What is VUCA and what strategy is derived from it?
Challenging conditions for companies
VUCA is an acronym of the terms volatility, uncertainty, complexity and ambiguity. It is understood as a description for a rapidly changing business world and thus for challenging conditions for companies. VUCA stands for:
- Volatility as the extent of fluctuations within short periods of time. The corporate environment does not change continuously but by leaps and bounds, customers and suppliers change their behaviour patterns, new business models emerge overnight and existing ones are replaced.
- Uncertainty refers to a state of lack of knowledge and clarity. Companies do not know what will happen next, forecasts become more difficult and even if different options are known, it is unclear which event will occur with which probability. Effectuation as an independent, non-causal decision logic, which is often used by company founders in situations of uncertainty, can help here.
- Complexity means that the effects of actions cannot be calculated in advance, nor can causes be traced back afterwards. The systems in which companies operate are too complex with their numerous parameters. Companies therefore try not to prematurely deduce causalities between cause and effect. They tend to counter complexity in small, cost-effective steps, e.g. in the development of new products and solutions through minimal viable products, as this gives them the opportunity to receive early feedback from stakeholders.
- Ambiguity means that terms and facts are ambiguous or unclear. It is characterised by ambivalent, i.e. contradictory circumstances such as falling share prices at companies that achieve record profits.
A strategy for companies and organisations in the VUCA world is also derived from the acronym:
- clarity and