Operational Excellence is the execution of the business strategy more consistently and reliably than the competition, with lower operational risk, lower operating costs, and increased revenues relative to its competitor. It is needed more than ever in today’s technology driven rapidly changing business models, which require organizations to undergo end-to-end business transformation. Operational Excellence can also be viewed as execution excellence.
VUCA is an acronym (artificial word), first used in 1987 and based on the leadership theories of Warren Bennis and Burt Nanus, and stands for Volatility, Uncertainty, Complexity and Ambiguity. It was the response of the US Army War College to the collapse of the USSR in the early 1990s. Suddenly, there was no longer the only enemy, resulting in new ways of seeing and reacting.
- VOLATILITY – We live in a world that’s constantly changing, becoming more unstable each day, where changes big and small are becoming more unpredictable – and they’re getting more and more dramatic and happening faster and faster. As events unfold in completely unexpected ways, it’s becoming impossible to determine cause and effect.
- UNCERTAINTY – It’s becoming more difficult to anticipate events or predict how they’ll unfold; historical forecasts and past experiences are losing their relevance and are rarely applicable as a basis for predicting the shape of things to come. It’s becoming nearly impossible to plan for investment, development, and growth as it becomes increasingly uncertain where the route is heading.
- COMPLEXITY – Our modern world is more complex than ever. What are the reasons? What are the effects? – Problems and their repercussions are more multi-layered, harder to understand. The different layers intermingle, making it impossible to get an overview of how things are related. Decisions are reduced to a tangled mesh of reaction and counter-reaction – and choosing the single correct path is almost impossible.
- AMBIGUITY – “One size fits all” and “best practice” have been relegated to yesterday – in today’s world it’s rare for things to be completely clear or precisely determinable. Not everything is black and white – grey is also an option. The demands on modern organisations and management are more contradictory and paradoxical than ever, challenging our personal value systems to the core. In a world where the “what” takes a back seat to the “why?” and the “how?”, making decisions requires courage, awareness, and a willingness to make mistakes.
VUCA stands for:
- Volatile – change is rapid and unpredictable in its nature and extent.
- Uncertain – the present is unclear and the future is uncertain.
- Complex – many different, interconnected factors come into play, with the potential to cause chaos and confusion.
- Ambiguous – there is a lack of clarity or awareness about situations.
Counter Volatility with Vision
- Accept and embrace change as a constant, unpredictable feature of your working environment. Don’t resist it.
- Create a strong, compelling statement of team objectives and values, and develop a clear, shared vision of the future. Make sure that you set your team members flexible goals that you can amend when necessary. This allows them to navigate unsettled, unfamiliar situations, and react quickly to changes.
Meet Uncertainty with Understanding
- Pause to listen and look around. This can help you understand and develop new ways of thinking and acting in response to VUCA’s elements.
- Make investing in, analyzing and interpreting business and competitive intelligence a priority, so that you don’t fall behind. Stay up to date with industry news, and listen carefully to your customers to find out what they want.
- Review and evaluate your performance. Consider what you did well, what came as a surprise, and what you could do differently next time.
- Simulate and experiment with situations, so that you can explore how they might play out, and how you might react to them in the future. Aim to anticipate possible future threats and devise likely responses. Gaming, scenario planning, crisis planning, and role playing are useful tools for generating foresight and preparing your responses.
React to Complexity with Clarity
- Communicate clearly with your people. In complex situations, clearly expressed communications help them to understand your team’s or organization’s direction.
- Develop teams and promote collaboration. VUCA situations are often too complicated for one person to handle. So, build teams that can work effectively in a fast-paced, unpredictable environment.
Fight Ambiguity with Agility
- Promote flexibility, adaptability and agility. Plan ahead, but build in contingency time and be prepared to alter your plans as events unfold.
- Hire, develop and promote people who thrive in VUCA environments. These people are likely collaborative, comfortable with ambiguity and change, and have complex thinking skills.
- Encourage your people to think and work outside of their usual functional areas, to increase their knowledge and experience. Job rotation and cross training can be excellent ways to improve team agility.
- Lead your team members but don’t dictate to or control them. Develop a collaborative environment, and work hard to build consensus. Encourage debate, dissent and participation from everyone.
- Embrace an “ideas culture.” Kevin Roberts, of advertising agency Saatchi and Saatchi, coined this alternative VUCA definition: “Vibrant, unreal, crazy, and astounding.” This describes the kind of energetic culture that can give teams and organizations a creative, agile edge in uncertain times.
- Reward team members who demonstrate vision, understanding, clarity, and agility. Let your people see what kind of behavior you value by highlighting innovations and calculated risk-taking moves.