We have entered an era of rapid, pervasive and unrelenting change. The acronym VUCA (Volatile, Uncertain, Complex and Ambiguous) captures key elements of this environment. Clarity is needed in understanding the meaning of VUCA elements each of them necessitating a distinct response.
- Volatility refers to situations where change is frequent and unpredictable
- Uncertainty refers to lack of knowledge regarding what will happen, the range of events that could materialize, and their potential impact
- Complexity is generated by interconnections across different elements of a system
- Ambiguity refers to lack of knowledge regarding the basic rules of the game and cause-effect relationships
Drivers of VUCA are many: globalization, shift in the center of gravity of business from developed countries to BRICS countries, unstable geo-political developments in the Middle East, Russia and China, policy changes by governments and regulators, technology and digitization (social media, cloud computing, Internet of Things and 3-D printing for example), resource crunch leading to volatility in resource prices and availability, sustainability movement, attempts to maintain quality of life and increased stakeholder activism.
“In a hypercompetitive world successful strategies cannot be grounded in sustainable competitive advantage. Instead, strategists must start thinking in terms of transient or temporary advantage.”
In VUCA environment businesses and increasingly also public service organizations, must cope with hyper competitive forces. Hyper competition is rapid and dynamic competition characterized by unsustainable competitive advantage and rapidly eroding profitability. Increasing competitive intensity leads strategists into pursuing extreme competitive advantage by employing hardball and/or curveball strategies. The focus of hardball strategies is on overwhelming the competition with superior resources and capabilities. The objective of curveball strategies is to outfox the competition by getting competitors to do something that they would normally not do.
In a hyper competitive world successful strategies cannot be grounded in sustainable competitive advantage. Instead, strategists must start thinking in terms of transient or temporary advantage. For constant renewal strategists must both engage in systems thinking and develop a granular understanding of important details.
In a VUCA environment, Business as Usual does not work as successful strategic frames and templates of the past become blinders. Strategic thinking and doing must be an ongoing process.
You are invited to find out how to escape Business as Usual by learning new mode of strategic thinking and action. My newly released book (with Ram B. Baliga) “Escaping Business as Usual: Rethinking Strategy” is your guide.
Writer, Timo Santalainen, is the founder and president of STRATNET. Read more about Timo here.