See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/263926940

What VUCA really means for you

Article  in  Harvard business review · January 2014

CITATIONS READS
98 6,922

2 authors:

Nathan Bennett G. James Lemoine

Georgia State University University at Buffalo, The State University of New York
55 PUBLICATIONS   5,637 CITATIONS    17 PUBLICATIONS   174 CITATIONS   

SEE PROFILE SEE PROFILE

All content following this page was uploaded by Nathan Bennett on 08 January 2018.

The user has requested enhancement of the downloaded file.

Our reference: BUSHOR 1126 P-authorquery-v9

AUTHOR QUERY FORM

Journal: BUSHOR Please email your responses and any corrections to bushor@indiana.edu

Article Number: 1126

Dear Author,

Please check your proof carefully and mark all corrections at the appropriate place in the proof (e.g., by using on-screen
annotation in the PDF file) or compile them in a separate list. Note: if you opt to annotate the file with software other than
Adobe Reader then please also highlight the appropriate place in the PDF file. To ensure fast publication of your paper please
return your corrections within 48 hours.

For correction or revision of any artwork, please consult http://www.elsevier.com/artworkinstructions.

Any queries or remarks that have arisen during the processing of your manuscript are listed below and highlighted by flags in
the proof. Click on the ‘Q’ link to go to the location in the proof.

Location in Query / Remark: click on the Q link to go

article Please insert your reply or correction at the corresponding line in the proof
Q1 Please confirm that given names and surnames have been identified correctly.

Please check this box or indicate your approval if

you have no corrections to make to the PDF file

Thank you for your assistance.

 BUSHOR 1126 1–7

Business Horizons (2014) xxx, xxx—xxx

Available online at www.sciencedirect.com

ScienceDirect
1 www.elsevier.com/locate/bushor

2
ORGANIZATIONAL PERFORMANCE

4
3
What a difference a word makes: Understanding
threats to performance in a VUCA world
5
Q1 Nathan Bennett a,*, G. James Lemoine b
6
a
7 Robinson College of Business, Georgia State University, Tower Place 200, Suite 400,
8 3348 Peachtree Road NE, Atlanta, GA 30326, U.S.A.
b
9 Scheller College of Business, Georgia Institute of Technology, 800 W. Peachtree Street, Atlanta,
10 GA 30308, U.S.A.

KEYWORDS Abstract VUCA is an acronym that has recently found its way into the business
VUCA; lexicon. The components it refers to–—volatility, uncertainty, complexity, and
Volatility; ambiguity–—are words that have been variously used to describe an environment
Uncertainty; which defies confident diagnosis and befuddles executives. In a ‘VUCA world,’ both
Complexity; pundits and executives have said, core activities essential to driving organizational
Ambiguity; performance–—like strategic planning–—are viewed as mere exercises in futility. VUCA
Leadership conditions render useless any efforts to understand the future and to plan responses.
When leaders are left with little to do other than wring their hands, organizational
performance quickly falls at risk. In this installment of Organizational Performance,
we demonstrate that by overlooking important differences in the conditions that
volatility, uncertainty, complexity, and ambiguity describe, we have disempowered
leaders. We show how leaders can appreciate the differences among each of these
challenging situations in order to properly allocate scarce resources to preserve and
enhance organizational performance.
# 2014 Kelley School of Business, Indiana University. Published by Elsevier Inc. All
10
rights reserved.

11
12 22
13 1. Living in a VUCA world unpredictable times–—as well as to sell these 23
same leaders consulting services. Employing an 24
14 ‘‘Across many industries, a rising tide of vola- acronym for volatility, uncertainty, complexity, 25
15 tility, uncertainty, and business complexity is and ambiguity1 (VUCA), pundits and leaders alike 26
16 roiling markets and changing the nature of have asserted that we now live in a ‘VUCA world.’ 27
17 competition.’’ (Doheny, Nagali, & Weig, 2012) This ongoing churn in the business environment 28
19
18
20 Observations such as this, from a recent issue of creates myriad traps for leaders. Of course, opti- 29
21 the McKinsey Quarterly, have been used to energize mists see the edge a company can gain if its leaders 30
22 leaders as they rise to confront yet another day in master the accompanying challenges. For example: 32
31
33
* Corresponding author
1
E-mail addresses: nate@gsu.edu (N. Bennett), The acronym VUCA originated in the U.S. military (Whiteman, 34
jim.lemoine@scheller.gatech.edu (G.J. Lemoine) 1998). 35

