and security, universal healthcare, and “living” wages for workers that line up with the actual cost of living.
  • For many organizations, it has revealed issues like weak business models, undercapitalization, and foundational flaws in global supply chains…which is the topic of this article.

Caveat: Before sharing the rest of this article with you, and in full disclosure – I am not a supply chain professional. However, I have had a lot of exposure to the “procurement” function in my career…as a buyer, a supplier, partner, collaborator, and consultant. In addition, I have many procurement professionals as friends and business colleagues…hopefully I don’t embarrass myself too much by swimming outside of my lane!

We Have Over-Optimized

Here is my thesis: across almost all categories of spend I believe we have “over-optimized” most supply chains for goods and services, in both direct and indirect categories.

What do I mean? In our relentless push to drive efficiency in delivery, and shave every marginal cent in cost we have inadvertently gone too far. The result: we have created at-risk and unhealthy supply chains that are unable to absorb a shock and still deliver goods and services when and where organizations (and consumers!) need them.

This didn’t happen overnight.

In the years following the financial crisis of 2008/09 we have been moving closer and closer to the edge, pushing the boundaries of business prudence in the name of growth and investment returns. In a never-ending quest for greater efficiency, we have cut too deep. Empowered by technology driven efficiencies, we didn’t think enough about external disruptions. Our emphasis on instant gratification and short-term gains means we have not paid enough attention to mitigating long-term risks. Companies thrived and stock markets soared to new heights – with no thought about how we had undermined the resiliency of our economy or companies, no thought about “what if” we were hit with a significant global crisis.

We have been short-sighted: The disruption caused by the pandemic crisis has exposed us as swimming naked.

VUCA Disruption

When a VUCA shock like COVID-19 hit us, global supply chains were caught flat-footed, too slow or unable to respond appropriately. This is not a failure of markets, but rather a failure to account for VUCA forces in our never-ending game of optimizing the balance between supply and demand.

Profit maximized and stable markets just don’t work very well in times of crisis.

Despite our best intentions, the “system” does not have enough slack to survive a shock like the one we have just experienced. It is too complex, and not agile or resilient enough, to pivot quickly. In addition, many suppliers of both goods and services have seen their margins ground so finely over the years that they are not financially able to invest in excess capacity or inventory in case of an emergency. Hence shortages of toilet paper, face masks, and testing swabs.

As we are now learning the hard way. It turns out that redundancy, security and resilience are pretty good things to have when times are really bad.

Complexity and Crisis-induced Changes in Behavior

The global economy, and all its constituent supply chains, is a complex beast. Unfortunately, accommodating a shock wave like COVID-19, and the eventual restart, are not going to be as simple as flipping a switch.

There are a huge number of organizations, workers, and consumers within each industry and each market. Because all these entities are not perfectly aligned, each has its own supply and demand curves, and shut-downs or ramp-ups won’t be coordinated, the result will be chaotic. This state of flux will likely go on for a significant period of time, perhaps the next several years.

This also applies to the human capital supply chain: Organizations across many industries that had staffed up for the never-ending boom, have had to quickly cut their workforces to line up with demand that has fallen off a cliff.

Changed consumer behavior will dramatically complicate any recovery. Coming out of this crisis, where every industry has been disrupted and over 30 million US workers have lost their jobs, there is no way we will revert to how things were before. There will be many fundamental changes, for example: More workers will be working remotely, traveling less, eating out less often, spending less on non-essential goods and services, and hopefully saving more.

This will have a profound impact on our economy. In addition, it will result in extremely volatile and unpredictable supply and demand patterns across every industry and market.

Supply chains that have been optimized to be “lean” in a stable economy are now at risk. Quick cycle times, low reserve inventories, and just-in-time delivery work great when you have predictable data on supply and demand. With the VUCA uncertainty and disruption in the marketplace now, that advantage is gone. Likely forever.

A Challenge for Procurement (and Business) Leaders

So where do we go from here?

