Invented by military strategists to describe the post-Cold War world, VUCA means volatility, uncertainty, complexity, ambiguity. I first discovered the concept as an Air Force captain in the early ’90s, and it captured the massive visceral change when the Soviet Union collapsed. While my commanders had spent their overseas deployments on large bases in Europe and Asia worried about nuclear war, I spent my deployment time in impromptu desert outposts of dusty tents, worried about the car bombings.
Since then, VUCA has become all the rage in commercial use, largely due to the digital disruption of business models and consumer behaviors. Yet, dramatic as the digital hype is, these trade disruptions are slow and contained compared to the instantaneous and large-scale economic dislocation caused by the pandemic. Gasping press releases and soaring IPOs in Silicon Valley have changed many aspects of business over the past two decades. The global pandemic has changed almost every aspect of business over the past twenty months.
Changes in consumer behavior (eat outside or have it delivered) and workforce expectations (I have better ways to spend my time than going to the office), combined with inflation and unimaginable supply chain challenges, are driving huge shifts in product and service economies. Overall, the volatility, uncertainty, complexity and ambiguity of these changes hit complex consumer-facing industries such as consumer packaged goods particularly hard.
VUCA Intensifies Existing Decision-Making Problems
In the concept’s military origins, VUCA was a problem mainly due to lack of agility – the old Cold War organizations were too big and too slow to respond to the new fast-paced and fragmented world. This same challenge applies to global consumer businesses today. Business decision-making processes are too slow to respond and too poorly monitored to adapt, and the era of the pandemic has exposed these loopholes.
The problem is that as VUCA grows, the existing decision-making issues get worse. This intensification is especially true for the four most common shortcomings of bottom-up and top-down approaches to decision making.
- Data-to-decision disconnections: Bottom-up analytics teams frequently generate insights and insights that don’t directly address the critical decisions facing their brands and businesses. Top-down decision-makers often ignore results and rely on experience and intuition, which means that data-driven information and recommendations never make it to the âdecision tableâ. More VUCA overwhelms traditional âboil the oceanâ approaches to analysis and obsolete hard-earned experience and intuition.
- Coordination breakdown: Bottom-up decision-making teams push decisions to the periphery of organizations, but it’s difficult to ensure the big picture of complex cross-functional collaboration. Top-to-bottom decision makers remove complexity with a big picture, but controlling every detail is impossible. In addition, such management action excludes important stakeholders from the process, which is detrimental to employee ownership and performance. More and more VUCA blurs matrix decision-making and scrambles attempts to exercise centralized controls, especially with a remote and more transient workforce.
- Decline in institutional knowledge: Bottom-up decision making increases the risk of execution âknow-howâ draining out of the organization as employee terms shorten. Top-down decisions further increase risk by concentrating tacit knowledge on a few people. More VUCA exacerbates both problems, as less experienced employees move into decision-making roles and more experienced decision-makers see the value of their “instincts” dashed in the face of unprecedented situations.
- No follow-up means no learning: Few organizations systematically follow critical decisions, leaving no final record of what was decided, how decisions were made, and what happened. This lack of transparency for bottom-up and top-down decisions masks gaps in decision-making and prevents the organization from learning and improving. More VUCA forces changes in decision-making processes, but changing a poorly understood process is as likely to cause problems as it is to improve the situation.
Using decision making to leverage VUCA for growth
But VUCA itself is not the enemy. On the contrary, greater volatility, more uncertainty, increased complexity, and greater ambiguity all present opportunities for more agile companies to transform their decision-making processes, outsmart their competitors, and grow much faster in 2022. VUCA empowers good decision makers to thrive – leaders can extend their lead and laggards can move forward.
The crucial first step is to map the decisions as they are made today. I think the new ‘decision recovery’ approach is the most promising. Decision-back creates comprehensive maps of key business decisions to help guide analysis, simplify coordination, capture institutional knowledge, and track results to set the stage for rapid organizational learning. This downloadable white paper describes how to apply the approach with several sample decisions.
While the pandemic erupted virtually overnight, there is no silver bullet to the heightened decision-making challenges most organizations face. It is therefore even more urgent to take the first step towards better decision-making. Successful leaders will use effective decision-making to grow with more agile and resilient organizations able to respond and adapt to the ever-changing VUCA world.