0007-6813/$ — see front matter # 2014 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
36
http://dx.doi.org/10.1016/j.bushor.2014.01.001
37
 BUSHOR 1126 1–7

2 ORGANIZATIONAL PERFORMANCE
31
32 85
33 ‘‘Volatility provides profit opportunity.’’ as strategy and marketing are now ‘dead’ (Draycott, 86
(Warwick-Ching, 2013) 2012). 87
34 Consider these three problems and it is evident 88
35 ‘‘Uncertainty is opportunity.’’ (Hemingway & that the second and third are not unavoidable con- 89
Marquart, 2013) sequences of the modern business world, but rather 90
36 entirely avoidable outcomes of the first. That is, we 91
37 ‘‘Simplifying IT complexity [is] a major opportu- have little actionable advice to deal with VUCA and 92
nity.’’ (Boston Consulting Group, 2013) are tempted to say there’s nothing we can do about 93
38 it specifically because we don’t break out the com- 94
39 ‘‘Ambiguity equals opportunity.’’ (Amerasia Con- ponents of VUCA and fully understand the exact 95
40 sulting Group, 2013) natures of the problems we face. Until leaders 96
41 become able to identify the unique challenges pre- 97
42 Capitalizing on opportunity first requires under- sented by volatility, uncertainty, complexity, and 98
43 standing it; reviewing what leaders have said and ambiguity, they will not be positioned to seize the 99
44 done thus far, however, there is ample evidence of opportunities promised by the aforementioned op- 100
45 misunderstanding. Three significant problems exist timists. This is because volatility, uncertainty, com- 101
46 in how leaders have employed these terms. First, plexity, and ambiguity all require their own separate 102
47 their use has been cavalier: VUCA has become a cute, and unique responses. Each of the four is a distinct 103
48 trendy way of saying ‘unpredictable change.’ As an phenomenon with equally distinct appropriate re- 104
49 experiment, perform a web search for any two of the sponses that require different–—and possibly diffi- 105
50 four words comprising VUCA. You’ll probably realize cult to reallocate–—investments. Leaders face a pair 106
51 two things: all four are typically used as a set in of problems: If VUCA is seen as general, unavoid- 107
52 executive interviews, consultant blogs, and the busi- able, and unsolvable, leaders will take no action and 108
53 ness press, and they’re treated as synonyms. Though fail to solve an actual problem. Alternatively, if 109
54 the words do have related meanings, it’s the differ- leaders misread the environment and prepare for 110
55 ences among them that are most valuable for leaders the wrong challenge, they will misdirect resources 111
56 to understand. We contend that the term VUCA offers and fail to address the actual problem. 112
57 a mélange that is dangerous in its consequences. The In the paragraphs that follow, we begin by point- 113
58 four components of the VUCA acronym have unique ing out the differences between the terms volatility, 114
59 meanings that should be instructive to leaders; in- uncertainty, complexity, and ambiguity. There are 115
60 stead, useful differences between the terms are non-trivial, albeit nuanced, differences in the 116
61 glossed over and their value lost. meanings of these words–—such as the military has 117
62 Second, even when pundits and leaders are sen- taken to teaching at the Army War College. Then, 118
63 sitive to the differences in meaning, there is a lack we discuss how to identify VUCA situations in the 119
64 of information regarding just what it is that leaders organizational environment and distinguish exactly 120
65 should do in order to confront one or another of which type of unpredictability is being experienced. 121
66 these conditions. Executives often mention in inter- Finally, we discuss the ways leaders need to position 122
67 views and press releases the difficulties of ‘‘doing their companies to address these singularly: each 123
68 business in a VUCA world,’’ but quickly move on to requires something different from the company and 124
69 simpler topics without discussing exactly how a firm its leadership. As we will explain, you cannot rec- 125
70 can position itself in such an environment. Those few ognize the hidden opportunity (e.g., in complexity) 126
71 that do consider how to deal with VUCA typically offer by misdirecting resources (e.g., addressing the 127
72 one highly general solution for all four of its compo- threat from ambiguity). Failure to use the right 128
73 nents, such as ‘‘innovate,’’ ‘‘be creative,’’ ‘‘be flex- label will lead to a misallocation of what could be 129
74 ible,’’ or ‘‘listen more.’’ History does not offer many considerable corporate resources. Table 1 summa- 130
75 examples of such pabulum producing great leaders, rizes our key thoughts regarding volatility, uncer- 131
76 effective change, or robust organizations. tainty, complexity, and ambiguity. 132
77 Finally–—and likely because there is a dearth of
78 actionable advice out there–—too many leaders are
79 confronting this VUCA world by simply throwing up 2. What do these terms mean. . .and 133
80 their hands. As one executive told us, strategic what do they mean for your company?
81 planning is idle at his company because, after all, 134
82 ‘‘How can you plan anything in such a VUCA world?’’ 2.1. Volatility
83 Indeed, a growing thought leadership movement 135
84 asserts that due to the complete chaos and uncon- Reid Spencer is a division manager for a technology 136
85 trollability of the VUCA world, ‘obsolete’ ideas such company in Cambridge, Massachusetts. The industry 137
 BUSHOR 1126 1–7

