How To Thrive in the VUCA World

Business leaders must develop three competitive advantages for their organisations to thrive in this VUCA World: insights, commitment, and execution. With the Ukraine war, inflation, and the pandemic in recent years, we can all agree that we are already in the volatility age. There are two types of emerging business leaders according to McKinsey: 

  1. Leaders who are Cautious and Defensive- Senior executives primarily fall within this category. They are in what McKinsey calls a “strategic wait and watch mode as conditions unfold.” For instance, the core of their focus is scenario planning, resilience preparation, etc. 
  2. While adopting the necessary defensive measures, offensive and defensive leaders use volatility as a motivator to spur action around unexpected chances. Based on their study on corporate resilience, the best leaders and organisations are what they call “ambidextrous”: being diligent in controlling the downside while pursuing the rewards. “Ambidextrous management teams” thrive than merely survive this environment because they create value from uncertainty. 

The Insights Edge 

Knowing what is expected to occur better than others may be helpful but it is not necessary. “The ability to see clearly through the mist 10% more frequently than your competitors is a significant competitive advantage, even though it may not be possible to be correct every time”. Granularity, depth, and diversity provide insights with a substantial advantage. Here are 3 of McKinsey’s suggested questions to ask to build an insights edge:  

  1. “Are we building a culture that is diverse, inclusive, and externally oriented enough to capture signals from outside our company or industry and solicit thoughtful contrarian perspectives from across ecosystems—or are we collecting perspectives from the usual suspects and telling ourselves that constitutes insight diversity?”
  2. “Do we have a mechanism to pick up signals from across the organization, including geographic leaders and commercial financial planning and analysis, on a regular basis—or, better still, in real-time—and distil them quickly into options the organization can act on?”
  3. “How intimate an understanding do we have of our customers and end consumers, and are we able to gather changes in consumer sentiment rapidly and continually?”

The Commitment Edge 

Knowing what to do and actually executing it with enough ambition are equally vital. Bold leaders and leadership teams stand out from others by acting decisively before others have gathered the confidence to commit, rather than by going in the correct direction, which most eventually do. These leaders approach uncertainty by acting and making adjustments rather than by waiting and watching. McKinsey’s study on a variety of subjects, including sustainability, digital strategy, and resource allocation, has demonstrated that those who act quickly and at scale benefit greatly.  

To put it another way, fate favours the brave. Here are 2 of McKinsey’s suggested questions to ask to build the commitment edge:  

  1. “Is our top management team effective at committing decisively to strategic choices, or do we need to change the team’s membership, processes, or mindsets to ensure they can?”
  2. “Do we embrace the mindsets of growth leaders who see and seize opportunities?”

The Execution Edge 

The third competitive advantage in a volatile age is execution. Naturally, the ability to execute successfully is always valuable, but just as volatility increases the cost of stock options, it also increases the worth of strategic options—the capacity to quickly change course in reaction to shifting circumstances. Once you’ve made the decision to take action, you need to have an edge in terms of execution, especially when going first gives you an advantage. Speed, or the ability to complete tasks quickly and effectively, is a key component of the execution edge. 

The pandemic has served as both a testing ground and a motivator for new methods of accelerating pace, making it an important internal component of the strategy. According to McKinsey and Harvard Business School research, organisations that had started their agile transformations before the pandemic outperformed those that had not by performing and operating more quickly throughout the crisis and its aftermath. Here are 2of McKinsey’s suggested questions to ask to build an execution edge:  

  1. “Are we reinventing our organization for speed?”
  2. “Do we codify the lessons from significant past experiences—important acquisitions, recessions, and crises—into playbooks and dry-run their execution so they become second nature?”

Such trying times continue to challenge our leaders. Some pull back for safety, while others recalibrate their strategies to keep moving forward. The ideal mindset for business leaders should be “how to thrive in this VUCA world; not just “how to survive in this VUCA world.” 

Adapted from: McKinsey & Company | Strategic Courage in an Age of Volatility | Michael Birshan, Ishaan Seth, and Bob Sternfels