Leadership under VUCA Conditions

VUCA, which has been used to mean "unpredictable change", is an acronym which has drawn a lot of interest lately in the business world. VUCA consists of the initials of four words. These are Volatility, Uncertainty, Complexity, and Ambiguity.

It is certain that the world has become more volatile, uncertain, complex, and ambiguous in the last decade. There are unpredictable geopolitical fluctuations behind this, as well as major discontinuities brought about by accelerating technological developments.

The first element of VUCA, "Volatility", is linked to the rate of change in the market or industry. Frequent and successive changes of different nature can increase the severity of volatility. "Uncertainty" is used to describe how much we can predict the future. In environments with increased uncertainty, the standard reaction of people and companies is to be withdrawn into their shell. This has a cost for the economy but a significant payoff for brave companies who do not act as such. “Complexity” is about the multiplicity of parameters to be taken into account. A lot of different, variable, and interrelated factors mean a complex environment. The magnitude of complexity is a factor that may make analysis difficult. “Ambiguity” is a measure of the difficulty in interpreting events and developments. Insufficient, contradictory, imprecise information brings ambiguity in drawing conclusions. This can be compared to a foggy environment.

VUCA actually refers to four different situations. However, it is possible to find that these four words are used like synonyms in the business world. If the differences are not well understood and treated as a combo, there is a danger that company leaders will make wrong decisions. Another problem is that leaders have no idea how to deal with each of these situations and try to find a general solution to all of them. This can result from time to time in giving up and backing down from what needs to be done  with a feeling of helplessness. Accepting for example, that it is not possible to be strategic in VUCA conditions.

However, Volatility, Uncertainty, Complexity, and Ambiguity require their own approaches separately. There are subtle but undeniable differences in meanings between these words. There are rapid, frequent but predictable changes in a world that is volatile only. It is difficult to predict how things will develop in a world with only uncertainty. Decoding and understanding events is not easy in a complex world. In just a ambiguous world, it becomes difficult to discern and sense situations that could mean more than one thing.