What VUCA really means for you

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BUSHOR
1126
1–7
ORGANIZATIONAL
PERFORMANCE
What
a
difference
a
word
makes:
Understanding
threats
to
performance
in
a
VUCA
world
Nathan
BennettQ1
a,
*,
G.
James
Lemoine
b
a
Robinson
College
of
Business,
Georgia
State
University,
Tower
Place
200,
Suite
400,
3348
Peachtree
Road
NE,
Atlanta,
GA
30326,
U.S.A.
b
Scheller
College
of
Business,
Georgia
Institute
of
Technology,
800
W.
Peachtree
Street,
Atlanta,
GA
30308,
U.S.A.
1.
Living
in
a
VUCA
world
‘‘Across
many
industries,
a
rising
tide
of
vola-
tility,
uncertainty,
and
business
complexity
is
roiling
markets
and
changing
the
nature
of
competition.’’
(Doheny,
Nagali,
&
Weig,
2012)
Observations
such
as
this,
from
a
recent
issue
of
the
McKinsey
Quarterly,
have
been
used
to
energize
leaders
as
they
rise
to
confront
yet
another
day
in
unpredictable
times–—as
well
as
to
sell
these
same
leaders
consulting
services.
Employing
an
acronym
for
volatility,
uncertainty,
complexity,
and
ambiguity
1
(VUCA),
pundits
and
leaders
alike
have
asserted
that
we
now
live
in
a
‘VUCA
world.’
This
ongoing
churn
in
the
business
environment
creates
myriad
traps
for
leaders.
Of
course,
opti-
mists
see
the
edge
a
company
can
gain
if
its
leaders
master
the
accompanying
challenges.
For
example:
Business
Horizons
(2014)
xxx,
xxx—xxx
Available
online
at
www.sciencedirect.com
ScienceDirect
www.elsevier.com/locate/bushor
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KEYWORDS
VUCA;
Volatility;
Uncertainty;
Complexity;
Ambiguity;
Leadership
Abstract
VUCA
is
an
acronym
that
has
recently
found
its
way
into
the
business
lexicon.
The
components
it
refers
to–—volatility,
uncertainty,
complexity,
and
ambiguity–—are
words
that
have
been
variously
used
to
describe
an
environment
which
defies
confident
diagnosis
and
befuddles
executives.
In
a
‘VUCA
world,’
both
pundits
and
executives
have
said,
core
activities
essential
to
driving
organizational
performance–—like
strategic
planning–—are
viewed
as
mere
exercises
in
futility.
VUCA
conditions
render
useless
any
efforts
to
understand
the
future
and
to
plan
responses.
When
leaders
are
left
with
little
to
do
other
than
wring
their
hands,
organizational
performance
quickly
falls
at
risk.
In
this
installment
of
Organizational
Performance,
we
demonstrate
that
by
overlooking
important
differences
in
the
conditions
that
volatility,
uncertainty,
complexity,
and
ambiguity
describe,
we
have
disempowered
leaders.
We
show
how
leaders
can
appreciate
the
differences
among
each
of
these
challenging
situations
in
order
to
properly
allocate
scarce
resources
to
preserve
and
enhance
organizational
performance.
#
2014
Kelley
School
of
Business,
Indiana
University.
Published
by
Elsevier
Inc.
All
rights
reserved.
*
Corresponding
author
E-mail
addresses:
nate@gsu.edu
(N.
Bennett),
jim.lemoine@scheller.gatech.edu
(G.J.
Lemoine)
1
The
acronym
VUCA
originated
in
the
U.S.
military
(Whiteman,
1998).
0007-6813/$
—
see
front
matter
#
2014
Kelley
School
of
Business,
Indiana
University.
Published
by
Elsevier
Inc.
All
rights
reserved.
http://dx.doi.org/10.1016/j.bushor.2014.01.001

‘‘Volatility
provides
profit
opportunity.’’
(Warwick-Ching,
2013)
‘‘Uncertainty
is
opportunity.’’
(Hemingway
&
Marquart,
2013)
‘‘Simplifying
IT
complexity
[is]
a
major
opportu-
nity.’’
(Boston
Consulting
Group,
2013)
‘‘Ambiguity
equals
opportunity.’’
(Amerasia
Con-
sulting
Group,
2013)
Capitalizing
on
opportunity
first
requires
under-
standing
it;
reviewing
what
leaders
have
said
and
done
thus
far,
however,
there
is
ample
evidence
of
misunderstanding.
Three
significant
problems
exist
in
how
leaders
have
employed
these
terms.
First,
their
use
has
been
cavalier:
VUCA
has
become
a
cute,
trendy
way
of
saying
‘unpredictable
change.’
As
an
experiment,
perform
a
web
search
for
any
two
of
the
four
words
comprising
VUCA.
