VUCA? What Does it Mean to Small Business Owners?

Between market and cultural volatility, ambiguity about the future, and complexity that underpins any decision—entrepreneurs do not have it easy. They call it VUCA.

What is VUCA?

A term borrowed from military leadership in the 1990’s, VUCA is an acronym for volatility, uncertainty, complexity, and ambiguity. In other words, VUCA is the normal operating environment of a small business owner. Sure, it is crazy world. But it’s more productive to examine the parts rather than become overwhelmed by the whole.

At a glance, the components of VUCA seem to lead to the same conclusion—there is too much to handle, so just do what you can. Much of the time, entrepreneurs are too deeply engaged in helping their business survive the economic roller coaster to apply critical thinking to the mechanism of the ride. Let’s take a look at the pieces:

• Volatility: We live in a culture of change. Those who embrace volatility have a better chance of using its characteristics to build stability. Volatility is identified by its speed, magnitude, flux, surprise, and energetic nature. Information about dynamic factors is usually available, making volatility somewhat…predictable.

• Uncertainty: Frequently confused with ambiguity, uncertainty occurs when information is not available about events, trends, circumstances, or issues. Ambiguity defines a situation, while uncertainty reflects a lack of information about it. Predictable outcomes are difficult when information is uncertain.

• Complexity: All human endeavors are complex. It is only recently that complexity became a business term to describe multiple variables that interrelate to create, or influence, a situation or business state.

• Ambiguity: They say, “the measure of the greatness of a person is their ability to handle ambiguity.” Ambiguity is another common feature of human life, now added to business jargon to describe an incoming atmosphere, or idea, before it makes landfall in structure and definition. It is a thought, situation, or trend, which can go either way, and about which you have almost no information.

The excitement of a VUCA world

When I work with entrepreneurs one-on-one, or in my master group, elements of VUCA are never far from the table. A situation is uncertain, supply or labor is volatile—these are everyday components we deal with on the way to success.

VUCA can be explored from an analytic and a hands-on approach. While many focus on how to survive in a VUCA world, I want to talk about how you can thrive in an uncertain world.

Change is certain—especially in the current business climate. We can accelerate and revitalize our business processes to embrace and use change, rather than defend stale business plans against it. Consider these tips:

• Meet volatility with critical thinking: Resource management and thoughtful leadership are essential during cycles of business volatility. Identify issues—internal and external—that impact your business during volatile market cycles. Create and implement planning processes to protect against financial exposure during an unexpected bump. During periods of volatility, clear communication and intent is essential. Use volatility to better your readiness planning.

• Uncertainty is an opportunity to learn: Information gathering—and sharing—is an important tool for dealing with uncertainty. Uncertainty challenges you to better understand your business, and the business climate. Work with a mentor, or group of entrepreneurs, to gain understanding of uncertain trends, key performance indicators, or market slides. Use networking, and information gathering, to reduce uncertainty, build relationships with experts, and better align your business to take advantage of unexpected opportunities.

• Use complexity to get ahead: Gain a strong understanding of the variables that impact the growth and management of your business. If necessary, work with consultants to understand the interrelatedness of these variables and how you can use factors such as marketing, customer care and analytics to support complexity. A better understanding of complexity may help you to plan new products and services—and reach a ready market faster.

• Use leadership to manage ambiguity: By definition, ambiguous circumstances offer little guidance. Instead, you must develop leadership to creatively deal and experiment with situations that have vague cause and effect. Ambiguous environments become clear over time. Confident leadership recognizes and works to define opportunity that may—or may not—exist within ambiguous settings.

Many small business owners already have the innate ability to recognize and meet volatile, uncertain times. Successful business in a culture of change means developing readiness, and confident leadership, in the face of continually changing circumstance.

When you need a fresh perspective on turbulent factors impacting your business, call me at 585-633-7563.

To your success.

Bob Britton