ORGANIZATIONAL PERFORMANCE 3

Table 1. Distinctions within the VUCA framework

What it is
Volatility Relatively unstable change;
information is available and
the situation is
understandable, but change
is frequent and sometimes
unpredictable.
Uncertainty A lack of knowledge as to
whether an event will have
meaningful ramifications;
cause and effect are
understood, but it is
unknown if an event will
create significant change.
Complexity Many interconnected parts
forming an elaborate
network of information and
procedures; often multiform
and convoluted, but not
necessarily involving change.
Ambiguity A lack of knowledge as to
‘the basic rules of the game’;
cause and effect are not
understood and there is no
precedent for making
predictions as to what to
expect.
An example
Commodity pricing is often
quite volatile; jet fuel costs,
for instance, have been quite
volatile in the 21st century.
Anti-terrorism initiatives are
generally plagued with
uncertainty; we understand
many causes of terrorism,
but not exactly when and
how they could spur attacks.
Moving into foreign markets
is frequently complex; doing
business in new countries
often involves navigating a
complex web of tariffs, laws,
regulations, and logistics
issues.
The transition from print to
digital media has been very
ambiguous; companies are
still learning how customers
will access and experience
data and entertainment
given new technologies.
How to effectively address it
Agility is key to coping with
volatility. Resources should be
aggressively directed toward
building slack and creating the
potential for future flexibility.
Information is critical to reducing
uncertainty. Firms should move
beyond existing information
sources to both gather new data
and consider it from new
perspectives.
Restructuring internal company
operations to match the external
complexity is the most effective
and efficient way to address it.
Firms should attempt to ‘match’
their own operations and
processes to mirror environmental
complexities.
Experimentation is necessary for
reducing ambiguity. Only through
intelligent experimentation can
firm leaders determine what
strategies are and are not
beneficial in situations where the
former rules of business no longer
apply.

