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How to Thrive in a VUCA World – Strategies for Innovators

I bet you already tripped over the term “VUCA”. Originating from military education in the 1980s, the term is not really new, but has been experiencing an increasing interest and significance over the last few years. VUCA is an acronym that describes an environment with four characteristics: Volatility, Uncertainty, Complexity and Ambiguity.

This, actually, is an accurate description of the environment in which almost every business in nearly every industry operates and strives to prosper today. In this blog, we want to 1) provide a deeper understanding of what a VUCA world really means and 2) offer you solution strategies for the four challenges VUCA stands for.

What does VUCA mean?

To understand what VUCA really means, it is important to take one step back and understand why the term has become so current in the last few years. George Forsythe, Karen Kuhla and Daniel Rice describe three effect factors of a VUCA environment in their article Can You Do VUCA?:

  1. Technology (the exponential growth of all the temptations and threats related to digitalization, the internet of things, artificial intelligence, big data, robotic etc.)
  2. Globalization
  3. Environment (climate change, population growth, migration, etc.)
    All these drivers are accelerating simultaneously and create an environment that is perceived as uncontrollable.

Further, in order to fully understand the concept of VUCA, it is also important to know what each single dimension of the model means. One of the best descriptions of the four dimensions of VUCA can be found in Jeroen Kraaijenbrink’s article What Does VUCA Really Mean?. Here’s a short summary:

Volatility is connected with speed and change that is frequent and, many times, unpredictable. The more volatile the world is, the more and faster things change.

  • Uncertainty refers to a lack of knowledge, for example, not knowing if and what events will take place or what the consequences of them might be. The more uncertain the world is, the harder it is to make predictions.
  • Complexity means that a system has many components that can interact with each other in different ways. The more complex an environment is, the harder it is to understand and draw the right conclusions.
  • Ambiguity means that a situation is not explicitly defined, making several interpretations plausible. The more ambiguous the environment is, the harder it is to interpret.

Kraaijenbrink also created a visual depiction of the VUCA model which you can find at the end of this blog.

Not all dimensions are valid to the same amount for everyone: Expanding into new markets, for example, is a complex and uncertain situation; you do not know the customers, the competitors, the rules of competing, the regulations, and so on. This doesn’t necessarily mean that it is also a volatile and ambiguous situation. To find the right strategy to survive in a VUCA world, you first have to discover which dimension is (or which dimensions are) relevant in your situation.

What generic strategies should innovators pursue to be successful in a VUCA world?

Much has been said about how to be successful in a VUCA world. Bill George, a senior fellow at Harvard Business School, created the acronym called VUCA 2.0. In this model, VUCA stands for Vision, Understanding, Courage, and Adaptability. As beautiful as this acronym sounds, in our opinion the solution strategies should be modified to be really useful for innovators:

  • Volatility calls for Vision: In a volatile environment, companies should build on a long-term vision that stands above all fluctuations. A vison for product development is the customer’s Job-to-be-Done. While product lifecycles become shorter and shorter, the customer’s Job-to-be-Done stays constant. It has always been true that people want their homes to be secure, however, while the generic process steps around this Job-to-be-Done have stayed the same, the solutions have evolved from manual door locks to digital security systems. Similarly, people always want to listen to music while solutions evolved from the gramophone and CD players to online streaming services. Processes and products change, needs stay the same.

  • Uncertainty calls for Knowledge: When innovating your product pipeline or growing into new markets, technology is rarely the biggest uncertainty factor – most of the time the real blind spot is how customers perceive and measure value. If a company knew all the needs of its customers, it could create the perfect solution to delight them.

    Outcome-Driven Innovation® does not uncover all customer needs in a market, but of all known methodologies, it is the one that comes closest to that. In a very systematic approach, it identifies up to 150 customer needs in most markets – this knowledge is the basis on which to build a data model that steers decisions for years to come. 

  • Complexity calls for Focus: Complexity can be reduced by focusing on the few things that have the biggest impact. Of course, this sounds easier than it is. To identify the things that really matter, you have to carry out a comprehensive analysis first – in Albert Einstein’s words: “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”

    This is what makes Outcome-Driven Innovation® so special: the comprehensive analysis phase sets the baseline for all the decisions that follow, such as strategic decisions about products, markets and innovation programs, definitions of product and service concepts, and marketing and sales programs. All these decisions are focused on the one thing that really matters: creating value for customers.

  • Ambiguity calls for Vision, Knowledge, Focus and Speed: Ambiguity is probably the trickiest VUCA dimension. HBR article What VUCA Really Means for You describes ambiguity as “facing unknown unknowns” and recommends experimentation as a solution strategy. We do not think that experimentation should be part of any strategy. To get a highly ambiguous situation under control, you have to build your growth ambitions on a strong vision, acquire all available knowledge and focus on the most effective factors – but you also have to be able to act quickly and adapt your decisions within the defined frame, if necessary.

    Again, Outcome-Driven Innovation® (ODI) is the perfect tool to reach that. Since strategic decisions made with ODI are valid in the long term, they allow concerted actions, from short term marketing messages and sales arguments over product modifications to long-term R&D programs. Variations and adaptions should be made whenever necessary – but within defined boundaries, such as identified target segments or topics that generate the most value to these segments.

Our world will not be less VUCA in the future – and those who are prepared today will have an advantage in future environments. Integrating Outcome-Driven Innovation® as a fundamental innovation process in your organization will provide you with all the knowledge and competences you need to thrive in a VUCA world. Do your homework today. Visit the knowledge base on our website and note the date of our main event on JTBD thinking and ODI in Europe: the 2nd JTBD SUMMIT EUROPE 2020 on March 25-26, 2020.

 

The Four Dimensions of VUCA COPYRIGHT JEROEN KRAAIJENBRINK; Source ‘What Does VUCA Really Mean?’

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