Navigating the new VUCA

Last month I hosted a workshop at EY's Innovation Realized event in San Francisco, focussed on accelerating enterprise transformation in a world of VUCA. The summit is for senior leaders to explore new ways of thinking to navigate an increasingly complex world, forge diverse new connections and collaborate with like-minded peers.

The two days were a hotbed of great discussions and ideas around a wide range of disruptive trends from GenAI and spacetech, to geopolitics and demographics. But what struck me most is the need to cut through the noise and focus on customer and employee centricity.

To do that, we need new transformation leadership behaviors. Here’s my take.

The phrase “VUCA” was first coined in 1987 by the US Army War College to describe a complex multilateral world following the end of the Cold War. The original definition of VUCA stood for:

• Volatility
• Uncertainty
• Complexity
• Ambiguity

 A quick search online shows that the term had very little search activity until 2011, when it started to be used widely to describe the disruption created by digital technologies (mobile, web, social, e-commerce, etc.). A common narrative at the time was that the world had never seen change happen so fast and be so pervasive.

Looking back, what we thought of as “volatility, uncertainty, ambiguity and complexity” in the 2010s feels fairly tame compared with today’s environment, where we see:

• Continued technological disruption – GenAI, quantum, biotech, robotics, autonomy, nanotech, spacetech, etc.
• Geopolitical uncertainty – elections affecting half of the world's population in 2024 and intensifying global conflicts and tensions.
• Economic pressures - cost of living crisis, slowed growth, inflation in many geographies
• Environmental and societal pressures – climate crisis and social pressures compete with financial constraints for companies’ strategic attention.

The combinatorial nature of these drivers of change creates unprecedented speed and scale of impact. Compared to the "VUCA" of the last decade, this is VUCA super-charged! As a result, according to the latest EY CEO research,  95% of CEOs are planning to either maintain or accelerate their transformation activities in 2024.

Yet, enterprise transformation is harder than ever:

• Customer expectations are rising like hyper-inflation. It’s harder and harder to keep up with their needs
• Technology is moving so fast that more and more technical debt is inevitable
• Employers and employees are still struggling to find the right formula for post-COVID-19 working practices and are adjusting to the new needs of Gen Z, many of whom have grown up digital native (note, the first of the Gen Alphas will enter the workforce in a few years’ time. This is the generation whose formative years of learning how to socialize and learn were digital-only during lock downs)
• AI is creating fear and uncertainty in the workforce
• Black swan events seem to becoming more common

Any of these factors can cause problems for transformation programs and create a fog of uncertainty. In this environment it's easy to confuse spend on transformation programs and high activity levels with progress. But often high activity levels (endless pilots and status reports, zombie initiatives, etc.) can become directionless in the fog.

Responding to this new generation of VUCA requires leadership and simplicity. The foghorn to guide a transformation out of the fog is placing customers and employees at the heart of transformation, continuously.

Every successful transformation project I have led has put a clear customer and employee vision ahead of technology, tools and tactics. The customer is the lightning rod that provides focus and direction for the transformation, while the employee is the enabler and driver of the change. Successful transformations find ways to bring the voice of the customer and employee into decision-making and prioritization. Over the years I've seen a wide range of techniques to achieve this, including:

• Placing an empty chair in each meeting to represent the customer (interestingly, some organizations are starting to replace the empty chair with an AI or synthetic personas of customers to simulate customer feedback).
• Creating a customer board or an employee shadow board.
• Ensuring executives regularly interact with customers (like taking a shift to answer calls in the contact center or join sales pitches, then reflecting on what they have learned from customers).
• Creating a simple, clear metric of CX (like NPS) and cascading it into scorecards.
• Ensuring business cases for new initiatives are measured and prioritized against a balanced set of metrics (financial, customer, employee, societal). No user feedback = no funding!
• Co-creating products or services with customers and employees.

In short, we need to bring the customer into the transformation in an ongoing and meaningful way, not just as a one-off exercise. We need to understand their problems, needs and expectations, and co-create solutions with them that bring the business model and customer promise to life.

We need to empower and engage employees in the transformation, not just tell them what to do. We need to inspire them with a clear and compelling vision, lead them with a co-creative and collaborative approach, care for them with empathy and support, build their capabilities with technology and tools, and reward their collaboration and contribution.nbsp;

Our latest research with the Said Business School found that transformation leaders who put humans at the center to navigate critical turning points in a transformation are 12 times more likely to significantly improve transformation performance.

There is a much less used adaptation of “VUCA” created by Bill George, a professor of management practice at Harvard Business School. Bill defines "VUCA 2.0" as:

• Vision
• Understanding
• Courage
• Adaptability

I love the flip from thinking about factors that create VUCA, to thinking about the leadership behaviours that allow companies to navigate VUCA. The new world of complexity will change the future for business, people and society. Surviving and thriving will require leadership that displays vision, understanding, courage and adaptability.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.