The Business World is Transforming
  • By 2025 the worth of the Internet of Things will be $6.2 trillion.
  • The sharing economy will reach $330 billion by 2025.
  • For people starting their education, 65% will enter the workforce into jobs that don’t exist today.
  • The average tenure on the S&P 500 is dropping. Only 25% of the companies in 2012 will remain by 2023.
  • Automation and robotic usage will grow 2,000% from 2015-2030 amounting to $190 Billion market.
  • 86% of global CEO’s are championing digital transformation of their companies.
  • By 2025, half of world’s companies with revenues exceeding $1 billion will be headquartered in today’s emerging markets.
  • By 2018, the data created by the Internet of Things will reach 403 zettabytes a year.
  • By 2030 the population will be over 8 billion people and 50% of Global GDP growth will come 440 cities in emerging markets.
  • By 2030 more than 30% of workforce will be older than 55 in developed countries.

Embracing Uncertainty: The VUCA Principle

Embracing Uncertainty: The VUCA Principle
04/05/2017, David Lee , in MSSBTI, Strategic Transformation

The world has become VUCA.

After the Cold War, the US Military came to something of a revelation. Without a clear power counterbalance from the USSR, the world became a much more challenging place. Suddenly, they were in a situation without a single, clear, predictable enemy but many potential adversaries who were unknown, remote, loosely organized, and hard to detect with diverse, indeterminable motivations. The new challenges ranged from global terrorist organizations to warlords and pirates in Africa to sudden geopolitical shifts such as Arab Spring. The term created for this new reality was VUCA:

  • Volatile: The rate of change is accelerating and exponentially impactful
  • Uncertain: We cannot know everything and must be prepared for anything
  • Complex: Multiple forces influence decisions and make implications precarious
  • Ambiguous: The context, cause, and meaning of events are unclear.

While the VUCA principle was generally understood in the early 1990’s, the transformation to the new reality was, unfortunately, measured. It was more comfortable to find a new great adversary, such as China, so that the focus would again be clear. Then, 9/11 illuminated the situation and transformation accelerated.

Accepting the new reality was a significant event because it enabled the military leaders to think differently about how they work in every way.  It changed everything from the command structure to the leadership methods to the field training to the types of people they recruited. The intelligence process, the communications structure, the technology infrastructure, and the weapons they built were all based on this new reality.

The business world today is where the military was in 2001, on the verge of transformation but slow to realize it. Some leaders have fully accepted it while others are still struggling to understand it. But, this change in mindset is an absolutely necessary first step to creating a Complexity Lens.

Question: Can an executive in New York manage the quality of a marketing campaign halfway around the world in Malaysia?

Perhaps, but add to that 20 other markets, hundreds of clients utilizing multiple product lines, and customer service centers in South Africa, India, and Manila; then pile on macro-environmental issues like war and disease, regulatory requirements at the national and city level, cultural adaptations, language barriers, etc. and the situation quickly becomes… VUCA.

Many businesses started accepting the new reality during the financial shock of 2008-2013. But that was just one of the most serious shocks showing the interdependency and complexity of global economics. Think of the number of global disruptions (or Black Swan Events) that have occurred, for better or worse, in the last two decades: The Asian Financial Crisis (1998), the Internet Boom/Bust (1996-2000), September 11 (2001), Afghanistan and Iraq (2001-ongoing), Argentina Economic Crisis (2001-2004), SARS (2003), The Rise of Social Media & Big Data (2003-present), Bird Flu (2005), Price of Oil increase (2004-2008), Russian Financial Crisis (2008-2009), the Greek Debt Crisis (2009-present), Arab Spring (2010-2012?), Argentina Debt Crisis (2014), Ukraine/Crimea War (2013-present), Ebola (2013 to present), Oil Price Fall off (2014 -present), the Chinese Stock Market Crash, Brexit (2016 – present), the US Presidential Election and aftermath (2016 – present).

These are just a few of the events that affected global economics. Can we imagine the list of events at the regional, local, organizational or individual level that affected the outcomes for any single organization? Is it time to acknowledge that your organization exists in a VUCA world as well?

Yes, it is a very difficult change to make. One key reason is that the people in charge have not been trained to think this way. Whenever I mention the complexity challenge to CXO’s, VP’s and Directors, inevitably they acknowledge the problem and immediately start boasting about how they are reducing complexity and gaining greater control. Rarely does it go beyond this point.

At the core of this belief system is that everything tends toward entropy over time. It is a Newtonian law that has been hammered into our heads. It means that, in organizations, we must keep control to stave off and reverse this process. This is the basis of Fredick Taylors Scientific Management, a staple of management thinking for over a century. But our understanding of the law is often incomplete. What we now know is that the tendency toward entropy, toward disruption, is what allows complex organizations to adapt and grow, reorder, self-organize and thrive.

The tendency of management is to do just that, manage. This typically means attempting to eliminate uncertainty, manage outcomes, and ultimately show that they are in control. This may be an adequate approach in a simple organization with singular objectives, but as complexity builds, systems become non-linear and decision making multi-dimensional. The process of trying to maintain full control proves insurmountable, expensive, and potentially fatal because it can prevent the necessary disruption of the current order.

Getting over the hump and embracing this new reality will allow leaders to begin to see the solutions differently. It provides a new perspective. One can see the solutions to the complexity issue, not only in removing complexity, but in embracing it, managing it, and building systems to accommodate it and adapt to it. Moreover, it allows the organization the opportunity to evolve, to become stronger, attack and improve on weaknesses. Viewing the organization with this perspective and making the necessary strategic transformation is what we refer to as the Complexity Lens.

“Abandon the urge to simplify everything, to look for formulas and easy answers, and to begin to think multi-dimensionality, to glory in the mystery and paradoxes of life, not to be dismayed by the multitude of causes and consequences that are inherent in each experience –to appreciate the fact that life is complex.”– M Scott Peck

David Lee

Executive Director,  MSS Business Transformation Institute

David is a global executive with experience developing business relationships in Asia, Latin America, Europe, and the Middle East, with over 20 years of executive management experience in Fortune 500, mid-sized companies and start-ups. David is a highly regarded facilitator, writer, and public speaker on topics including Business Transformation, Managing Complexity, Disruptive Innovation, and Organizational Change Management.  ASAP™

 

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