Wednesday, August 28, 2019

VUCA is a matter of perspective

VUCA is the new black.  Suddenly everyone has realized that sometimes the economy or markets are volatile or uncertain.  If I were older and cranky I'd blame this on the millennials, not because they are millennials but because they've never lived with a stock market that goes down.  Volatility seems like something we've only just discovered.  Not too many people seem to remember the stock market crash of 2008, but of course that was a decade ago.

VUCA is now getting tossed around like it is a new idea, which is NOT true. VUCA is, however, more relevant than ever to people who refuse to take the long view, or who refuse to prepare.  What is volatility or uncertainty after all, if you have a longer term view?  What appear to be massive swings in an economy or a market in the short term turn out to be small hills and valleys over a 20 or 30 year horizon.  There is of course the famous and perhaps misquoted statement by Zhou Enlai, the Chinese premier, who replied "too early to say" when asked about the impact of the French revolution.  Some people have suggested this is the sage advice of a people who take a long view, reflecting on the impact of the French revolution in the 1789.  Others note that he might have been referring to violence in France in 1968.  This quote has the benefit of being true and the added bonus of proving that ambiguity and uncertainty matter.


VUCA, like many four letter acronyms, probably springs from military usage.  It stands for Volatile, Uncertain, Complex and Ambiguous.  A learned scholar would note that there's not a lot of difference between these words.  Many things that are volatile are also uncertain.  Uncertain and ambiguous are almost synonyms.  Many things that are complex can be uncertain or ambiguous.  VUCA is just a way of saying difficult to describe or understand.

We innovators and purveyors of future insight talk about VUCA like it's a problem.  Wouldn't it be nice if the world were predictable, stationary, completely certain.  The problem is that very few people want to live in a world with such predictability and stability.  We'd get bored fairly quickly I think, and those of us who like change would go absolutely crazy.  I think it's healthy for people to live in a VUCA world.  It only becomes a problem when the world becomes too uncertain, too volatile or too complex, and that measure is often in the eyes of the beholder.

Three ways to respond to VUCA

There are options to respond to a VUCA situation.  The first is to react to the volatility and change after the fact and complain about what a crazy, VUCA world we live in.  This is what most people do, simply react after the fact and complain about change, as if change isn't the norm.  Sorry to sound judgemental but this is the least interesting, least engaging response and one that places the blame on change that is already occurring.

The second option is to take a long view.  Notice that much change reverses itself or corrects over time.  I noticed just this week that jean shorts seem to be back in style, after being the butt of jokes (jorts anyone?) for years.  The market crashed in 2008 and reached the same point as the top of the market a few years later.  In this model we ignore the momentary blips and look for longer term, not reacting to every change.  This model relies on patience, past performance and slowly adapting to the markets and environments as necessary.  Call this the dollar-cost averaging approach.  If you don't know the reference, ask your broker.

The third option to address VUCA is to look ahead, examine trends and conduct foresighting or scenario planning.  The future, as we've been assured, is out there, and there is evidence of what is going to happen, many times long before it happens.  Uncertainty can be reduced by looking at the possible options and their likelihood of occurrence.  Volatility can be anticipated if we look forward and expect it.  Playing out various scenarios helps to illuminate what is likely to happen and what the requisite reactions will be from those who are simply reacting to the events.

VUCA is what happens to intellectually lazy people

Isn't VUCA just an excuse for "I was too busy or preoccupied or lazy to do a little investigation into what could happen?"  Maybe VUCA isn't an acronym but Latin for "didn't do enough planning".  Of course much of this diatribe is tongue firmly planted in cheek.  The world is more volatile and markets and economies are more uncertain than ever.

 But on the flip side we have more information and are more connected than ever.  Instead of being a victim of VUCA and acting like VUCA impacts are unpredictable and unavoidable, perhaps we should become more proactive, trying to anticipate the volatility, trying to reduce the uncertainty, trying to simplify the complexity.  But that takes foresight, thinking and free time, all of which are sadly in short supply in too many businesses today.

If you need help, contact me.  I've conducted dozens of foresighting and scenario planning exercises for non-profits, universities, government agencies and of course corporations.  If you are living in a VUCA world and don't want to simply react to changes, and don't have the patience to simply wait them out, we can help.  You can reduce the impact of volatility, create more clarity and simplify complexity by working to understand the future.
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posted by Jeffrey Phillips at 6:43 AM


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