Posted in Marketing & Strategy Articles, Total Reads: 2830
, Published on 04 December 2013
The characteristics of today’s world is defined in “VUCA” acronym first coined by US army war college Volatility Uncertainty Complexity Ambiguous.
The world around us is changing dynamically and decisions are taken for future, which is as Volatile as the rupee/dollar exchange rate, as Uncertain as the fed’s next announcement, as Complex as uprisings of the Middle East and as Ambiguous as the BRIC nation’s next growth numbers. The technology is ever changing and undermining the impact of social, economic, and knowledge change can prove to be fatal in this VUCA world. The mobile phones used by us today are faster than computers in Apollo Era.
According to Richard Foster from Yale, S&P 500 companies in 1958 survived on the index for an average of 61 years. By 1980, this figure had dropped to 25 years and by 2011, to only 18 years. Companies fell off the index as they declined in market value, were acquired by others or threatened by bankruptcy. Once respected corporates like Kodak, Enron and Lehman brother have vaporized showing how quickly things can change. With new dimensions like big data, social media that are coming up and many more new that are expected in future, one must realize the fact that present “revolutionary” ideas will get outdated and with them our knowledge, experience and learnings also gets outdated.
Image Courtesy: Idea go, freedigitalphotos.net
Today, the world is running because the developing countries are the drivers of the global economy. The innovations and technologies came from developed world and we adopted it but take an example of Narayan Hridulaya which challenged the domination of US on Medical and Healthcare sector by providing world class surgeries at fraction of cost that one would have incurred there. And now it’s going worldwide.
Taking the case of Lenovo, which has the highest market share in the world PC market, to strive in this turbulent market Lenovo has adopted a saying in mandarin which translates as ” A small change every year, a big change every three years”.
Paul Polman, CEO, Unilever, says “rapid globalization, and the resulting interdependence of financial markets, technology and economic systems have made this a more complex world to manage. The complexities created make it difficult to deal with. Enormous swings in currencies, raw material costs or climate have become the norm. The digital revolution will continue to change lives and businesses at an increasingly fast pace. Many struggle with this 'new normal'.”
We are in the world of digitization, rising developing world, and unsustainable environmental conditions.
The three most important things that need to be looked upon with this VUCA perspective are:
Strategy is paramount of all business decisions. It can’t be framed without looking at the business landscape. While in VUCA world strategy can be said to be futile, but then comes something called as emergent strategy, which is not planned, and is a result of something.
For example the Honda’s strategy when they entered American Markets. They first entered the market with its Super Club, light weight and inexpensive model. The initial failure of this model was uncertain as the model was number 1 in their native. At this time Japan was still a poor and resource starved country. Honda later repositioned its bike with the famous marketing slogan “You meet the nicest people on a Honda” and became one of the market leaders.
If the world is dynamic and volatile, it is so for everyone. In such an environment companies need to strike a balance between the Protect Strategy and Attack strategy. The strategy for today should be a right mix of efficiency, innovation and control.
Leadership and Management
How a leader and his style as well as investors’ confidence, rather an individual’s perception impacts on the decision making, strategies, and success of a company in the world which is volatile, uncertain, full of complexities and Ambiguous in nature ? From rhetoric to reality, globalization has opened up avenues for trade, and for a company to become successful it needs decision makers.
The leader’s gut to handle a crisis situation either brings the company out of the crisis or it’s a death knell for the firm. When Johnsons& Johnsons was held responsible for the death of 7 people because of consumption of one of its healthcare product. At this crisis situation the one time CEO Mr. James Burke stayed calm and took the decision of calling back its products worth $ 100 million but that brought the company on a very high place unlike the case of British Petroleum where, CEO aggressively handled the case of oil leakage in the ocean and denied from any such blame instead of working it out. The company suffered big way.
In today’s VUCA world people look for ethical factors as well to rate the health of a company which is very much required to stick on in the market and survive the worst. Investors’ confidence plays a very important role in any economy. As we have always seen right from the history that how investors’ confidence has molded the system always. Be it Asian Crisis 1997, or The Great Depression in 1930s or the very recent global financial crisis 2008.
In any company there has to be certain parameters at top notch which will build the investors’ confidence. The founding team has to be strong in executing and performing leadership.
What an investor wants from a company and its leaders?
Passion and commitment
Values and ethics
Planning and strategy
Strong track records
Vision and flexibility
Complementary, yet diverse skills
What they don’t want?
Risk Aversion attitude
Lack of ambition
Inability to attract talent
Lack of learning
Poor money managers
These all factors determine how confident an investor is while investing in an economy through FIIs and FDIs in various companies.
What stands most important for a corporate is its value chain and the focus in this VUCA world should be on establishing long term relations rather than short term profit. Corporates should follow a wholesome approach to develop an ecosystem that revolves around your business and where the needs of all stakeholders are taken care of.
MasterCard as a company went back to the drawing board to define its business, it realized that it would no longer assume itself as a credit card company, but a payment technology company. This fundamentally changed how it wanted to evolve, and the partners it wanted to work with.
"Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn't matter whether you are the lion or the gazelle. When the sun comes up, you better start running."
Winning in VUCA world
“Accept the uncertainties, surprises and shocks as a part of life and make your peace with it. Don't fret about the liquidity crunch or other seemingly insurmountable obstacles that are holding you back. Often times, it's about how creatively you tackle these obstacles that determines how successful you are, not how effectively you are able to buy your way out”
Three tourists touring in forest and suddenly a lion sprang out of nowhere. First tourist had cold feet, he just stood there waiting for lion to jump right on him. Looking at him, the second one started preparing himself to run, while the third just was observing all the happening around.
The first one yelled at the second guy, “Are you crazy, you never going to outrun this lion”. The second tourist said I don’t have to outrun him, I am outrunning you”. Suddenly something struck to the third tourist and he took out a lighter and scared the lion off.
If we relate this story with a company or an economy overall, this is how it faces crisis in either of the three ways, which is new normal in today’s world.
It completely catches off guard and is unable to adjust to the need of the situation, it gives up to the vulnerability of the crisis.
It tries to outwit the competitors by taking steps just to stay afloat and not to survive in long run
It strategizes to handle the crisis by grasping the whole situation and taking full control of the confrontation. It accepts the undesirable consequences by sailing smoothly on the surface and struggling hard to find solutions.
Which one do we have to be, to be a part of in this new ballgame, instead of taking escape route?
It’s just not about following the trend to which already companies have accustomed or getting accustomed but to foresee what hasn’t yet come. Being ready to face that challenge is what required from companies and the leaders.
This article has been authored by Nimisha Jain And Sundeep Babbar from Great Lakes Insitute of Management