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Is VUCA Really The Enemy Of Good Decision-Making?

Erik Larson Jan 12, 2022 7:00:00 AM

Coined by military strategists to describe the post-Cold War world, VUCA stands for Volatility, Uncertainty, Complexity, Ambiguity. I first learned of the concept as an Air Force captain in the early ‘90s, and it captured the massive visceral change when the Soviet Union collapsed. While my commanders had spent their overseas deployments on large established bases in Europe and Asia worried about nuclear war, I spent my deployed time in impromptu desert outposts of dusty tents worried about car bombs.

Since then, VUCA has become trendy in business use, largely driven by digital disruption of business models and consumer behaviors. Yet however dramatic the digital hype, those business disruptions are slow and circumscribed compared to the instant, far-reaching economic dislocation caused by the pandemic. The breathless press releases and skyrocketing Silicon Valley IPOs have been changing many aspects of business over the past twenty years. The global pandemic has changed almost every aspect of business over the past twenty months.

Changes in consumer behavior (let’s eat outside or just get it delivered) and workforce expectations (I’ve got better ways to spend my time than commuting to the office), combined with inflation and unimaginable supply chain challenges, are driving huge shifts in the product and service economies. All together, the volatility, uncertainty, complexity and ambiguity of these changes are hitting complex consumer-facing industries like consumer packaged goods especially hard.

VUCA Intensifies Existing Decision-Making Problems

In the military origins of the concept, VUCA was a problem primarily due to lack of agility – the old Cold War organizations were too big and too slow to react to the new fast and fragmented world. That same challenge applies to global consumer businesses today. Business decision-making processes are too slow to react and too poorly tracked to adapt, and the pandemic era has laid those shortcomings bare.

The problem is that as VUCA increases, existing decision-making problems get worse. This intensification is especially true of the four most common shortcomings of bottoms-up and top-down approaches to decision-making.

  1. Data-To-Decision Disconnects: Bottom-up analytics teams frequently generate analyses and insights that do not directly address critical decisions facing their brands and businesses. Top-down decision-makers often ignore the results and rely on experience and intuition, meaning data-driven insights and recommendations never make it to the “decision table.” More VUCA overwhelms traditional “boil the ocean” approaches to analysis and obsoletes hard-won experience and intuition.
  2. Coordination Collapse: Bottom-up decision teams push decisions to the edge of organizations, but it is tricky to ensure a big picture view of complex cross-functional collaboration. Top-down decision-makers cut through complexity with big picture thinking, but commanding every detail is impossible. Moreover, such executive action cuts important stakeholders out of the process, hurting employee ownership and performance. More VUCA scrambles matrixed decision-making and muddles attempts to exert centralized controls, especially with a remote and more transient workforce.
  3. Declining Institutional Knowledge: Bottom-up decision-making increases the risk of execution “know-how” draining out of the organization as employee tenures shorten. Top-down decisions increase the risk further by concentrating tacit knowledge in a few people. More VUCA exacerbates both problems as less experienced employees move into decision-making roles and more experienced decision-makers find the value of their ‘gut-feelings’ wiped out in the face of unprecedented situations.
  4. No Tracking Means No Learning: Few organizations systematically track critical decisions, leaving no definitive record of what was decided, how decisions were made, and what happened. This lack of transparency for both bottom-up and top-down decisions hides decision-making shortcomings and holds the organization back from learning about and improving the situation. More VUCA forces changes to decision-making processes, but changing a poorly understood process is as likely to cause problems as it is to improve the situation.

Using Decision-Making To Harness VUCA For Growth

But VUCA itself is not the enemy. On the contrary, greater volatility, more uncertainty, increased complexity and wider ambiguity all represent opportunities for more agile companies to transform their decision-making processes, outmaneuver their competitors and grow much more quickly in 2022. VUCA lets good decision-makers thrive — leaders can extend their lead and stragglers can surge ahead.

The crucial first step is to map decisions as they are made today. I believe the new “decision-back” approach is most promising. Decision-back creates complete maps of key business decisions to help guide analysis, simplify coordination, capture institutional knowledge and track results to set the stage for rapid organizational learning. This downloadable white paper describes how to apply the approach with several example decisions.

While the pandemic erupted practically overnight, there is no quick fix for the heightened decision-making problems that face most organizations. That makes acting now to improve decision-making even more urgent. Successful leaders will use effective decision-making to grow with more agile and resilient organizations that can react and adapt to the ever-increasing VUCA world.