Is VUCA the answer to a rapidly changing global market?
Military history, strategy and tactics have often been used by businesses around the world when planning on how to innovate, keep pace with or beat the competition and prosper in an increasingly challenging economic climate.
According to Simon Carpenter, Chief Customer Officer at SAP Africa, strategy is about positioning. You always have a position relative to the competition. The idea behind strategy is to gain the most advantageous position, for example look at an ancient castle positioned on top of a hill to defend against attack he says. Carpenter says strategic tools like those developed by Boston Consulting Group, Porter and McKinsey to assist companies position themselves worked for a while but the pace of modern change is now getting faster and faster and cycles are becoming increasingly shorter.
For example if you look at RIM he says, the company behind Blackberry, in 2009 they owned over 20 percent of the mobile phone market but after a few missteps in terms of their strategy and various market challenges they are currently down to one percent of the global mobile phone market share, all within a few short years.
Carpenter says VUCA may offer a more useful framework in contemporary business conditions. It too comes from military strategy, which traditionally used to be more straightforward with one or two clear enemies to fight and defined battlefields on which to fight. Yet, with the breakup of Russia and the events of 9/11, military strategy had to evolve to fight a more amorphous and unconventional enemy. VUCA evolved as a strategic planning framework to react to this threat of constant change.
The V in VUCA stands for volatility and highlights the need for companies to move fast in a volatile environment, to discern in real-time and to strip out latency within cycles to remain competitive. As a counter to volatility companies need a clear vision and values and a culture that holds the company together in chaotic times through a strong company identity.
The U in VUCA stands for uncertainty and the corollary of this is the need to have a depth of data and analytical capability so powerful that uncertainty is removed with deep insights leading to a clear business strategy in the face of any possible scenario. “Uncertainty is dealt with by constantly building understanding,” says Carpenter.
The C in VUCA stands for complexity and represents how complicated it can be to conduct business in the 21st century, especially for multinational corporations who have many product lines and services and operate across many different countries, markets and regulatory regimes at the same time.
According to Carpenter the strategic solution to complexity cannot always be a naïve approach to simplicity, but there is a lot that can be done to profoundly simplify IT for example. “By moving a lot of the IT workload into the Cloud we can unlock scarce IT resources to drive innovation within the business. We may not want to get too simple, but using current technologies to consolidate resources introduces increased efficiencies into the business, adds Carpenter.
He said another example of current technology resolving increased complexity is an in-memory computing platform which radically reduces the number of legacy systems and runs everything on one ‘big data’ environment; combining transactional and analytical systems.
The final letter of the VUCA acronym is A which stands for the ambiguity of the modern business world. The strategic solution to ambiguity is clarity, which can be achieved by managing a company’s data to get clear insights into the business and drive positioning and innovation to help the business thrive.
The VUCA concept is very helpful in closing the gaps between business and IT. He says there have often been gaps in the past, like Y2K for example, where he says a lot of money was spent by companies merely to survive, with little in the way of business transformational benefits. ”VUCA is a useful strategic framework that enables you to understand what forces are acting on your business, and how, and then identify the gaps and fill them with a complementary technology like cloud, mobility or big data.”
For example he says a large South African company used to take two weeks to compile a complex report on market demands and production but after using HANA they have become more agile and rapid and the report is now completed within a few hours.