You’ll
probably
realize
two
things:
all
four
are
typically
used
as
a
set
in
executive
interviews,
consultant
blogs,
and
the
busi-
ness
press,
and
they’re
treated
as
synonyms.
Though
the
words
do
have
related
meanings,
it’s
the
differ-
ences
among
them
that
are
most
valuable
for
leaders
to
understand.
We
contend
that
the
term
VUCA
offers
a
me
´lange
that
is
dangerous
in
its
consequences.
The
four
components
of
the
VUCA
acronym
have
unique
meanings
that
should
be
instructive
to
leaders;
in-
stead,
useful
differences
between
the
terms
are
glossed
over
and
their
value
lost.
Second,
even
when
pundits
and
leaders
are
sen-
sitive
to
the
differences
in
meaning,
there
is
a
lack
of
information
regarding
just
what
it
is
that
leaders
should
do
in
order
to
confront
one
or
another
of
these
conditions.
Executives
often
mention
in
inter-
views
and
press
releases
the
difficulties
of
‘‘doing
business
in
a
VUCA
world,’’
but
quickly
move
on
to
simpler
topics
without
discussing
exactly
how
a
firm
can
position
itself
in
such
an
environment.
Those
few
that
do
consider
how
to
deal
with
VUCA
typically
offer
one
highly
general
solution
for
all
four
of
its
compo-
nents,
such
as
‘‘innovate,’’
‘‘be
creative,’’
‘‘be
flex-
ible,’’
or
‘‘listen
more.’’
History
does
not
offer
many
examples
of
such
pabulum
producing
great
leaders,
effective
change,
or
robust
organizations.
Finally–—and
likely
because
there
is
a
dearth
of
actionable
advice
out
there–—too
many
leaders
are
confronting
this
VUCA
world
by
simply
throwing
up
their
hands.
As
one
executive
told
us,
strategic
planning
is
idle
at
his
company
because,
after
all,
‘‘How
can
you
plan
anything
in
such
a
VUCA
world?’’
Indeed,
a
growing
thought
leadership
movement
asserts
that
due
to
the
complete
chaos
and
uncon-
trollability
of
the
VUCA
world,
‘obsolete’
ideas
such
as
strategy
and
marketing
are
now
‘dead’
(Draycott,
2012).
Consider
these
three
problems
and
it
is
evident
that
the
second
and
third
are
not
unavoidable
con-
sequences
of
the
modern
business
world,
but
rather
entirely
avoidable
outcomes
of
the
first.
That
is,
we
have
little
actionable
advice
to
deal
with
VUCA
and
are
tempted
to
say
there’s
nothing
we
can
do
about
it
specifically
because
we
don’t
break
out
the
com-
ponents
of
VUCA
and
fully
understand
the
exact
natures
of
the
problems
we
face.
Until
leaders
become
able
to
identify
the
unique
challenges
pre-
sented
by
volatility,
uncertainty,
complexity,
and
ambiguity,
they
will
not
be
positioned
to
seize
the
opportunities
promised
by
the
aforementioned
op-
timists.
This
is
because
volatility,
uncertainty,
com-
plexity,
and
ambiguity
all
require
their
own
separate
and
unique
responses.
Each
of
the
four
is
a
distinct
phenomenon
with
equally
distinct
appropriate
re-
sponses
that
require
different–—and
possibly
diffi-
cult
to
reallocate–—investments.
Leaders
face
a
pair
of
problems:
If
VUCA
is
seen
as
general,
unavoid-
able,
and
unsolvable,
leaders
will
take
no
action
and
fail
to
solve
an
actual
problem.
Alternatively,
if
leaders
misread
the
environment
and
prepare
for
the
wrong
challenge,
they
will
misdirect
resources
and
fail
to
address
the
actual
problem.
In
the
paragraphs
that
follow,
we
begin
by
point-
ing
out
the
differences
between
the
terms
volatility,
uncertainty,
complexity,
and
ambiguity.
There
are
non-trivial,
albeit
nuanced,
differences
in
the
meanings
of
these
words–—such
as
the
military
has
taken
to
teaching
at
the
Army
War
College.
Then,
we
discuss
how
to
identify
VUCA
situations
in
the
organizational
environment
and
distinguish
exactly
which
type
of
unpredictability
is
being
experienced.
Finally,
we
discuss
the
ways
leaders
need
to
position
their
companies
to
address
these
singularly:
each
requires
something
different
from
the
company
and
its
leadership.
As
we
will
explain,
you
cannot
rec-
ognize
the
hidden
opportunity
(e.g.,
in
complexity)
by
misdirecting
resources
(e.g.,
addressing
the
threat
from
ambiguity).
