In recent years, the acronym VUCA has been gaining popular use in the business press. The acronym stands for Volatility, Uncertainty, Complexity and Ambiguity. The term originated from the U.S. Army War College to describe the world after the end of the Cold War – for example the proliferation of non-state-based combatants such as ISIS. Since its emergence, it has gained an increasing significance in business to describe the ever-changing environments in which all businesses operate today.
So, what do each of these elements mean to an organisation?
- Volatility – What is changing in our operating environments, geographical, geo-political, industry or market? What effect does this have on the demand for our products or services?
- Uncertainty – How well can we can predict what is going to happen in future? What are our competitors doing and in these times of ‘challenger’ companies, who will our competitors be?
- Complexity – How many different factors are there to account for in our decision-making, how are they interconnected? The more factors that exist and the more connections between them, the greater the level of complexity.
- Ambiguity – What is the level of understanding that we have about our world? Do we have all the information to give us a clear picture, or are there gaps in our data that makes it difficult to draw conclusions?
What significance does this have for innovation?
VUCA can be the outcome of disruptive innovation e.g. a new product that has changed the dynamics of the industry in which it operates, (think iPod and the music industry), or the driver of the disruption, e.g. we have a challenge that we need to address (think of the current attempts to mitigate against the effects of COVID19).
The VUCA nature of the world is increasing and the need to innovate new products and services to meet our customers’ needs, or to address key organisational challenges will not lessen. Therefore, organisations need to embrace VUCA and build teams and processes which can take advantage.
The Innovative Organisation
There are some key features common to innovative organisations which make them best placed to exploit, or mitigate against, VUCA in their industries –
- Vision and leadership – Hierarchical organisations are not typically conducive to innovation. Leadership teams, in most cases, are not the best judges of what will work for customers. When was the last time your CEO spoke to a customer? Highly innovative companies embrace decentralisation of decision-making, enabling them to be more responsive to customer needs, to be quicker to identify opportunities and threats, and to support employee ownership of the customer experience.
- Democratisation of Information – To drive innovation, all those who are involved need to be informed. Organisations that innovate successfully (including ourselves at Bridgeall) incorporate Agile working into the fabric of the organisation, with daily scrum meetings across all teams and regular sprint planning, review and retrospective lessons learned sessions. These Agile teams include individuals from different disciplines across the business. To aid collaboration, information tools are widely used to support information sharing; this is key to faster, more responsive decision-making.
- Creative climate – Without the support of a creative climate, employees will not feel confident to contribute their ideas for innovative change. A creative climate requires a transparent process in which ideas that are submitted to solve an innovation challenge are evaluated using a consistent, fair approach, and where there is visibility for every one of the progress that their own, and their colleagues’ ideas are making (nothing will kill your innovation programme quicker than employees feeling that their ideas disappear into a black hole). It is equally important that the environment encourages collaboration, enables staff to have time and freedom to investigate their own innovative ideas, embraces controlled risk-taking, and celebrates success.
- Failure is accepted but is managed – Innovative organisations understand that many of the ideas they receive will not be implemented and failure is an accepted function of the innovation process. The experts will however identify this inability to meet the challenge requirements early in the process. They will not commit valuable project implementation team time to an idea until they’re confident of project success.
- They learn – Innovative organisations learn from their innovation processes, the good and the bad. They use this to inform future innovation projects. They keep a record of those failed ideas from earlier innovation projects because they know that what failed before might not fail now with new information.
By addressing these key areas, organisations can thrive even when the level of VUCA increases.
Over the coming weeks we will look at some of these factors in a little more detail – why getting the right people into the right groupings will accelerate innovation, how an innovation framework with “fail fast, learn fast” at its heart will increase the organisations ability to identify the best ideas quickly, and why having measurement criteria that align with organisational objectives will keep the Senior Management Team engaged with your innovation programme.