Embracing the opportunities of VUCA in business

Meeting Complexity with Complexity

Never has there been so much complexity in our world. Running institutions is proving increasingly difficult due to the complexity they are operating under. Complexity appears to have a life of its own, making it more difficult for organisations to organise themselves sustainably.

Or is it? Is our world really becoming more complex? Or isn’t it just that the methods we are using were never designed for complexity? Isn’t it that leadership in complexity requires a different set of tools, a different mindset, different ways of working? If so, wouldn’t it be better to change our methods and mindset, rather than blaming complexity?

In this article, I want to give an overview of a few of the key thinkers and researchers who have been exploring complexity and uncertainty in a business organisational setting.

The Consequences of VUCA

Complexity is one of four challenges expressed in the acronym VUCA – Volatility, Uncertainty, Complexity, Ambiguity. The term VUCA was first used in US military, but has largely been adopted in the business world to refer to challenges which traditional leadership models find difficult to address. There is an ever-growing awareness that the methods and mindsets that have worked well in the past do not work in our “complex and uncertain” environment.

Many who have studied different aspects of VUCA and ‘wicked problems’ have concluded that it requires different skills, structures, modus operandi, mindsets and organisational principles from those currently taught and practised. This is true in education, politics, business, communities as well as other societal institutions. It turns out our current leadership approaches are counter-productive, even harmful, to working with uncertainty and complexity. In trying to gain control of complexities, in trying to get a grip, our management methods are actually making things worse.

Egyptian Revolution 2011: unpredictable, unplanned and without leaders – Emergence from complexity

Are uncertainty and complexity new phenomena? This is unlikely, indeed they have always existed – think of parents raising children, intricately complex and unpredictable, yet generally managed quite well by most. Or think of farmers and how they have to work with changing and uncertain weather conditions. Uncertainty and complexity are not new!

While there is nothing new about VUCA (except the acronym itself), its omnipresence appears to be increasing probably due to, on one hand, external factors like globalisation, the internet and technological interdependence. And on the other hand, I would argue that the cumulative effect of applying the wrong management practices to complexity has exacerbated the challenges of VUCA, a bit like continuously trying to put out a fire with oil instead of water.

The Problem with Management

Applying dehumanising command and control hierarchical management methods over 100 years has progressively made complexity more complex. Ignoring or suppressing issues like the climate crisis, has led to the world becoming ever more unstable and uncertain, to the point now where the existence of many of our institutions is threatened, if not our whole civilisation.

This is bad news for managers and executives in organisations because it requires a complete overhaul of how organisations are run. It is also bad news for politicians, as is evident from the way our Western democracies are breaking down, with politics becoming increasingly divisive and toxic. Education also needs a complete rethink, essentially because it is teaching the wrong skills and mindset.

The ‘natural’ management response to complexity is to do more of what created it in the first place, i.e. to fight and bring it under control, to suppress it or to ‘fix’ it, rather than to accept and work with it. What complexity requires is the forming of a complete picture of an issue (symptoms), looking at it from various angles to identify the root causes (problems), from which new patterns can emerge. Because any individual is limited by the filters or lens he/she perceives through, this can only be achieved by including and integrating the perspectives of all the people affected. Yet this is precisely what our current management structures discourage ….. and so we throw more oil onto the fire.

Retired business strategy and one of the earlier human complexity researcher Ralph Stacey, for instance, a mathematician who spent many years working with leaders in industry before returning to academia, concludes that most management activities in organisations, like annual budgeting, planning & control and strategy development are largely meaningless in an unpredictable world, and therefore a waste. Worse, he reports senior executives often know or intuit this, yet continue to endorse these wasteful activities simply because, like religious rituals, they maintain stability in organisations and minimise the anxiety that would otherwise arise when facing the abyss of uncertainty. While Stacey has elaborated a complex theory of complexity transformation, in order to address the disconnect he essentially calls for more wide-scale conversations in the form of what he called “reflexive inquiry”, the most complex of all complexities.

So what can we do about VUCA? How can we respond to it? And specifically, rather than fighting or fixing complexity, how can we work with it to our advantage, how can we make it our friend, and how can we embrace VUCA? What follows is the research and thinking of VUCA researchers who work practically in the field within organisations.

