And one that deserves to join your business vocabulary, especially in #marketresearch #etudesdemarché and generating #insights.
DEFINITION OF VUCA
VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity.
The origin of the term
The term was coined in the late 1980s. It aims to describe a world in which a certain number of foundations have been shaken, and in which a certain form of uncertainty now reigns.
VUCA gained in stature after September 11, 2001, and after our involvement in Afghanistan. An engagement that showed that the battlefield could also be virtual or “cyber”, that an army could no longer be clearly identified, and that the enemy could come from its own population. VUCA illustrated that armed forces must now be able to deploy attack techniques developed during the mission by those on the ground. And not by some general with a powerpoint.
More recently, VUCA has begun to be used as an introduction to the technological, economic, social and societal transformations to which companies must adapt. These 4 letters give some meaning to this “new normal”, in which corporate boundaries are becoming much more blurred than before, in which the customer has to be more and more involved, and in which any well-oiled plan can’t withstand an unforeseen and unpredictable crisis. Yes coronavirus, covid-19 and containment. But not only
Becoming aware of the impact of the V.U.C.A. world on the organization and individuals helps us to better understand the difficulties encountered, and to identify what needs to be changed to adapt to them.
Ultimately, the term VUCA, like many other military terms, gradually made its way into the corporate world. There is now talk of training managers in the VUCA world to steer a company in an uncertain environment.
The term VUCA refers to the 4 characteristics that reflect the world according to these soldiers.
- Volatility (Volatility): In other words, everything changes very quickly, and you have to constantly adapt your organization.
- Uncertainty: We don’t know what the future will bring, and it’s hard to imagine the long term.
- Complex (Complex): We receive a lot of information, the threat (or competition) can come from anywhere. Situations are difficult to analyze.
- Ambiguous: There is no pre-established pattern (situations are new) and the chain of cause and effect is not clear… It’s hard to interpret a situation.
Volatility of Vuca
Volatility refers to the rate of change in the environment. Volatility in the information age means that even the most recent data may not provide adequate context for decision-making. Beyond the ability to accurately assess the current environment, managers need to anticipate rapid change, and do their best to foresee what may happen in the course of a project, program or operation. The volatility of the environment, combined with the long lead times of modern acquisition programs, creates a particular challenge for management.
vUca uncertainty
Uncertainty is the inability to know everything about a situation and the difficulty of predicting the nature and effect of changes (at the crossroads between uncertainty and volatility). Uncertainty often delays decision-making processes and increases the likelihood of widely differing opinions about the future. It calls for intelligent risk management and hedging strategies.
vuCa complexity
Complexity refers to the difficulty of understanding the interactions of multiple parts or factors, and the difficulty of predicting the primary and subsequent effects of changing one or more factors in a highly interdependent system or systems. Complexity is not the same as uncertainty. Although it’s possible to predict the immediate results of single interactions within a larger network, non-linear branches and sequences multiply so rapidly – and duplicate previous connections – that they overwhelm most evaluation processes. One could say that complexity creates uncertainty due to the sheer volume of possible interactions and outcomes.
Ambiguity of vucA
Ambiguity describes a specific type of uncertainty that results from differences in the interpretation of information when contextual cues are insufficient to clarify its meaning. Ironically, “ambiguity” is an ambiguous term, whose definition changes subtly depending on the context in which it is used. For our purposes, he refers here to the difficulty of interpreting meaning when the context is blurred by factors such as cultural blindness, cognitive biases or a limited perspective. At the strategic level, managers can often legitimately interpret events in several ways, and the probability of misinterpretation is high.
WHAT IS VUCA USED FOR?
VUCA, a framework for understanding the “new normal
The “new normal ” is a term that has now become fairly commonplace, illustrating a state in which an economy, a company or a business reinvents itself after a sudden change. The term first appeared in business books in 2004: “Karaoke capitalisme” by Jonas Ridderstråle and Kjell A. Nordstróm. It was only a few years later, with the financial crisis of 2008, that the term became popular in the English-speaking world. In France, the new normal has become widely used to present the world during and after the COVID-19 pandemic.
Older people, and consultants, may prefer to speak of a “paradigm” shift.
VUCA, AMAZON’s management and sales policy
Jeff Bezos, boss of the company most often cited as an example of disruptive business models (along with Uber) explains in his 2016 letter to shareholders the strategies that will be followed to ensure that Amazon remains in the company’s words “as it was on day one” or ” day one “. In this letter, Bezos gives 4 strategies that respond point by point to the VUCA acronym:
“High velocity decision making”: better to make a bad decision quickly in a volatile situation than a good decision too late!
“To retain the energy and dynamism of the First Day, we need to find a way not only to make high-quality decisions, but also to make them quickly. It’s easy for startups; a real challenge for large companies.
Amazon’s teams do everything they can to ensure that decisions continue to be made quickly. In business, speed is important. What’s more, a fast decision-making process makes the environment in which we work a lot more fun!
We don’t have all the answers, but here are a few pointers: don’t adopt a single, standardized decision-making process. Recognize a bad decision quickly and correct it. We may disagree, but we go along anyway to speed up the decision-making process. Quickly highlight deep-seated divergences that demonstrate a lack of alignment of objectives.”
“Embrace external trends: don’t waste time predicting an uncertain future, but react quickly when a trend is confirmed.
“If you resist the new, you resist the future. Choose innovation and you’ll have the wind at your back. Great innovations aren’t all that hard to identify (they’re usually widely talked about and written about), but strangely enough, big companies have a hard time adopting them. Today, there is a clear trend towards innovation in artificial intelligence and machine learning.
But most of the areas in which we employ machine learning technologies are not visible. For example, machine learning technologies drive our algorithms for demand forecasting, product search and recommendation, fraud detection, translation, and many others. Although less visible, the majority of machine learning applications will be of this type. Discreetly, but powerfully, they are helping to improve our core operations.”
“Resist proxies”: the customer remains at the center of attention, not the processes, which tend towards complexity.
“When companies get bigger, there’s a natural tendency towards management by proxy. It can take many forms and be of varying magnitude, but it’s always dangerous, subtle and very Second Day.
Let’s take a common example: delegating power to procedures. Of course, good procedures help us to serve our customers. But if you’re not careful, the procedure can become the main focus. This can happen very easily in large companies. The procedure becomes the operation to which you delegate responsibility for achieving the desired results.
In fact, you don’t look at the results anymore, you just make sure that the procedures are carried out correctly.”
“Customer obsession : No ambiguity, the customer comes first!
“There are many ways to run a company. You can be focused on your competitors, your products, your technologies, your business model, and many other things. But in my opinion, being focused and obsessed with the customer is by far the best way to preserve the energy of Day One.
Why? I could list lots of advantages to a customer-centric approach, but there’s one main reason: customers are always wonderfully, delightfully dissatisfied, even when they say they’re happy and content with the relationship with the company. Even when they don’t know it yet, customers always want something better, and your desire to charm them will drive you to invent something better on their behalf. No customer ever asked Amazon to create their Premium program, but it turns out they wanted it.”
At the end of this letter, Bezos points out that it’s going to take intuition, curiosity, playfulness, audacity and taste. I’m not sure I understand the taste, but for the others, intuition, curiosity, playfulness and audacity are the 4 managerial attitudes adapted to VUCA.
VUCA, a vision for the future of management.
If we go into the details of VUCA, it becomes clear that for every letter in the acronym, there is a misunderstanding on the part of today’s executives and managers. And which letters have touched you personally?