The future has always been unpredictable, so we have always had to work with uncertainty. In the past, we were able to use strategy tools to analyze our competitive environment and competitive position. We were able to identify the direction and rate of change in the factors and forces shaping the environment, and to use these trends to develop strategies and long-term plans.
Added on 15 September 2016 by James Moncrieff
But all that has changed now. The US Military Academy coined the acronym VUCA to describe the arena of modern warfare: Volatile, Uncertain, Complex and Ambiguous. The term has since entered the business world as a description of the industrial and commercial world in which we now operate. “The world has become more volatile, uncertain, complex, and ambiguous than ever before, certainly than I can remember,” says Unilever CEO Paul Polman (Hult CEO Report, The Age of Upheaval’, 2016).
The rate of change is not only accelerating but driven more by disruption than by incremental change. Disruptive factors are coming at us from many different directions:
globalization, geo-political unrest and economic uncertainty
the impact of technology on almost every part of our lives and businesses
social change, including radicalization in many parts of society around the world
rapidly changing environmental conditions as global warming accelerates
It is time to be guided once again by the academics in the US Military Academy. Their view is that the future can be anticipated (in the form of possible scenarios) and that it can be influenced (which scenario plays out) but it cannot be predicted. They say this world calls for new skills, for people who anticipate conditions that do not yet exist, who have non-linear reasoning and intuitive skills, and who integrate multi-source information to detect unfolding trends and patterns.
So, how does strategy fit into all this? We have always recognized that strategies are never executed exactly as intended. The world changes as we develop and implement our plans and we have to respond to those changes so that the strategy we ultimately pursue emerges over time. As one of our colleagues described it, ‘strategy is the unfolding encounter between intention and chance’.
We now have to embrace this emergence more deliberately and build flexibility into our strategies, business models and organizations. For the most part, the old strategy tools are still the best tools to use to make sense of our competitive environment and how it is changing. We just need to use them in a different way. Instead of using them to develop long-term strategies, we need to use them to understand exactly what is happening today, to make sense of the chaos and ambiguity. We need to apply the new skills mentioned above when using the tools to help us think strategically in a new way - noticing and sense making, drawing on intuition and experience to exercise judgement about what is happening and what to do about it.