This crisis has shown us that rapid and significant changes to supply or demand can jeopardize the viability of an organization. A radical shock like COVID has severely tested and exposed many continuity plans.

All the marginal dollars that were saved in grueling price negotiations don’t mean much if you can’t keep the business open. Perfectly tuned just-in-time supply chains don’t mean a thing if demand drops to zero.

If you are a supply chain strategist, procurement professional, or any business leader for that matter, it is a great time to re-think how your business operates in a VUCA world. There are many strategic questions to consider, including:

  • How can you optimize your supply chain, while still leaving enough slack to handle surprises?
  • What demand-side changes should you consider in your planning?
  • How much redundancy and excess capacity should you have?
  • Are you investing enough in collaborating with your suppliers as true business partners?
  • What services should you outsource, versus insource?
  • What does your workforce of the future look like? Is there a better, more flexible and agile mix of employees and contractors?
  • Do you have enough cash reserves to weather a significant storm?

Conclusion

If we agree that VUCA disruption is likely the new normal, then procurement leaders will need to collaborate better with their suppliers and internal business stakeholders to build more agility and flexibility into their sourcing strategies for all goods and services. This will ensure healthy supply chains that are better able to meet rapidly changing and unpredictable demands.

Why You Need a VUCA Plan

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“If you do not expect the unexpected, you will not recognize it when it arrives.” – Heraclitus

Everything was going so well. Until it wasn’t.

Although the global pandemic unfolded over the period of several months, it sure feels like the world changed overnight.

We now live in a VUCA world (defined by the characteristics of volatility, uncertainty, complexity, ambiguity).

In this new and disruptive environment, change seems to be the only constant and we have little ability to predict what is coming next.

With this new reality, it has become clear that the traditional approach to strategic planning is inadequate. We need a better approach, one that embraces VUCA instead of ignoring it.

We need the VUCA strategic plan.

VUCA History Lesson

The US Army created the concept of “VUCA” after the fall of the Berlin Wall and the subsequent changing of the geo-political order. They needed a new doctrine and procedures to deal with the uncertain and unpredictable post-cold-war environment.

The Army had spent the decades following WWII with a primary focus on deterring and, if necessary, defeating, a military threat from the Soviet Union. The fall of the Soviet Union created a new and dangerous dynamic, and exposed our vulnerability.

With growing uncertainty about potential threats, the modern military had to be ready for a full spectrum of scenarios, from low-intensity conflicts to nuclear war. In response, the Army moved from a threat-based force to a capability-based force, prepared to go anywhere in the world, with the right resources at the right time. This new approach would enable the Army to quickly mix and match forces and adapt to a more complex and uncertain operational environment.

This same model has great application to the current business climate.

VUCA Definition

The Army described this new environment as VUCA, an acronym standing for:

  • Volatility – The tendency for things to change quickly and unpredictably, typically for the worse. These challenges are unexpected or unstable, and may be of unknown duration. However, they are not necessarily hard to understand – knowledge about them is often available. The more volatile the world is, the more change there is and the faster that change occurs.
  • Uncertainty – Situations where there is imperfect or unknown information. It applies to predictions of future events, to physical measurements, or to the unknown. Despite a lack of other information, the disruptive event’s basic cause and effect are known. Change is possible, but not a given. Uncertainty refers to the extent to which we can confidently predict the future, therefore the more uncertain the world is, the harder it is to predict.
  • Complexity – Refers to the number of factors that we need to take into account, their variety and the relationships between them. The more factors, the greater their variety and the more they are interconnected, the more complex an environment is. Some information is available, or can be predicted, but the volume or nature of it can be overwhelming to process. The more complex the world is, the harder it is to analyze and come to rational conclusions.
  • Ambiguity – A lack of clarity about how to interpret something. Situations where information is incomplete, contradicting or too inaccurate to draw clear conclusions. More generally, it refers to fuzziness and vagueness in ideas and terminology. The more ambiguous the world is, the harder it is to interpret. The causal relationships are completely unclear. No precedents exist and you often face many “unknown unknowns.”

