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How to Prepare Your Organization for the VUCA World

How to Prepare Your Organization for the VUCA World

If, like me, you have attended countless conferences and forums over the past few years, listening to leaders, experts, and scholars discuss how VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) the world will be in the future, you may have been full of anticipation, thinking that you are on the path of evolution in the face of VUCA. However, during this holiday season, I believe you, like me, have experienced firsthand what it means to have an external environment that is complex, dynamic, blurry, and uncertain. A full-fledged VUCA “moment + onslaught” hit all of us, catching us off guard, leaving us unprepared and having to face it.

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The Nature and Phenomena of Complexity

The world is changing at an increasingly rapid pace, boundaries of knowledge are constantly being breached, information is exploding, and exponential technological innovations are continuously breaking one balance after another that we can see. Brian Arthur, the author of “The Nature of Technology,” says that “complexity” and “people” are the two most difficult concepts to define in the world.

At the same time, what may be bad news for some and good news for others is that the level of VUCA will only intensify, not decrease. As shown in the chart below, it is easy to see that when human cognition surpasses technological development, humans can easily use technology to pursue efficiency. However, as of today, with the rapid development of technology, this exponential and explosive growth, human cognition has been left far behind, and the GAP in between is only getting wider. VUCA emerges and will become even more turbulent.

The Stacey model effectively combines this kind of uncertainty with the level of social group agreement. Ralph Stacey proposed that when comparing different levels of group agreement and the degree of uncertainty in a situation, we have four states.

In a simple mode, all you need to do is repeat and repeat, highly repeating a task, and you can even achieve perfection. Such tasks and scenarios in today’s era have been almost replaced by machines and technology.

Transitioning to the complicated mode, just like many outstanding individuals who emerged during the industrial age, we are absolute creators and guardians of complexity. We focus on data, excel in analysis, emphasize logic, pursue objectives, and acknowledge the achievement of results.

In this era, our metaphor for organizations is that of a machine. It’s similar to a car, where the engineering design and assembly of various components are highly intricate and complex tasks. However, at the same time, if a car encounters any issues, such as a headlight malfunction or an engine problem, we can address them through testing, analysis, professional knowledge, and skills. This is why the leadership models advocated and learned by most large enterprises today emphasize stability and predictability. It can be understood as “rational decision-making is the norm.” “Prediction + control” is the key to winning the game. Consequently, our definition of talent tends to lean more toward “expertise + diligence + loyalty.”

But as uncertainty factors increase, we break through boundaries and enter the realm of complexity. Here, you will face non-linearity, disequilibrium, sudden changes, bifurcations, chaos, and diverse emergent phenomena, among others. I’d like to share a concept with you in this context: entropy. It was first introduced by German physicist Clausius in 1865 and is used to measure the “intrinsic disorder” within a system. You can also think of it as the ineffective energy within a system. In an isolated system, without external forces doing work, its total disorder (entropy) will continually increase. Erwin Schrödinger once said something similar in “What Is Life?”: “Life is fighting against the increase of entropy, and life lives on negative entropy.” In the last chapter of “The Road Less Traveled,” it is mentioned that everything tends toward randomness, disorder, and chaos. If you want to become disciplined, you must work against the increase of entropy. This process is very painful.

Can everyone recall the feeling at the beginning of the outbreak, that we had no idea of the full picture of the information, and couldn’t predict what would happen in the future? Our lives revolved around words such as outbreak, panic, isolation, shutdown, stoppage, closure, false numbers, and more. You can see that when we face an extremely complex situation, we try to deal with it by exerting more effort and comprehensive control. However, even so, we still find ourselves in an uncertain, fuzzy, and even uncontrollable state. You can’t make judgments and plans for everything, and everything will happen step by step in the direction you’ve planned, and then reach your expected results. Even with rich experience, perfect planning, and strong control, no one can guarantee everything. The mode of prediction and control is gradually becoming ineffective.

The problem lies here. When the environment we face shifts from ‘complicated’ to ‘complex,’ we often habitually use the most handy way to face and handle problems, and empiricism and expert thinking guide every action and decision we make. Just as many people around us are victims of linear bias, obvious choices are often wrong. What I want to say, everyone, is that the rules of the game, the underlying systems, and cognitive patterns need to change entirely, or else every action we take may make everything more chaotic.

What are we pursuing?

Here, I want to say that from now on, the order (order) of the whole world and the definition of success will undergo a fundamental change. The choice between complexity and scale is actually a choice between adaptation and efficiency.

I believe that in the increasingly VUCA environment, ‘adaptation and prosperity’ will become the new purpose and pursuit (not just about getting bigger and stronger). This will also allow for the emergence of different types of business organizations and diverse and rich group communities. As we have seen not only on a global scale but also gradually in China, many enterprises no longer seem to be obsessed with becoming super enterprises or listed companies. Instead, they pursue the mission of the team and the excitement of living in the moment. They see everything as too regular and orderly as a danger signal. Change is the norm, and change is exciting, an opportunity for everyone to practice.

