“You can’t manage what you can’t measure” is a well-known principle in management. However, before measuring anything, you need to acknowledge its existence and how it affects you.
For example, a trigger for the French Revolution was the beginning of the terms “justice” and “injustice.” The people understood they were living “injustice” and decided to take the corrective measures we all know.
In comparison, this pandemic brought a hard-to-identify challenge because we didn’t know it existed. In business, there are very few tools to adapt to such chaotic circumstances. One of them, coined by the American army, is VUCA.
What Is VUCA?
VUCA is an acronym for volatility, uncertainty, complexity, and ambiguity.
VUCA is a perspective to analyze, respond to, and prepare for different risk types in management. To do that, it uses four classifications to identify challenges and determine the best approach to solve them.
What Is VUCA For?
For your company, the objective of a VUCA analysis should be to create solutions to challenges. According to the Harvard Business Review, it is easy to lose hope when this analysis is done without an action plan.
For some, it can be depressing to plan for a VUCA world. That is why this analysis requires a propositive vision:
To know how to classify possible challenges.
Generate response strategies for each classification.
VUCA’s categories help you get a clearer picture.
What Does VUCA Mean?
To summarize, you can understand VUCA through two different perspectives:
Literally, it’s an acronym where each letter means something. Practically, you can understand it as a tool for analysis and perspective.
In this case, it gets adapted for the business analysis context.
Under this optic, you can identify factors that maybe other analyses could have missed.
To illustrate, think of a company currently selling a lot. From a financial perspective, this situation might lead to a positive conclusion.
More sales mean more income. Both are significant financial indicators.
On the other hand, when you analyze through the Human Resources lens, we might see that salespeople are quitting due to stress.
Similarly, analyzing challenges through VUCA brings a different and useful perspective.
The meaning of the acronym and recommendations
You already know the meaning of each letter of the acronym. Remember, those words are classifications.
The following table shows the meaning and some practical examples::
|Volatility||· Unexpected and unstable challenges.· Possibly of an undetermined duration.· Easy to understand.· There is enough information about it.||A natural disaster halts the operations of a supplier, and prices begin to fluctuate.||· Have a buffer of resources, staff, or stock.· These decisions can be expensive.· The size of your investment must match the risk’s size.|
|Uncertainty||· Effects and causes are unknown.· There could be changes, but nothing is certain.||What the launch of Uber was for regular taxi drivers. Everyone knew changes would come, but no one knew to which scale.||· Invest in research and intelligence.· You could add a specialized department for this end.|
|Complexity||· The situation is made of many parts and interconnected variables.· There is enough information available.· With so many implications, it is difficult to analyze and understand.||Doing business in countries with different legislation, tariffs, and unique values.||· Hire consultants or specialists.· Generate resources that reduce anxiety factors.|
|Ambiguity||· There are no precedents.· Completely unknown situations.||Opening a branch in an emerging market or launching products outside of your area of expertise.||· Experimenting· Create a hypothesis and test it.· Designing tests and document lessons learned.|
To summarize, analyzing your situation from a VUCA perspective increases your chances of successfully adapting to existing or emerging challenges.
Remember the example of the French Revolution? After they identified “injustice,” they understood they could live a better life.
From that optic, by defining the problem, it is easier to determine the solution. Also, it was easier to create alliances since many others were going through the same situation.
Thinking only about the “big problems” can be overwhelming and not improve your operations. On the other hand, categorizing challenges reduces stress and promotes action.
For now, nobody knows when the pandemic will end. Regardless, when you analyze this situation through VUCA, you get a clearer understanding of risk scenarios.
This perspective helped countries and corporations diversify their manufacturing plants, warehouses, and distribution routes in real life.
Now, you can initiate this improvement process in your company. Remember, this pandemic has hit everyone. You know that other companies share challenges with you; they could be your next allies.