VUCA Brings the New Level of Complexity, Opportunities, and Risks for Digital Businesses Today.
VUCA is an acronym used to describe or reflect on volatility, uncertainty, complexity and ambiguity of general conditions and situation. (Wikipedia), perhaps it’s the best description of today’s digital characteristics -"VUCA” as Digital Normality.
V = Volatility: The nature and dynamics of change, and the nature & speed of change forces and change catalysts.
Volatility means change with increasing speed technologically, economically, politically, environmentally. It used to take years or even decades for disruptive innovations to displace dominant products and services and destabilize incumbent industries. However, in the age of digitalization, any business can be at risk to survival in any minute due to the disruptive innovation and digitalization.
The strategy is no longer a static document sitting on executive’s desk for years, but a cascading strategy-execution continuum. In such a new normal, efficiency and productivity no longer guarantee business’s survival, agility-the ability to change with speed, flexibility-the alternative options to do the things; and anti-fragility-the new trait to thrive at volatility are the new capabilities for business to success.
U = Uncertainty: The lack of predictability, the prospects for the surprise, and the sense of awareness and understanding of issues and events.
The very basic nature of uncertainty is defined by Wikipedia as a term used in a number of fields (physics, philosophy, statistics, economics, finance, insurance, psychology, sociology, engineering, and information science) with as many variants as the number of fields themselves. It applies to predictions of future events, to physical measurements already made, or to the unknown.
"Uncertainty must be taken in a sense radically distinct from the familiar notion of risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement while at other times it is something distinctly not of this character. It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an un-measurable one that it is not in effect an uncertainty at all." -Frank Knight
To use the common term, uncertainty is as the lack of certainty, a state of having limited knowledge where it is impossible to exactly describe the existing circumstance. Today’s digital businesses need to build such ‘anti-fragile’ capability, as the anti-fragility loves randomness and uncertainty, which means crucially, a love of errors, allowing organizations to deal with the unknown, to do things without understanding them and do them well. By grasping the mechanisms of antifragility, people can build a systematic and broad guide to non-predictive decision making under uncertainty in business and life in general.
C = Complexity. The multiplex of forces, the confounding of issues and the chaos and confusion that surround an organization.
The hyper-connectivity nature of digital organizations can bring the new level of business complexity. Complexity is a systematic thinking concept, and it’s not the opposite of "simplicity”. In systematic thinking, systems such as organizations, biological systems, enterprise as a system, etc., can be characterized as being complex if they have non-linear feedback loops; such systems can exhibit emergent behavior. Simple systems can have complexity in that they have non-linear feedback loops which can result in emergent properties and outcomes.
Complexity is diverse, ambiguous, and dynamic with unpredictable outcomes. It is often erroneously confused with the term complication. Nevertheless, complexity and complication do not mean the same thing. Something that is complex is not necessarily difficult, but something that is complicated does have a high degree of difficulty. The complexity can be good or bad for you depending on your strategy. Complexity Management is the methodology to minimize value-destroying complexity and efficiently control value-adding complexity in a cross-functional approach.
A = Ambiguity. The haziness of reality, the potential for misreads, and the mixed meanings of conditions; cause-and-effect confusion.
Ambiguity can be understood as being similar to business ‘risk’, a term used to describe a circumstance in which an investment is made, but the outcome is uncertain. Consequently, in times of organizational change or such digital transformation, dealing with ambiguity is a leadership skill. Ambiguity may be used strategically to encourage creativity, and guide through the multiple ways to perceive organizational reality & future.
At senior management level, planning and decision for action are always based on rough estimations of what the future conditions of execution would be. They can therefore not predict any accurate consequences of execution, on the circumstances of the action to come; they can also have the certain level of ambiguity toleration to inspire innovation and new adventure.
In the world where change is significantly speeding up, that business leaders couldn’t predict the future with a certain degree of accuracy, and the strategy can no longer stay static, the business goals can no longer be well framed in advance. Business leaders shall realize the breakthrough success in digital business requires not only forward-thinking strategies but also a transformation of the company's underlying functions and organizations, in order to build the new sets of business capabilities to adapt to the VUCA digital normality.