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December 3, 2021

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On how to respond to a rapidly changing business environment

When the World Health Organization (WHO) announced the COVID-19 pandemic in March 2020, I was just finishing up an assignment in Oman. On the way to the airport, seeing the news, I bought a mask for the flight home to Switzerland.

My colleague on the trip was somewhat surprised by this — after all, I was probably the only person on the plane wearing any protection. Of course, I felt a little self-conscious, but, as a trained biologist, I had some sense of what was to come, and I was ready and able to adapt my behavior in response. Three months later, the WHO updated its own guidance to recommend the wearing of face masks to tackle the rapid spread of the virus.

Being ready to react to disruption goes beyond having the right knowledge at hand; it requires developing certain traits that allow us to continuously put that knowledge into practice and to adapt. For organizations, it means fostering a specific kind of culture biased towards action.

The pandemic may have transformed the way we work, consume and live, but, in reality, this shock to the system only served to turbocharge forces that were already reshaping our world. COVID-19 was the ultimate stress test for the ability of companies and leaders to navigate, adapt, survive and seize opportunities in a volatile, uncertain, complex and ambiguous (VUCA) world.

How did you fare? I’m sure most executives would say they could have done better. Perhaps you didn’t react quickly enough, or failed to see certain trends emerging. Did your organization lack the agility, creativity and leadership necessary to pivot? Were you well prepared to turn trends into opportunities? Did you ask the right questions early on? Maybe you had failed to nurture an active ecosystem to co-create solutions for the unprecedented challenges posed by the pandemic.

It is possible, but not easy, to learn how to react to rapid change. Over time, we can train ourselves and our teams with the culture and attributes needed to continuously adapt and prosper, rather than drown, in uncertainty and the fear of the unknown. In this article, I would like to propose a helpful and battle-tested framework and checklist to assess and then strengthen your own VUCA world readiness.

The term VUCA — used to describe the ever-changing and unpredictable nature of the global economy — dates back to 1987. While the pandemic sent global uncertainty soaring to record levels in 2020, uncertainty has in fact been trending upwards for decades.

Although the global uncertainty measures from the World Uncertainity Index have eased to pre-pandemic levels, COVID-19 drew hard battle lines between those organizations that could handle rapid change and those that could not. From my observations, the big winners were already primed with an ability to transform, pivot and innovate at speed, while not completely abandoning their existing or traditional offerings.

Take, for example, music streaming firm Spotify. As advertisers cut budgets during the pandemic, the company’s free user/advertisement model came under fire. In response, Spotify leveraged its existing streaming service and customer base to move into offering its own original content with exclusive, in-demand podcast deals. How can more organizations follow this kind of example? The concept of VUCA has been influencing the role of leadership for decades, but there has been limited help for executives to directly address and overcome it.

Based on my work and research helping organizations navigate change over the past year, I have created the following framework and checklist to help executives and their teams more effectively respond to a rapidly changing VUCA business environment. It is built on four key pillars of action: learn, adapt, collaborate, experiment (LACE).

1. Learn

Checklist questions: How do you embrace new ways of thinking and doing? How do you train the curiosity muscle to identify and act on opportunities? What systems are in place for active and continuous learning?

By training the “curiosity muscle,” organizations must embrace new ways of thinking and doing by adopting active and continuous learning. Innovation is a social phenomenon that can be learned, and cultures of curiosity can be developed.

Encourage and empower people to challenge the status quo, ask questions, connect and interact meaningfully with many diverse people, seek out answers, take risks and, yes, also fail.

2. Adapt

Checklist questions: Can you transform at the speed of change? How does your organization engage in rapid adaptation and increase its flexibility? How focused are you on customer centricity?

Organizations must be able to transform at the speed of change in a way that develops long-term resilience, not just short-term survival. This means developing increased flexibility and a deeper focus on customer centricity to evolve the core business to create new growth.

Look to align your company with one or more of the long-term trends that have intensified during the pandemic. Take for example, farmers and local stores who have harnessed digital platforms such as Shopify to enhance their direct-to-consumer offerings. Tapping into the rapid evolution of digital technologies and the importance of sustainability as a megatrend, drinks maker AB InBev has deployed blockchain to create a secure monitoring and audit system for ingredients in its supply chain to safeguard standards and improve its management of natural resources.

3. Collaborate

Checklist questions: How are you striving to be a partner of choice? How do you foster a common purpose in your organization? Do you co-create with partners in a way that offers shared value?

Complexity calls for collaboration. In the increasingly complex business environment, where talent is a scarce resource, no one actor can even dream of having all the answers, all the time. To create competitive edge in the hunt for ideas and solutions, organizations must strive to be the partner of choice and focus on shared value creation by tapping into their entire ecosystem of stakeholders, including suppliers, customers, players beyond their industry and even competitors.

4. Experiment

Checklist questions: Does your organization learn by doing? How often do you rethink your value creation strategy? Do you engage in “sense-making” — interpreting and seeing potential in new ideas, trends and technology?

Being prepared to take risks by experimenting, rethinking value creation, making sense of what is available such as data, learning by doing, embracing new technology to create value and looking at problems through different lenses is crucial to success in a VUCA world.

Take Marriott International. To counter the loss of income from restrictions on business travel and tourism, the global hotel giant offered alternative and hygienic workspaces in its rooms with daytime rates.

Razorpay experimented with the concept of virtual hackathons during its 2020 Payments Innovation Week, with 200 employees working in 50 teams producing more than 100 new ideas. The firm said it would implement more than 80 percent of those new ideas.

By asking the right questions and actively working to develop these four pillars, you will gradually nurture and acquire the culture and tools to “VUCA-proof” your organization.

Louise Muhdi is Affiliate Professor of Innovation and Strategy at IMD. Copyright: IMD.




 

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