Failure
to
use
the
right
label
will
lead
to
a
misallocation
of
what
could
be
considerable
corporate
resources.
Table
1
summa-
rizes
our
key
thoughts
regarding
volatility,
uncer-
tainty,
complexity,
and
ambiguity.
2.
What
do
these
terms
mean.
.
.and
what
do
they
mean
for
your
company?
2.1.
Volatility
Reid
Spencer
is
a
division
manager
for
a
technology
company
in
Cambridge,
Massachusetts.
The
industry
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2
ORGANIZATIONAL
PERFORMANCE

is
highly
competitive
and
speed
is
a
key
competency
for
both
leaders
and
their
organizations.
Like
others
in
similar
positions,
Reid
has
a
lot
on
his
plate
and
only
so
much
bandwidth.
Among
today’s
concerns
is
the
impact
a
fire
at
a
large
computer
chip
production
facility
will
have
on
the
prices
charged
by
one
of
his
key
suppliers.
Margins
are
thin,
and
upon
approach-
ing
his
boss
for
advice,
Reid
is
told
merely:
‘‘In
a
VUCA
world,
we
have
to
innovate!’’
A
volatile
situation
can
be
defined
as
one
that
is
unstable
or
unpredictable;
it
does
not
necessarily
involve
complex
structure,
a
critical
lack
of
knowl-
edge,
or
doubt
about
what
outcomes
may
result
from
key
events.
Rather,
volatility
most
closely
represents
the
general
definition
of
VUCA
com-
monly
used
in
the
business
press:
relatively
unsta-
ble
change.
A
manager
facing
a
volatile
situation
like
Reid’s
seeks
to
address
certain
questions:
Will
the
situation
create
a
spike
in
prices?
If
so,
how
high?
And
how
long
will
the
elevated
prices
last?
The
production
facility
fire
introduces
cost
volatility,
but
Reid
still
maintains
several
useful–—
perhaps
critical–—assets
as
he
attempts
to
manage
the
situation:
he
understands
both
the
situation
itself
and
the
likely
associated
causes
and
effects.
Reid
knows
that
the
fire
could
cause
price
in-
creases,
he
knows
the
history
of
price
fluctuations
for
the
computer
chip,
and
he
likely
has
a
good
idea
of
what
has
caused
these
trends.
He
has
informa-
tion
on
other
suppliers
for
the
chip
and
how
many
other
production
facilities
for
the
part
exist
within
the
key
supplier.
The
secret
to
dealing
with
vola-
tility,
as
with
any
component
of
VUCA,
is
under-
standing
the
opportunities
and
threats
inherent
in
the
situation.
Not
long
ago,
pundits
widely
credited
Southwest
Airlines’
decision
to
hedge
on
jet
fuel
as
a
key
toward
supporting
the
company’s
low-cost
operat-
ing
strategy
(Brooks,
2010).
Fuel
prices
can
be
quite
volatile,
but
not
really
VUCA.
Southwest
was
not
faced
with
significant
deficits
of
knowl-
edge
or
overwhelming
complexity;
rather,
it
rec-
ognized
that
environmental
factors
beyond
its
control
were
lining
up
to
cause
a
highly
volatile
fuel
market.
Southwest
knew
change
was
coming,
and
what
was
causing
that
change.
It
required
a
strategy
to
deal
with
that
change,
for
which
even-
tual
existence
was
expected
but
magnitude
was
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Table
1.
Distinctions
within
the
VUCA
framework
What
it
is
An
example
How
to
effectively
address
it
Volatility
Relatively
unstable
change;
information
is
available
and
the
situation
is
understandable,
but
change
is
frequent
and
sometimes
unpredictable.
Commodity
pricing
is
often
quite
volatile;
jet
fuel
costs,
for
instance,
have
been
quite
volatile
in
the
21
st
century.
Agility
is
key
to
coping
with
volatility.
Resources
should
be
aggressively
directed
toward
building
slack
and
creating
the
potential
for
future
flexibility.
Uncertainty
A
lack
of
knowledge
as
to
whether
an
event
will
have
meaningful
ramifications;
cause
and
effect
are
understood,
but
it
is
unknown
if
an
event
will
create
significant
change.
Anti-terrorism
initiatives
are
generally
plagued
with
uncertainty;
we
understand
many
causes
of
terrorism,
but
not
exactly
when
and
how
they
could
spur
attacks.
Information
is
critical
to
reducing
uncertainty.
Firms
should
move
beyond
existing
information
sources
to
both
gather
new
data
and
consider
it
from
new
perspectives.
Complexity
Many
interconnected
parts
forming
an
elaborate
network
of
information
and
procedures;
often
multiform
and
convoluted,
but
not
necessarily
involving
change.
