VUCA and the Value of “How-to-Think” Business Simulations

By Tim Reeves - August 24, 2017

In the VUCA world, immersive learning, experiential learning, is the pedagogy of choice, because it’s not just a fixed body of knowledge that you want to transfer. It’s a whole contextual set of lessons that you have to learn almost at the muscle memory level, to make them real,” Bob Johansen, 2012, Distinguished Fellow, Institute for the Future.

It seems that everywhere you turn, business leaders, leadership development consultants, and developers of business simulations are talking VUCA. They are referring to their business environment and describing it as Volatile, Uncertain, Complex, and Ambiguous.

First coined in the 1990s by the military, the term means that traditional patterns of identifying, engaging, and defeating the enemy may no longer be valid; an indication that it is time to change the mental model of warfare. As the phrase continues to enjoy widespread adoption in the business world, it indicates that a change in business leaders’ mental models around making critical decisions is required.

Tathagat Varma, founder and CEO of Thought Leadership and an observer of VUCA in his Agile Project Management consultancy, offers this definition of a VUCA environment: “How people view the conditions under which they make decisions, plan forward, manage risks, foster change, and solve problems.” Those conditions are:

Volatile – Key drivers of business, either inputs or outputs, are changing more frequently and when they cycle, the swings are larger and more unpredictable than in the past. Things are fast-changing but not in a predictable or repeatable manner. This may be linked to the rapid advances in computing power now catalyzing new industries, allowing unprecedented access to knowledge, and providing 24-hour viral stories through social media.

How is this surfacing in today’s business environment? Consider the case of an experienced highly trusted network news anchor who mentioned an event from his past news coverage that is exaggerated. His correction and apology that followed was viewed as weak and disingenuous and created a large furor in social media over his trustworthiness as a journalist, threatening his network’s viability in an age of declining viewership.  Who could have imagined that within days he would be relieved of his duties as anchor?

Uncertain – Changes occur that are disruptive and cannot be anticipated. With so much to know, you can’t know everything, and that certainly applies to the parts of your business ecosystem that are outside your direct control. Uncertainty is not so much about the probability of something happening – the change is impactful and known to influence the system; however, you can’t know if it will be a positive or negative change.

In the pharmaceuticals industry today, concerned consumer groups are conducting random tests of products using non-validated or inappropriate methods. Triggered by incidents of adulterated or contaminated drugs, these non-industry groups are setting themselves up as an alternative to industry labs and attempting to test for trace contaminant chemicals. Consumers are alerted to these findings via social media, a channel completely outside the realm of the industry.   

Complex – There are a multitude of forces, stakeholders, and decision factors involved which create a sense of chaos and confusion surrounding an organization. Linear thinkers, who look for basic cause and effect, have trouble navigating numerous causes and effects occurring simultaneously, or as part of the bigger system dynamic.  

Consider, for example, the healthcare industry in the US. Several years into the Affordable Care Act. providers, payers, and patients witnessed a Supreme Court challenge of the meaning of four words in the 1,990-page Act. A court ruling could have suddenly nullified the IRS treatment of federal subsidies to states, dramatically increasing the cost of health insurance to those dependent on federal subsidies, and possibly creating a death spiral to the program. The change is impactful and known to influence the system, but in a politically charged court, how could industry experts and healthcare company CEOs have known how the Court would act?

Ambiguous – The who and why of an event are unclear. The contextual clues that would have been traditionally relied on are insufficient to give meaning to the situation. This leads to many interpretations about what “could” be happening, resulting in more instances of not recognizing the significance of a tipping point.

Imagine the concern of a bank customer who receives an email informing them that their bank account login has been disabled due to multiple failed attempts to access the account. The customer knows that they have not recently used the online banking service and the email looks official. A quick call to the bank and a longer visit to the local bank branch confirms the account is disabled but cannot explain why this has occurred.

Was the email a cleverly disguised “phishing” expedition? Did a “robo-dialer” randomly select the account to hack into? Did the bank make an honest mistake? Is there a software glitch in the app? No one knows. Everyone has a theory. The consumer decides that this personal experience of a security breach is going to alter future use of online banking. If enough consumers experience the same frustration, suddenly online banking is vulnerable.

“We are moving from a world of problems which demand speed, analysis, and elimination of uncertainty to solve – to a world of dilemmas which demand patience, sense-making, and an engagement with uncertainty,”  Denise Caron, President APSG, Inc.

What can be done to effectively manage in a VUCA environment?

Doing nothing is certainly not an option. What is called for is a new mental model that does not rely on the past, on benchmarking others, nor in believing one knows or should know everything.