137 161
138 is highly competitive and speed is a key competency itself and the likely associated causes and effects. 162
139 for both leaders and their organizations. Like others Reid knows that the fire could cause price in- 163
140 in similar positions, Reid has a lot on his plate and creases, he knows the history of price fluctuations 164
141 only so much bandwidth. Among today’s concerns is for the computer chip, and he likely has a good idea 165
142 the impact a fire at a large computer chip production of what has caused these trends. He has informa- 166
143 facility will have on the prices charged by one of his tion on other suppliers for the chip and how many 167
144 key suppliers. Margins are thin, and upon approach- other production facilities for the part exist within 168
145 ing his boss for advice, Reid is told merely: ‘‘In a VUCA the key supplier. The secret to dealing with vola- 169
146 world, we have to innovate!’’ tility, as with any component of VUCA, is under- 170
147 A volatile situation can be defined as one that is standing the opportunities and threats inherent in 171
148 unstable or unpredictable; it does not necessarily the situation. 172
149 involve complex structure, a critical lack of knowl- Not long ago, pundits widely credited Southwest 173
150 edge, or doubt about what outcomes may result Airlines’ decision to hedge on jet fuel as a key 174
151 from key events. Rather, volatility most closely toward supporting the company’s low-cost operat- 175
152 represents the general definition of VUCA com- ing strategy (Brooks, 2010). Fuel prices can be 176
153 monly used in the business press: relatively unsta- quite volatile, but not really VUCA. Southwest 177
154 ble change. A manager facing a volatile situation was not faced with significant deficits of knowl- 178
155 like Reid’s seeks to address certain questions: edge or overwhelming complexity; rather, it rec- 179
156 Will the situation create a spike in prices? If so, ognized that environmental factors beyond its 180
157 how high? And how long will the elevated prices control were lining up to cause a highly volatile 181
158 last? The production facility fire introduces cost fuel market. Southwest knew change was coming, 182
159 volatility, but Reid still maintains several useful–— and what was causing that change. It required a 183
160 perhaps critical–—assets as he attempts to manage strategy to deal with that change, for which even- 184
161 the situation: he understands both the situation tual existence was expected but magnitude was 185
 BUSHOR 1126 1–7

