In a volatile and uncertain world, where govt regulations in the COVID arena bring about complexity, along with the ambiguity of what you can, cannot, should, and should not do when operating your business and in living your lives. This video looks at that, and we address one word: VUCA.
What is VUCA?
VUCA is an acronym that stands for volatility, uncertainty, complexity, and ambiguity. Volatility describes the intensity of fluctuation (or changes) over time. Uncertainty describes the unpredictability of events. Complexity describes the factors that influence a situation—how many they are, how often they interact with each other, and whether they are interdependent. Ambiguity corresponds to the ambiguity of a situation or information.
VUCA is not a recent buzzword. This was first introduced in 1985 in the book “Leaders: Strategies for Taking Charge” written by economists Warren G. Bennis and Burt Nanus to describe the external factors faced by corporate leaders. It gained traction when the US Army War College used it in response to the collapse of the USSR in the 1990s.
What are examples of VUCA situations?
The collapse of the USSR in the 1990s is an example of a VUCA situation because that meant a large geopolitical and economic bloc dissolved into multiple, smaller, independent states.
A more recent example, the emergence of disruptive technology has created a VUCA situation, which has given rise to disruptive startups that disrupted their respective industries: Amazon, Netflix, Airbnb, and cryptocurrency, are such examples.
And then, there is the covid-19 pandemic that has affected everyone and everything, including how we plan for the future, how we view the future, and how our lives have changed since early 2020.
How can small businesses survive in a VUCA world?
An academic study proposed that businesses, large and small, can survive and thrive in a VUCA world through 4 key ways:
- Being agile, in response to volatility
- Learning how to manage information and knowledge—and knowing what to do with it, in response to uncertainty
- Learning how to respond to what you can control and establishing clarity and simplicity to counter complexity
- Being open to experimentation, to counter ambiguity
Let’s look at two examples of how companies have responded to the global pandemic: one that thrived during the pandemic and one that is pivoting to help them move forward after being hit hard by the pandemic.
Bunnings Warehouse has thrived during the pandemic because they have been able to respond to their customers’ changing needs. It also helps that their business and what they offer coincided with consumers’ lifestyle changes because of being locked down in their homes.
As a result, Bunnings Warehouse reported almost 20% year-on-year earnings growth as Australians used their forced isolation on home improvements. The company was also named Australia’s strongest brand in 2021 by Brand Finance Australia’s annual analysis of brand strength.
What made Bunnings thrive during the pandemic?
- They provided tools and platforms that addressed the customers’ need for contactless services, including their (1) e-commerce shop, (2) the Bunnings Product Finder App, which help customers find what they need in-store, and (3) their Drive and Collect service.
- They also used their locations as vaccine sites. This is a form of goodwill to their community, including customers who frequent their locations by providing a familiar and convenient space to get vaccinated. From a practical standpoint, serving as a vaccine site was an opportunity to increase foot traffic in-store as well.
- Bunnings has a strong loyal and engaged customer, many of whom became unofficial brand ambassadors and social media influencers. There are many online groups and blogs/vlogs that share DIY hacks that solve everyday problems or provide inexpensive solutions using products available in Bunnings. This embodies the DIY culture of the brand.
Airbnb was a technology disruptor that changed the way people vacationed and invested in their property. But when the pandemic struck, it experienced a profit crunch which led to 25% of their workforce being laid off in May 2020.
The good news is that they have been rebounding in the last quarter of 2021, and both investors and analysts are very hopeful that Airbnb is in for a comeback. The founders of Airbnb see new opportunities: the pandemic has shifted how people work and travel.
The company believes that remote work has “untethered” people from the office, allowing them to work anywhere and as a result, “people are spreading out to thousands of towns and cities, staying for weeks, months, or even entire seasons at a time.” And to help Airbnb pivot and respond to this new normal of work and travel, co-founder Brian Chesky has committed to living full time in Airbnb properties to better appreciate how remote workers intend to work and travel. He intends to use this experience to help Airbnb’s properties understand the unique needs of remote workers on travel.
What Bunnings and Airbnb have in common is that they were able to respond to volatility, uncertainty, complexity, and ambiguity in 4 ways:
- They knew what to do and how to manage the information that they had. In this case, they understood that lifestyles are changing, which affects what their customers need.
- They knew how to respond based on this information and in their case, provided what their customer needed.
- They were open to experimentation: Bunnings provided new services, while Airbnb is extending their services to cater to a new customer demographic.
- Overall, they are agile by responding to the changes as they come.
Being agile, learning how to manage what you know about the market and your customers, responding to what you can control, and being open to experimentation are the four key 4 ways to survive and thrive in a VUCA world.