At the same time, we are facing the collapse of the old system and the reconstruction of the new system. Please note that we are not discussing whether a particular app in your computer is useful or how to improve it. The topic we are discussing is how to completely switch from the Microsoft operating system to the Apple operating system when facing an organization. This kind of transformation is thorough, and you need a period of adaptation (initially, your operation will be uncomfortable). However, once you adapt, there will be countless excellent apps for you to choose from in the app store. At the same time, you will have a broader space to create new apps. You will feel the breakthrough in efficiency and value that all of this brings.

This is a difficult process, and many companies have sniffed this scent but are unwilling to touch it immediately. Fortunately, we still see many companies undergoing self-disruption. According to Christensen’s research on disruptive innovation, a company seeking development in a new market rather than an existing one has a six times higher chance of success, and the potential income will increase by 20 times.

So, when we face VUCA, what will the new underlying system look like? Here, I’d like to share a few of my viewpoints:

01 – Sensing + Responding – Everyone as a Super Sensor for the Organization

Human beings naturally have a preference for control, order, structure, and overall norms, which bring us a sense of security. Conversely, chaos, change, and unpredictability make us feel uneasy.

In a complex world, every organization must face the impact of nonlinear changes and unforeseen events. Organizations need to become capable of identifying faint signals that foreshadow significant changes. Paying attention to these faint signals can provide members within the organization with a new perspective and nonlinear thinking, helping the organization imagine various possible futures and formulate corresponding plans. The specific approach is quite simple: turn every individual within the organization into a “super sensor.” At the same time, the organization needs to continuously cultivate an open and transparent environment, including the capacity, mechanisms, and culture, to encourage these “sensors” to operate continuously and smoothly bring back perceived opportunities and risks to the organization for rapid processing and feedback.

02 – No Global Controller – Empowering the Organization’s Nervous Endings

We often refer to such new complex systems as “adaptive nonlinear networks,” a term coined by John H. Holland. In the natural world and human society, this type of adaptive nonlinear network is ubiquitous: the nervous system, the immune system, ecosystems, economic systems, and even the current pandemic. Jokingly, what ultimately defeats the pandemic is not doctors, not isolation, and certainly not masks, but your own immune system.

For living organisms, there is no single cell (or virus) that is more advanced than other cells (viruses) and can command them on how to act; this is a law of nature. Linear rules and hierarchical centralized command often don’t work here. Such systems with higher complexity and adaptability, where there are no longer controllers or leaders both internally and externally, are called self-organizing organizations. Due to simple rules generating complex behaviors in unpredictable ways, the macro behavior of these systems is sometimes referred to as emergent. This leads to another definition of complex systems: systems that exhibit emergent and self-organizing behavior.

03 – Constant Emergence – Realizing the Power of Employee Ownership Culture

In fact, the internet world is a fully emergent global family. Whether it’s your social media network, TikTok, Quora, or the numerous protocols on blockchain, almost everything thrives on the continuous emergence of individual nodes (you and me) to create the prosperity we see today. Our lives have become quite accustomed to this emergent pattern, and what we’re discussing here is how to bring this emergent model into corporate organizations.

Returning to businesses, one of the preparatory steps I always take when supporting organizations in their organizational evolution consulting is to observe who talks the most during a team meeting or a one-on-one conversation between a leader and an employee. Do leaders ask more open-ended questions or issue more directives? In situations of disagreement (or often, the absence of disagreement), whose viewpoint is ultimately considered correct? I’ve often encountered scenarios where leaders, after dominating a meeting with their words, tell me how tired and frustrated they are because their team members don’t take the initiative and can’t make decisions on their own.

There’s an interesting shift in perspective for leaders here, transitioning from “leadership within a team – leading a team with authority” to “leadership as a network – integrating into a team to exhibit leadership.” We delve deeper into this aspect in our training courses.

04 – Continuous Adaptation, Diversity Brings Organizational Prosperity

The higher the complexity, the more individual behaviors tend to be independent, diverse, and multifaceted. This diversity in behavior allows the entire system to have greater adaptability. Conversely, if many individuals in the system maintain a high degree of behavioral consistency, they can efficiently complete established tasks and meet large-scale or large-sized requirements. However, such an efficient system may have reduced adaptability to future uncertainties and changes, both within itself and in the environment.

Let’s take a simple example – a city. The more vibrant and efficient a city is, with higher overall productivity or average individual productivity, the more diverse its population tends to be. For instance, in Shanghai, a bustling metropolis with higher average wages (individual productivity) compared to other cities and a higher overall GDP, people come from all over China and the world. This diversity creates inclusivity, allowing for different perspectives and approaches.

This cultural shift has found particular support among the younger generation of employees. They emphasize personal values and personal branding. In their value system, terms like “going with the flow” and “conformity” have negative connotations.

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