4 ORGANIZATIONAL PERFORMANCE
185 239
186 unknown. The company prospered during this pe- inherent in it at all. For instance, Reid is uncertain 240
187 riod of change by leveraging its agility, the key to about the pending product to be offered by his Asian 241
188 handling volatility. competitor. There is nothing volatile here; he simply 242
189 When volatile change is expected, the best way does not know enough to plan a best response. The 243
190 to prepare is to devote resources toward developing solution to volatility is agility and building slack 244
191 agility. This is typically expensive and consists, for resources, but there is not enough information in 245
192 example, of stockpiling resources. Hedging on fuel, an uncertain situation to indicate that this would be 246
193 overbuying talent, and amassing raw materials al- an appropriate response. If there is not enough 247
194 lows the slack to be agile–—should volatile times information to indicate that volatile change is ap- 248
195 suddenly suggest that is the right move. As previ- proaching, stockpiling resources could be a costly 249
196 ously mentioned, Southwest Airlines embarked on a waste of time. 250
197 massive fuel-hedging plan that baffled its compet- Because uncertainty exists in the lack of ad- 251
198 itors, predicting the fuel market volatility and lev- equate information, addressing it simply involves 252
199 eraging its assets to create future agility. As most of obtaining information. Investment here entails 253
200 Southwest’s competitors hedged only 20%—30% of methods of collecting, interpreting, and sharing 254
201 their fuel purchases, limiting their eventual agility, information. Uncertainty can be solved structurally 255
202 Southwest hedged a massive 70% of its total need. by devoting more resources to boundary-spanning 256
203 The end result was that Southwest ended up paying activities: moving beyond existing networks, data 257
204 as much as 50% less for fuel than its competitors, and sources, and analysis processes to gather informa- 258
205 has arguably been the only consistently profitable tion from new partners and look at it differently. 259
206 airline for most of the 21st century. Information networks are created from many differ- 260
207 Southwest correctly forecast the volatility in fuel ent sources, both inside and outside the firm. 261
208 prices while prices were still low, and acted aggres- This principle is well illustrated by the aftermath 262
209 sively to maintain its agility. We propose that this of the 2001 U.S. terror attacks. Since those events, 263
210 agility is the key to dealing with environmental the world has lived with a greater sense of uncer- 264
211 volatility. When change is coming but its magnitude, tainty regarding if, when, and where a next attack 265
212 direction, and length are unknown, effective organ- could occur. To again reinforce distinctions between 266
213 izational leaders build their slack resource avail- the different components of VUCA, we note that the 267
214 ability, preparing for a potentially ‘long winter.’ In post-9/11 situation was not necessarily volatile: the 268
215 the short term, this is often expensive and seem- core issue facing the world’s governments was not a 269
216 ingly unneeded. However, if a market truly is vola- lack of stability or predictability. Rather, govern- 270
217 tile, it’s the definitive prescription for success in the ment leaders realized that the success of the attacks 271
218 long term. on the World Trade Center might encourage other 272
terrorists to create similar plots. How many more 273
2.2. Uncertainty attacks might we face? When and where might these 274
219 attacks occur? Who might be behind them? This was 275
220 In a separate market, Reid is anxious to learn more the core of the West’s uncertainty–—but not neces- 276
221 about the precise capabilities of a product about to sarily a volatile situation, nor a totally ambiguous 277
222 be launched by a worthy Asia-based competitor. It one, nor an overly complex one. Addressing the 278
223 could be that the new product changes the game–— uncertainty regarding the strategies of potential 279
224 and it could have strong implications for how he terrorists has led governments around the world 280
225 manages his research and development dollars. A to collect and cull through unimaginable amounts 281
226 senior manager in this division of Reid’s company, of information. New partnerships were formed and 282
227 speaking to a trade publication about the impend- information networks established, resulting in a 283
228 ing challenge this product may bring, was quoted as relatively successful anti-terror campaign. The 284
229 saying: ‘‘It’s a VUCA world. We’re going to have to key to the West’s success in rebuffing more attacks 285
230 be flexible.’’ in the style of 9/11 has been uncertainty reduction 286
231 Uncertainty is a term used to describe a situation through relentless information gathering. 287
232 characterized by a lack of knowledge, not as to Although Reid has likely heard the general advice 288
233 cause and effect but rather pertaining to whether to ‘‘be flexible’’ countless times regarding VUCA 289
234 a certain event is significant enough to constitute a issues, his best course of action may be to actively 290
235 meaningful cause. Uncertainty is not volatility. A grow his information collection and data processing 291
236 volatile situation is one in which change is likely, but resources. He lacks precise information about the 292
237 that change may come quickly and at varying mag- capabilities of the new product, and needs to gather 293
238 nitudes; an uncertain situation, on the other hand, that data. Further, he needs to reach out to part- 294
239 is not so volatile–—in fact, there may be no change ners, customers, researchers, trade groups, and 295
 BUSHOR 1126 1–7