Moving
into
foreign
markets
is
frequently
complex;
doing
business
in
new
countries
often
involves
navigating
a
complex
web
of
tariffs,
laws,
regulations,
and
logistics
issues.
Restructuring
internal
company
operations
to
match
the
external
complexity
is
the
most
effective
and
efficient
way
to
address
it.
Firms
should
attempt
to
‘match’
their
own
operations
and
processes
to
mirror
environmental
complexities.
Ambiguity
A
lack
of
knowledge
as
to
‘the
basic
rules
of
the
game’;
cause
and
effect
are
not
understood
and
there
is
no
precedent
for
making
predictions
as
to
what
to
expect.
The
transition
from
print
to
digital
media
has
been
very
ambiguous;
companies
are
still
learning
how
customers
will
access
and
experience
data
and
entertainment
given
new
technologies.
Experimentation
is
necessary
for
reducing
ambiguity.
Only
through
intelligent
experimentation
can
firm
leaders
determine
what
strategies
are
and
are
not
beneficial
in
situations
where
the
former
rules
of
business
no
longer
apply.
ORGANIZATIONAL
PERFORMANCE
3

unknown.
The
company
prospered
during
this
pe-
riod
of
change
by
leveraging
its
agility,
the
key
to
handling
volatility.
When
volatile
change
is
expected,
the
best
way
to
prepare
is
to
devote
resources
toward
developing
agility.
This
is
typically
expensive
and
consists,
for
example,
of
stockpiling
resources.
Hedging
on
fuel,
overbuying
talent,
and
amassing
raw
materials
al-
lows
the
slack
to
be
agile–—should
volatile
times
suddenly
suggest
that
is
the
right
move.
As
previ-
ously
mentioned,
Southwest
Airlines
embarked
on
a
massive
fuel-hedging
plan
that
baffled
its
compet-
itors,
predicting
the
fuel
market
volatility
and
lev-
eraging
its
assets
to
create
future
agility.
As
most
of
Southwest’s
competitors
hedged
only
20%—30%
of
their
fuel
purchases,
limiting
their
eventual
agility,
Southwest
hedged
a
massive
70%
of
its
total
need.
The
end
result
was
that
Southwest
ended
up
paying
as
much
as
50%
less
for
fuel
than
its
competitors,
and
has
arguably
been
the
only
consistently
profitable
airline
for
most
of
the
21
st
century.
Southwest
correctly
forecast
the
volatility
in
fuel
prices
while
prices
were
still
low,
and
acted
aggres-
sively
to
maintain
its
agility.
We
propose
that
this
agility
is
the
key
to
dealing
with
environmental
volatility.
When
change
is
coming
but
its
magnitude,
direction,
and
length
are
unknown,
effective
organ-
izational
leaders
build
their
slack
resource
avail-
ability,
preparing
for
a
potentially
‘long
winter.’
In
the
short
term,
this
is
often
expensive
and
seem-
ingly
unneeded.
However,
if
a
market
truly
is
vola-
tile,
it’s
the
definitive
prescription
for
success
in
the
long
term.
2.2.
Uncertainty
In
a
separate
market,
Reid
is
anxious
to
learn
more
about
the
precise
capabilities
of
a
product
about
to
be
launched
by
a
worthy
Asia-based
competitor.
It
could
be
that
the
new
product
changes
the
game–—
and
it
could
have
strong
implications
for
how
he
manages
his
research
and
development
dollars.
A
senior
manager
in
this
division
of
Reid’s
company,
speaking
to
a
trade
publication
about
the
impend-
ing
challenge
this
product
may
bring,
was
quoted
as
saying:
‘‘It’s
a
VUCA
world.
We’re
going
to
have
to
be
flexible.’’
Uncertainty
is
a
term
used
to
describe
a
situation
characterized
by
a
lack
of
knowledge,
not
as
to
cause
and
effect
but
rather
pertaining
to
whether
a
certain
event
is
significant
enough
to
constitute
a
meaningful
cause.
Uncertainty
is
not
volatility.
A
volatile
situation
is
one
in
which
change
is
likely,
but
that
change
may
come
quickly
and
at
varying
mag-
nitudes;
an
uncertain
situation,
on
the
other
hand,
is
not
so
volatile–—in
fact,
there
may
be
no
change
inherent
in
it
at
all.
For
instance,
Reid
is
uncertain
about
the
pending
product
to
be
offered
by
his
Asian
competitor.
There
is
nothing
volatile
here;
he
simply
does
not
know
enough
to
plan
a
best
response.
The
solution
to
volatility
is
agility
and
building
slack
resources,
but
there
is
not
enough
information
in
an
uncertain
situation
to
indicate
that
this
would
be
an
appropriate
response.
If
there
is
not
enough
information
to
indicate
that
volatile
change
is
ap-
proaching,
stockpiling
resources
could
be
a
costly
waste
of
time.
