VUCA: Pawn or Co-Creator?

Yet another term is causing a stir in the business world. As is often the case, many who hear or use this term are not entirely clear on what it means and how it is used. We're here to clarify and explain what VUCA means, how environmental disturbances affect businesses, and how a company can become more resistant to environmental changes.

VUCA is an acronym, a shortening of several words to the composition of their initial letters. VUCA is composed of the English terms Volatility, Uncertainty, Complexity, and Ambiguity.

1. Volatility

The term volatility or instability (from Latin volatilis "flying", "fleeting") is often used in finance and statistics and describes the extent of the intensity of change. High volatility, therefore, means significant price jumps over time. Examples in the economy are price fluctuations on the stock markets.

2. Uncertainty

With increasing volatility, predicting the future becomes ever more difficult. What could be estimated a while ago is now hardly possible. There is a lack of clarity about how to correctly assess changes from the outside to evaluate challenges and opportunities.

3. Complexity

Complexity means that the connection between cause and effect in our interconnected environment is becoming increasingly difficult to discern. Linear causality reaches its limits. Complexity in this context also means that connectivity is so high that the same external conditions (e.g., public demand) can lead to different reactions in the system (e.g., sales pressure due to internal forecasts, increasing production costs, etc.).

4. Ambiguity

Ambiguity means that situations can be interpreted in different ways and that they are no longer subject to any rule or process. So, if you ask different people for the solution to a particular problem, there can be different action plans, all of which lead to a solution (e.g., reducing production costs through automation; adjusting product prices, changing/expanding the product range, etc.).

Origin of the VUCA Term

The VUCA term originates from the American military and describes a world order where threats are diffuse and uncertain. Transferred to the world of work, this means that our environment holds unpredictable situations for us. This leads to existing models becoming quickly outdated due to the situational complexity and uncertainty of the modern world. For example, in the past, one would not have changed a product with high demand without a significant drop in sales. A failed social media campaign, or poor product reviews, can still cause this nowadays even with consistent demand.

As globalization penetrates our (work)day lives, our world will be more connected with other worlds. With the number of corresponding changes, the complexity of our system also increases. It cannot be the solution to simply design our creation and see the world system as complicated, but rather to break down the complex structures and make them tangible for us.

The question is how to deal with the increasing complexity and uncertainty in our world. When it comes to grasping complexity, everyone defines this fact differently. Complexity is not an objective term, but a subjective impression, where everyone "decides" for themselves what is complex for them and what is not.

Systems are perceived as complex by people when they generally see the process connected with the vision, rather than seeing the system as the sum of small, successive steps that belong to a subsystem of the system. For example, a large Airbus may seem extremely complex to us. How is it possible to lift a 560-ton behemoth (Airbus 380) gently into the air? If you break down an airplane into its components and explain their functionality and performance, it should at least make sense to a layperson how an airplane of this size can generate enough lift for takeoff.

Complex systems can only be understood if their complexity is reduced and it is recognized how the individual parts are interconnected.

Increasing VUCA Capabilities

Experienced managers know even without explicit knowledge that they cannot fully control their complex work environment. However, they have adopted strategies for dealing with uncertainties and complexities, or for reducing the effects of the VUCA phenomena that directly affect them so that they feel less threatened.

One of these strategies is to increase the level of VUCA within the company so that the difference between the environment and the company is reduced; (one thus adapts to the complexity of the outside world. This can be done, for example, through so-called oscillation.

With oscillation, the number of possible options for a manager is initially increased (comparable to brainstorming). This is supposed to simulate the abundance of possible solutions in complex situations. The decision-maker must be aware that the likelihood of a "wrong" decision always becomes greater the more options are available. The initially VUCA-appearing multitude of decision options can, in turn, serve as a toolbox for the manager, to be able to fall back on another measure or develop it further in case of failed measures. Because, as with the Airbus, the options should be understandable in their individual functions (e.g., Which process would be triggered by automating a production?).

A company has the task of creating an environment in which the reduction of complexity is achievable and serves as constant training in how to act in such a changing environment. The claim must also be to have suitable internal resources ready for changes caused by the environment in order to be able to react to these changes. This is only possible by uniformly increasing internal complexity. In other words: The greater the variety of possible options for external influence, the greater the range of influences that the system can compensate for.

One example of such a measure would be the decentralization of departments within a company. Easier said than done. Through a jointly developed analysis and subsequent consulting, zweikern can improve the skills for dealing with VUCA within the management level and show which small steps are necessary to understand and use the big picture without uncertainty.

Conclusion on VUCA

People cannot reduce the extent of a VUCA environment, but a company can increase its ability to act in such an environment. There are measures that bring light into the darkness with VUCA problems. In addition, tailored analyses and measures manage to increase and consolidate skills within the management level.