ORGANIZATIONAL PERFORMANCE 5
295 349
296 perhaps even competitors to better understand how Instead, the most straightforward way for an organ- 350
297 this new innovation might or might not change the ization to address complexity is to simplify the 351
298 marketplace. Will the product’s launch be more situation by adopting a structure that mirrors that 352
299 comparable to that of the iPod (a game changer) of the environment. Research has consistently 353
300 or that of the Segway personal transporter (market shown organizations that adapt themselves to 354
301 impact did not match pre-reveal hyperbole)? What ‘match’ environmental change perform at substan- 355
302 are the specifications of the new product, how do tively higher levels, whereas firms that maintain 356
303 they compare to the current market, and what past structures and processes in the face of a 357
304 impact should it have on the firm’s own research changing business environment are less effective 358
305 and development direction and budget? These are (Heugens & Lander, 2009). Organizations should 359
306 all questions that can be answered by information be structured to align with and take advantage of 360
307 gathering, making an uncertain situation more environmental complexity rather than struggle 361
308 certain–—and certainly more manageable. against it. 362
In the most obvious example, as a small, informal 363
2.3. Complexity organization grows, it is expected that formal de- 364
309 partments will appear to address what has become 365
310 Meanwhile, efforts to grow markets abroad have too much for a single person to handle. A smaller 366
311 been frustrating because of a variety of consider- operation dealing with a smaller group of suppliers, 367
312 ations such as export control, tariffs, and the in- a smaller customer base, and fewer regulations 368
313 transigence of officials in each market. Reid often works best within a relatively simple organizational 369
314 feels overwhelmed by the sheer number of moving structure, but that structure becomes obsolete as 370
315 parts involved in each market, and his staff strug- the organization grows and–—consequently–—the or- 371
316 gles to keep up with all of the associated regula- ganization’s operating environment becomes more 372
317 tions and other idiosyncrasies. Reid looks to trade complex. Finance, operations, marketing, and hu- 373
318 journals for guidance, and is struck by a columnist man resources functions are established so that 374
319 who writes: ‘‘It’s a VUCA world, and dealing with each part of the organization addresses something 375
320 multiple markets is just part of that. You can in which it has expertise. As the organization grows 376
321 succeed in this VUCA environment by being crea- larger, complexity will increase and departments 377
322 tive.’’ may divide further: the human resources depart- 378
323 A complex situation is characterized by many ment may hire specialists in benefits, compensation 379
324 interconnected parts. Again, this is distinct from a administration, and EEO compliance. Causes of this 380
325 volatile or an uncertain situation. The situation Reid internal restructuration should not be limited to 381
326 faces in regard to the regulatory environments and changes within the organization; changes in increas- 382
327 political climates in the many nations where his ingly complex business environments (i.e., changes 383
328 company does business is indeed complex, but not outside the organization) also indicate a need for 384
329 necessarily volatile or uncertain. There is no un- internal change. For instance, many organizations in 385
330 predictable or unstable change implied in this sit- the U.S. are restructuring their operations in terms 386
331 uation, and Reid is not faced with a lack of key of employee benefits due to the onset of healthcare 387
332 information. Indeed, he has a great deal of hard reform. The new healthcare law is tremendously 388
333 information on regulations, tariffs, and the like, but complex, and many leaders are finding that the most 389
334 is overwhelmed by the need to process it all. In efficient solution to cope with it is to restructure the 390
335 complex situations, a great deal of effort is required relevant parts of their firms to better align with its 391
336 to collect, digest, and understand the relevant in- requirements. 392
337 formation in its entirety. In Reid’s situation, his firm’s growth into so many 393
338 A complex situation calls for a uniquely distinct new markets creates a complexity that might best 394
339 response that is utterly separate from those neces- be resolved by moving to a more geographically 395
340 sitated by the other components of VUCA. This based organizational structure, such that different 396
341 highlights the danger of not properly understanding branches of the company are able to specialize in 397
342 and defining firm challenges. Although effective in understanding and exploiting market regulations 398
343 volatile situations, stockpiling resources is useless if and idiosyncrasies. It seems his company’s involve- 399
344 a firm does not understand where best to allocate ment in multiple markets has created an untenable 400
345 them in a complex environment. Similarly, estab- complexity for the current organizational structure. 401
346 lishing new information networks, as a firm should To reiterate, the preferred solutions for volatile and 402
347 do in times of uncertainty, risks an even greater uncertain situations are not relevant here: instead 403
348 degree of information overload, which can cause of stockpiling unneeded resources or gathering re- 404
349 firms to ‘freeze’ and not make any decisions at all. dundant information, the firm’s most efficient 405
 BUSHOR 1126 1–7

