Categories
Business Development & Marketing Cash Flow & Forecasting Finance General

VUCA – protecting your business when nothing is predictable

VUCA uncertaintyVUCA is an acronym devised by the US military to describe an environment of Volatility, Uncertainty, Complexity, and Ambiguity.
But it doesn’t only apply to conflict zones. At the moment, and for the foreseeable future, it could equally well describe the climate in which business is operating.
For UK businesses the predominant uncertainty has been the situation, arguably since June 2016, when the country voted by a narrow margin to leave the EU. Since then, there have been three years of VUCA which won’t end tomorrow when we know the outcome of today’s General Election.
In the meantime, the UK economy has been sluggish, with the latest data from the ONS this week indicating that there had been almost no growth, a derisory 0.7%, in the third quarter of the year.
However, there are other influences that have combined to make uncertainty the new business norm, including a rise in nationalistic sentiment and population, trade wars between the US and China and also those between Japan and S Korea, all of which have led to a slowdown in the global economy.
Longer-term influences are the rapid pace of automation and AI development and, increasingly, worries about the future of the environment, which are influencing both consumer and investors in the direction of more ethical and responsible behaviour and decision-making.
Given the headwinds, VUCA is likely to get worse and will affect businesses for a long time to come.

Can businesses turn VUCA into a positive?

Despite its reference, VUCA offers terrific opportunities to entrepreneurs and adaptable businesses although exploiting them tends to be at the expense of those businesses, normally large ones, that rely on stability and predictability.
The website  vuca-world.org re-imagines the acronym as Vision, Understanding, Clarity and Adaptability and several business writers, among them Karen Martin and Sunnie Giles, both writing for Forbes, make the point that ultimately dealing with uncertainty is down to the creativity, agility and skill of people in an organisation.
Giles suggests that businesses need a change of mindset, so that they can react to fast-moving changes.
These include “moving from hierarchy to self-organisation”, “democratising information”, “speeding up interactions” and using “simple rules to make quick decisions, rather than perfect analyses.”
Of course, there will need to be effective and flexible leadership and a sound knowledge of the business situation at any point in time, which makes such things as management accounts and cash flow monitoring, as well as sound knowledge of customers’ changing behaviour and requirements even more crucial.
I would argue that it is often SMEs that are in the best position to deal with a VUCA climate as very often they are flatter organisations where there has to be a good deal of multi-tasking when the numbers of key employees are fewer than in larger, more hierarchical organisations.