Because
uncertainty
exists
in
the
lack
of
ad-
equate
information,
addressing
it
simply
involves
obtaining
information.
Investment
here
entails
methods
of
collecting,
interpreting,
and
sharing
information.
Uncertainty
can
be
solved
structurally
by
devoting
more
resources
to
boundary-spanning
activities:
moving
beyond
existing
networks,
data
sources,
and
analysis
processes
to
gather
informa-
tion
from
new
partners
and
look
at
it
differently.
Information
networks
are
created
from
many
differ-
ent
sources,
both
inside
and
outside
the
firm.
This
principle
is
well
illustrated
by
the
aftermath
of
the
2001
U.S.
terror
attacks.
Since
those
events,
the
world
has
lived
with
a
greater
sense
of
uncer-
tainty
regarding
if,
when,
and
where
a
next
attack
could
occur.
To
again
reinforce
distinctions
between
the
different
components
of
VUCA,
we
note
that
the
post-9/11
situation
was
not
necessarily
volatile:
the
core
issue
facing
the
world’s
governments
was
not
a
lack
of
stability
or
predictability.
Rather,
govern-
ment
leaders
realized
that
the
success
of
the
attacks
on
the
World
Trade
Center
might
encourage
other
terrorists
to
create
similar
plots.
How
many
more
attacks
might
we
face?
When
and
where
might
these
attacks
occur?
Who
might
be
behind
them?
This
was
the
core
of
the
West’s
uncertainty–—but
not
neces-
sarily
a
volatile
situation,
nor
a
totally
ambiguous
one,
nor
an
overly
complex
one.
Addressing
the
uncertainty
regarding
the
strategies
of
potential
terrorists
has
led
governments
around
the
world
to
collect
and
cull
through
unimaginable
amounts
of
information.
New
partnerships
were
formed
and
information
networks
established,
resulting
in
a
relatively
successful
anti-terror
campaign.
The
key
to
the
West’s
success
in
rebuffing
more
attacks
in
the
style
of
9/11
has
been
uncertainty
reduction
through
relentless
information
gathering.
Although
Reid
has
likely
heard
the
general
advice
to
‘‘be
flexible’’
countless
times
regarding
VUCA
issues,
his
best
course
of
action
may
be
to
actively
grow
his
information
collection
and
data
processing
resources.
He
lacks
precise
information
about
the
capabilities
of
the
new
product,
and
needs
to
gather
that
data.
Further,
he
needs
to
reach
out
to
part-
ners,
customers,
researchers,
trade
groups,
and
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4
ORGANIZATIONAL
PERFORMANCE

perhaps
even
competitors
to
better
understand
how
this
new
innovation
might
or
might
not
change
the
marketplace.
Will
the
product’s
launch
be
more
comparable
to
that
of
the
iPod
(a
game
changer)
or
that
of
the
Segway
personal
transporter
(market
impact
did
not
match
pre-reveal
hyperbole)?
What
are
the
specifications
of
the
new
product,
how
do
they
compare
to
the
current
market,
and
what
impact
should
it
have
on
the
firm’s
own
research
and
development
direction
and
budget?
These
are
all
questions
that
can
be
answered
by
information
gathering,
making
an
uncertain
situation
more
certain–—and
certainly
more
manageable.
2.3.
Complexity
Meanwhile,
efforts
to
grow
markets
abroad
have
been
frustrating
because
of
a
variety
of
consider-
ations
such
as
export
control,
tariffs,
and
the
in-
transigence
of
officials
in
each
market.
Reid
often
feels
overwhelmed
by
the
sheer
number
of
moving
parts
involved
in
each
market,
and
his
staff
strug-
gles
to
keep
up
with
all
of
the
associated
regula-
tions
and
other
idiosyncrasies.
Reid
looks
to
trade
journals
for
guidance,
and
is
struck
by
a
columnist
who
writes:
‘‘It’s
a
VUCA
world,
and
dealing
with
multiple
markets
is
just
part
of
that.
You
can
succeed
in
this
VUCA
environment
by
being
crea-
tive.’’
A
complex
situation
is
characterized
by
many
interconnected
parts.
Again,
this
is
distinct
from
a
volatile
or
an
uncertain
situation.
The
situation
Reid
faces
in
regard
to
the
regulatory
environments
and
political
climates
in
the
many
nations
where
his
company
does
business
is
indeed
complex,
but
not
necessarily
volatile
or
uncertain.
There
is
no
un-
predictable
or
unstable
change
implied
in
this
sit-
uation,
and
Reid
is
not
faced
with
a
lack
of
key
information.
Indeed,
he
has
a
great
deal
of
hard
information
on
regulations,
tariffs,
and
the
like,
but
is
overwhelmed
by
the
need
to
process
it
all.