6 ORGANIZATIONAL PERFORMANCE
405 459
406 course of action is to restructure itself to align with the digital revolution is presenting traditional print 460
407 the new environmental complexity. publishers: how news junkies will want to stay in- 461
formed, how students will want to get their learning 462
2.4. Ambiguity materials, and how lovers of fiction will want to 463
408 discover new authors are factors that will require 464
409 Finally, Reid tries to carve out time each day to the industry to adopt a mindset of experimentation. 465
410 ponder whether or not an innovative product cur- Further, technology allows content providers to 466
411 rently under development is likely to catch on. entirely circumvent traditional publishers. It is 467
412 Although it is unlike anything on the market today, unclear what the revenue model that maximizes 468
413 it isn’t clear that customers will see the value return will be. Successful publishers, small and 469
414 proposition the product provides. He can’t afford large, have thus far responded to this ambiguity 470
415 to escalate commitment to the product if it isn’t with experimentation and a willingness to take 471
416 going to be a hit. He reads a marketing blog for risks. In an industry not typically recognized for 472
417 advice and learns that ‘‘The VUCA world is pure groundbreaking innovation, publishers have created 473
418 chaos. Successful firms avoid over-planning and bundled contracts for authors with both traditional 474
419 make things up as they go.’’ publishing and e-books, offered bonus content to 475
420 Ambiguity characterizes situations where there is customers who purchase e-books through their own 476
421 doubt about the nature of cause-and-effect rela- digital marketplaces, embedded exclusive videos 477
422 tionships. Looking at Reid’s situation, it is easy to within their e-books, and even offered book chap- 478
423 see how this is distinct from the other components ters or whole books for free (for a limited time) in 479
424 of VUCA. It’s not volatile: there is no reason for Reid order to entice new readers. What will work as a 480
425 to expect quick, unpredictable, unstable change. business model 10 years from now? The only way 481
426 It’s not complex: there aren’t an overwhelming these publishers can find out is to experiment with 482
427 number of moving parts here, just a lack of under- the unprecedented. 483
428 standing as to what will happen next. And that lack The potential impact of his company’s new prod- 484
429 of understanding is distinct from uncertainty: in a uct is very ambiguous to Reid. Being such a depar- 485
430 merely uncertain situation, you have a good idea of ture from what the company is known for, 486
431 what causes what. An ambiguous situation, on the predicting customer reaction to the product is dif- 487
432 other hand, typically revolves around a wholly new ficult; accurately forecasting associated supply 488
433 product, market, innovation, or opportunity. In an processes and needs may also prove problematic. 489
434 uncertain situation, you can predict what may hap- Reid’s best option may be experimentation. For 490
435 pen if you gather adequate information. An ambig- example, his company can introduce individual 491
436 uous situation is more challenging because of the features from the new product into existing prod- 492
437 newness: there is little historical precedent for ucts, experimenting with customer receptivity. 493
438 determining the outcomes of certain causes or Furthermore, his firm may contract out–—to a vari- 494
439 courses of action. ety of suppliers–—input processes required by these 495
440 Stockpiling resources, while appropriate for vol- new features, experimenting with different supply 496
441 atile situations, could be a huge waste of time and flows and partners. The key here is options. Reid 497
442 energy in an ambiguous situation. Gathering infor- isn’t locked into any one plan without knowledge of 498
443 mation is similarly unhelpful when a situation is cause and effect; that would be risky for the firm. 499
444 ambiguous, as you likely don’t know what informa- Instead, he spreads out his resources, trying many 500
445 tion would be most useful to gather. Likewise, a different new strategies and analyzing each care- 501
446 company restructuring could be enormously ineffi- fully until he can determine with some confidence 502
447 cient if the firm doesn’t really understand what that exactly which will be best suited to the market 503
448 restructuring might lead to. The fourth component environment. 504
449 of VUCA continues the overall trend: the solution
450 that works for one part of VUCA likely won’t work
451 for the other three. Each dimension of VUCA is 3. Final thoughts
452 distinct and unique, and requires a different opti- 505
453 mal course of action. In the case of ambiguity, we It isn’t just Reid Spencer who suffers from a daunting 506
454 believe the key to success is experimentation–—not agenda. There is broad consensus that these are 507
455 slack resources, information gathering, or restruc- challenging times for leaders. Globalization has 508
456 turation. created opportunities with one hand as it has in- 509
457 Recall that ambiguous situations are those in troduced threats with the other. The stubborn glob- 510
458 which the relationship between cause-and-effect al recession has blunted repeated bursts of optimism 511
459 is uncertain. Such could be said of the challenge for the return to a path of prosperity. Layer on the 512
 BUSHOR 1126 1–7