Like most conceptual models, interpreting the elements of a VUCA environment is much more complicated in real life than it is in theory – the four components are very much interrelated and hardly ever live in isolation. For example, the more complex and volatile an industry is, the harder to predict and therefore more uncertain it will be.

Regardless of the difficulty, there is still a lot of value in understanding each component because all four represent distinct elements that make our environment – the world, a market, an industry – harder to comprehend and control.

Why a Flexible Approach to Strategy is Key

In this VUCA world, it is critical to stay as flexible as possible in all aspects of the business. Not only in tactical terms of people, capital, process, and technology, but more importantly in terms of strategy.

Strategy is vital to keeping the organization aligned, focused on what is most important, executing to win in the marketplace, and prepared for anything that tries to knock us off balance. The flexibility of your strategy should directly correlate with the level of VUCA uncertainty you face in the market.

The more we expect and plan for the unexpected, the better prepared we are to effectively deal with anything that happens.

Traditional Strategic Planning Versus VUCA Planning

In an earlier article, I wrote that effective strategic planning in a VUCA environment needs to be more agile than the traditional strategic planning approach.

Yes, strategic planning still requires the classic strategic definition of why the organization exists and what it does, but it also demands that we question every assumption about the business, the market, and the environment. Furthermore, we need to make it more robust, you could call it “VUCA-proof,” by stress testing our ability to counter known and unknown threats effectively.

Instead of driving the bus by looking through the rear-view mirror, we should endeavor to steer by looking through the front windshield – gazing not just at the road ahead, but also far into the horizon so that we can better anticipate what might be up ahead and can react appropriately to any disruptive forces or changes that come at us.

To illustrate this paradigm shift, and offer some insight on the path to a better strategic planning methodology, here’s a simple comparison of some key elements and assumptions in a traditional strategic planning model versus a VUCA strategic planning model:

 Traditional Strategic PlanningVUCA Strategic Planning
EnvironmentStaticDynamic
OutcomesPredictiveSpeculative
ProgressionLinearNon-linear
StructureHierarchicalMatrixed
ApproachFixedFlexible
Field of viewNarrowWide 360 degree
PerspectiveInside-outBi-directional
AssetsProtect knownExpose hidden or new

Key Elements for VUCA Planning Success

In upcoming articles, I’ll share some foundational concepts and critical elements for success in designing and managing a VUCA strategic plan, including:

  • Tactical remedies that business leaders and growth strategists can use to counter each of the VUCA elements (volatility, uncertainty, complexity, ambiguity)
  • The vital importance of mission clarity for leaders, and their teams
  • The incredible value in gaining situational awareness
  • How a scenario-driven approach to building a VUCA plan empowers you and your leadership team to consider a range of possible future conditions before they hit you
  • Why taking a portfolio-based approach to strategy is the smartest thing leaders can do to keep moving forward while preserving strategic flexibility

All of this leading up to sharing a proven framework for creating a highly effective VUCA strategic plan.

-Onward

VUCA’s Impact on Strategic Planning

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“Everyone has a plan until they get punched in the mouth.” – Mike Tyson

The global pace of change was accelerating long before the current pandemic crisis hit us like an out of control freight train. For quite some time it has been clear that the new normal is now a confusing environment best described as volatile, uncertain, complex, and ambiguous (VUCA for short).

Both today, and into the foreseeable future, VUCA appears to be the only thing we can count on as business leaders and growth strategists. It will force us to reconsider many aspects of the world of work  and, more importantly, how we develop strategy within it.

While VUCA may not have killed traditional strategic planning, it has definitely exposed some shortcomings…

The Pain of Today’s VUCA Environment

I was talking to a CEO last week about the impact COVID-19 was having on his 2020 business plan achievement. Up until the end of February his team had been very confident they would crush their growth targets for the year, and he was making investment plans to match. The economic and social tsunami of the pandemic has now completely decimated his business (topline revenue down more than 70%) and unfortunately, his confidence in planning for the future has been destroyed as well.