In
complex
situations,
a
great
deal
of
effort
is
required
to
collect,
digest,
and
understand
the
relevant
in-
formation
in
its
entirety.
A
complex
situation
calls
for
a
uniquely
distinct
response
that
is
utterly
separate
from
those
neces-
sitated
by
the
other
components
of
VUCA.
This
highlights
the
danger
of
not
properly
understanding
and
defining
firm
challenges.
Although
effective
in
volatile
situations,
stockpiling
resources
is
useless
if
a
firm
does
not
understand
where
best
to
allocate
them
in
a
complex
environment.
Similarly,
estab-
lishing
new
information
networks,
as
a
firm
should
do
in
times
of
uncertainty,
risks
an
even
greater
degree
of
information
overload,
which
can
cause
firms
to
‘freeze’
and
not
make
any
decisions
at
all.
Instead,
the
most
straightforward
way
for
an
organ-
ization
to
address
complexity
is
to
simplify
the
situation
by
adopting
a
structure
that
mirrors
that
of
the
environment.
Research
has
consistently
shown
organizations
that
adapt
themselves
to
‘match’
environmental
change
perform
at
substan-
tively
higher
levels,
whereas
firms
that
maintain
past
structures
and
processes
in
the
face
of
a
changing
business
environment
are
less
effective
(Heugens
&
Lander,
2009).
Organizations
should
be
structured
to
align
with
and
take
advantage
of
environmental
complexity
rather
than
struggle
against
it.
In
the
most
obvious
example,
as
a
small,
informal
organization
grows,
it
is
expected
that
formal
de-
partments
will
appear
to
address
what
has
become
too
much
for
a
single
person
to
handle.
A
smaller
operation
dealing
with
a
smaller
group
of
suppliers,
a
smaller
customer
base,
and
fewer
regulations
works
best
within
a
relatively
simple
organizational
structure,
but
that
structure
becomes
obsolete
as
the
organization
grows
and–—consequently–—the
or-
ganization’s
operating
environment
becomes
more
complex.
Finance,
operations,
marketing,
and
hu-
man
resources
functions
are
established
so
that
each
part
of
the
organization
addresses
something
in
which
it
has
expertise.
As
the
organization
grows
larger,
complexity
will
increase
and
departments
may
divide
further:
the
human
resources
depart-
ment
may
hire
specialists
in
benefits,
compensation
administration,
and
EEO
compliance.
Causes
of
this
internal
restructuration
should
not
be
limited
to
changes
within
the
organization;
changes
in
increas-
ingly
complex
business
environments
(i.e.,
changes
outside
the
organization)
also
indicate
a
need
for
internal
change.
For
instance,
many
organizations
in
the
U.S.
are
restructuring
their
operations
in
terms
of
employee
benefits
due
to
the
onset
of
healthcare
reform.
The
new
healthcare
law
is
tremendously
complex,
and
many
leaders
are
finding
that
the
most
efficient
solution
to
cope
with
it
is
to
restructure
the
relevant
parts
of
their
firms
to
better
align
with
its
requirements.
In
Reid’s
situation,
his
firm’s
growth
into
so
many
new
markets
creates
a
complexity
that
might
best
be
resolved
by
moving
to
a
more
geographically
based
organizational
structure,
such
that
different
branches
of
the
company
are
able
to
specialize
in
understanding
and
exploiting
market
regulations
and
idiosyncrasies.
It
seems
his
company’s
involve-
ment
in
multiple
markets
has
created
an
untenable
complexity
for
the
current
organizational
structure.
To
reiterate,
the
preferred
solutions
for
volatile
and
uncertain
situations
are
not
relevant
here:
instead
of
stockpiling
unneeded
resources
or
gathering
re-
dundant
information,
the
firm’s
most
efficient
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ORGANIZATIONAL
PERFORMANCE
5

course
of
action
is
to
restructure
itself
to
align
with
the
new
environmental
complexity.
2.4.
Ambiguity
Finally,
Reid
tries
to
carve
out
time
each
day
to
ponder
whether
or
not
an
innovative
product
cur-
rently
under
development
is
likely
to
catch
on.
Although
it
is
unlike
anything
on
the
market
today,
it
isn’t
clear
that
customers
will
see
the
value
proposition
the
product
provides.
He
can’t
afford
to
escalate
commitment
to
the
product
if
it
isn’t
going
to
be
a
hit.
He
reads
a
marketing
blog
for
advice
and
learns
that
‘‘The
VUCA
world
is
pure
chaos.
Successful
firms
avoid
over-planning
and
make
things
up
as
they
go.’’
Ambiguity
characterizes
situations
where
there
is
doubt
about
the
nature
of
cause-and-effect
rela-
tionships.
