Business Ecosystem Has Now Become a VUCA World

Considering volatility and uncertainty of the business ecosystem, in many ways, it becomes equated to the VUCA world
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Jun 17,2020
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  • 13 Mins Read

In this crisis, businesses are being uprooted from their foundation and exposed to rough weather conditions. If the devastation does not end here, the recovery can take a year or more. At present, almost every business complains about liquidity crunch, decrease in footfall and broken ties with clientele due to low demands for product. 

The present threat was unprecedented, that's why businesses were prepared to deal with it. The main flaw is that small and medium-sized companies do not perform risk management in their business and thus, not able to assess forthcoming events. Considering volatility and uncertainty of the business ecosystem, in many ways it becomes equated to the VUCA world. VUCA mainly stands for Volatility, Uncertainty, Complexity and Ambiguity. The term has basically come from the US army in the early 1990s. The business communities  had adopted this term when they had their own encounter with the unprecedented chain of events in the financial crisis 2007-08.

As opposed to the present crisis, the world has become topsy-turvy for many entrepreneurs. The four mad horses of VUCA are on a rampage and causing a hurricane in businesses. For better understanding of VUCA, let's break the terms and comprehend its underlying nature.

1. Volatility

It is the first component of the VUCA. It essentially refers to the speed of change in an industry, market or the world in general. The more volatile the world is, faster things change. 

It leads exponentially accelerating change and is unexpected as well as unstable. It takes place for an unknown period. Accelerated decision making and an urgent response are required in volatile situations. However, it is not difficult to understand the volatility of an event.

2. Uncertainty 

It is the second component of the VUCA. It refers to the extent to which we can confidently predict the future. The more uncertain the world is, the harder it is to predict. People's inability to understand what is going on contributes to the uncertainty and is also associated with it. 

In an uncertain situation, change is possible but not given. Despite a lack of other information, the event’s basic course and effect are known.

An individual, who sees only one outcome and does not think beyond the immediate, fails to handle uncertainty in business. As opposed to this, a person, who effortlessly handles an uncertain situation, envisions a range of outcomes and perceives in terms of confidence intervals. 

Also, a person, who holds to existing processes even when they are inadequate, cannot tide over uncertain times and would definitely face failure. On the other hand, a smart individual will identify the issue with the current situation and try to acclimatize with changing time.  

3. Complexity 

It is the third component of complexity. It refers to the number of factors that we need to take into account, their variety and relationship between them. The more factors we need to take into account, greater is their variety and they get interconnected with high complexity. Also, the more complex the world is, the harder it becomes to analyze it.

A complex situation has several interconnected parts and variables. In this, some information is available or can be guessed, although the volume or nature of it can be overwhelming to process.

4. Ambiguity 

It is the fourth component of VUCA. It refers to the lack of clarity about how to interpret something. The more ambiguous the world is, the harder it is to comprehend. In an ambiguous situation, causal rapports are wholly unclear and no precedent exists. 

In practice, all these terms are interlinked to each other. So, if there is volatility in the market, then uncertainty will certainly be there. In a similar vein, uncertainty will eventually lead to ambiguity and complexity in the business environment. Consequently, the business world has moved into the VUCA world. 

The VUCA world is basically applied in the Indian army. In order to comprehend its application, one has to observe and calibrate how the Indian army uses VUCA in their environment. 


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