In a nod to Mike Tyson’s quote above, this certainly qualifies as bombshell punch to the mouth. The real question is whether my friend will absorb it, pivot his company’s plan and keep fighting, retreat to a corner, or be forced to throw in the towel. I think this question will apply to many business leaders and organizations in the upcoming months.

Another example comes from Brian Chesky, co-founder and CEO of Airbnb, who was recently quoted: “We had a plan, and all of a sudden the entire plan was not relevant anymore. The world changed.” In the interview he was talking about how they are taking bold and decisive actions in the face of coronavirus – with the objective of helping to weather the storm while also preparing for an inevitable new era of travel in the future. His leadership focus is to bring Airbnb back to its roots as a scrappy, resilient startup that can quickly adapt and evolve with changing market conditions.

As a recent HBR article highlights, there is a risk in weak and indecisive leadership in VUCA environments: “Strategic uncertainty can feel like slogging through mud. Leaders avoid investments. Decisions are deferred. Resources are frozen. Fear, uncertainty, and doubt drive bad behavior and personal agendas. Even so, companies often succeed or fail based on their managers’ ability to move the organization forward precisely at times when the path ahead is hazy.”

The Value of Having a Plan

In the world of startups and strategic planning, it has long been accepted gospel that no business plan survives first contact with the market (a huge shout out to Steve Blank for that timeless pearl of wisdom!). However, that doesn’t mean there is no value in having a plan.

Quite the opposite is true. There is enormous value in creating a strategic plan.

In fact, I would suggest that any organization aspiring to grow and thrive must have a plan.

Why? The act of strategic planning requires business stakeholders to think about why the organization exists, and how they will get from wherever they are today to where they want to be in the future. This level of thought forces them to quantify human and financial capital requirements, and more importantly evaluate the tradeoffs that investment decisions often require since both people and money are limited resources.

Without a strategic plan, an organization is like a rudderless ship, in stormy seas, on a journey to some unknown destination. Not a good place to be, and it guarantees a very low probability of success.

The Shortcomings of Traditional Strategic Planning

The challenge with traditional strategic planning is that markets, economies, and global climates are not static. They are dynamic – always in motion. The path to growth is almost never linear…it can have many twists, turns, detours, and dead-ends…and that complexity is at the core of why traditional strategic planning often fails. It fails to think through the complexities that a VUCA environment introduces.

The reality is we don’t know exactly what’s going to happen, or how quickly it will unfold. However, what we do know, as a good friend once told me, is that “something will happen!”

Today, your business needs to be prepared to respond quickly to disruptive new threats, often from completely unanticipated directions. Therefore, your strategy needs to be agile and robust. It requires enough breadth and flexibility to accommodate known challenges plus whatever is lurking around the corner. Traditional frameworks like SWOT, PEST or Porter’s Five Forces have some utility but are also limited because they are relatively static models of history or a snapshot of the current state. While they do bring historical events, current trends, known competitors, and trending developments into the planning picture, that is simply not enough.

The risk is that you optimize the current business model, instead of challenging the status quo and evolving. Ultimately, you risk spending scarce resources to strengthen your current business advantages only to discover that the market has changed and no longer values what you offer. You wake up one day to discover the rules have changed, you’ve been left behind and more nimble competitors have stolen your market share.

Moving Forward

The essence of great strategy is making decisions. Deciding where the organization should go and what to do, and by default where not to go and what not to do.

The essence of great leadership is the ability to quickly make decisions between competing choices with less than perfect information, and then taking action.

This is where the value of a VUCA plan comes in to play.

As business leaders, it is very easy for us to spend much of our time worrying about a future that is unknown and largely unpredictable. It is also impossible to anticipate every possible disruptive change. The risk in being caught between these two forces is that we freeze in our tracks and therefore fail to make any meaningful progress.

