VUCA is an acronym to describe on the volatility, uncertainty, complexity and ambiguity of general conditions and situations. If you are in a decision making process or analysing or understanding situation in personal or professional life, then use VUCA to make your understanding clearer and deeper. All big corporate companies use VUCA for strategic leadership. Analyse a situation by gauging 4 parameters namely volatility, uncertainty, complexity and ambiguity. VUCA is one way to describe today’s business world. It is a totally new environment, where old laws don’t apply.
Each parameter is explained as below
- Volatility : It is about the nature and dynamics of change. It is the quality of being subject to frequent, rapid and significant change. Things change continuously. What is true today isn’t true tomorrow. In a volatile market, for example, the prices of commodities can rise or fall considerably in a short period of time, and the direction of a trend may reverse suddenly.
- Uncertainty : It is the lack of predictability, the prospects for surprise, and the sense of awareness and understanding of issues and events. Fixed values in the economy and stock exchange can collapse overnight. And because of globalization a relatively small cause can have huge worldwide consequences.
- Complexity : It is the multiplex of forces, the confounding of issues, no cause-and-effect chain and confusion that surrounds organization. It involves a multiplicity of issues and factors, some of which may be intricately interconnected. Your electronic gadgets like tv were simply connected with a wire to an antenna or the phone network. Today it has become far more complex with setup-boxes, routers, wifi connections, etc…
- Ambiguity: It is the haziness of reality, the potential for misreads, and the mixed meanings of conditions; cause-and-effect confusion. Ambiguity is manifested in a lack of clarity and the difficulty of understanding exactly what the situation is. For example is Donald Trump in favor or against raising minimum wages?
VUCA can be seen as four types of environment in a matrix with 2 dimensions:
– how much you know about the situation?
– how much you can predict the results of your actions?
The corporate has adopted the VUCA model in a big way. Big companies assess the business situations and align their strategy using VUCA. You can also use VUCA in your own life and business. Let’s understand VUCA with a simple example.
Peter works as a software engineer. He loves cooking. Peter wants to quit his full time job and start a cafe as he believes he would be happy doing this. Peter analyses his decision based on VUCA.
- Volatility: ( More for job, Less for Cafe ) : Peter’s job is more uncertain than operating his own cafe. The nature of software companies is such that firing of employees happen often. However a cafe business is rather stable as food is basic necessity of humans. It is quite probable that even though the cafe may not be a roaring success, it will still survive if it is run rightly.
- Uncertainty: ( More for job, Less for Cafe ) : Again Peter’s job can be taken over by Artificial Intelligence related technologies. But cafe will survive such uncertainty factor.
- Complexity: ( More for job, Less for Cafe ) : Peter may have to learn new programming skills continuously which may keep on posing challenges to Peter throughout his job tenure. But Peter will love running cafe as he is passionate about food business. He will happily do all the needful required for his cafe.
- Ambiguity: ( More for job, Less for Cafe ) : Peter’s job skills may soon become outdated with advancement in technology. But his cafe will not face this issue as basic food items on a cafe’s menu remain same.
From the above example, we see through VUCA analysis that Peter should start his cafe. What a simple, wonderful and objective way of understanding the reality !
Apply VUCA in important situations and live happily.