Winning in the VUCA World: Key Principles and Transformation Priorities for Enterprises

You have to learn the rules of the game and then you have to play better than anyone else. – Albert Einstein
Many enterprises are struggling to cope with the digital disruption happening in their industries. Digital disruption is one of the megatrends of our time but it is a difficult challenge to master. Many different forces have come together in what is described as a VUCA (volatile, uncertain, complex, and ambiguous) world. In this VUCA world, it is difficult to predict the winners. But it is precisely for this reason that the VUCA world also presents a huge opportunity for enterprises: those that are able to figure out the new rules of the game and transform themselves stand to win big.
I learned about and experienced the VUCA world in two very different situations – at Fidelity, an eminent global investment firm, and at Flipkart, a poster child of the e-commerce revolution in India. Subsequently, I have had the opportunity, through Incedo, to observe and work with many Fortune 100 companies that are facing digital disruption. Based on my experience at these companies, I have developed some key principles and transformation priorities for enterprises to win in the VUCA world.
My perspectives on this subject are presented under three topics:
Five key forces of disruption leading to unprecedented velocity of change
Complications of operating in a VUCA world
Eight new rules of management to win in the VUCA world
1. Five Key Forces of Disruption Leading to Unprecedented Velocity of Change
i. Technology disruption
The velocity of technology changes and business disruption we are witnessing is unprecedented. Mobile, e-commerce, cloud, big data, etc., have changed consumer behaviour and business models dramatically in less than fifteen years of their existence. We are now into the next phase of technological advancement, with artificial intelligence, robotics, machine learning, blockchain and the ‘internet of things’ dominating mindshare. The rate at which technology is changing makes it difficult to pivot on any one trend. Moreover, technology changes are a great equalizer: large organizations that are not nimble are often at a disadvantage in leveraging technology changes. Smart entrepreneurs and young companies are often best placed to experiment with and leverage new technologies.
ii. Changing expectations of customers
Technology disruptions are changing customer preferences dramatically. You are definitely dealing with a digitally savvy, significantly more aware and demanding customer. According to research by Accenture, 91 per cent of consumers say they are more likely to shop with brands providing offers and recommendations that are relevant to them.2
Two specific points to call out:
Different sets of customers can have very different expectations of the same experience. For example, customer expectations of the digital experience with an e-commerce company might be very different across segments: from convenience for the top- tier to value-seeking for the mid-tier segments. It is important to understand this and to design targeted customer offerings accordingly. Additionally, it must be remembered that it is not just customer segmentation but personalization too that is becoming increasingly important.
Digital is leading to greater information transparency for customers, on matters ranging from the composition and manufacturing details of food products to pricing in insurance. In many cases, transparency is leading to downward pressure on pricing.
iii. Shift of wealth from West to East
Purchasing power in developing countries like China, India and Brazil and many others is growing. A BCG study says that by 2023, Asia will represent 37 per cent of total cross-border assets, up from 31 per cent in 2018.3 Equally, growth in the traditional developed markets is becoming a challenge, as their population pyramid continues to age. This is creating tremendous growth opportunities for homegrown companies in developing markets, and challenges for many established majors who are focused on developed markets. This is also forcing multinational companies (MNCs) to look East, thereby creating tremendous competition (‘hyper-competition’) in these markets.
iv. Geopolitical uncertainty
Over the past two or three years, global politics has become unpredictable, in fact near bizarre. A few years ago, we were proclaiming that the world is flat and we are a global village. Suddenly, we see a resurgence of nationalism and protectionism coming up in the most unlikely places. The Covid-19 pandemic has further disrupted economies and businesses, putting time-tested business strategies, people practices and assumptions to the test. These sudden changes have not just brought in a lot of regulatory uncertainty, they have disrupted well-established business models too, and have had a devastating impact on small businesses and daily wage earners.
v. Shortening product and business cycles
With rapid technology changes and hyper-competition, product and business cycles are shrinking dramatically. It does not take very long for the hunter to become the hunted. Take the example of the Indian IT industry. It created the global outsourcing industry, which has disrupted a number of traditional operational processes and delivery models over the last twenty years. However, it is now facing growth challenges and is being forced to reinvent itself or risk getting thrown off the rails by disruption.
2. Complications of Operating in a VUCA World
The combination of technological innovation, shortening business cycles, hyper-competition and shifting of traditional markets is creating unprecedented uncertainty and a high velocity of change. The acronym VUCA best describes this world:
V: Volatility – High degree and speed of change.
U: Uncertainty – The lack of predictability, the prospect of surprise.
C: Complexity – The multiplex of forces, the confounding nature of issues, absence of cause-and-effect chains and the confusion that generally surrounds the organization today.
A: Ambiguity – The haziness of reality, the potential for being misread, the mixed meanings of conditions; and cause-and- effect confusion.
Management rules developed for a more structured, stable environment will most certainly not work in the VUCA world. This is a great challenge for managers (especially those of us above the age of forty!) as they need to unlearn what has made them successful so far.
Excerpt from the National Bestseller “Winning in the Digital Age” by Nitin Seth, CEO of Incedo Inc. To learn more visit www.winninginthedigitalage.com or purchase your copy of the bestselling book at Amazon, Flipkart, and leading bookstores nationwide.