Looking
at
Reid’s
situation,
it
is
easy
to
see
how
this
is
distinct
from
the
other
components
of
VUCA.
It’s
not
volatile:
there
is
no
reason
for
Reid
to
expect
quick,
unpredictable,
unstable
change.
It’s
not
complex:
there
aren’t
an
overwhelming
number
of
moving
parts
here,
just
a
lack
of
under-
standing
as
to
what
will
happen
next.
And
that
lack
of
understanding
is
distinct
from
uncertainty:
in
a
merely
uncertain
situation,
you
have
a
good
idea
of
what
causes
what.
An
ambiguous
situation,
on
the
other
hand,
typically
revolves
around
a
wholly
new
product,
market,
innovation,
or
opportunity.
In
an
uncertain
situation,
you
can
predict
what
may
hap-
pen
if
you
gather
adequate
information.
An
ambig-
uous
situation
is
more
challenging
because
of
the
newness:
there
is
little
historical
precedent
for
determining
the
outcomes
of
certain
causes
or
courses
of
action.
Stockpiling
resources,
while
appropriate
for
vol-
atile
situations,
could
be
a
huge
waste
of
time
and
energy
in
an
ambiguous
situation.
Gathering
infor-
mation
is
similarly
unhelpful
when
a
situation
is
ambiguous,
as
you
likely
don’t
know
what
informa-
tion
would
be
most
useful
to
gather.
Likewise,
a
company
restructuring
could
be
enormously
ineffi-
cient
if
the
firm
doesn’t
really
understand
what
that
restructuring
might
lead
to.
The
fourth
component
of
VUCA
continues
the
overall
trend:
the
solution
that
works
for
one
part
of
VUCA
likely
won’t
work
for
the
other
three.
Each
dimension
of
VUCA
is
distinct
and
unique,
and
requires
a
different
opti-
mal
course
of
action.
In
the
case
of
ambiguity,
we
believe
the
key
to
success
is
experimentation–—not
slack
resources,
information
gathering,
or
restruc-
turation.
Recall
that
ambiguous
situations
are
those
in
which
the
relationship
between
cause-and-effect
is
uncertain.
Such
could
be
said
of
the
challenge
the
digital
revolution
is
presenting
traditional
print
publishers:
how
news
junkies
will
want
to
stay
in-
formed,
how
students
will
want
to
get
their
learning
materials,
and
how
lovers
of
fiction
will
want
to
discover
new
authors
are
factors
that
will
require
the
industry
to
adopt
a
mindset
of
experimentation.
Further,
technology
allows
content
providers
to
entirely
circumvent
traditional
publishers.
It
is
unclear
what
the
revenue
model
that
maximizes
return
will
be.
Successful
publishers,
small
and
large,
have
thus
far
responded
to
this
ambiguity
with
experimentation
and
a
willingness
to
take
risks.
In
an
industry
not
typically
recognized
for
groundbreaking
innovation,
publishers
have
created
bundled
contracts
for
authors
with
both
traditional
publishing
and
e-books,
offered
bonus
content
to
customers
who
purchase
e-books
through
their
own
digital
marketplaces,
embedded
exclusive
videos
within
their
e-books,
and
even
offered
book
chap-
ters
or
whole
books
for
free
(for
a
limited
time)
in
order
to
entice
new
readers.
What
will
work
as
a
business
model
10
years
from
now?
The
only
way
these
publishers
can
find
out
is
to
experiment
with
the
unprecedented.
The
potential
impact
of
his
company’s
new
prod-
uct
is
very
ambiguous
to
Reid.
Being
such
a
depar-
ture
from
what
the
company
is
known
for,
predicting
customer
reaction
to
the
product
is
dif-
ficult;
accurately
forecasting
associated
supply
processes
and
needs
may
also
prove
problematic.
Reid’s
best
option
may
be
experimentation.
For
example,
his
company
can
introduce
individual
features
from
the
new
product
into
existing
prod-
ucts,
experimenting
with
customer
receptivity.
Furthermore,
his
firm
may
contract
out–—to
a
vari-
ety
of
suppliers–—input
processes
required
by
these
new
features,
experimenting
with
different
supply
flows
and
partners.
The
key
here
is
options.
Reid
isn’t
locked
into
any
one
plan
without
knowledge
of
cause
and
effect;
that
would
be
risky
for
the
firm.
Instead,
he
spreads
out
his
resources,
trying
many
different
new
strategies
and
analyzing
each
care-
fully
until
he
can
determine
with
some
confidence
exactly
which
will
be
best
suited
to
the
market
environment.
3.
Final
thoughts
It
isn’t
just
Reid
Spencer
who
suffers
from
a
daunting
agenda.