A better approach is to be agile, to create flexible strategic plans that incorporate our most up-to-date data points and insights, but also leave latitude for the unknown. This frees us up to focus primarily on those things you can control and do right now! By addressing your fixable risks today, and building as much flexibility into your plans as possible, you will be in the best position to thrive in the future. No matter what it brings!

In the next article, I will introduce the concept of a VUCA plan, and why you need one.

-Onward

Envisioning the New World of Work…

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“Close scrutiny will show that most ‘crisis situations’ are opportunities to either advance, or stay where you are.” – Maxwell Maltz

There is little doubt that every organization in every industry will be permanently altered in some way from the COVID-19 pandemic crisis.

In prior articles, I’ve shared that crisis can create opportunity, and we now live a VUCA (volatile, uncertain, complex, ambiguous) world. There are still many things we don’t know and need to figure out, however there is also a growing realization that we have a very limited capacity to keep things locked down.

Against this backdrop, local and federal governments around the world are making urgent plans to loosen shelter-in-place restrictions and re-open their economies. Organizations are also considering how they can resume operation and safely bring their workers back to the workplace. Many of these considerations are centered around the world of work: the nature of work itself, the workforce, returning to work, the workplace, and the organization.

Having spent the past 20 years providing human capital management solutions to enterprise clients, and having a front-row seat to the evolving world of work, here are my thoughts on what the new normal might look like:

The work

  • Work from home. It’s here to stay. Forced by mandatory shelter-in-place orders, organizations quickly figured out how to provision and enable large numbers of formerly office-bound workers to work remotely from their homes. There are many crisis-related reasons why this hasn’t been perfect (for example, children at home due to school closures, internet bandwidth, etc) but the bottom line is it has largely worked, and will grow in prominence.
  • Remote work. Moving forward, more organizations will leverage the work-from-home experience and embrace remote work. The enlightened ones will realize it can also deliver many productivity and psychic benefits to the worker, the less altruistic might do it purely for cost savings and access to cheaper labor.
  • Projectized work. A related thread is the very nature of work itself will change. Once you start to revisit where work gets done, you can also revisit who does it, and how it is packaged. I think more work will be structured as projects (new verb: projectized!), with a focus on outcomes and deliverables, versus the traditional role based work output.
  • Videoconferencing. Obviously, videoconferencing technology adoption (thanks Zoom!) has been greatly accelerated. As more of us learn how to manage our days remotely and more of our business interactions through video, it will be natural to continue doing so even when we are able to meet in person again. This will have interesting long-term implications for business travel and traditionally heavy travel dependent professions (hello management consulting!)
  • Technology-enabled. Another aspect to working virtually will be broader and deeper adoption of software to improve collaboration for distributed teams, store and share work artifacts, and manage remote workers. In parallel, with so much work being done outside of the traditional secure office environment, spending on security software will definitely grow in volume and importance in order to protect the organization.

The workforce

  • PTSD. I’ve heard people joke about the impending COVID baby boom (we’ll have to wait and see!), but on a more serious note I think there will be a wave of Post-Traumatic Stress Disorder (PTSD) from this crisis. Very few have lived through anything this stressful and impactful in our lifetime. There will likely be lingering effects that require assistance from mental healthcare professionals, and accommodation from employers.
  • Non-employee labor. The growth of the contingent workforce has been a long-term trend over the past two decades. It will take a huge hit in the short-term (temp labor is always the quickest and easiest thing to cut first), however in the long-term it will grow due to a number of the trends cited in this article: more project-based work, more remote workers, better technology to manage work, and the need for more flexibility by organizations.
  • Worker protection. With the dramatic growth of the “gig economy” over the past few years there has not been enough attention given to the pervasive issues around protecting the self-employed, independent contractors, or gig workers. Access to affordable healthcare, unemployment insurance, wage and hour protections are just some of the issues. Ironically, the CARES relief package that Congress passed might actually break new ground on this issue and lead to better legislation. Could it ultimately lead to the mythical “third class” of worker sitting in between employee and independent contractor status? We’ll have to wait and see!

