How is what we’re experiencing different from what people have been calling the VUCA (Volatile, Uncertain, Complex, Ambiguous) nature of the world?
It’s fundamentally different. Here are three examples of how:
1) Companies talk about VUCA (some do, anyway), but haven’t really followed through. For example:
- How many organizations included in their 1, 3, and 5-year plans either (a) scenarios that included truly fundamental uncertainty, or (b) robustness testing for strategies, options, and decisions. (Part of our process for fixing foresight is the ROADS tool – Robust Options And Decision Scenarios)
- How many organizations did any inclusion of fundamental uncertainty in their numerical projections or plans? Even if the range of possible uncertainty is very wide, and its value extremely uncertain, neither the range nor the value includes zero
- How many organizations identified signs that would tell them which scenarios were becoming more likely? Or points where they could shift strategies based on these signs?
- And how many CFOs and finance functions included the option value of being able to shift strategies based on these signs?
2) Almost everyone missed the volatility and uncertainty in the Bedrock layer on which their organizations rest [more about the “Bedrock” layer in the RESET webinar; nature and society are key Bedrock elements]. And they missed most of the volatility and uncertainty in the Foundational layer too [also from the webinar; e.g., health, overall economy, government]
- Nature and society were undergoing real strain and even (mostly unnoticed) seismic shifts
- Taken seriously, that means organizations needed much more flexibility in their supply chains, their strategies, and their financial status. But airlines spent almost all of their profits buying back their own stocks. And that’s where almost all of the windfall US companies got from the recent tax cuts went
- Companies continued to do more to push cost out of their supply chains, even at the expense of flexibility
- Sustainability wasn’t included as a true strategic power center in the business – in planning, executive stature, etc. On companies’ leadership pages, there were many times more Chief Legal Officers listed than Chief Sustainability Officers – which shows the person in charge of reducing legal risks has a lot more clout than the person in charge of reducing environmental and social risks*
3) There has been far too little appreciation of another “V” – vulnerability. Not only can the Bedrock and Foundational layers change quickly (“volatility”), organizations themselves are far more vulnerable to these changes than they appreciated.
- In the UK, the British Chambers of Commerce found over 60% of firms had three months or less of cash in reserve
- A US survey found almost two-thirds of small businesses would have to close permanently if COVID caused economic conditions to stay bad for five months or more
*One of the largest, best-known companies in the world includes on the company’s Leadership page: their General Counsel, Chief Compliance Officer, Chief Tax Officer, Chief Accounting Officer, Chief Information Officer, Chief Technology Officer, and many other executives. But not the Chief Sustainability Officer.