The term VUCA was originally coined by the US military but has since become a shorthand for describing the current business environment. Standing for ‘volatile, uncertain, complex, and ambiguous’ it aptly articulates conditions as the fourth industrial revolution takes hold.
At a recent one-day workshop co-hosted by global Business Leaders network YPO (Young Presidents Organization) and AGSM @ UNSW Business School, AGSM academics and industry leaders explored how the way we do business has changed forever, and what it takes to be a successful leader in today’s accelerating world.
Operating in a VUCA reality is a chance to learn from military leadership practices, according to keynote speaker Dr Dan Pronk, Former Special Operations Regimental Medical Officer. He described war as a ‘complex adaptive system’, a term also coined in the US to describe the increasing complexity and interconnectedness of the world.
“In a complex adaptive system, the whole is completely different to the sum of the parts,” Dr Pronk explained. “You can’t address small sub-systems in isolation, and it is both non-linear and opaque. A small operational impact can have huge consequences.”
Stock markets, the human body and climate are other examples of complex adaptive systems. And they all present adaptive challenges – or ‘wicked problems’ which are difficult or impossible to solve due to incomplete, contradictory or changing requirements.
“These are problems with no precedents, where there is no templated solution and unpredictable or unintended consequences,” explained Dr Pronk.
If your business is operating in a disrupted market, these ‘wicked problems’ may sound familiar. Dr Pronk says, “adaptive leadership is a style of leadership suited to addressing these challenges.” It’s not applicable in every business situation or strategy – but it does require a different type of organisational structure and leadership approach.
In complex situations, distributed leadership provides people with autonomy to make quick decisions because everyone understands the objectives. “It’s something you do, not a title,” Dr Pronk explained of the fluidity of roles required. He could be called on to be a soldier and doctor, jumping from combat to medical situations in an instant.
As a former Special Operations Regimental Medical Officer with the Australian Army SAS (Special Air Service) regiment, Dr Pronk has experienced the reality of adaptive leadership firsthand. He gave the dramatic example of how an Afghanistan raid in 2011 unfolded, to illustrate this approach.
“Rank may exist, but influence goes to those who add value. A fluid organisational structure can shift to suit the mission, and policies actively encourage innovative thinking and solution finding,” he said.
Dr Pronk says a successful leader in complex adaptive systems may not know the answers but is prepared to work with their teams to figure it out. “They have humility and vulnerability, because adaptive leadership requires very little ego. They are comfortable delegating but accountable for their teams’ actions, and will change tack quickly if they recognise, they are on a trajectory to failure.”
This means they need a high tolerance of risk and ambiguity and can overcome their own biases. “This is not a strategy you employ 24/7 in an organisation. Sometimes you need a template solution to problems,” he noted.
So how can today’s leaders resolve this tension between templated solutions and agile iteration? During the afternoon workshops, AGSM Fellow Patrick Sharry took attendees through a series of case studies showcasing how organisations move from complex environments to simple scenarios – where a template approach then applies.
Sharry used David Snowden’s Cynefin Framework1 to explain how leaders can make the right decisions in different operating environments.
“This is a powerful insight into life, the universe and everything,” Sharry claimed. Both simple and complicated situations display a clear link between cause and effect, so you can use analysis to apply good or best practice. However, in complex settings it’s much harder to predict outcomes, and when things are ‘chaotic’ the link between cause and effect can only be understood in hindsight.
“Good science pushes things from complex to complicated to simple, and I think good businesses do this too,” he said. “But you can’t afford to be complacent if things have been ‘simple’ for a while.”
McDonald’s is one example. Having built a successful, highly efficient business model by repeating scalable operating procedures, the fast food giant now faces new threats – from Uber Eats to a healthy food movement. In mining or construction operations, safety checks fall into the ‘simple’ category – but to ensure safety is a state of mind and not a checklist, leaders rehearse ‘chaotic’ events, so everyone knows how to respond to catastrophe.
This clearly illustrates the current challenge for incumbents in a disrupted business environment. “Their effort is going into making sure simple processes run smoothly, and they continue to make the decisions and investments they’ve always made while everything around them changes,” observed Sharry.
For YPO members, this is an insightful way to reframe their own business issues. “It’s so important to know more than your own role, and not create siloes in your thinking,” said YPO Gold member James Stevens
YPO member Josh Kirton says he is now seeing how his business Plasson needs to evolve the global supply chain. “Our office is the first subsidiary to apply eCommerce principles for B2B orders, which means we now generate valuable data that provides customer insights we never had before.”
It’s insights such as these that can help businesses continue to adapt to constant change in a VUCA operating environment.
1 A leader’s framework for decision making, David J Snowden and Mary E Boone, Harvard Business Review November 2007