VUCA awareness must to thrive in business

LAHORE: In Pakistan, we have always been suffering in an environment of volatility, uncertainty, complexity and ambiguity (VUCA). After the 2008 financial crisis, VUCA has become a global phenomenon. The resultant research to operate in VUCA should benefit Pakistan as well.

No matter where one lives, works or operates business, the world is full of uncertainties because of various reasons which could be political, economical, social, technological, environmental or legal. Changes in the world and rapid transformations are creating a new environment and strategic business leaders have started designating it as per the VUCA environment. The notion of VUCA was introduced in 1990s. 

Pakistani businessmen face volatility and uncertainty due to fluid political and security situations, but there are no set rules to operate in such situations. There is a dire need to guide Pakistani entrepreneurs to successfully operate in the VUCA environment. After the advancement in technology, businesses in developed economies have been impacted even more adversely than their Pakistani counterparts.

Research has shown that with the right policies it is possible to prosper in volatile, uncertain, complex, and ambiguous times.

Volatility is an unexpected situation the duration of which is not known. The challenge is to operate in such a situation. The businessmen find it hard to take business decisions in such circumstances. Opinions about the duration and nature of volatility differ. For instance, prices of inputs may fluctuate after natural disaster or a bad crop. The solution lies in building in stocks and deviation of more resources for preparedness to deal with the circumstances. Besides stockpiling inventory, companies should also over buy talent. One word of caution is that these steps are expensive and the risk being taken should match the investment profile of the company.

In case of ambiguity the businesses have to operate in dark because generally there are no precedents on which they could fall back. Ambiguity is felt once an enterprise moves in to an immature market or it launches products that are outside the company’s core competencies. In such cases, it is advisable to experiment based on logical hypothesis.

We may not have complete knowledge of the causes of uncertainty, but businessmen are pretty certain about the impact it would have on their companies. Uncertainty would be at its peak if a competitor launches a product that messes the future of the business and market. In such instances the affected company should invest in collecting information, interpreting it and then sharing it within or even outside the organisation. This works best in conjugation with structural changes such as adding networks and information analysis.

As VUCA has overshadowed the whole business world irrespective of geography, it’s affecting Pakistan as well. The oil and gas sector is facing volatility due to fluctuation in international oil prices. Likewise, the auto industry is experiencing uncertainty of market, being exposed to Chinese intervention.

Also, pharmaceutical industry is exposed to the global technological revolution. Similarly, textile industry, cement industry, education sector, IT industry, software houses, health sector, and others experience extensive VUCA. Consequently it has affected almost every organisation, while only a few have grabbed the opportunity and created avenues of success.

In a VUCA world, the race does not go with swift, strong or smart. The race goes to the most adaptable who learns from experience and co-evolves with the complex adaptive systems within which they work and live.

Fortunately, awareness about the importance of VUCA has been felt by professional organisations and it is the theme of the ICAP conference on CFOs, where speakers would emphasise the need to operate in VUCA that will remain a permanent feature for businesses.