The solution lies in learning how to think, not what to think.

Recognizing the complex and underlying interrelationships of organizations as systems is key. It’s a way of thinking derived from applying systems dynamics, in conjunction with critical and creative thinking. This advanced approach adeptly addresses client organizations’ challenges, while advancing leadership decision-making skills for a VUCA environment to overcome potential derailers.

In the face of challenges stemming from increased volatility, leaders may feel overwhelmed and unprepared to lead effectively. The behavioral response may be fear, risk aversion, and a back-to-basics reaction. What is needed is greater agility and resilience within the organization, and appropriate corporate leadership training resources to support. Command and control structures might need to give way to flexible processes and a wider distribution of decision making. Critical thinking and problem-solving skills practiced in an environment that leverages business simulations to empower those close to the action to make more effective decisions.  

When the environment is full of uncertainty, leaders are required to act on incomplete or insufficient information. They are more likely to rely on what seemed to have worked in the past because it becomes difficult to “connect the dots” when there are too much noise and not enough signal. In looking for a comfortable home for decision making, leaders tend toward an excessive and futile effort at data analysis. The answer is probably not in the data but in creative and innovative thinking.  

When faced with complexity, it can be difficult to know where to start to affect change. Leaders lack the time to reflect and consider multiple perspectives and often do not address root causes. Which, in turn, makes it difficult to envision, let alone implement the required change. The danger is in acting too late, implementing short-term solutions, and looking for scapegoats when things don’t turn out. To become more comfortable with complexity, simulations include a systems dynamic component to enable participants to wrestle with trade-offs and balance various stakeholders in the short and long term. Visibility to outcomes that might not be apparent for months or years are available immediately in a simulated situation.

If the environment is ambiguous, there is a high risk of misinterpreting and ineffectively responding as leaders act on a limited understanding of the event. Doubt, distrust, and hesitancy results. Leaders must be immersed in the source and context of events and that state can be practiced in highly customized business simulations.

“Having spent forty years forecasting, I believe that the future world will be more volatile, more uncertain, more complex, and more ambiguous, or so it will seem if you are in a seat of leadership.” Bob Johansen, 2012, Distinguished Fellow, Institute for the Future

In his book, Leaders Make the Future: Ten New Leadership Skills for an Uncertain World, author Bob Johansen offers his view of required leadership skills for a VUCA environment. He presents a holistic picture of a leader with clarity to see through contradictions, the ability to turn dilemma into opportunity, and the social skills to leverage social networks, collaborate, and innovate with others authentically.

In some respects, Johansen is describing leadership development and a new mental model of a leader. The new model called by some, “VUCA Prime” (“We Live in a VUCA World and how managers can navigate it,” Colin Ramsay, Associate, Cambridge Management Learning, Slideshare, 2013) consists of:

  • Vision: using the skills of communication, focus, personal belief, and influence
  • Understanding: having a curious and open mind that can assess any situation
  • Clarity: using systems thinking to get at the cause and effect influences
  • Agility: being innovative, decisive, and collaborative

How is VUCA Prime implemented?

The Regis Company has developed a unique approach, based on neuroscience, that enables the transformation to this new VUCA Prime mental model. Our observations and research led us to create optimal learning environments that help develop how-to-think, Value Workers. (Michael Vaughan, The Thinking Effect; Nicholas Brealey Publishing, 2013 pp 124-128). The focus is on creating learning experiences that prime the learner by creating optimal tension and engaging mental models, combined with the encoding activities of activating core abilities and surfacing limiting beliefs.

These conditions are central to acknowledging the VUCA world and changing learner mental models to VUCA Prime. The vehicle is a rich, robust and realistic business simulation.

The derailers of the VUCA environment can be shifted to become the VUCA Prime attributes of the Value Worker – the leader who adds value because they know how to think, not just what to think.

“In order to increase their own readiness and ability to make the future, leaders must immerse themselves in the future and practice their skills in a low-risk environment. Leaders must immerse themselves in the future (through games and immersion experiences) and return to the present ready to make a better future,” Bob Johansen, 2012, Distinguished Fellow, Institute for the Future.

Tim Reeves is a Senior Strategist at The Regis Company helping organizations solve their most complex business challenges through the use of highly customized business simulations, learning curriculum design and development, and strategic leadership development consulting. Tim is accomplished in all aspects of training and professional development and is a seasoned professional with more than 20 years experience in designing and delivering business acumen and leadership solutions and collaborating with executives on their most strategic initiatives.


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