Returning to work

  • Re-start sequencing. Here in the US it appears that individual states and counties will each craft their own re-start plan. It will likely be done in successive waves of workers re-entering the workplace, defined by geography and industry, with the most essential given priority. I’m wondering if this process will set precedent for a new “class system” within the economy. For example, who defines what’s essential? Are dog groomers more or less important than hairdressers? Dentists versus dermatologists?
  • WFH. It has been estimated that 42% of US workforce could work from home (i.e. they’re not tied to a location specific factory or service job) – what if all of them don’t want to go back to the office? Once the economy picks back up many professionals will be thinking of this. This will be complicated because the decision probably depends on many factors, including their family and housing situation, commute, role, age, mobility. A recent survey of HP employees indicated 87% would like to keep remote working. Wow!
  • Commuting. Related to working from home, this deserves a special call out. Many have seen their daily commute radically changed from several hours a day to just a few steps from the bedroom to a home office. We’re already seeing that these extra hours can have a profound impact on productivity, work-life balance, and the environment. NYC has reported a decline in subway ridership of 90%, you have to wonder how much it will come back.
  • Living patterns. Technology-enabled remote working will likely drive an exodus out of historically job-rich urban areas. It has been reported that more Americans would like to live in rural communities than would like to live in cities.
  • Work schedules. Changes to commuting patterns, travel patterns, and living patterns may lead to changes in work schedules. Will we see more flexibility around days worked, and schedules?
  • Immunity certification. Widespread testing is a key component of managing the pandemic and safely restarting the economy. It makes sense that workers should have a clean bill of health in order to set foot in an office, factory, or airplane. But, how will this work? Will there be health certification cards? Who will issue, monitor, certify them? How will your personal health information be protected? Many questions, few answers so far…

The workplace

  • WFH policy. Working from home will be an option for some but not all workers. Some organizations must have workers come in (for example, healthcare, factories, distribution, retail) others might not need to (most white-collar professions). Organizations will need to think carefully about the implications of their policies, carefully balancing the needs of the business with what workers want. Providing options and flexibility will be an important talent attraction and retention tool.
  • Workstations. One likely outcome is that the much-hated “open office” workplace will revert to more traditional cubicles or enclosed offices. Companies will need to provide more flexible “hoteling” options for their workers. One positive benefit is there will be less capital intensive real estate needed for the organization to operate!
  • Work rules. It is likely that social distancing will be a new norm. How will this be accommodated in a work setting? The impact could be huge when you think about the physical challenges of hallways, meeting rooms, restrooms, elevators, and cafeterias.
  • PPE. Will workers have to wear masks and other forms of personal protection equipment? Will the type be mandated? Bring your own, or provided by the organization? How will the organization ensure a properly sanitized and “safe” working environment?

The organization

I’ve saved this section for last, because organizational issues will likely prove to be the most difficult.

  • People first. They say that great leaders are forged in battle, and this pandemic has proved it. For me it has re-affirmed what many exceptional leaders already know – it is all about the people. Demonstrating empathy, compassion, and clear communication to workers will hopefully become part of every leaders toolkit moving forward.
  • The value of HR. Organizations will need to re-invent themselves and focus more on “the business of the business”. This is an excellent opportunity for corporate HR and legal teams to rise up and really demonstrate their value as change agents, protectors of the enterprise, and designers of the future organization.
  • Policy updates. Organizations will be forced to revisit (or, more likely, develop entirely new) policies that address such vital new issues as COVID testing, social distancing, who can or cannot work remotely, travel, expenses, etc.
  • Workforce planning. In a new and more uncertain (VUCA) world of work, many organizations will begin to revisit their structures, and workforce composition. Needing greater access to talent, and more flexibility, organizations will seek to better optimize the mix of employees and non-employees of all stripes (temp labor, contractors, gig workers, etc.)
  • Remote management. Organizations will need to re-think the physical logistics of how they manage the entire worker lifecycle, developing new ways of interviewing, onboarding, training, managing, and offboarding workers who are now working remotely.
  • Legal minefield. The U.S. Chamber of Commerce shares that businesses are anxious about a wave of lawsuits from customers and workers who contract COVID-19 in the workplace. Customers and employees can sue a business for lost wages, medical expenses, and other damages if they prove negligence, recklessness, or intentional disregard for their safety. Some recommended precautions could run up against workplace protection laws, such as: Telling other employees when someone is sick (privacy violation), Requiring workers to test negative before coming back (discrimination and health privacy) and, Prohibiting at-risk populations like the elderly from coming to work (more discrimination)

