I often read or hear that today we live in a VUCA world: a world without fixed rules, where basically anything is possible. But what does that actually mean – for us, the economy and our processes? And what does the agility proclaimed by many companies have to do with this? We shed light on the darkness.
Let’s start with the term itself: the acronym VUCA was created back in the 1990s and stands for volatility, uncertainty, complexity and ambiguity. At first glance, it may seem difficult to put these elements into context, especially since they are difficult to grasp even when they are separately. And basically, this is also the core of the whole thing: in the VUCA world nothing is predictable and yet at the same time everything is possible; everything is interrelated. Let us take a closer look at the individual components:
- Volatility: It refers to the extent of fluctuation within a period of time, be it in terms of price development, interest rates or the like. Volatility therefore describes a state of uncertainty; nobody knows how values will develop.
- Uncertainty: This term is an integral part of our linguistic usage and explains itself virtually by itself. Uncertainty describes a state of uncertainty, lack of knowledge and also risk. The world is developing faster and faster, which is why we are more and more uncertain about what to expect and which paradigms apply at the moment.
- Complexity: Many interdependent characteristics and a variety of possible behaviors of the individual elements – the term complexity is, well, more complex than one might think. Complexity is determined by the number and type of characteristics and their relationship to and among each other. Complex processes are characterized by their own dynamics and a certain lack of transparency, which makes it virtually impossible for decision-makers to always make an exact forecast. Connections can no longer be explained in simple cause-and-effect mechanisms – side effects and surprises are therefore pre-programmed.
- Ambiguity: Ambiguity stands for the ambiguity of a fact or a situation in which those affected have no concrete idea of the probabilities of possible events. It already exists when probabilities must be subjectively assessed. It therefore occurs more frequently in economic decision-making situations.
Not Only Problem, but also Solution
If you look at the individual components, a commonality quickly becomes apparent: VUCA is determined by a lack of clarity about what needs to be done in our networked world and in terms of concrete decisions. No wonder that it is often mentioned in connection with the challenges of digitalization and the digital transformation of entire business processes.
But that does not mean that VUCA is merely a pessimistic description of the difficult framework conditions and our loss of control. On the contrary: a VUCA strategy can even provide helpful recommendations for action – in this case, the abbreviation stands for vision, understanding, clarity and agility. Perhaps one thing in advance: without investment in the development of digital skills, the implementation of the following points is hardly realistic.
- Vision: Goals offer a company orientation, also or especially in uncertain environments. These goals should reflect what the company wants its customers to stand for. Whether one calls the whole thing vision or mission is of secondary importance.
- Understanding: In insecure, dynamic environments, old patterns of action may no longer work, even if they have proven themselves so far. Modern work thrives on good cooperation – internally among employees, but also across company boundaries. Modern companies must understand this in order to be successful in the long term.
- Clarity: A lack of clarity can be recognized, for example, by the fact that decision-makers base necessary changes or digital change on the VUCA world. However, companies need to be clear about why these changes are happening and – above all – what benefits they have. “Action not reaction” can become an important guiding principle here.
- Agility: The terms that make up VUCA already make it clear that it can be difficult to plan ahead in a changing environment. The world and the economy are changing; proven processes may need to be rethought from the ground up. It is therefore particularly important to be able to align the company’s vision to change in an agile manner. Agile project and working methods mean iterative intervals, which in turn minimize uncertainty.
See VUCA as an Opportunity
The VUCA world is often synonymous with the dynamics of the economy, often driven by digitalization. It is an attempt to describe our networked world with all its challenges. However, companies must individually determine which challenges, but also opportunities, really arise. Then they recognize the opportunities to develop their own company in a targeted and strategic way. Digital platforms as well as business models, automated processes and good networking with business partners – all of this can help companies in the VUCA world to hold their own in the dynamic digital markets in the best possible way.