ORGANIZATIONAL PERFORMANCE 7
544
513
512 challenge of digesting technological advancements References
514 that impact industry, as well as the consequences of 545
Amerasia Consulting Group. (2013, June 3). Ambiguity equals 546
515 demographic shifts in the workforce, and there can
opportunity: The story of the new HBS application. Retrieved 547
516 be little doubt that leaders have their hands full. from http://www.amerasiaconsulting.com/blog/2013/6/3/ 548
517 Recognizing and then addressing the myriad factors ambiguity-equals-opportunity-the-story-of-the-new-hbs- 549
518 that can threaten organizational performance is not application 550
519 getting any easier. It’s a VUCA world, after all. Boston Consulting Group. (2013, March 21). Simplifying IT com- 551
520 So what are leaders to do to preserve and en- plexity a major opportunity for many companies [Press 552
Release]. Retrieved from http://www.bcg.com/media/Press 553
521 hance their companies’ performance? Consolation ReleaseDetails.aspx?id=tcm:12-130333 554
522 can be found in that we are all enduring this VUCA Brooks, R. (2010). A life cycle view of enterprise risk manage- 555
523 world together; after all, misery loves company. Or ment: The case of Southwest Airlines jet fuel hedging. Journal 556
524 we can choose to celebrate our capacity for lan- of Financial Education, 38(3/4), 33—45. 557
525 guage and the power words have, when carefully Doheny, M., Nagali, V., & Weig, F. (2012, May). Agile operations for 558
volatile times. McKinsey Quarterly. Retrieved from http:// 559
526 applied, to point us toward purposeful action. Of www.mckinsey.com/insights/operations/agile_operations_ 560
527 course, the components of VUCA are often present for_volatile_times 561
528 in some combination; for instance, a new product Draycott, R. (2012, April 25). ‘‘Marketing is dead’’ says Saatchi 562
529 market might be both volatile and ambiguous, or & Saatchi CEO. The Drum. Retrieved from http://www. 563
530 expansion into a new territory in the midst of thedrum.com/news/2012/04/25/marketing-dead-says-saatchi- 564
saatchi-ceo 565
531 sweeping governmental change might be both com- Hemingway, A., & Marquart, J. (2013, June 27). Uncertainty is 566
532 plex and uncertain. Although combinations of VUCA opportunity: Engage with purpose. Edelman. Retrieved from 567
533 elements are–—well, complex–—we believe that the http://www.edelman.com/post/uncertainty-is-opportunity- 568
534 solutions we propose to the components of VUCA are engage-with-purpose/ 569
535 worthwhile, both on their own and in combination. Heugens, P. P. M. A. R., & Lander, M. W. (2009). Structure! Agency! 570
(and other quarrels): A meta-analysis of institutional theories of 571
536 Left untangled, the mess implied by the phrase organization. Academy of Management Journal, 52(1), 61—85. 572
537 VUCA presents an unsolvable frustration. Develop- Warwick-Ching, L. (2013, March 25). Currency wars: Volatility 573
538 ing the discipline to carefully diagnose and label a provides profit opportunity. The Financial Times. Retrieved 574
539 situation for what it is, however, offers a salve. from http://www.ft.com/intl/cms/s/0/e17e1ab0-8714-11e2- 575
9dd7-00144feabdc0.html#axzz2r3QHfbxW 576
540 Leaders need to work to develop this discipline;
Whiteman, W. E. (1998). Training and educating army officers 577
541 organizational performance cannot be preserved, for the 21st century: Implications for the United States 578
542 let alone enhanced, if its finite resources are mis- Military Academy. Fort Belvoir, VA: Defense Technical Informa- 579
543 appropriated to address a phantom threat. tion Center. 580
581
582
583

View publication stats