It seems incredible that in only four months the world of organizations has changed so much. So much that many companies are questioning their own existence. This is because of what we call VUCA environments.
Meanwhile, they have stopped asking themselves questions like that:
- how can we increase sales by 15% this year?
- Is there a way we cana increase the EBIDT by 6% this year?
- how can we increase the service rate of the business by 10%? or
- Can we improve productivity by 10% this year? How?
Instead, they are trying to find the answers to vital questions for the organization such as:
- where will we be able to sell our product or service?
- what should we do with our people?
- how can we accelerate innovation?
- what do we have to do to stay alive?
However, there are other organizations that manage the current environment very well and are capable of finding solutions to always win.
As we learned from Jeff Bezos and his famous phrase: «your margin is my opportunity».
Organizations that consciously accept that each evolution implies a radical change of their reality, that challenge their own organizational design, that eagerly accept new paradigms that replace the previous ones.
These are companies that face the future with optimism and the determination to create a new product/service. And that exceeding the expectations and requirements of a changing environment. These are companies that look forward to the future and aspire to be the architects of their transformation.
What are the features of a VUCA environment?
As already mentioned, the current environment is changing; we all are experiencing this change and are well aware of the complexity of the situation. However, VUCA is not a new term, as it has regularly appeared in times of crisis for almost two decades. It describes an environment, a scenario like the current one and it adapts to the particularities of the era in which we live: the era of transformations.
VUCA is the acronym for:
Volatility refers to the speed of change, to market variations, to how the world changes in general. It is associated with fluctuations in demand, changing user and customer requirements, and stakeholder turbulences. The more volatile the world is, the more and the faster things change. And when the context changes, the leading companies – companies that rely on digitalization and adaptation through Agile, ExO, etc. Methodologies that are used to quickly to put the customer at the center so they can continue to offer exactly what is needed and define their future.
Uncertainty refers to the degree of prediction, to the confidence about what will happen in the future. Part of the uncertainty is perceived and associated with people’s inability to understand what is actually going on. However, uncertainty is also a more objective characteristic of an environment. Truly uncertain environments do not allow any prediction, even in a statistical way. The more uncertain the world is, the more difficult it is to make any predictions.
Complexity refers to the number of components to be taken into account, their variety and their interrelations. The more components, the more variety and the more interfaces between components, the more complex the environment. When complexity is high, it is not possible to completely analyze the environment and reach rational conclusions. The more complex the world is, the more difficult it is to be analyzed. However, the exponential increase in data access through Artificial Intelligence defines the guideline that companies must adhere to in a world in which, as Mark Walport announces:
«Public trust is a vital condition for artificial intelligence to be used productively».
Ambiguity refers to the lack of clarity about how to interpret matters. When we lack information, when they are contradictory or too imprecise to draw clear conclusions. It refers to confusion and vagueness in ideas and terminology. The more ambiguous the world is, the more difficult it is to be interpreted. Therefore, ActioGlobal advocates the use of methodologies that really put our capabilities at the service of the client so that their needs are at the center of our business. Then, we are capable of really adapting ourselves to the environment, change what must be changed and optimize the delivery of value to clients who have placed their trust in us expecting great results.
Accepting VUCA as a framework is against human nature, who flees from risk, avoids change, abhors uncertainty, who systematically seeks safety. Nevertheless, in the times we are travelling through, ActioGlobal is navigating against convenience and inactivity and is leading the new era of organizations to adapt and celebrate the environment and the opportunities it offers.
How to manage in VUCA environments
From our perspective as management consultants with the experience of more than 50 transformed organizations, more than 1200 high performance teams created in 32 countries and 23 sectors of industry, we have a clear insight into how leading companies manage VUCA environments.
They are organizations that firmly hold on to their values and principles, organizations that have a voracious hunger to always be the best, organizations that perfectly manage VUCA environments because they, in a way, consider themselves VUCA organizations.
Organizations that question their own business model if necessary, that rely on agile transformation processes, and that understand that both technology and digitalization serve global transformation.
There are four fundamental principles defining the way these Agile High Performance Organizations are to be managed in VUCA environments with VUCA leadership:
Radical Priority for Key Results with OKRs:
The main reason why organizations become mills of endless and exhausting tasks is because they fail to explain to their employees the reasons what they actually do their job for.
The main task of an organization’s management, prior to defining a strategy, is to create clear objectives that can be easily measured and that are transparent to the entire organization.
OKR (Objectives and Key Results) is undoubtedly one of the most powerful methodologies for defining objectives, due to its simplicity, its clarity in defining what is to be achieved and in what time, and also due to its ability to push people out of their comfort zone.
A good execution of OKRs establishes an organization-wide focus, especially for the teams that have to execute the strategy in VUCA environments with a guarantee.
Empowerment and Self-Organization:
Teams cannot be empowered or get decisions transferred to if those objectives (in our case we use OKR) have not been defined clearly.
Self-organization is achieved through focussing, when each team knows exactly what they have to achieve and what their contribution is to the company’s objectives. This is VUCA leadership by self-organized teams.
A good execution of the OKR implementation process results in a subsequent phase of questioning the organization’s design.
● What’s the amount of teams do we need?
● Are there any functions that we transfer to the teams?
●Do they collaborate with each other? And, how?
● What is the way they communicate with each other?
Once these issues are resolved, the teams define their own OKRs in alignment with the company’s OKRs.
To ensure the achievement of the objectives, the teams’ OKRs are defined on a short time scale, usually one quarter.
This is an important change in the traditional management systems, but it is fundamental to create a major focus, especially when managing in VUCA environments, since we do not know what will happen in the next four months.
System Alignment & Full Synchronization:
The perfect configuration to win at this point: teams with a clear focus on the P&L, a radical orientation towards customer value creation, a network of support and collaboration that is lubricated and ready to react quickly.
However, we need these teams to dance to the same rhythm, to synchronize in time, to follow clear routines.
We need an operating system that joins all the teams, systems like our OKROS® that synchronizes both planning and execution routines. Leaving room for methods like Scrum or Kanban.
These routines free up time for teams to execute their tasks correctly to impact their OKR indicators, to deliver value to the customer and income to the company.
A system that also incorporates the necessary dialogues to bring the teams together, to create a solid relationship with the management, where feedback is almost permanent and where recognition is a multiplying element.
With weekly routines like the Gemba Walk where the teams explain to the management their progress in the objectives and their strategies to achieve them.
This system where the ‘what’ is defined by the management and where the ‘how’ is defined and executed by the teams.
Continuously learning by delivering:
Once we have clear objectives, the necessary teams and an efficient execution system, then we can execute, deliver products or services to customers or users on a constant basis.
This is the time when teams experiment at a furious pace, when they discover what works and what doesn’t work for the customer, whether or not they move the indicator needles.
The teams learn, they eliminate the uncertainty week by week through the opportunities they discover, the initiatives they launch and the tasks that are assigned autonomously day by day.
Squads that make up a learning organization through constant execution, sincere and honest feedback, and open and frequent conversations. Teams that collaborate and help each other.
Teams that are gradually caught by the hidden forces used by the leading organizations, that become addicted to winning, and that enjoy their work, especially in VUCA environments.
It is this VUCA leadership that organizations need today to lead exponential change. We have recognized from our experience and proved that this is a new way to make organizations grow. It represents the appropriate approach to meet the challenges faced by organizations in the environment of the accelerated change we are living in.