02. 02. 2021

VUCA – Opportunities and risks

Which challenges companies have to face in the time of change and digitalization.

For several years now, the term VUCA has been circulating in the agile corporate world and often forms the basis for change initiatives, not only around digital transformation.

The acronym VUCA has its origins in the planning of strategic operations of American military forces, which had to adapt to changed framework conditions after the collapse of the USSR. VUCA stands for volatility, uncertainty, complexity and ambiguity.

Away from military operations, VUCA is applicable in entrepreneurial contexts as our professional environment requires a whole new set of methods and tactics to cope with today’s and tomorrow’s innovation pressures. As D-LABS GmbH actively accompanies digital transformation across industries, it is important to know the challenges and obstacles on the path in order to lay the foundations for future success together with project partners. Let’s take a deeper look at the meaning of VUKA and the resulting solutions that are needed to address these realities.

Volatility – Using change as an opportunity for business success.

The term volatility, which originates from physics, describes fluctuation or instability, e.g., the aggregate state of water or the fluctuating share price on the stock exchange. Depending on the perspective, fluctuations can hold both opportunities and risks. Predictions are more difficult than ever due to changing customer requirements, falling or rising prices, shorter product cycles, etc., while precisely these changing factors offer potential for progress and success. In doing so, we can develop strategies based on current needs through in-depth research, before, during and after the product launch, and adapt them in an agile manner as needed.

Uncertainty – The only thing that is certain is that nothing is certain.

The uncertainty affecting so many industries today is based on several factors. Changing customer demands, new disruptive innovations, and global players entering the market are just a few of these factors and mean that existing business model may become obsolete tomorrow.

Complexity – Becoming master of the data.

Across industries, digitization continues to drive the interconnectedness of systems, technologies, and objects. Companies are globally positioned across national borders and their supply chains are closely interlinked. These and many other factors mean that understanding cause-and-effect mechanisms is only possible to a limited extent. It is important to adopt different perspectives and look through different lenses, in order to master the complexity and embrace today’s multi-layered phenomena. Machine learning and automation technologies can help us find our way through the data jungle. Having someone on your side who knows the field helps take shortcuts and avoid pitfalls.

Ambiguity – Learning to deal with ambiguity.

Digitalization means that more and more data is being generated. Since the information can be interpreted ambiguously depending on the reference, misinterpretations are also inevitable. Ambiguity is a cause of stress for many people, especially for those who work in very structured organizations. Because ambiguity implies disorder, we try to avoid, ignore, or minimize it.

VUCA – A path to new work

Speaking about ambiguity: The acronym VUCA can in fact be used in another way, not to describe the problem, but to indicate the solution.
In this case, VUCA stands for Vision, Understanding, Clarity and Agility, and thus also provides a frame of reference for managing employees and companies.

A shared vision in the company aligned with common values not only increases motivation, but also identification and meaning for employees. Such a corporate culture gives an organization stability and makes it possible to dispense with rigid structures and hierarchies.

Experiencing self-efficacy at the organizational level as well as individual tasks strengthens employees’ sense of personal responsibility and motivation. The success of this change process is not only important for the corporate culture, but also for efficiency and value creation – today more than ever.

By understanding, in this case by focusing on analyzing and interpreting business and competitive information, one’s own business model can be quickly adapted to changing conditions as needed.

Knowing user needs is at least as important to develop products and services that are a perfect fit. Assumptions, i.e., bets on the future, can be used to start the product development process quickly, but a suitable tool is needed to validate these assumptions at an early stage and on a recurring basis. The user research department plays a key role in this process. It makes it possible to uncover hidden user needs and to develop products tailored to these findings.

And even though we live in a VUCA world, not everything is unpredictable. There are clear global trends emerging, such as demographic change, growing technological progress, climate change or the continuing trend toward urban living spaces.

From a business perspective, it is even more important to create this clarity through values and through consistent corporate goals, and thus to establish guard rails for corporate and individual action.

All these recommendations can be found in various agile process models such as SCRUM, Lean Start-up or Design Thinking, which should be part of the toolbox of an experienced agile coach. While these process models do not replace a crystal ball with which the future can be predicted, the methods and tools developed here nevertheless help minimize risk through customizable effort estimates, visualizations of progress, or early and constant testing of product increments. Our experts for agile work provide holistic support at enterprise and project level.
Let’s shape the future together, as open as it may be!

by Stefan Schmechel
Enabling & Coaching


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