There
is
broad
consensus
that
these
are
challenging
times
for
leaders.
Globalization
has
created
opportunities
with
one
hand
as
it
has
in-
troduced
threats
with
the
other.
The
stubborn
glob-
al
recession
has
blunted
repeated
bursts
of
optimism
for
the
return
to
a
path
of
prosperity.
Layer
on
the
BUSHOR
1126
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6
ORGANIZATIONAL
PERFORMANCE

challenge
of
digesting
technological
advancements
that
impact
industry,
as
well
as
the
consequences
of
demographic
shifts
in
the
workforce,
and
there
can
be
little
doubt
that
leaders
have
their
hands
full.
Recognizing
and
then
addressing
the
myriad
factors
that
can
threaten
organizational
performance
is
not
getting
any
easier.
It’s
a
VUCA
world,
after
all.
So
what
are
leaders
to
do
to
preserve
and
en-
hance
their
companies’
performance?
Consolation
can
be
found
in
that
we
are
all
enduring
this
VUCA
world
together;
after
all,
misery
loves
company.
Or
we
can
choose
to
celebrate
our
capacity
for
lan-
guage
and
the
power
words
have,
when
carefully
applied,
to
point
us
toward
purposeful
action.
Of
course,
the
components
of
VUCA
are
often
present
in
some
combination;
for
instance,
a
new
product
market
might
be
both
volatile
and
ambiguous,
or
expansion
into
a
new
territory
in
the
midst
of
sweeping
governmental
change
might
be
both
com-
plex
and
uncertain.
Although
combinations
of
VUCA
elements
are–—well,
complex–—we
believe
that
the
solutions
we
propose
to
the
components
of
VUCA
are
worthwhile,
both
on
their
own
and
in
combination.
Left
untangled,
the
mess
implied
by
the
phrase
VUCA
presents
an
unsolvable
frustration.
Develop-
ing
the
discipline
to
carefully
diagnose
and
label
a
situation
for
what
it
is,
however,
offers
a
salve.
Leaders
need
to
work
to
develop
this
discipline;
organizational
performance
cannot
be
preserved,
let
alone
enhanced,
if
its
finite
resources
are
mis-
appropriated
to
address
a
phantom
threat.
References
Amerasia
Consulting
Group.
(2013,
June
3).
Ambiguity
equals
opportunity:
The
story
of
the
new
HBS
application.
Retrieved
from
http://www.amerasiaconsulting.com/blog/2013/6/3/
ambiguity-equals-opportunity-the-story-of-the-new-hbs-
application
Boston
Consulting
Group.
(2013,
March
21).
Simplifying
IT
com-
plexity
a
major
opportunity
for
many
companies
[Press
Release].
Retrieved
from
http://www.bcg.com/media/Press
ReleaseDetails.aspx?id=tcm:12-130333
Brooks,
R.
(2010).
A
life
cycle
view
of
enterprise
risk
manage-
ment:
The
case
of
Southwest
Airlines
jet
fuel
hedging.
Journal
of
Financial
Education,
38(3/4),
33—45.
Doheny,
M.,
Nagali,
V. ,
&
Weig,
F.
(2012,
May).
Agile
operations
for
volatile
times.
McKinsey
Quarterly.
Retrieved
from
http://
www.mckinsey.com/insights/operations/agile_operations_
for_volatile_times
Draycott,
R.
(2012,
April
25).
‘‘Ma r k eting
is
dead’’
says
Saatchi
&
Saatchi
CEO.
The
Drum.
Retrieved
from
http://www.
thedrum.com/news/2012/04/25/marketing-dead-says-saatchi-
saatchi-ceo
Hemingway,
A.,
&
Marquart,
J.
(2013,
June
27).
Uncertainty
is
opportunity:
Engage
with
purpose.
Edelman.
Retrieved
from
http://www.edelman.com/post/uncertainty-is-opportunity-
engage-with-purpose/
Heugens,
P.
P.
M.
A.
R.,
&
Lander,
M.
W.
(2009).
Structure!
Agency!
(and
other
quarrels):
A
meta-analysis
of
institutional
theories
of
organization.
Academy
of
Management
Journal,
52(1),
61—85.
Warwick-Ching,
L.
(2013,
March
25).
Currency
wars:
Volatility
provides
profit
opportunity.
The
Financial
Times.
Retrieved
from
http://www.ft.com/intl/cms/s/0/e17e1ab0-8714-11e2-
9dd7-00144feabdc0.html#axzz2r3QHfbxW
Whiteman,
W.
E.
(1998).
Training
and
educating
army
officers
for
the
21st
century:
Implications
for
the
United
States
Military
Academy.
Fort
Belvoir,
VA:
Defense
Technical
Informa-
tion
Center.
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PERFORMANCE
7