Recently, I have found myself in lots of conversations about risk. There are many factors behind this, but partly it is driven by the recognition that our global economic, social and environmental context is becoming ever more VUCA: volatile, uncertain, complex and ambiguous.
Many of these conversations are coloured with a sense of fatigue. For lots of people, the pressures of surviving in this climate are relentless and the situation feels overwhelming; things are just getting too difficult, and the challenges we face seem beyond even our most experienced leaders.
However, I believe that this weariness also derives from a sense of boredom with the whole notion of VUCA: ‘Oh, VUCA is so yesterday; we were talking about that five years ago… what’s new?’ Are we attempting to rationalise our current reality so that we can move on to something new and more attractive? In our eagerness to identify the next fashionable acronym are we in danger of missing the point altogether?
Finding opportunities in a VUCA world
VUCA is simply one of many ways to describe the context within which business is operating – and it works. It encapsulates a difficult, systemic truth about the current state of our markets, our societies and our politics. VUCA was never intended as an action plan or model and it doesn’t pretend to be one; it’s descriptive, not operative.
However we choose to describe the situation, most business leaders will relate to feeling that everything is in a state of flux. It is no longer a given that businesses can continue to generate revenues from a marketplace in which they have built a level of competitive advantage.
So, what do we do about this? How do we take VUCA by the scruff of the neck and work out how to not only cope with it, but to thrive?
In my opinion, the most useful strategy is not to get hung up on mitigating risks, but to focus on maximising the practical opportunities that flow from a VUCA environment – to work out how best to build capacity to respond to opportunities and to take calculated risks.
All businesses must take risks to survive; yet at the same time, all businesses must avoid risks in order to survive. Calibrating the perfect approach to risk is tough to get right.
Conventional approaches to risk-scanning are top-heavy, normally relying on one person – or at best a small group of people – at the very top of a hierarchical heap. But the truth is that the more diversified and devolved the processes of scanning and deliberation, the more likely they are to generate the knowledge and understanding on which effective strategy depends. This inclusive approach also has the added benefit of creating spaces in which to foster innovation around opportunities. If these spaces are filled with thought, exchange, conversation, creativity and imagination then the raw building blocks of innovation will emerge organically.
The need for agility
In a world that feels increasingly unpredictable and uncertain, the new objective of business strategy must be to understand how to constantly evolve competitive advantage. At Impact we use the term ‘agility’ to describe the many different ways in which a business can adapt their market position in this way. Agility is a critical skill for any leader, enabling them to react quickly with adaptive and decisive leadership action in order to successfully address real-time challenges – and the new challenges of 2020 have only amplified this need. Our Leadership Agility model outlines the five key drivers needed to develop the agility muscle, including: readiness and scanning; awareness and self-management; communicating and inspiring; adaptive action; and collaboration and integration.
Companies with truly agile leadership are able to take more risks, not only because they have more diverse, inclusive risk-scanning capabilities but also because they can quickly flex their position if the decisions they made turn out to be wrong. They are able to learn from those mistakes and move forward. When combined with an agile mindset, risk-taking, then, can become a learning strategy in its own right.
It is frustrating to witness so many businesses failing to grasp both the strategic challenge and the opportunities of a VUCA world. When strategy becomes difficult, when the direction, scale and scope of change are difficult to map, and when everyone is just really busy fire-fighting – it is all too easy to do nothing. But employing the strategy of ‘hoping for the best’ will not cut it, because not taking action to create an agile capability that can thrive on risk leaves companies open to the biggest risk of all: exit.
David Williams is Impact's Founder and CEO.