Volatility and exponential change that boggles the mind.
The second in a 4-part series on VUCA. See the first blog in this series for an overview of leading in a VUCA world of Volatility, Uncertainty, Complexity, and Ambiguity.
Volatility, or rapid, unpredictable change, is the driving force of VUCA. These rapid, unpredictable changes actually create two other aspects of the VUCA constellation:
Ambiguity: What’s going on? What does this all mean? How do I make sense of this?
Uncertainty: How do I respond? What should I do now? What’s coming next?
Researchers at McKinsey estimate that the pace and scale of change is 3000 times more significant than during the Industrial Revolution. To lead effectively in these challenging times, it’s important for leaders to understand the nature of change and volatility, so they can address the anxiety, discomfort, and even fear that accompanies ambiguity and uncertainty.
As a starting point, few would argue that many things are changing, and changing faster all the time. What’s new in recent times is that different kinds of things are changing, faster, and in different ways.
As one example, it’s easy today to see the dramatic effects of Moore’s Law, as technology improves exponentially. The computing power in a smartphone today is significantly greater than the Deep Blue supercomputer that beat Garry Kasparov in a dramatic human vs. computer chess competition. Imagine the computing power you will hold 20 years from now!
But it’s extremely difficult to fully appreciate the dramatic effects of exponential growth. First, consider linear progress: If you take 30 linear steps, you can easily picture how far you’ve traveled. You’ve gone 30 steps.
Now imagine 30 exponential steps: 1, 2, 4, 8, 16, 32, 64 and so on. How far would you have traveled? You’d have gone a little over one billion steps, which is dozens of times around the world, depending on the length of your stride. Or to the moon and back, plus one full trip around the earth. Crazy far.
Paradoxically, the early stages of exponential growth seem to move slowly. Imagine a startup with exponential annual revenue growth: first year $1000, second year $2000, third year, $4000. Just $1 million total sales for the first 10 years. How soon would people give up? Yet after 30 years, that tiny startup has generated over $1 trillion in sales. Sign me up.
Given how difficult it is for us to envision exponential change, we are constantly surprised by it. In areas moving at exponential speeds – essentially anything that benefits from advances in technology – it’s worth taking time to do thoughtful projections of what might be possible just a few years from now.
Exponential change is a key factor in disruptive changes, too. Virtually no dominant player thinks they will be disrupted by the new entrants in their space who provide a cheaper, low quality offering. But new players, who are hungry and focused and not bound by old business models, frequently adapt and improve quickly. Suddenly, they are offering better value, and the game changes overnight.
The pattern of disruption is well understood, but few think it will happen to them, and so they are repeatedly taken by surprise.
How can you prepare for unknown and unpredictable changes?
It’s almost impossible to predict exactly what will happen to your business next year. But it is quite clear that something is going to change soon, so now is the time to start exploring different scenarios and building organizational agility.
Explore alternative scenarios – What if an upstart introduces a disruptive product? What if our suppliers align with a competitor? What if our target audience finds a cheaper alternative?
Compete with yourself – If we were a well-funded startup, how would we attack and compete with our current business? What weaknesses would they go after that we should be addressing before that happens?
Seek diverse input – talk to people who disagree with you, potential customers who don’t use your product, people in different industries and markets.
Monitor trends in adjacent markets and technologies – Stay abreast of innovations and advances in other areas that might potentially expand into your space. Pay attention to early signals that things are starting to shift, rather than dismissing them out of hand.
Create space for reflection – step back and look for the larger patterns. Get up on the balcony so you can see the bigger picture of the system that you are operating in.
All these things take time, of course, so you have to decide – am I going to continue to operate with last year’s assumptions and business models, or am I going to prepare for change that is just around the corner? Will your organization be ready to respond faster than anyone else to new threats and opportunities?
Change. That’s the future, and it’s coming faster than you think.
For a deeper discussion of these topics, check out Ray Kurzweil’s work on exponential change, such as The Singularity is Near (2005) and Clayton Christensen’s work on disruption and innovation.