Cynefin

If you have not come across Dave Snowden‘s Cynefin sense-making model you should definitely do so when exploring complexity. The Cynefin framework offers an easy-to-understand way of looking at complexity. Most complexity research is based on mathematics, computer science, biology and physics. The Cynefin framework is one of the earlier attempts to relate complexity to leadership, culture and organisational development, by exploring the human dimension of sense-making and decision-making.

In the Cynefin framework there are four quadrants: Simple or Obvious, Complicated, Complex and Chaos. The suggestion is that all problems or challenges fall into one of these, each quadrant requires a completely different way of solving the problem, and this framework helps decision-makers decide what kind of thinking they should apply to solve a problem.

Graphic showing the Cynefin 4 part model: Complex, Complicated, Chaotic, Simple

Cynefin was conceived in an IT data management context. The framework cannot always be applied in non-IT contexts, so while it is useful conceptually there is more to complexity than Cynefin, and we should also explore other avenues. Many of Dave Snowden’s presentations have been recorded and are worth listening to, if you can get past his cynicism. The name Cynefin has an interesting connotation to complexity – it is the Welsh word for habitat, but refers to one’s place of multiple belongings (cultural, family, national, religious, geographic etc.)!

Vertical or Horizontal

Vertical cost management, which aims to reduce costs, actually achieve the opposite, they increase costs when analysed through the systems lens of the total organisational cost rather than just myopically at the particular activities which are being cost-managed.

Uncertainty and unpredictability have ramifications for many of our management practices. It has been shown, for instance, that our practices of vertical cost management, which aim to reduce costs, actually achieve the opposite, they increase costs when analysed through the systems lens of the total organisational cost rather than just myopically at the particular activities which are being cost-managed. This is because they divert attention away from what really matters in business, customer satisfaction, to mere cost reduction compliance. Essentially one cannot ‘improve’ the whole simply by working on the parts, indeed that is often harmful, as Russell Ackoff has repeatedly emphasised, a point often missed by financial control.

Cost management tends to increase ‘failure demand’, a term invented by consultant John Seddon in his Vanguard Method. Failure Demand (as opposed to Value Demand) is generated when not meeting real customer needs. The failure arises from cost management methods focussing on measuring the efficiency of response to (failure) demand, rather than on working on eliminating those failures in the first place. This is also a premise of Beyond Budgeting, as well as one of its derivatives, consultant Niels Pflaeging‘s Beta Codex (see his book Organising for Complexity). Likewise Toyota and Edward Deming already recognised this 50 years ago when they famously showed how, for instance, you do not improve the quality of a product by increasing the inspection at the end of the line; rather you integrate a horizontal zero-defect ‘customer’ mindset on the shop floor, using an ‘internal customer’ outlook and tools like A3-thinking. This has proven very difficult for Western organisations to apply, because it essentially means giving thinking power back to the workers, effectively making management as we know it ‘redundant’.

VUCA Skills

Switching to an educational setting, researcher Dr Theo Dawson has been exploring the ‘Lexica scale’ based on people’s innate curiosity and learning ability, and by implication organisations’ ability to learn and adapt, vital in a world of VUCA. Working with VUCA requires a departure from our traditional (Darwinian?) competitive, adversarial way of thinking taught at school and practiced in politics, the courts and business. She refers to developing specific ‘VUCA skills’. VUCA skills include

  • interpersonal skills (e.g. active listening),
  • perspective coordination skills (complementarity),
  • contextual thinking skills (shifting perspectives according to context) and
  • collaboration skills (inclusive decision-making);

so, overall the ability to integrate and coordinate solutions collectively. This is a move away from ‘either-or’ thinking towards ‘both-and’ thinking. The inclusion of different perspectives, rather than their exclusion, is what is crucial here. Our Western democracies are falling apart, because the voting system excludes minorities whose perspectives are simply excluded and ignored. By continuing to teach adversarial debating and competitive achievement skills in education we are putting more oil on the fire – resulting in our society being increasingly divided and toxic.

VUCA requires the integration and fusion of different perspectives, and not alpha heroes with all the ‘right’ answers. Our educational testing culture, however, does not allow for ‘not knowing’ – schools teach us there is always a right answer which we should know. VUCA skills, on the other hand, suggest we have to unlearn this habit of (pretending to) knowing the answer. What we should learn, instead, is how to respond to complex problems from a vantage point of not knowing, probingly approaching inquiry with an empty mind and humility; likewise we need to learn how to integrate seemingly polar opposite perspectives collaboratively.