Wow! That’s a lot…

A crisis of this magnitude will surely create and accelerate dramatic change in the broader world of work. It could easily take 12-18 months, or more, for the full post-pandemic picture to emerge – a status likely determined by the widespread availability of testing, no major new outbreaks, and a vaccine.

An important component of strategic planning is to start with what you know (both good and bad) as the foundation for planning a path forward. I hope that this article has provided some perspective for you and your organization to start planning for the new world of work. With this foundation in place, you can begin to consider contingencies for various scenarios that may or may not become reality once things get moving.

Much, much more to come…

-Onward

We Now Live in a VUCA World

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“There is nothing more certain and unchanging than uncertainty and change” – John F. Kennedy

For the foreseeable future, volatility and uncertainty appear to be the only two things we can count on.

As our government and business leaders begin contemplating how to restart the economy without further stoking the pandemic, we must also begin looking for new strategic planning frameworks that can help us navigate and succeed in this uncharted territory.

The past several months have illustrated something the US military has known and grappled with for over three decades: we live in a dangerous and unpredictable world, and yet we must be prepared to handle every scenario thrown at us.

Attempting to solve the dichotomy between unpredictability and the need for planning gets to the heart of a framework the U.S. Army developed in early 1990s. They coined the acronym VUCA to describe the new post-Cold War environment that we found ourselves in after the fall of the Berlin Wall:

  • Volatile – The accelerating rate of change, without a clear or predictable trend or pattern
  • Uncertain – The lack of predictability, frequently disruptive changes with unknown outcomes
  • Complex – The interconnection and dependencies of many cause-and-effect forces
  • Ambiguous – The strong potential for misreads, little clarity about what is “real” or “true”

With this description of their “new normal” VUCA operational environment, they developed frameworks and playbooks to allowed military leaders to plan for and effectively respond to any threats, with the right force, anywhere in the world. This new flexible approach to planning has enabled the Army to rapidly mix and match forces and adapt to a more complex and uncertain operational environment.

It should come as no surprise that this concept of VUCA has great non-military application as well.

If we add COVID-19 to the other significant drivers that exist in today’s global economy (including the transformational growth and impact of technology, globalization, and environmental change) you get a massive VUCA environment. When you consider that all these drivers are accelerating and converging simultaneously our challenge becomes clear.

We now live in a VUCA world, and no leader, organization, or industry is immune.

Volatility, uncertainty, complexity and ambiguity all play a role in how business leaders must make decisions, solve problems, lead teams, mitigate risks, and innovate for change. They can also provide a strategic framework for leaders and businesses to plan, and make decisions.

If you embrace this basic VUCA framework, a playbook for turning VUCA to your advantage begins to emerge:

  1. We can counter volatility with vision.
  2. We can meet uncertainty with understanding.
  3. We can react to complexity with clarity.
  4. We can fight ambiguity with agility.

The biggest risk of a VUCA environment is that it can lead to inaction. People can become confused and overwhelmed by the turmoil and, as a result, rendered immobile. In a warfighting scenario those who sit still usually end up dead. To succeed we must take action.

In upcoming articles we’ll dig further into VUCA and how leaders can build out and execute the basic playbook above.

-Onward