In the late 1990s, the U.S. military came up a new acronym to describe the world: VUCA. It stands for “volatile, uncertain, complex, and ambiguous.” Threats were evolving from those presented by monolithic blocs such as the Soviet Union and its allies to a more fragmented set of dangerous actors. U.S. embassies were bombed in Kenya and Tanzania in 1998, bringing radical jihadists to the attention of the intelligence and law enforcement communities. The USS Cole was attacked in 2000 by a suicide bomber. The terror attacks of 9/11, carried out by a small group of individuals belonging to what had been seen as an overseas threat, brought the chilling reality of this new world home to the world’s remaining superpower. Subsequent attacks in London, Madrid, Ottawa, Beirut, Istanbul, Baghdad, Paris, Brussels, and elsewhere demonstrate that the threat is pervasive globally and ongoing.
And those represent only physical terrorism. WikiLeaks and the Panama Papers disclosures have rocked establishment elites and shaken trust in institutions. Migrants and refugees are on the move in massive numbers in search of a more hopeful existence. Increasingly common extreme weather events bring surging flood waters, damaging winds, mountains of snow, and raging fires that threaten our communities. Turbulence is all around us.
Why does this matter to your leadership? In short, because context is important. The over-arching gestalt of your time shapes you and your world view: your expectations, your perceptions of risk, your willingness to trust, and how you balance your individual interests versus those of the company where you work, the community where you live, and the nation which you call home. It has a similar impact on your work associates, your customers, your investors, and the communities in which you hope to lead. It shapes the contours of your culture. There is significant variation among individuals, of course, though larger meta-events and trends make an unmistakable imprint that you must carefully read and to which you must respond as you lead.
The United States is my home, and a concise (and admittedly free of nuance) overview of its recent history serves to illustrate the point. The generation marked by the Great Depression carried forward frugality and an abhorrence of waste throughout their lives—even into more prosperous times. If you could secure a steady job, you kept it. Even if you hated going to work every day. Stability was paramount. Coming of age during or immediately after WWII brought a shift. Confidence in the nation and its institutions was high despite angst over a possible nuclear war with Soviet Union. The future looked bright. The economy boomed, suburbs sprouted, and the middle class blossomed. The 1960s brought tumult, starting with the assassination of President John F. Kennedy in 1963. America became committed to an increasingly unpopular war in Southeast Asia. Malcolm X, Martin Luther King, Jr., and Robert F. Kennedy were all assassinated. There were civil rights marches, anti-war protest, and race riots.
In the interest of brevity, I will not detail every decade, but each was marked by a general feeling of strength or vulnerability, economic vitality or stagnation, relative stability or turbulence, and optimism or pessimism. Which brings us back to now—and VUCA.
VUCA has moved beyond the military and is also widely used by businesses and nonprofit organizations to describe the world in which they operate. Consider this:
Volatility: Describes the pace of change that is perceived to be increasing. Technology may be the easiest example to cite: it may seem incredible now, but not too long ago, a phone could last 20 years. The shift from rotary dial to touchtone was the only major technological advance for decades. Today, you cycle through a phone at least every two years, and you may have a plan that encourages you to adopt a new model every few months. New features are released continually. In fact, what we have now are pocket-sized digital devices that happen to make phone calls.
Geopolitically, we spent 40 years facing off against a single perceived threat: the Soviet Union and its satellites. The world revolved around two super powers. Today, threats morph almost overnight. Five years ago, no one knew anything about a group called ISIS. Only recently is Al Qaeda back in the news. Britain may exit the European Union. China is coming into its own as a global power.
In business, apps and online games come and go with meteoric speed—and the firms behind them rise and fall just as fast. MySpace, anyone? The average time that a company spends in the Standard & Poor’s index of the largest 500 firms publicly traded on American stock exchanges (the S&P 500) has been declining since the 1960s, and the pace of churn has continually increased. A company is replaced every two weeks. At the level of the individual worker, people are holding an average of more than 10 jobs over their working lives, and their average tenure is just 4.4 years at each.
Uncertainty: Means that outcomes are less predictable, even from familiar actions and processes. There is a greater chance of surprise, for good or ill. Will your company still exist in three or five years? How confident are you that you can predict, say, where streaming music will be in 24 months? Or driverless cars in 10? (Though, not long ago they were confined to the realm of science fiction.) Did you foresee the rise of Donald Trump or Bernie Sanders in the 2016 U.S. presidential race? Who among us would have bet money that transgender rights would be making headlines in 2016—particularly in terms of public policy, not celebrity gawking?
Incumbents, and even entire industries, are being disrupted by unconventional competitors. The taxi business and its regulators remain flummoxed by Uber with its ad hoc network of drivers and flexible pricing. Hoteliers are wrestling with Airbnb, now the lodging company with the most rooms in the world, yet owning none of them. The Internet of Things is in its infancy, and chances are that no one will foresee all of its impact.
In geopolitics, the Arab Spring seemed to erupt out of nowhere in December 2010 after a Tunisian fruit seller set himself on fire to protest police actions against him. Protests rocked the streets of city after city, transmitted via social media in real time. Suddenly, there was a cascade of falling governments across the region. Many predicted that democracy would follow. Instead, many of these nations saw either the return of autocratic government or prolonged turmoil. The rise of ISIS took many by surprise. In the U.S., at least, “active shooter” drills are increasingly common in all sorts of organizations because these seemingly random events are becoming more and more common.
