‘Strategising in a high VUCA world’: Presentation by TMC member Roshanga Wickremesinghe

Rohanga Wickremesinghe kept a packed audience of TMC members and guests with a unique and a thought provoking presentation on how corporates can strategise in a volatile, uncertain, complex and ambiguous (VUCA) world.

The topic of discussion was ‘How to develop strategic plans in a high VUCA world?’. The key message of this presentation is that you need to keep on planning strategically, but at a faster pace with several layers of strategic input. However, to do so, one must understand what VUCA means, VUCA stands for volatile, uncertain, complex and ambiguity. The notion of VUCA was introduced by the US Army War College to describe the more volatile, uncertain, complex and ambiguous multilateral world which resulted from the end of the Cold War. For those who are keen to learn more on this concept the edited book on Managing in a VUCA world by Oliver Mack, Anshuman Khare, Andreas Krämer and Thomas Burgartz is a worthwhile read. Free pdf versions of this book are available on the internet. 

However since the financial crisis of 2008, the whole world is now said to be living in the reality of a high VUCA world. A major effect of this high VUCA world is that your businesses’ strategic plans don’t seem to work. In January of 2010 the Wall Street Journal stated that “strategy as we know it is dead”. This is possibly because business models are changing, customer loyalty is a thing of the past and disruptive change is the new normal. Today a business is defined by its ability to be flexible and adaptable to the future changes it faces. 

Sri Lanka is not immune to this phenomenon and as a matter of fact has seen the effects of high VUCA events impacting our economy and businesses. In the pre VUCA era a typical business would develop a strategic plan that would address known issues in the business environment. Businesses would develop a three to five-year strategic plan to address these changes and would review the progress of the implementation of these strategic plans quarterly. 

Occasionally, the more dynamic businesses will develop certain scenarios to address exceptional changes in the external environment of the business or to address predictable competitive action. This situation does not exist anymore, now business are in a constant state of flux and need to react at a much faster pace to the external environment/customer/consumer needs. The issue faced by many a CEO/Managing Director is how to do this? 

Those CEOs and Managing Directors who did not believe in doing strategic plans in the past when it was viable to do so are in for a big surprise. The answer is still to develop your strategic plan, but faster and in a slightly different manner. So if you don’t have any experience on doing strategic plans when things were moving at a much slower pace you are probably going to find it next to impossible to do strategic planning in the new reality. Today a strategic plan will have three layers; Known Issues, Emerging Issues and Wild Cards. 

 

Strategic planning on known issues

Today, numerous strategic planning process models are available, mostly following a common approach: Most models include the development of vision and mission statements, followed by an external and internal analysis, constructing and implementing goals, objectives and strategies and the formation of a multi-year plan and finally the development of an implementation, review and updating process. Even though we live in a high VUCA world companies must continue to perform this planning function to develop the organisations to meet the threat of these known issues.

 

Strategic planning on emerging issues

These issues can easily be identified, relevant data is available to be collected and analysed and trends and patterns can be easily identified. Therefore scenarios can be developed for this type of issue. However the number of scenarios developed must not exceed the organisations ability to deal with them. A general rule of thumb would be a maximum of three scenarios which will go through a continuous process of evaluation to see the likelihood of materialising. Planners can use scenario planning tools and techniques to develop scenarios.  As soon as a given scenario becomes a clear enough future by virtue of its indicators planners must treat it as a new know issue, develop a strategy to deal with this issue and integrate it within the current strategic plan for implementation.

 

Wild Cards

‘Wild Cards’ are issues that crop up out of nowhere and surprise you when you least expect it. They tend to be completely unpredictable (example 2008 financial crisis). This means that you are unlikely to be able to identify all the contributory factors for this event, thereby making it impossible to predict / develop or explain possible outcomes. Thankfully these types of situations are very rare and infrequent. In such situations planners can use techniques and tools such as pattern recognition to start organising the early data. 

There are of course events that will allow you to see a possible range of scenarios due to the prevailing event. Not as complex as the above but still may yield a higher number of possible outcomes (example BREXIT). For such situations planners can use tools and techniques as latent demand research and technology forecasting to further narrowing down the possible scenarios. Once you have narrowed the possible scenarios to manageable number the planners can use decision analysis and game theory to select just a few (not more than three) scenarios to tackle. This method will allow you to cut through the noise and select and focus on issues that are highly likely to affect your business. The whole idea of planning on Wildcards is to analyse the event and come up with at least two to three possible scenarios that a business can deal with as emerging issues.

It is this process of moving external phenomena through our planning layers (Wild Card, Emerging issues and Known Issues) which will allow a business to strategise and overcome the effects of a high VUCA world. Business Leaders therefor must adjust to this new reality of strategising to stay ahead of the competition and to ensure the sustainability of the business.