Like learning to drive or dance at first, acquiring these integration skills can initially feel rather awkward and ‘unnatural’, and we easily revert to the old prima donna habits taught at school. Some of the ways suggested to learn these VUCA skills include design thinking and practicing Sociocracy. We should take note, however, that one cannot learn integration skills by oneself, these have to be practised and refined in groups. We therefore need to create more Communities of Practice where people can hone these new skills. Except for side activities like team sports and school plays our education rarely provides opportunities for pupils to learn these skills – again, education needs reinventing.

Rich Interconnectivity

While it is important to work on individual and team / community skills at the micro-level, this is insufficient without also redesigning the system and culture at the macro-level. This is why the work of practical researchers like Prof Mary Uhl-Bien is important. Building on the huge knowledge base developed in the sciences Uhl-Bien explores the human application of complexity in corporations, a distinctly non-mathematical social technology application of complexity.

Uhl-Bien defines complexity as ‘rich interconnectivity’. Interconnecting parts become complex when the parts interacting actually influence and change each other. She gives mayonnaise as an example in that once the egg and oil atoms start interacting they influence each other and change to a point where they cannot revert back to their original state, like a butterfly never reverts to a caterpillar. This happens in human interactions, whereby people influence and change each other unconsciously – like lovers being subtly yet irrevocably transformed after falling out of love from when they first fell in love.

The richness in interconnectivity is generated by networked parts being as diverse in outlook as possible and being constantly evolving. So while intensive project teams can be deeply effective, for instance, they need to be complemented by another mechanism which magnifies exposure to a dynamic and ever-changing multitude of perspectives.

Uhl-Bien’s team has researched many organisations and observed most try to manage complexity by controlling it. This is precisely what makes it worse. Complexity comprises many moving and interacting parts, and the best way to work with complexity is through complexity itself in what she calls Adaptive Space. What this means is bringing in intermingling constantly reforming and interacting networks of multi-perspectivity into conversation.  In an organisation, Adaptive Space sits in between the entrepreneurial / innovative system and the result-driven / operational system. This is currently missing in the structure of most organisations.

Adaptive Space is created by letting the many interacting parts and networks move and intermix, thereby interacting more intensively, richly. This is what enables new ways or patterns to emerge. Most organisations tend to control or terminate such moving interactions and get people to stay in their place, in teams and silos, which has the opposite effect. Uhl-Bien advocates pan-organisational Adaptive Spaces with a strong focus on interchange and connectivity, using practices like Liberating Structures and the like.

A key part in this process is the interplay between Linking and Conflicting. Without tension and conflict, there is no flame of interactivity, but this has to be combined with linking and connecting. It is this combination that sparks new patterns, new ideas, new thinking. Adaptive space should be a safe space where both conflicting and linking can occur. To enable such spaces, a new type of leader is required, which Uhl-Bien simply refers to as ‘Adaptive Leaders’. They have (or need to learn) their own special sets of skills, which are different from entrepreneurial or from operational leadership skills. As I see it the Adaptive Leader skills required are those of, in the jargon, ‘facilitative leadership’.

So in addition to VUCA skills, what complexity calls for are deeper conversations that matter, or as Stacey says reflexive enquiry.  However Uhl-Bien emphasises the conversations themselves should be complex bringing in multifaceted, dynamic and undirected, so not just within existing teams, departments and silos, but across the different areas of an organisation. The Adaptive Space maintains a balance between the innovative spirit of an organisation and its operational stability so that both innovation and delivery can prosper while keeping the organisation adaptive and alive.  Richness of interconnectivity creates serendipitous cross-pollination of ideas and bring in a multitude of perspectives from different parts of an organisation intermingling, forming rich exchanges, and thereby meet complexity with complexity

This rich interactivity and emergence is precisely what Open Space Technology thrives on as well! Open Space may appear chaotic and complex, but it takes complexity to work with complexity. Harrison Owen knew it all along.

Conclusion

In short, overall what VUCA requires are new individual and team skills of integration and complementarity learned in groups through Communities of Practice. At an organisational level, this needs to be combined with rich interconnectivity of interchangeable networks with a diversity of perspectives brought together in Adaptive Spaces. By applying this human intermixing interactivity, with everyone fully engaged meeting complexity with complexity, organisations should be able to embrace VUCA for the new emerging opportunities it brings.