Complexity: Refers to the many interdependencies in globally connected organizations, value chains, and societies. Many of our organizations remained designed with a linear mindset: there is a formal organizational chart that shows who reports to whom and how responsibilities are divided. We have workflows and financial projections that suggest that step follows step in an orderly flow of information, physical resources, and funds. The reality is that less and less of our work—and life—flows this way.
This is not to suggest that linear thinking and systems are always bad. If you were to visit an Apple or Samsung mobile phone production line, you would see linearity in action. Physical production is one of those situations when linearity gets you the most efficiency and quality control. After all, you can specify all of the parts that go into a Model X phone, and there is only one correct way to put them into the device. You can study and optimize a standard process for all workers to use. The trick is recognizing that while a situation like this may be complicated, it is not necessarily complex.
Knowledge work and innovation, however, are complex. So are geopolitics, free markets, and weather systems, for example. You may ascertain the relative probability of outcomes, but it is impossible to consistently predict results with exactitude. There are too many independent variables. Put five people in a room to solve a customer problem today and they get nowhere. Tomorrow, those same five people in the same room click with one fresh approach after another. What changed? A random comment sparked an idea. Good news about a sister’s engagement shifted someone’s mood. One member of the team reframed the challenge, stimulating original insights. It wasn’t the components of the system that changed; it was the chemistry and relationship between them. That’s the mystery and magic of complexity.
It is likely that in the setting in which you lead, much is achieved through informal networks, ad hoc relationships, and intentional efforts to break the constraints of formal structures. You work in a complex, adaptive system. Ideas and information must flow freely. Serendipity is welcomed. Deviations from standard operating procedures that are shunned on a production line can lead to breakthrough discoveries at a hackathon. As teams and organizations become dispersed geographically, more dependent upon technology, and engaged in more asynchronous activity mastering the dynamics of complexity move front-and-center. I have written more about complexity in Three Critical Shifts in Thinking for the Evolving Leader, which is a free ebook.
Ambiguous: Refers to a certain haziness in the present and the future. Who is winning and who is losing? Momentum shifts are frequent. Cause and effect aren’t perniciously difficult to link. Competitive lines are not as clearly drawn as they were when entire industries could be summed up simply as Coke versus Pepsi, UPS versus FedEx, or Microsoft versus Apple. There is a multiplicity of influencers, large and small. Apple and Google are moving toward major stakes in the development of driverless cars, for example. Their actions may reshape the automotive future in ways that the traditional car companies could neither imagine nor predict.
All of the elements of VUCA may not be present in every situation. You may face one or two, depending upon how much you know about a situation and how much control you have over the variables. For example, a situation may be quite volatile but not particularly ambiguous. The challenge for you as a leader is that we all tend to over-estimate our knowledge and predictive capacity.
If VUCA were not daunting enough, I will add two new elements that take us from VUCA to VUCAST. They are system-scale change and ubiquitous transparency. They make the job of leaders more critical and formidable than ever.
System-scale change can be seen in four mega-trends that I have been following since 2008. These are what I call “Pillar Trends” because they are global, will affect virtually everyone, have a discernable long-term trend curve (even if final outcomes are not clear), and no single individual or organization can alter their basic trajectory. They are:
- Climate change: The science showing that the Earth is warming is overwhelming, and as a result, seas are rising, wet regions are getting wetter and dry regions drier, and the frequency of extreme weather events appears to be on the rise. Some still argue about the role that humans play in this. I’ll let the overwhelming scientific evidence stand on its own. Whether or not you believe it does not change the fact that you will have to deal with its impact on your workers, customers, suppliers, and other stakeholders.
- Global urbanization: More than half of the world’s population now lives in cities, and that number is projected to rise to 75% by 2030. This does not mean that everyone is moving to New York or London. Much of the urban growth will occur in the developing world, as cities such as Lagos, Nigeria, and Dhaka, Bangladesh move into the list of the top 10 global population centers.
- Aging populations in the developed world: The confluence of falling birthrates and increased longevity mean that we, as a species, are getting older on average. Europeans are the oldest, followed by North Americans, and then the Chinese. The greatest concentrations of young people will be found in the planet’s south and east regions. Interestingly, and challengingly, global wealth will remain concentrated in the North and the West.
- Exponential growth in computing power and connectivity: The growth of the power and pervasiveness of technology will continue. Costs will continue to decline. Our collective knowledge will surge, and an unprecedented number of people will have access to it.
Ubiquitous transparency is a direct outgrowth of the last component of system-scale change. When a Royal Caribbean cruise ship hit a fierce storm off North Carolina in February 2016, passengers were instantly uploading video—well before the company could craft a response. How many dissatisfied customers take straight to Yelp or TripAdvisor to vent their frustrations? The aforementioned WikiLeaks and Panama Papers revelations opened thousands of supposedly secret documents to public view. On a personal level, your social media activity may determine your career prospects and even your credit score. Looking for a job? You will certainly stop by GlassDoor.com or another such site where employers are reviewed by their employees. You have to assume that almost anyone can know almost anything in almost real time. While this will cause some organizations to try to lock things down more tightly than ever, expectations of transparency will also grow.
Each element of VUCAST brings with it both challenges and opportunities. Whether you are staying up nights to launch a startup or hoping to advance at an established company, your leadership mindset, decisions, and actions will need to be attuned to this reality.