Thriving in an age of uncertainty
Today’s leaders have to navigate an increasingly complex and unpredictable world. In this globalised and highly connected environment, organisations can be affected in unexpected ways by natural disasters, introduction of disruptive technologies, political upheavals, or changes in consumer habits in various parts of the globe.
This condition of perpetual flux is often referred to by the acronym VUCA – which stands for Volatility, Uncertainty, Complexity, and Ambiguity.
As VUCA begins to penetrate various industries, leaders are beginning to see the importance of adopting “strategic agility” to deal with chaos. Strategic agility is the fluidity in which organisations adjust and adapt to change.
We will be looking at each characteristic of VUCA to discover the ways that leaders can deal with change in a strategically agile way.
A volatile environment is one that fluctuates and never stays stable. Situations can change for the worse in unpredictable ways. Leaders may often find themselves in a worrisome and apprehensive state, as disaster can strike at any time and may disrupt their business over an unspecified duration.
In his 2014 book, Antifragile: Things That Gain From Disorder, statistician and former trader, Nassim Nicholas Taleb challenges conventional wisdom by arguing that systems can benefit from exposure to pressure or stress.
To be productive in a volatile environment, Taleb advocates that organisations embrace the concept of antifragility. Antifragile systems are systems that grow in productivity and capability as a result of being exposed to challenges. In other words, what doesn’t kill you makes you stronger.
Individuals have a built-in capacity to be antifragile. Psychologists, Richard Tedeschi and Lawrence Calhoun, have observed that people can sometimes experience enhanced personal growth and psychological resilience after having gone through traumatic life events like a debilitating illness, death of someone close, or abuse – a phenomenon known as post-traumatic growth.
Similarly, organisations can cultivate an antifragile mindset that focuses on self-enhancement in the face of crisis.
In recent years, Tesco has been put to the antifragility test. The retail giant had grown considerably for the last three decades, as it expanded across the globe.
In 2013, it announced a drop in annual profits – the first in 20 years but not the last, as performance continued to plummet. As it launched a wide campaign of cost-cutting to achieve “operational excellence”, many felt that Tesco had lost touch with customers.
Some observers have pointed out that Tesco needs to embrace the strategies of Toyota if it is to succeed. In the last decade, Toyota had suffered two major disasters – faulty airbags have prompted massive recall of its cars and the 2011 tsunami in Japan crippled its supply chain. Toyota not only recovered from the damage, but went on to have profits that quadrupled its earnings in 2013.
Its antifragility secret – Toyota has prepared its employees to become problem-solvers at every level of its organisation. Even at the level of the production line, employees have to be able to identify issues, discover steps to improve the process, and learn from mistakes.
Related article: Leading Change When Everything Continues to Change
Uncertainty is when the leader is unable to predict what will happen to the organisation. Uncertainty calls for a leader to gain better understanding of the situation, as the ancient saying goes, “know thy enemy and know thyself”.
It is helpful to take into account the strengths, weaknesses, opportunities and threats (or SWOT). A good example of strategic agility in the face of uncertainty can be found in one of the most famous pivots in Silicon Valley history.
The predecessor of Twitter, or Odeo, was once a site for people to record and share their own podcasts. Despite an interesting premise, Odeo did not live up to expectations. This put the team on the edge as funds were running out and they were on the verge of closing down.
The team went back to the drawing board, got into groups of three to brainstorm for solutions.
Finally, Jack Dorsey, who would soon lead Twitter, thought of having a platform where you could just post your thoughts in 140-character snippets as a way of keeping in touch.
Users found it simple and addictive. The new site, Twitter, launched in 2006 and became an online sensation that people kept revisiting to check for new bite-sized updates.
In Twitter’s case, the leaders knew their team members’ capabilities and shortcomings (strengths and weaknesses). Having an open conversation with the team and practising good listening skills can offer a leader insights into how the team is progressing and the challenges they face.
On the contrary, setting a judgmental or negative tone when communicating has the effect of deterring important information from reaching the top. The leadership at Twitter made decision-making a collaborative effort through brainstorming, realising that it is not just routine tasks that need to be delegated, but creativity and ideas.
Knowledge about the external factors affecting a team’s goals is also crucial (opportunities and threats). This requires that effort and resources be spent on engaging customers, clients, and employees to discover market trends and potential areas to explore. With this, the leaders were able to discover that very few people were interested in creating podcasts at the time, and Odeo would fail to attract enough users.
Complex environments are those with numerous variables, making attempts to understand the situation difficult and far from straightforward. Acquiring information is only part of the problem. Making sense of it is often another.
In such cases, strategic agility can be gained by putting decisions to the test. Experimentation and tinkering can be important to narrow down your focus, when you are being drowned in data.
Southwest Airlines innovated through reduction and streamlining rather than the addition of new features to their business. Through experience, the organisation discovered that the things that mattered most to customer satisfaction were fast, friendly customer service and more frequent departures.
The airlines was able to beat its competitors by focusing resources on improving the essentials, and cutting out excessive expenditure on things that made little impact, like fancy meals, lounges and seating choices.
Strategically agile leaders have to sometimes make decisions that other leaders find difficult to make, such as removing elements from their core business that they have worked hard on.
In an ambiguous situation, leaders find it hard to discern what is right and wrong. Ambiguity leads to errors in judgment. Clients, customers or the market may be sending mixed messages about which direction the organisation must go. Ambiguity must be offset by clarity of purpose. Leaders must ensure that their vision is clearly aligned with their long-term plan.
Operating in innovation-driven environments can often be daunting for leaders. Nevertheless, difficult choices have to be made decisively and quickly. Failure to do so can have drastic effects, as seen in the downfall of Kodak in 2012.
For most observers, one of Kodak’s main missteps was missing the digital revolution. Despite having prototyped some of the earliest digital cameras, Kodak was hesitant in introducing it to the market, with fears that the device would “cannibalise” their core business. In other words, they might risk having a new product compete with traditional products they already had on the shelves.
This was compounded by having a culture that is rigid and non-resilient against change. The organisation began to lose sight of its vision because of managerial complacency and an inflexible hierarchy that prevented innovative ideas from being voiced to top management.
Apple faced the same dilemmas when designing its first iPhone. Decision-makers, including Steve Jobs himself, were reluctant to enable iPhone users to listen to music because this might encroach on the market of the pre-existing iPods.
After considering the long-term impact that iPhones would have, Apple eventually decided to take the risk of including this feature, sacrificing iPod sales in the process. This bold move benefitted Apple in the long run, showing that apparent gains and losses only become clear once the bigger picture is assessed.
It is unlikely that we will see a downward trend in VUCA. Leaders have to get used to the idea that even the best organisations make mistakes or encounter seemingly insurmountable problems; but what separates an antifragile company from the rest is its ability to bounce back, learn and grow from unexpected and calamitous events.
Jack writes about the psychology of leadership. His interests span across various fields – from psychometrics (the science of measuring the human psyche), to developing software that improves people’s lives. Share your thoughts about this article by e-mailing firstname.lastname@example.org