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!

Exponential change
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.

Disruptive change
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.

VUCA:  It’s not that complicated

A four-part series on leading in VUCA

In the late 90s, the US Army War College started using the term VUCA to refer to the Volatility, Uncertainty, Complexity, and Ambiguity that characterize battle conditions. More recently, it has been used to describe the business conditions that corporate leaders need to navigate to succeed in today’s world.

When we try to unpack these four elements and help leaders figure out exactly what they need to do differently, we see that the VUCA framework is potentially misleading. Just two of these elements – Volatility and Complexity – are actually the driving forces, with Uncertainty and Ambiguity being side effects. A slight reframing, as explained below, makes it a far more useful tool for leaders.

Volatility. To start with, the pace of change is accelerating. Not only is change happening faster, but different kinds of things are changing, in different ways. So it’s harder to predict the implications for different kinds of change, and what changes are right around the corner. So leaders need new ways to understand and adapt to volatility – rapid, disruptive change. Personal and organizational agility – the ability to learn and adapt quickly – are essential. Volatility and the accelerating pace of change are explored in detail in our next blog.

Complexity. At the same time, the world is becoming increasingly interconnected and interdependent, amplifying the complexity of making decisions. To make sense of this complexity, leaders need to think more systemically and step back and see the bigger picture. – Then they can act more strategically, by anticipating the longer-term, second- and third-order consequences of their actions. How leaders can thrive in the face of complexity is the topic of our third blog in this series.

As rapid change and unexpected consequences ripple through our lives, people experience Ambiguity and Uncertainty. Most people are uncomfortable with ambiguity and uncertainty, and at high enough levels they may experience fear and confusion. In the face of ongoing ambiguity and uncertainty, it’s difficult to know the right course of action, so people become more cautious, more reactive, and more self-protective. It’s easy to point fingers and blame others when targets are missed.

At a basic level, then, the best leaders approach complexity and change with a cognitive lens – search for patterns, make sense of what’s happening, anticipate and plan for potential obstacles and opportunities. In parallel, they approach ambiguity and uncertainty with an emotional lens – build psychological safety and trust, listen with empathy and compassion to fears and concerns, acknowledge and value diverse views and opinions, foster a sense of community and connection.

In VUCA times, two complementary principles are useful for organizational leaders:

  1. Cultivate clear mission, vision, and values to provide stability and help people focus on what’s most important. Having a clear sense of what we stand for and where we’re headed enables a shared sense of meaning and purpose that encourages collaboration and teamwork.

  2. Once you have a clear strategic foundation, you can then build the organization’s capabilities and discipline to act decisively and adapt quickly. Working in small steps toward a higher-level goal enables you to learn and adjust as you go, so you can reflect on what you’re learning and pivot quickly when appropriate. Leading in this fashion is similar to E. L. Doctorow’s view of writing; it’s “like driving at night in the fog. You can only see as far as your headlights, but you can make the whole trip that way.”

David’s second and third blogs in this series will explore a deeper dive into Volatility and Complexity, and the fourth blog will conclude with an integrated guide to how leaders can optimize how they lead in VUCA.